TMI Blog1958 (11) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... vision is mandatory. It is express and explicit. Ordinarily, elected directors of companies are not appointed for any specified period of time in terms of years. They retire by rotation and they retire from their office of directorship at a date which would be the date of the statutory annual general meeting of the company. The question which we have to determine is whether in a case where despite the mandatory provisions of section 166 and in breach of their duty as directors, the directors do not call an annual general meeting of the company for any length of time, can they claim to continue in their office of director after the expiry of the period mentioned in the section for calling the statutory meeting. Prima facie the contention that they can continue to hold the office in any such case would seem wholly unsound. But we are told that there is a provision in the Companies Act, which, is properly interpreted, leads to such an undesirable result. 2. The application before us in by the Colaba Land and Mills Co. Ltd. and the circumstances in which it is made are these. On April 14, 1955, the annual general meeting of the company was held for the year 1954. The financial year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion we are asked to determine is whether Jayantilal Patel and/or Solomon Moses have ceased to be directors of the company. 4. The relevant part of section 166 of the new Companies Act to which we have already made some reference may be set out here : 166. Annual general meeting. - (1)(a) Every company shall, in addition to any other meetings, hold a general meeting which shall be styled its annual general meeting at the intervals, and in accordance with the provisions, specified below. (b) The first annual general meeting shall be held by a company within eighteen months of its incorporation. (c) The next annual general meeting of the company shall be held by it within nine months after the expiry of the financial year in which the first annual general meeting was held; and thereafter an annual general meeting shall be held by the company within nine months after the expiry of each financial year : Provided that the Registrar may, for any special reason extend the time within which any annual general meeting (not being the first annual general meeting) shall be held, by a further period not exceeding six months. (d) Except in the case referred to in the forego ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the vacancy by appointing the retiring director or some other person thereto ... 6. V. J. Pilani, respondent No. 2, Jayantilal Patel, respondent No, 4, and K. J. Pilani are represented different counsel and have made their submissions before us. The company is represented by separate counsel and the company has also made its submissions before us. Solomon Moses, although he is not a party to the petition, is also represented by counsel. Learned counsel for the company as well as these directors have pressed before us the contention that the position in law is that even though there is the breach of the statutory duty on the part of the directors in not calling an annual general meeting of the company as required by law, they continue and will continue to be the directors of the company till an annual general meeting is in fact held. The directors appointed by the Central Government have opposed that contention. The greatest reliance has been placed by learned counsel for those directors and the company on certain words in section 256 of the Act and the words are : At the first annual general meeting and at every subsequent annual general meeting . It is urged that the direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peaks of two-thirds of the number of directors as persons whose period of office is liable to determination by retirement of directors by rotation. Section 256 speaks of annual general meeting. But evidently it proceeds on the basis that the annual general meeting has been called as required by statutes, i.e., section 166. In our judgment it speaks of directors who till the date of the actual calling of the meeting continued to be directors in accordance with the provisions of law. A persons who is to cease to be a director by retirement at the expiry of a stated time cannot claim to have escaped such retirement simply because an annual general meeting has not been called as required by law within that time. Section 256 does not include those who vacated their office. It only applied to directors who had not already vacated their office or ceased to be directors by operation of any provision of law. It has nothing to do with the tenure of the office of a director in the proper sense of that expression. The marginal note of section 256, which we may look at for the purpose of seeing the trend of the section, speaks of ascertainment of directors retiring by rotation and filling of va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l or any of the regulations contained in Table A in the First Schedule, and shall in any event be deemed to contain regulations identical with or to the same effect as regulation 56, regulation 66, regulation 71, regulation 78 79, 80, 81 and 82 regulation 95, regulation 97, regulation 105, regulation 107 and regulation 112, 113, 114, 115, 116 contained in that Table. 8. We are only concerned with article 78 mentioned above which was to be deemed to be contained in the articles of association of every company. That regulation was as under : At the first ordinary meeting of the company, the whole of the directors shall retire from office, and at the ordinary meeting in every subsequently year, one-third of the directors for the time being or, if their number is not three or a multiple of three, then the number nearest to one-third shall retire from office. 9. The wording of the analogous provision in English law which was also a regulation was in Pari materia. By the Companies (Amendment) Act of 1936, section 861 was added in out Companies Act of 1913 which dealt with the question of vacation of office of a director. Sub-section (2) of that section was as under : Noth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bject in England have referred to the English decisions laying down the law on the subject. We are in respectful agreement with the decision of the Madras High Court. 12. Our attention, however, has been drawn to a decision of the Calcutta High Court where a different view appears to have been taken. That case in reported in Kailash Chandra v. Jogesh Chandra and this is all that is state in that case (p. 870) : With regard to the merits, the articles of association provided that the directors should be elected annually at a general meeting. It follows, therefore, that so long as the general meeting is not held in which the directors are to be elected the directors elected at the previous meeting would continue in office. It is contended by the learned advocate for the respondent that according to the true interpretation of the articles the directors would hold office only for one year form the date of their appointment, and if no general meeting is held at the lapse of one year the directors would automatically vacate their office and the company would go on without any directors at all. I am unable to accept this contention of the learned advocate as it seems to me that it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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