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F.A.C. Rebello Vs. Co-operative Navigation and Trading Co. Ltd. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtMumbai
Decided On
Case NumberSuit No. 1945 of 1923 and O.C.J. Appeal No. 2 of 1924
Judge
Reported inAIR1925Bom105; (1924)26BOMLR907; 84Ind.Cas.363
AppellantF.A.C. Rebello
RespondentCo-operative Navigation and Trading Co. Ltd.
DispositionAppeal dismissed
Excerpt:
meeting of company--meeting held under orders of the court--chairman appointed by the court--proceedings regulated by the orders of the court--discretion of chairman--closing of doors of the meeting room at the polling time--want of appointment of scrutinizers--opportunity to he given to a party to see if the votes were validly given.;at a meeting of the share-holders of a limited company held, under the orders of the court, for the purpose of electing directors of the company, and presided over by a chairman appointed by the court, the names of rival sets of directors were proposed and seconded. whilst poll was being taken on the two resolutions, the chairman ordered the doors of the meeting room to be closed and took votes and proxies of those only who were present. it was laid down by..........and discovery of the papers connected with this meeting was adjourned to the hearing of the suit. the suit came on for hearing on november 19, when the first thing that was heard was the said notice of motion. after hearing the parties on that notice the hearing was adjourned. the case was then taken up on december 3, on which date the learned judge delivered his judgment on the notice. he discharged the notice with costs, and proceeded to hear the suit. the learned judge came to the conclusion that on the evidence no irregularity was established and that nothing was shown which would enable him to say that the sense of the meeting was not correctly ascertained or that the resolutions purporting to have been passel at the meeting were not validly passed if the resolutions at the.....
Judgment:

Lallubhai Shah, Ag. C.J.

1. This appeal arises out of a suit, which has been tiled in consequence of the unfortunate differences that have arisen among the members of the Indian Co-operative Navigation & Trading Co. Ltd. It appears that up to February 1923 the plaintiffs and defendants Nos. 2 and 9 were directors of this company. By a special resolution of May 20, 1923, the company resolved to put in defendants Nos. 3 to 8 as new directors and to remove the plaintiffs from their office as directors. Before that resolution was confirmed the present suit was filed on May 28, 1923, in which the plaintiffs asked for a declaration that the said resolution was illegal and invalid and that defendants Nos. 3 to 8 were not properly appointed. Apparently there was no dispute about defendants Nos. 2 and 9 continuing as directors. This resolution was subsequently confirmed and the defendants filed their written statement, in which they pleaded that the resolution was valid, and made a counter-claim on that basis. Thereafter the parties came to an agreement that they should accept the result of a fresh meeting to be convened according to the consent terms under the direction of the Court. On August 14, 1923, with the consent of all the parties, a consent order was made, the terms of which are important. The effect of that consent order was that a meeting of the shareholders of the first defendant company, the Indian Co-operative Navigation & Trading Co. Ltd., was to be called on September 30, 1923, under the chairmanship of Mr. H.C.B. Mitchell, the Administrator-General of Bombay, to elect six directors. Provision was made for the appointment of a receiver who was to work in consultation with and with the advice of the first and fourth plaintiffs on the plaintiffs' behalf and the eighth and third defendants on behalf of the defendants. The order also provided that Mr. Mitchell, as chairman of the said meeting, was to admit to the meeting to be held on September 30, 1923, shareholders of the first defendant company on their putting their signatures or thumb impressions on the books provided for the purpose by the said Mr. Mitchell and on their producing their share certificates or final call payment receipts and that the shareholders of the said company were at liberty to canvass for the purpose of the said meeting. The chairman was to report the result of the said meeting and this suit and two other suits, with which we are not concerned in this appeal were to be put down for hearing on the first day after the October vacation. It was further provided that the resolution for the election of six directors from both groups or for proposing any other person qualified to be a director in lieu of any name in either group be put before the said meeting, with liberty to move amendments on the said resolution. It was provided that defendants Nos. 2 and 9 were not to be removed from the directorship of the said company and that six more directors were to be added to these two. It appears that some further attention was paid to the details connected with this meeting as a result of which there was a further consent order on August 29, 1923, whereby it was provided that no confirmatory resolution be required to make the resolution passed at the said meeting valid and binding. The terms of the notice convening the meeting were settled and a meeting was to be held at the particular place and time fixed in the order, i.e., in a Shamiana to he erected at the Esplanade Maidan in Bombay. It was also provided that the first resolution mentioned in the notice convening the meeting was to be put first, and, if it was passed, the other resolutions were not to be put at the meeting. In consequence of these orders of the Court, passed with the consent of all the parties concerned, a meeting was held on September 30; and the chairman made a report to the Court, which is Exhibit 4 in the case, stating the result of the meeting and also the various details connected with the conduct of the meeting. The minutes of the meeting were also put in which showed the different resolutions and the amendments proposed and the result of the voting. The other papers connected with this meeting were submitted by the chairman to the Court. Thereafter apparently the plaintiffs raised certain objections as to the validity of the resolutions passed at this meeting; and the notice of motion for inspection and discovery of the papers connected with this meeting was adjourned to the hearing of the suit. The suit came on for hearing on November 19, when the first thing that was heard was the said notice of motion. After hearing the parties on that notice the hearing was adjourned. The case was then taken up on December 3, on which date the learned Judge delivered his judgment on the notice. He discharged the notice with costs, and proceeded to hear the suit. The learned Judge came to the conclusion that on the evidence no irregularity was established and that nothing was shown which would enable him to say that the sense of the meeting was not correctly ascertained or that the resolutions purporting to have been passel at the meeting were not validly passed If the resolutions at the meeting were accepted the result would be that the plaintiffs' claim would fail and the six directors elected at the meeting, who were in fact the same as defendants Nos. 3 to 8, would come in as directors Accordingly the learned Judge dismissed the plaintiffs' suit, and made an order as to costs. The plaintiffs have appealed from this decree and practically all the objections raised before the trial Judge have been raised before us.

2. I shall first deal with the contention that the learned Judge erred in not adjourning the suit on December 3, as in effect on account of this refusal to adjourn the suit the plaintiff's were deprived of the real opportunity of establishing their objections. It is urged that as no judgment was given on the notice as to inspection and discovery of the papers connected with the meeting the plaintiffs did not know whether they would be required really to go on with the suit on December 3, and it is urged that if the learned Judge had allowed the plaintiffs inspection of the documents, the hearing would have been necessarily adjourned. Under these circumstances it is said that they have not been allowed sufficient opportunity to establish their case. I am unable to accept this contention. It appears that the suit had been on board for hearing from time to time and that the notice was adjourned to the hearing of the suit. The suit was really due for hearing and there is no reason to think that on December 3, if the learned Judge disallowed the application of the plaintiff's for the inspection and discovery of the documents they could have thought that they would not be required to go on with the suit. It was a suit in which any delay was to be avoided as far as possible. Already the matter had been sufficiently delayed and in the interests of the company it must have been obvious that an adjournment could not be justly granted. I am unable to say that the learned Judge was not right in disallowing the application for adjournment.

3. The next point relates to the validity of the second resolution passed at the meeting. The objection is that the Chairman wrongly disallowed the amendments proposed at the meeting. Three amendments were proposed at this meeting. The first amendment was that ten persons, who were named, should be elected directors. The Chairman refused to accept this amendment on two grounds Firstly, that the terms of the order required that six persons were to be elected and any proposal leading to the election of more than six persons would be out of order, and, secondly, that the ten names contained two names, which were already rejected as having been included in the first resolution, which was by that time negatived according to the calculation of the votes by a decisive majority. This amendment was rightly disallowed as being clearly contrary to the terms of the consent order. The second amendment was that the six persons named be elected directors. The Chairman refused to accept this amendment as not being in proper form, and also on the ground that it was practically asking for a fresh panel so far as one of the six persons, who had already been rejected, was concerned. It seems to me that here also the objection raised against the ruling of the Chairman is not right because according to the consent order the name of any person qualified to be director in lieu of any name in the second resolution could be allowed by way of amendment; but as the amendment was not in that form, it was rightly disallowed. This amendment is not very important, for the proposes of the amendment realised that it was not in a proper form and put in another amendment, in which four persons were named as substitutes for the four persons mentioned in the principal resolution which was resolution No. 2 at the meeting The Chairman accepted this amendment, but thereafter three out of the four persons intimated to the meeting that they declined to act as directors of the company. Under the circumstances the amendment which was one integral amendment could not be put to the meeting and the amendment as a whole was therefore ruled out. If the mover of the amendment still wanted to press his amendment he could have moved an amendment as regards the remaining one person, who had not expressed his unwillingness to act. But he did not do so. It seems to me that the view the Chairman took as regards the various amendments that were proposed is right. I have dealt with this point in detail, as the appellants have relied upon Henderson v. The Bank of Australasia (1890) 45 Ch. D. 330 as indicating that if the amendment, which the party has a right to move has been wrongly disallowed by the Chairman, it would invalidate the resolution. In the present case, for the reasons, which I have already given, they were properly dealt with by the Chairman.

4. Then there are various objections as to the course adopted by the Chairman at this meeting. For instance, it is urged that the Chairman was not right in closing the doors, so as to exclude the shareholders present outside the pandal when the poll was taken on the first resolution. It is pointed out that the Chairman ought to have appointed scrutineers and that there was no sufficient time left for the Chairman to make a proper and searching examination of the proxies in order to be able to know whether those proxies would be validly accepted or not It is also urged that the arrangements at the meeting-were not satisfactory in the sense that some people, who were not shareholders, could get in and in fact voted at the meeting, and that some shareholders were kept out and were unable to vote.

5. All these are objections with regard to which it must be remembered that this was a meeting convened under the orders of the Court and the Chairman was to act in accordance with the orders of the Court so far as they were given and for the rest he had a discretion, which the Chairman of such a meeting would have. I may refer to the observations of Lord Selborne in In re Indian Zoedone Company (1884) 26 Ch. D. 70, 77:--

That the minutes in the books are to be received, not as conclusive, but as prima facie evidence of resolutions and proceedings at general meetings; and also it may be added, and I think correctly, that inasmuch as the chairman who presides at such meetings, and has to receive the poll and declare its result, has prima facie authority to decide all emergent questions which necessarily require decision at the time, his decision of those questions will naturally govern, and properly govern the entry of the minute in the books; and, though in no sense conclusive, it throws the burden of proof upon the other side, who may say, contrary to the entry in the minute-book, following the decision of the chairman, that the result of the poll was different from that there recorded.

6. These observations were made with reference to a meeting, which was held on behalf of a company and it seems to me that they apply with greater force to a meeting like this, where the Chairman is acting under the orders of the Court under special circumstances such as we have in this case. It seems to me that the report of the Chairman to the Court and also his evidence recorded at the hearing should have considerable weight, and there is really nothing in the evidence to show that anything was done at the meeting, which could improperly affect the voting and the proper recording of the votes. I do not think that these objections could properly be allowed. Subject to what I have to say with regard to the application for the inspection of the documents, it seems to me to be enough to say generally that under the circumstances in the objections relating to the general conduct of the meeting, there is no substance. There is no evidence of any real value in support of these objections.

7. The important point in the appeal, which has presented some difficulty, is the point as to the right of the appellants to inspect the papers relating to the voting at the meeting. It is urged that in view of Articles 71 and 76 of the Articles of Association it was essential to determine whether the voters, whose votes were recorded, were competent to vote according to the provisions of these articles. The plaintiffs urge that unless they are allowed to see the proxies and the register of the shareholders showing which votes were recorded they could not make out these objections. This point has apparently considerable force; and, speaking for myself, in spite of the weighty considerations referred to by the learned Judge in his judgment for refusing the application for the inspection and discovery, it seems to me that it would have been better if this inspection had been allowed. All grounds of dissatisfaction or complaint would have been removed. If the application had been granted, no doubt, it would have meant delay, and that was a consideration not to be ignored under the circumstances of the case. After a careful consideration of the record and the arguments which have been forcibly put on behalf of the appellants, I have come to the conclusion that really the plaintiffs have laid no foundation for the suggestion that the inspection would yield any useful result from their point of view. In the first place the plaintiffs or those who are working on their behalf had ample opportunity during the month after the notice and before the meeting was hold to point out to the Chairman the course which he was to adopt in order that no invalid votes may be recorded There is no suggestion that during that time anything that could be done by way of securing that result was not done by the Chairman. Then we have the fact that at the meeting no objection of any kind with reference to any voter was made. It appears from the record that the solicitors of the plaintiffs were present and the plaintiffs were not without legal assistance. The absence of any objection on this point, at the meeting or of any indication that they would have some objection on that score is not in favour of the plaintiffs. But the most important thing against them, which is to be borne in mind is, that when the Chairman was examined at the hearing, though he was cross-examined on certain points, not a single question was put to suggest that in the examination of the proxies or of the register of the shareholders, in respect of the votes that were recorded at the meeting, he had omitted to do something, which he ought to have done, or that he had done something, which he ought not to have done, in order to be able to decide whether a particular proxy or a particular vote was in accordance with the provisions of Articles 71 and 76 of the Articles of Association. It is true that an attempt has been made before us particularly with reference to one of the voters who held forty-two proxies to show that he was not entitled to vote. But the evidence on that point is far from satisfactory and one case of that kind does not under the circumstances appear to me to justify the general suggestion that the result of the inspection might materially alter the voting on the first resolution. It is important to remember that the result was duly recorded in the minutes. On the first resolution, which was really the most important from the plaintiffs' point of view, 803 votes and 2582 proxies were recorded in their favour; whereas 1410 votes and 2652 proxies were recorded against them. The Chairman has also given an analysis of the proxies which were received by him [Exh. (E) at p 22 of Part III]. Except as to one voter, who is No. 12 in the list, it is not suggested even now, nor was it suggested at the hearing, that any other voter had voted contrary to the requirements of Articles 71 and 76 of the Articles of Association. That analysis also shows the proxies, which were disallowed and which were disputed. The disputed proxies are 81 and the proxies disallowed are 98 in number. Even if, we take the number of the disputed proxies in favour of the plaintiffs, it is clear that the result of the voting is not affected. The Chairman has stated in his evidence in effect that he took all possible precautions to check the proxies. Under these circumstances, though it seems to me that ordinarily the plaintiffs would have the right of inspecting these documents with a view to establish their objections, I am unable to hold that under the circumstances of the case there was any error in the order of the learned Judge.

8. In the result I would dismiss the appeal and affirm the decree of the trial Court, except as to costs

9. As regards the costs of the suit incurred up to the date of the first consent order, i.e., up to August 14, including the costs of the rule nisi, each party should bear his own costs. The costs of the consent orders and the costs up to the date of the meeting including the costs of the meeting, should come out of the assets of the company. The costs of the notice of motion and the costs of the suit after the date of the meeting should be paid by the plaintiffs. The appellant to pay the costs of this appeal. On account of the consent orders, it has become unnecessary to examine the merits of the plaintiffs' claim as originally made, and having regard to all the circumstances it seems to us to be fair that each party should bear his own costs up to the date of the first consent order inclusive of the costs of the rule nisi.

10. As regards the costs of defendant No. 9, we order that the plaintiffs should pay his costs up to the date when he was discharged in the lower Court and his costs in appeal. The receiver's costs should come out of the assets of the company.

Fawcett, J.

11. I agree with the judgment and orders proposed by my learned brother. I think, the legal position, after the report of Mr. Mitchell was received, must be borne in mind. It is not the case that the result of the voting, as recorded in this report and appendices, can be attacked as freely as if the meeting had not been held under the Court's orders and under the chairmanship of an officer appointed by the Court specially for that purpose. The case is like that of a report of a commissioner for a local investigation falling under Order XXVI, rule 10, Civil Procedure Code, and although that particular rule does not in terms cover the present case, it does afford a useful guide as to the situation arising. The adducing of evidence in regard to objections to a commissioner's report is subject to the discretion of the Court, as has been ruled by the Privy Council in Grish Ghunder Lahiri v. Shoshi Shikhareswar Roy I.L.R. (1900) Cal. 951, and the Court had, therefore, in my opinion, a certain control as to the kind and amount of evidence that should be allowed to be adduced in regard to the objections taken to the result of the voting as reported by Mr. Mitchell.

12. Again the case may be likened to that of an arbitration, for in effect the company was appointed to decide between two contending groups of proposed or alleged directors, and regarded from that point of view the case is similar to one where objections are raised to the validity of an award on various ground's. In such a case the questions arising are generally dealt with on the affidavits put in by the respective parties and, if necessary, after examination of the arbitrator. The appellants in this case had, in my opinion, sufficient opportunity to adduce that kind of evidence attacking the report of Mr. Mitchell as to the results of the meeting, and they have filed very lengthy affidavits in regard to the matter I agree with the view taken by the learned Judge, when he says: 'I think I may safely assume that when so experienced and able an officer as that appointed by the Court on this occasion was in charge of the meeting and furnished a report regarding the proceedings, on the face of which report there is nothing to show that this meeting was not properly conducted, the Court may take it for granted, unless good reasons are shown to the contrary, that everything was done in accordance with law.' The examination of Mr. Mitchell also, I think, corroborates the statement in his report as to the due precautions that were taken to prevent irregularities in voting, such as persons entitled to vote not being able to do so, or persons not entitled to vote being allowed to do so. The objections that have been raised about the result of the voting have been sufficiently dealt with in the judgment of the learned Chief Justice, and I will only add a few remarks.

13. In regard to the objection, that the chairman closed the doors during the taking of the second poll, in my opinion, he was clearly justified in doing so having regard to the fact that this was not an ordinary meeting of a company, but a meeting in which special precautions had to be taken in view of the rivalry between the two groups. Although in an ordinary meeting the doors may be kept open, yet in the present case, it was, in my opinion, open to the chairman, if he thought it advisable, to close the doors during the taking of the poll. As to the checking of the proxies with reference to Articles 71 and 76 of the Articles of Association of the company, no substantial ground has been shown for thinking that a scrutiny would really give a different result, in view of the large majority obtained on the defendants' side. The probabilities are that the objections on either side would tend to cancel each other, just as Mr. Mitchell found that out of twenty-four shareholders who were present and Voted, although they had also given proxies, eleven were 'ayes' and thirteen 'noes'.

14. In regard to the objection that no scrutineers were appointed, it is sufficient to say that there was no request made to the chairman at the time for their appointment, and, the ordinary rule is that scrutineers need not necessarily be appointed. I agree with my learned brother that substantially there is no reason to think that the result of the voting would be materially altered by an inspection of the records, of which inspection is sought, or by a scrutiny into the voting both by person and by proxy I think this is clearly corroborated by the admission of the former secretary of the company, who gave evidence that he knew that the majority at the meeting was against them and so he left as well as by the statement of Mr. Mitchell that one of the plaintiffs, Mr. Rangall, told him, when he was asked whether he was going to vote, 'It is no good' and pushed past him. In my opinion, there can be no doubt that there was a strong majority against the appellants; and so far as there may have been an irregularity on the part of the lower Court in not allowing inspection of the register of the company and the proxies, etc., it is one which falls, in my opinion, under Section 99 of the Civil Procedure Code, and affords no ground for reversing the decree of the lower Court. The inspection of these documents should perhaps have been allowed in view of the fact that they were appended to or referred to in Mr. Mitchell's report, and so may be said to have been part of the proceedings put in evidence in regard to the result of the meeting. But it is not quite irrelevant to note that there are restrictions in England in regard to the inspection of ballot papers in elections both to the House of Commons and in regard to Municipal elections, as stated in Halsbury's Laws of England, Volume XII, at pp. 428 and 511. Such inspection cannot be obtained without an express order of the Court; strong grounds for making such an application must be shown, and the Judge must be satisfied that the application for it is made bona fide. I do not say that this applies to the present case because these restrictions are statutory; but it does show there are s me considerations against a free right of inspection of voting papers in a case like the present.


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