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Parshuram Dattaram Shamdasani Vs. the Tata Industrial Bank Limited - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtMumbai
Decided On
Case NumberSuit No. 3643 of 1923 and O.C.J. Appeal No. 3 of 1924
Judge
Reported inAIR1925Bom49; (1924)26BOMLR987; 90Ind.Cas.580
AppellantParshuram Dattaram Shamdasani
RespondentThe Tata Industrial Bank Limited
DispositionAppeal dismissed
Excerpt:
indian companies act (vii of 1918), sections 218, 79, 81--amalgamation of company--resolution by directors--notice to convene extraordinary general meeting of share-holder's--perm of notice--procedure at the meeting--point of order--power of chairman to overrule, the point,--amendment tending to negative the resolution may be ruled out--point of order, impeaching validity of all voles, not in order--right, of speech at the meeting.;the directors of t. bank (respondent no. 1) having approved of the amalgamation of their bank with c. bank (respondent no. 2), resolved, on july 5, 1924, that the scheme of amalgamation should be placed before the shareholders of their bank for approval. on the same day one of the directors entered into a provisional agreement with c. bank for amalgamation. a.....lallubhai shah, ag. c.j.1. [his lordship after setting out the facts of the case, proceeded:] i shall first take up the points relating to the notice convening the extraordinary general meeting on july 19. in order to appreciate them, it is material to state here that the capital of the tata bank was seven and a half crores of rupees, consisting of ten lakhs shares of 11sectin. 75 each. in respect of each share at the material time rs. 22-8-0 were oiled in with the result that at that date its paid up capital was two and a quarter crores. the balance sheet of this bank published before these negotiations commenced relates to the year ending with march 31, 1923. it appears from the evidence that about the end of june 1923, the condition of the bank was not satisfactory. the deposits in the.....
Judgment:

Lallubhai Shah, Ag. C.J.

1. [His lordship after setting out the facts of the case, proceeded:] I shall first take up the points relating to the notice convening the extraordinary general meeting on July 19. In order to appreciate them, it is material to state here that the capital of the Tata Bank was seven and a half crores of rupees, consisting of ten lakhs shares of 11Sectin. 75 each. In respect of each share at the material time Rs. 22-8-0 were oiled in with the result that at that date its paid up capital was two and a quarter crores. The balance sheet of this Bank published before these negotiations commenced relates to the year ending with March 31, 1923. It appears from the evidence that about the end of June 1923, the condition of the Bank was not satisfactory. The deposits in the Bank at the end of March 1923 amounted to about Rs. 5,95,00,000, while at the end of June 1923 they had gone down to 3,37,00,000 of rupees. It is also in evidence that the Manager of the Bank had found it difficult to carry on the business of the Bank. At this time the Central Bank had a capital of one crore of rupees consisting of 2,00,000 shares of rupees 50 each. In respect of each share Rs. 25 were paid. A Thus, in June 1923, the condition of that Bank was fifty lacs of rupees paid up capital and thirty lacs reserve fund, with deposits amounting nearly to thirteen crores of rupees. It is also in evidence that the market value of the Central Bank shares was Rs 30 and a little over, and the market value of the Tata Bank shares was Rs. 14-8-0 per share. It may be remembered that in respect of the Centra! Bank shares the shareholders were liable to pay Rs. 25 per share and in respect of the Tata Hank shares the shareholders were liable to pay Rs. 52-8-0 per share. This was the state of the Banks when the negotiations commenced. The result of the negotiations is to be found in the agreement which came to be signed on July 5, 1923, by Mr. Commissariat and the Central Bank of India, Limited. According to that agreement the Central Bank was to take over all the assets and liabilities of the Tata Bank, was to increase its capital so as to be able to give one share of Rs. 50 with Rs. 25 paid up in respect of two shares of the Tata Bank to the shareholders of that Bank It was also a part of the agreement that if a number of shareholders not exceeding one-third of the shareholders did not wish to take shares in the Central Bank they were to be paid at the rate of Rs. 15 per share or such amount as may be fixed under the scheme of arbitration which was provided for in the agreement in accordance with the requirements of Section 213 of the Indian Companies Act. There were other provisions with regard to the payment of the officers and other employees of the Tata Bank, but in substance the effect of the agreement was as I have just stated.

2. After this provisional agreement was discussed by the directors the notice in question was issued. I have already referred to the terms of that notice, and along with that notice a circular was issued. It is pointed out in that circular, which was issued by the orders of the Board of Directors, that there was an offer from the Central Bank of India, Limited, to take over the Tata Bank as a going concern on terms of allotting one share of the Central Bank of India, Limited, of the nominal value of Rs. 50 credited as paid up to the extent of Rs. 25 for every two shares in the Tata Industrial Bank, Limited, of the nominal value of Rs. 75 on which the sum of Rs. 22-8-0 per share was paid up. The directors had called for the opinion of the auditors of both the Banks to examine the financial position of the two Banks and it was stated in the circular that the auditors were satisfied that the offer made was fair and equitable and that two shares of the Tata Bank were worth one share of the Central Bank. The result of the amalgamation was stated in the circular to be that the uncalled liability of Rs. 1.05 which then existed on two shares in the Tata Industrial Bank, Limited, would be exchanged for an uncalled or contingent liability of Rs. 25 per share in the Central Bank of India, Limited.

3. A reference to the agreement was made in the circular in the following terms:--

An agreement for carrying the proposed amalgamation into effect has been entered into between Mr. Hormnsji Framji Commissariat a shareholder of your company on behalf of your company and the Central Bank of India Limited, which agreement is conditional upon your sanction of the scheme of amalgamation and a copy of the conditional agreement which bears date July 5, 1923, is open for inspection by any member of your company at the registered office.

4. The attention was drawn in the circular to Section 213 of the Indian Companies Act and to the rights of the shareholders under that section and it was pointed out that those dissentient shareholders, who would not like to take up the shares of the Central Bank of India, Ltd., would be paid as provided, i. e., Rs. 15 per share or such amount as may be fixed by arbitration in the manner prescribed under Section 213. It also mentioned that the Central Bank was not bound to proceed with the scheme of amalgamation if more than one-third of the shareholders dissented.

These were the materials circulated to the members and they had an opportunity under the terms of the circular to inspect the agreement if they were minded to do so.

5. With reference to this notice it is urged:--

(1) That the interest of the directors in this arrangement has not been disclosed;

(2) that the difference of opinion among the directors with reference to this scheme, as indicated in the minutes of the directors' meeting, was not communicated to the share-holders;

(3) that the basis of the calculation adopted by the two banks in arriving at this result, or rather in fixing the price of the Tata Bank concern, has not been disclosed; and

(4) that it was defective because a copy of the agreement was not sent with the circular to the shareholders.

6. As regards the point relating to the interest of the directors, it has been suggested vaguely that the directors themselves were to benefit under this arrangement, and that there was some kind secret understanding which was not disclosed Beyond a suspicion on the part of the plaintiffs that there was some secret arrangement between the directors of the Tata Bank and the Managing Director or directors of the Central Rank, there is nothing to show any secret arrangement. So far as the record is concerned it is clear that there is no evidence of it, and Mr. Pochkhanawalla, the Managing Director of the Central Bank, stated definitely as follows:--'There are no terms of the amalgamation not contained in the agreement of July 5, 1923.' It is true that if there was any kind of secret arrangement between the directors of the two banks, it must be disclosed in the notice and, if it has not been disclosed, the notice would be bad. Such an arrangement cannot be assumed and, if that suggestion is to be made with any effect, it must be proved. It is material to note on this point that in the plaint there is no allegation in the sense that the directors wore going to make any secret profit or to get any secret benefit out of this transaction.

7. The second thing suggested against the directors relates to their liability in respect of certain debts due to the Tata Bank. The liability of the directors is indicated in the balance sheet of March 31, 1928, and is stated thus:--

Debts due by Directors of the Bank jointly with other persona or against securities and considered good including debts due by the Joint Stock Companies guaranteed by their agents, a Director of the Bank being a member of the firm of Agents.

8. In respect of this liability it is clear that the effect of the agreement is merely to substitute the Central Bank as a creditor instead of the Tata Bank, and there is no suggestion and certainly there is no evidence to show that the directors were in any way placed more favourably with reference to their liability for these debts under the agreement-than they were before the agreement with reference to the Tata Bank. Therefore so far as the suggestion that the notice is bad because the directors' interest or any secret arrangement with regard to the directors' interest has not been disclosed in the notice is concerned, it seems to me that the contention of the appellants must fail for the simple reason that there is no evidence whatever on the point in favour of the plaintiffs. On the contrary there is clear and reliable evidence to the effect that there was no arrange-mont between the two banks except that disclosed and stated in the terms of the agreement of July 5, 1923.

9. I have so far dealt with the question of the directors' interest which is said not to have been disclosed and also incidentally with the point that there was an undisclosed agreement which should have been stated in the notice. The next point is that the difference of opinion among the directors should have been referred to in the notice. I am quite unable to accept this contention. It is true that apparently there was some difference of opinion among the directors up to a certain stage, but they all unanimously resolved on June 27 to refer this matter for the consideration of the shareholders. It may be that there was some difference of opinion among the directors; but I do not see how the omission to mention that circumstance can be said to constitute a defect in the notice. There is no rule of law or prudence which compels a reference in the notice to such differences of opinion among the directors.

10. The next point is that the basin of the calculation, upon which broadly speaking the terms of this arrangement wore settled, is not disclosed in the notice On this point I do not consider it necessary to go into the details of the figures. They have been explained by Mr. Pochkhanawalla in his evidence and the learned trial Judge has referred to that evidence as follows:--

266 lakhs as assets as per the balance sheet as at March 31, 1923, plus two lakhs by way of profits, and four laks by way of approbation of Government securities, to be added. That would make a total of 272 lakhs, and making allowance for depreciation in industrial investments prior to March 31, 1923, balance 252 lakhs not assets. Less depreciation made for the purpose of amalgamation, 22 lakhs depreciation in buildings, 15 lakhs depreciation in industrial investments since March 1923, ten lakhs for loss of interest on capital locked up in buildings not let and to meet the claims for compensation by employees, and five lakhs for contingencies. This would make a total of 252 lakhs leaving a balance of 200 lakhs and the assets which form the basis of the calculation for the purposes of the amalgamation scheme.

11. The learned Judge has referred to these different items in detail, and has expressed his opinion thus:--

It is clear they refer to details which there was no obligation to set forth the notice, and which would have been elicited by any intelligent shareholder at the meeting.

12. I agree with this view of the learned Judge. Apart from that I am of opinion that there is no proviso which compels any Rule 126 reference to the statement of these details in a notice convening the meeting. It seems to me that what was stated in the circular and notice was sufficient. I do not say that the basis of this calculation could not have been referred to in the circular. If the directors of the Tata Bank thought it proper to do so, they could have done so. But the fact that they have not done so does not, in my opinion, constitute any defect in the notice, much less such a defect as would invalidate it. The information given in the circular was broadly speaking what the shareholders would require as to how they would stand under the proposed agreement with reference to their interest in the bank. It was made clear to them in the circular that so far as they were concerned they were getting the equivalent of their shares with this added difference that the outstanding liability of Rs. 105 on every two shares would be reduced to Rs. 25. It cannot be said that anything more was necessary. It seems to me that the basis which has been disclosed by Pochkhanawalla in his evidence is merely a sort of rough calculation for the guidance of the Banks But there is nothing on the record to show that that basis was accepted in writing on any occasion. Broadly speaking the basis so far as the Tata Bank was concerned was that all the assets such as they were at the date of this agreement were to be taken over by the Central Bank, subject to their liability to give one share of the Central Bank for every two shares of the Tata Bank with Rs. 25 paid up in respect of that share, and in the case of those shareholders, who were not prepared to accept the shares in the Central Bank they were to get at the rate of Its. 15 or such further sum as may be determined by arbitration in accordance with the provisions of Section 218 of the Indian Companies Act. It clearly gave notice to the shareholders as to what was proposed to be done. The assets of the Bank were disclosed in the last balance-sheet; and it was made clear that these were to be taken over by the Central Bank subject to their getting this return. If any further information was needed, as pointed out by the. learned Judge, it could have been elicited at the meeting; but if the shareholders were satisfied that no further information was required, that this was a good scheme as regards their interests, it was open to them to accept it without any further information as to the basis of the calculation. I think that the omission to refer to this basis in the notice does not in any sense constitute a defect in the notice.

13. The last point with reference to the notice is that the copy of the agreement was not circulated along with the notice to the members. The agreement is referred to in the special resolution which is proposed for consideration; and it is also stated that the agreement will be available for inspection at any time to the shareholders, when they would care to have inspection of it. It is also in evidence that this agreement was on the table at the meeting of July 19, though it has been contended on behalf of the appellants that this agreement was not available for reference at the meeting. It seems to me that on the evidence of Mr. Pochkhanawalla it must be held that the agreement was kept on the table for reference at the meeting. Apart from that, I am unable to hold that the omission to send a copy of the agreement to each shareholder with the notice constitutes a defect in the notice.

14. I have so far dealt with the specific points urged as regards the notice. It may be stated generally that under Section 79 of the Indian Companies Act read with Article 68 of the Articles of Association of the Tata Bank all that was required by law to be stated in the notice was the general nature of the business. The general nature of the business was clearly indicated in the notice and sufficient details were given, which were necessary for the purpose of enabling the shareholders to consider the question. I may state that several cases have been cited with reference to the point of defective notice. I shall mention only Alexander v. Simpson (1889) 43 Ch. D. 139; Kaye v. Groydon Tramways Company [1898] 1 Ch. 358; and Tiessen v. Henderson [1899] 1 Ch. 861.

15. The net result is that where there is any secret agreement or any interest of the directors in the agreement not disclosed in the circular, or in the notice, the Court will view with strictness any omission to refer to it in the notice or in the circular accompanying the notice; and the omission to mention any secret arrangement would constitute a serious defect in the notice But where no secret agreement is proved or suggested and where there is no indication that there was anything to conceal the Court will as far as possible take a liberal view of the terms of the notice and will not upset the proceedings taken on a notice for some defect, which might have been avoided, but which was not avoided on account of some honest mistake. On this point, I think the following observation of Cotton L.J. in Henderson, v. Bank of Australasia (1890) 45 Ch. D. 330 is important:--

I do not think that a notice calling a meeting ought to be treated very critically in order to see whether wo cannot pick out some defect in it.

16. In the present case looking at the notice and the accompanying circular broadly with reference to the facts of the case, I am satisfied that there is no such defect in this notice such as could invalidate it. I concede that more could have been stated in the circular: but there is no essential matter, which can be said to have been omitted in the present case.

17. I shall now deal with the objections which have been raised with reference to the special resolution. It has been urged that there is no express power in the Memorandum of Association of the Tata Bank to effect amalgamation, that there is no amalgamation between the two banks in the legal sense of the word and as the special resolution purports to effect amalgamation between the two banks, it is illegal and invalid. It is urged that the resolution does not satisfy the requirements of Section 203(2) of the Indian Companies Act, in so far as the resolution as to the voluntary winding up of the company, is mixed up with other matters, The argument is that there should have been separate resolutions for the voluntary winding up and other matters relating to the agreement. Lastly, it is urged that as the special resolution does not in terms comply with the provisions of Section 213 in so far as it does not expressly authorise the liquidators to receive compensation for disposal among the shareholders it is an illegal resolution.

18. As regards the first objection, it is enough to say that this action is taken under the statutory right, which every limited company has under Section 213 of effecting such an arrangement, and not under any special power conferred upon the company by the Memorandum of Association. Though a reference has been made to the express power of this kind contained in the Memorandum of Association of the Central Bank of India, Ltd., I do not think that it is necessary to say more on this point, beyond this that if the Tata Bank and the other Bank were both inclined to give effect to such an arrangement, it was perfectly open to the Tata Bank under section 213 of the Indian Companies Act to sanction a scheme of this nature.

19. The next point about the amalgamation is also based upon an incorrect appreciation of the meaning of the word. As regards the meaning of this word it is enough to refer to two cases. In Wall v. London and Northern Assets Corporation [ 1898] 2 Ch. 469, the observations of Lindley M.R. are as follows:--

No very precise meaning can be given to the word ' amalgamate ' when we talk about amalgamating a company with any persons, companies, or firms, and I confess that I am not prepared to put any sharp definition upon the word. I have no doubt that it includes the case put by Lord Hatherley in Higg's case (1865) 2 H. & M. 657 and mora recently by Lord Davey in New Zealand Gold Extraction Company (Newberyvantin Process) v. Peacock [1894] 1 Q.B. 622. I do not think it involves the formation of a new company to carry on the business of an old company. I have no doubt it includes that; but I do not think it is confined, or understood to be confined, to that. I do not see how a company as a business transaction can practically amalgamate with persons or companies carrying on business unless the company in some way or other sells its assets as a whole--not for money, for that would be a simple sale--but for shares in the purchasing company.

20. According to these observations, an arrangement like the one we have in this case can bo included within the meaning of the word 'amalgamation.

21. In In re South African Supply and, Cold Storage Company [1904] 2 Ch. 268 Buckley J says as follows (p. 287):--

An amalgamation may take place, it seems to me, either by the transfer of undertakings A and B to a new corporation, 0, or by the continuance of A and B by B upon terms that the shareholders of A s' all become shareholders in B. It is not necessary that you should have a new company.

22. It is clear to my mind, therefore, that the use of the word 'amalgamation' in the resolution is not inaccurate and cannot possibly constitute any illegality.

23. As regards the objection based upon Section 203(2), under Section 213(5) it is provided that a special resolution shall not be invalid for the purpose of this section by reason that it is passed before or concurrently with a resolution for winding up the company, or for the appointment of liquidators. It has been urged before us that this clause really means that it may be passed at the same meeting, but it cannot be put up in the same resolution I am unable to accept the contention. I have no doubt that the resolution as framed was a perfectly legal resolution which it was open to the company to accept if it was disposed to do so.

24. The last point is that the terms of the resolution are not in accordance with the requirements of Section 213 of the Indian Companies Act. Here again it seems to me that the objection is purely technical. It is conceded that the agreement as drawn up is proper in form, and it is clearly within the scope of Section 213. In fact it was said that it was so cleverly drawn up that appellant No. 1 could not point out any defect in the form of the agreement, so far as the requirements of Section 213 were concerned Looking to the substance of the resolution it is clear that it was within the authority of the company to pass it under Section 213. On this, point I may refer to the following observations in Imperial Bank of China, India, and Japan v. Bank of Hindustan, China, and Japan (1868) L.R. 6 Eq. 91:--

I believe it would have been sufficient if the first notice had gone on and said, 'This is to be carried out under the Act;' or, even short of that, if it had given notice to the parties that it was intended to pass a resolution giving authority to the liquidators to carry out the arrangement.

25. In the present case we find the resolution both in substance and form fulfilling the requirements of Section 213. It is true that in terms there are no words authorising the liquidators to receive compensation and distribute it amongst the shareholders; but the fact is clear, and to my mind the point is without any substance.

26. The next set of points relate to the meeting of July 19. Four points have been urged with reference to the proceedings at this meeting. First, it is urged that the point of order, Exh. L, was wrongly ruled out of order; secondly, that the amendment moved by the appellant No. 1 (Exh. 0) was wrongly disallowed; thirdly, that the appellant No. 1 wanted to apeak on the resolution after his amendment was disallowed, but in fact he was prevented by a majority of the shareholders from speaking to this resolution, and that as his right of speech is denied to him, the resolution passed at the meeting is vitiated; and, lastly, that the point of order, which he had raised with reference to the validity of the votes, was wrongly disallowed.

27. As regards the first point, I may mention that the point of order is long enough to puzzle any chairman. It was a request to the chairman to hold that the meeting was not competent to consider and confirm the said arrangement, which was ultra vires of the company. I am not surprised that the chairman simply ruled it out of order, and in my opinion, that was the only course which the chairman could reasonably adopt in dealing with it. It was for the shareholders to consider whether to accept or reject the resolution, and looking at this point of order it might have well formed a speech of decent length against the resolution; but as a point of order it was properly ruled out, and I agree with the learned trial Judge on this point.

28. The second point is not so easy. With regard to the amendment which he proposed (Exh. 0) the learned trial Judge has upheld the decision of the chairman on two grounds. First, according to him on a proper interpretation of Section S1 no amendment could be allowed, if a resolution proposed comes under that section. Secondly, having regard to the nature of the amendment, as it was practically a negative of the resolution, it was properly disallowed. The correctness of both these conclusions is questioned before us. As regards the first point it depends upon the interpretation of Section 81 of the Indian Companies Act. According to the decision in Torbock v. Lord, Westbury [1902] 2 Ch. 871 an amendment may be allowed at the first meeting, and in the case of a special resolution no alteration whatever will be allowed at the confirmatory meeting. The learned trial Judge has doubted the correctness of this decision; but it seems to me that it is going too far to hold that at the first meeting, when the resolution is to be considered, no amendments could be allowed. It is no doubt a possible view on a strict reading of Section 81 of the Indian Companies Act, which provides that it must be a resolution of which notice specifying the intention to propose the resolution has been duly given, It may be urged that when an amendment is moved, it ceases to be the resolution of which notice is given, becomes some other proposal than the one contained in the resolution of which the absent shareholders would not have any notice. In spite of this consideration an amendment at the first meeting is allowed under the English statute. In the absence of any decision to the contrary, I am not prepared to go so far as to say that no amendments could be allowed. It must necessarily depend upon the nature of the resolution and the nature of the amendment, whether it could be or should be allowed by the chairman. Therefore I proceed to consider the second objection with reference to this point. I have already referred to this amendment. It really asks the shareholders to consider that the proposed amalgamation may be modified so as to require the entire values of the properties and assets and capital and liabilities of this company as determined on June 30, 1923, by the Managers and Auditors of this company and the Central Bank of India for the purposes of amalgamation be credited to the capital of the Centra] Bank of India without any deduction whatsoever and with the further proviso that nothing out of the said values be allowed to be carried by way of premium or otherwise to the reserve fund of the Central Bank of India. This amendment goes beyond the proper scope of an amendment which could be considered with reference to the subject matter before the meeting. The subject matter for consideration before the meeting was whether the particular offer made by the Central Bank of India on the conditions contained in the agreement was to be accepted by the Tata Bank or not, and they could either accept that offer or reject it. It was perfectly open to them to adjourn the consideration of this question with a view to further negotiate with the Central Bank and to see whether any counter-offer to be made by the Tata Bank would be accepted by the Central Bank. The amendment though in fom an amendment was really a counterproposal of a different nature and in effect it involved either the adjournment of the consideration of the resolution or the rejection of the resolution proposed before; the meeting. Further this amendment required that when the transfer was effected the Central Bank was to act in a particular mariner with reference to the assets of the Tata Bank, so that nothing out of the said values be allowed to be carried by way of premium or otherwise to the reserve fund of the Central Bank of India. The amendment required something to be done by the Central Bank when the transfer was effected, and when the whole property of the Tata Bank became the property of the Centra] Hank. That would be in a sense beyond the powers of the Tata Bank to control. Having regard to the wording of the amendment it is clear that it went so far beyond the scope of the subject-matter of the resolution before the meeting, that it was clearly open to the chairman to rule it out of order. It could not affect the position of the appellant No 1 in any way; it was perfectly open to him if the amendment was rejected to point out that the resolution as it was framed should not be passed or that the consideration of it should be adjourned in order that further negotiations on the lines which he desired should take place. That was not rendered impossible to him by .this amendment being ruled out and on a consideration of the arguments on both sides of the question, I am satisfied that the amendment was rightly ruled out. It is true that any proper amendment, which is moved by any member at a meeting, should be put to the meeting for consideration and if the chairman rules out any such amendment, the resolution is liable to be set aside as was decided in Henderson v. Bank of Australasia. (1890) 45 Ch. D. 330.

29. The next point relates to the right of speech The learned trial Judge has found that after the plaintiff No. 1 was disappointed in his attempt to speak on two occasions, first, as regards the point of order, and, secondly, on the amendment which he moved, he really elected not to speak on the resolution and therefore there was no denial of the right of speech. On this point it has been urged before us on behalf of the appellants that the finding that the appellant No. 1 elected not to speak on the resolution is not justified on the evidence in the case. It is urged that having regard to the temper disclosed at the meeting towards him, whether he was in fact prevented forcibly from speaking to the resolution though he attempted to do so, or whether under the circumstances he made a feeble and courteous attempt, which may be interpreted as an election not to speak, in substance he was prevented from speaking on the resolution. On the evidence bearing on this point, which it is not necessary to discuss in detail, I am satisfied that appellant No. 1 was practically prevented from speaking to the resolution. Even if we accept the evidence of the witness for the defendants on this point that plaintiff No. 1 just appealed to the shareholders ' Brother shareholders, will you care to listen to me,' that when they said 'no' he elected not to speak, in substance he was prevented from speaking. Having regard to the incidents that had happened already at the meeting, and to the persistent manner in which the shareholders showed their unwillingness to hear him, it may be inferred that if the appellant No. 1 had thought of speaking he would have been prevented from speaking. I should say that he was practically prevented from speaking to the resolution. On this finding the question arises whether that is sufficient to vitiate the resolution. As regards the right of speech, I may refer to the case of Wall v. London and Northern Assets Corporation [11898] 2 Ch. 469 to which I have already referred with reference to another point. There the Court of Appeal had to consider the effect of a closure applied by the chairman of a meeting. With reference to that the observations of the Master of the Rolls and of Chitty L.J. are practically to the same effect. It is pointed out that the majority must not refuse to listen to the speech of a member in reasonable terms for a reasonable time, and having regard to the circumstances of that case the Court was satisfied that the closure was properly applied and that even if it resulted in negativing the right of speech to a particular member, it did not vitiate the resolution. It is difficult to lay down any general rule as to what should be the result where the right of speech is denied to a member in a general meeting of the shareholders. It seems to me that the proper test to lay down is to consider the facts and circumstances of each case and to determine whether the denial of the right of speech is sufficient to vitiate the resolution under the circumstances of that case. I may here pause to point out that those who refuse unnecessarily out of sheer impatience to listen for any reasonable length of time, to any arguments in support of the opposite views incur a grave risk in adopting this attitude of exposing the very resolution, which they may he anxious to adopt, to the scrutiny of the Court and to render it liable to be set aside. The very purpose which they may have in view may be defeated on account of such conduct. It is important that the risk involved in such conduct should be realise 1 by those who resort to it. Apart from that question, however, we have to consider on the circumstances of this case whether the fact that appellant No. 1 was not allowed to speak to this resolution is sufficient to justify our setting aside the resolution. On that point after a consideration of the circumstances I have come to the conclusion that it is not sufficient to justify our setting aside the resolution, and I have been influenced by the following considerations. In the case of Parashuram v. The Tata Industrial Bank, Limited I.L.R. (1923) 47 Bom. 915, 25 Bom. L.K. 1083.

30. the question of the right of speech was considered and Mr. Justice Pratt, referring to the English case to which I have referred, held that a shareholder is not entitled to speak at a meeting as much as he pleases, but has a right to be heard in reasonable terms for a reasonable time. In that particular case that view apparently did not help the plaintiff, and the decision was against him. It is to be noted that the plaintiff No. 1 in this case is the same as the plaintiff in that case. It is material to remember that his general attitude with reference to this bank was known to the shareholders. They were entitled to form their own opinion about his attitude. I am not concerned with the justice of that opinion: but the shareholders knew him as being ready to go against the bank. At the meeting of July 19, with which we are directly concerned, the first thing that happened was that, after the chairman delivered his speech and after the resolution was moved, the point of order Exh. L was handed by the appellant No. 1. This point of order, which is referred to in the minutes as extending over seven typed pages, was read at the meeting. Thus the view of the appellant was known to the members and the reasons for his conclusions also were known. Then we have the fact that he moved an amendment, which indicated his attitude with reference to the resolution under consideration at the meeting. That amendment was ruled out. Already one member had spoken in fact against the resolution; and it may be said that having regard to the importance of this subject, it is not unlikely that the shareholders may have informed themselves previously and formed certain opinions of their own with reference to the merits of this resolution. At the time appellant No. 1 rose to speak to the resolution they had ample means of knowing what his views were and what his side thought. Under the circumstances if the shareholders or some of them practically refused to listen to appellant No. 1, I am not prepared to hold that that by itself is sufficient to invalidate the resolution. So far as the circumstances are disclosed on this record I do not think that any speech from the appellant No. 1 could have made any difference in the resolution. No doubt it is a difficult thing to say whether a particular speech will impress the audience in the direction desired by the speaker; but having regard to the definite attitude which the majority of the shareholders maintained at the meeting with reference to appellant No, 1, as also to the fact that all that he could have said, was really said in the first point of order, which was already read to the meeting. I am satisfied that though the right of speech was denied to him at that stage the circumtance could not be accepted as affording a sufficient basis for setting aside a resolution, which represents the ascertained views and wishes of an overwhelming majority of the shareholders.

31. The next objection with regard to the incidents at this meeting relates to the point of order which he handed in to the chairman regarding the validity of the votes. That point of order was in these terms:--

Pursuant to Article 93 of the Articles of Association of the company I challenge the validity of all the votes tendered for the resolution declared by the chairman as having been carried and under the circumstances the chairman do appoint the day and the time for receiving objections as to the validity of every vote tendered.

32. The initial difficulty about this point in the story of the appellants is that it does not appear on the record as to when it was handed in. The minutes of the meeting, which must be taken as prima facie evidence of what happened at the meeting, contain the following statement --

After the close of the poll the business) of the meeting was resumed and the chairman, before declaring the result of the poll read out to the meeting a, further point of order handed to him by Mr. P.D. Shamdasani challenging the validity of all the votes tendered for the resolution etc., and ruled. it out of order.

33. Though I concede in favour of the appellants that this objection was sufficiently referred to in the plaint, I do not think there is any evidence to show that this was handed in before the poll was commenced. It is significant that we have not been referred to any evidence on the point, and it may well be that the point of order was not handed in time, at least not before the chairman commenced to take the poll. In any case the point is left in ambiguity and assuming that the handing in of such a point of order at the proper time should have prevented the chairman from declaring the result of the poll, it seems to me that the Court should incline more in favour of the validity of the proceedings than in favour of their invalidity, if the fact which would go to invalidate the proceedings is not established beyond reasonable doubt. I am not satisfied that it was handed in before the chairman commenced to take the poll, and if it was handed in after that work was nearly finished it would be too late. But there is a fundamental objection to this point of order and I am satisfied that the chairman was right in disallowing it. The amendment simply says that he objects to all the votes, it does not enable the chairman to consider the validity of any particular vote. It is too general to be of any effect and no authority has been cited in support of the proposition which the appellant No. 1 has contended for, that the objection in this general form must be investigated and the proceedings of the meeting adjourned. I am quite unable to accept such a view having regard to Article 93 of the Articles of Association of the Bank, which runs as follows:--

No objection shall be made to the validity of any vote, except at the meeting or poll at which such vote shall be tendered, and every vote, whether given personally or by' proxy, not disallowed at such meeting or poll, shall be deemed valid for all purposes of such meeting or poll whatsoever.

34. If this objection was to be raised, it should have been directed to particular votes. It seems to me that it is futile for any member to raise a general objection without indicating the nature of the objection, and without any attempt to particularise the votes objected to. It can only be interpreted as a sort of invitation on the part of the member to adjourn the proceedings of the meeting to examine the votes over again. Under the circumstances I am satisfied that this general objection was properly disallowed.

35. I now come to the confirmatory meeting of August 60, The minutes of this meeting are marked Exh. Q in the case. The resolution which was adopted at the meeting of July 19 was confirmed and there is no objection so far as this confirmation is concerned. But it is urged that the appointment of the liquidators at the meeting is not valid, because there was an irregularity in accepting the final amendment to the proposal. I have already stated that the proposal to appoint two liquidators was subject to two amendments, which were duly proposed and seconded. The second amendment was lost on a show of hands. A poll was demanded. The poll was taken, but before the result of the poll was declared a new amendment was allowed to be proposed, the demand for poll and the other amendments being withdrawn. It seems to me that it was perfectly open to the meeting to adopt that course; and I doubt whether there has been any irregularity in doing so. Even if there was any irregularity it was a matter for the meeting or the chairman to control and that irregularity has not the slightest effect, in my opinion, upon the validity of the appointment of the liquidators named at that meeting.

36. It is further urged that even if the appointment of the liquidators be valid the final agreement signed on August 7 is not valid because the directors of the Central Bank had no authority to enter into such an agreement. The contention in effect is that as there was no resolution of that company accepting this agreement the directors would have no authority to enter into such an agreement. It is, in my opinion, an utterly futile objection. From the Memorandum of Association of the Central Bank it is clear that the Bank had authority 'to acquire and undertake the whole or any part of the banking and discount business of any person or company carrying on any business which this company is authorised to carry on or to amalgamate the company's business with that of any such person or company'; and Article 115 of the Articles of Association gives genera] powers to the directors, under which it seems to me that it was perfectly open to the directors to act on behalf of the company.

37. [His Lordship here adverted to matters not material to this report and concluded:] I would, therefore, confirm the the decree of the trial Court and dismiss the appeal with cost.

Fawcett, J.

38. I agree entirely with the judgment just delivered, and I shall only add a few remarks on some of the most important of the numerous objections that have been taken by the appellant to the validity of the proceedings. First of all, as regards the use of the word 'amalgamate' in the resolution and the circular, I may refer to Palmer's Company Prece-dents, 12th Edition, Part I, at pages 1413 to 1415 as showing that this is a popular term which has been, used for many years, and which can properly be used to cover a scheme such as the present one under Section 213 of the Indian Companies Act. Secondly, as regards the form of the resolution, I may point out that it follows almost word for word, with a few necessary modifications, the form No. 794 laid down in the same work for such a scheme, and therefore it is difficult to hold that this particular form is one that is contrary to the provisions of Section 213, or is otherwise a form open to objection. In fact the only real departure from Palmer's form is that the resolution omits saying that such and such persons are hereby appointed liquidators for the purpose of the winding up, and instead of this the notice says that the confirmatory meeting would among other matters consider the question of appointing liquidators. It seems to me that that is quite a correct change to make because, as is pointed out by the Court of Appeal in In re Trench Tubeless Tyre Company, [1900] 1 Ch. 408. the proposed liquidators may be changed at the confirmatory meeting. That is because the appointment of liquidators is not required to be by 'special resolution,' the latter being necessary only in regard to the proposed voluntary winding up of the company and amalgamation under Section 213.

39. I next come to the chairman's ruling as to the amendment proposed by the appellant No. 1. I think that amendment was rightly ruled out of order, because in effect it merely negatived the proposal before the meeting, viz., that the conditional agreement submitted to the meeting should be approved. It is a well recognised rule that an amendment should be affirmative in form, and not merely negative of something already proposed, and be in such a form that a definite decision can be arrived at: of. Crew's Procedure at Meetings, 3rd Edn., p. 111. Thus in the rules laid down for the conduct of business of the Bombay Legislative Council, Rule 37(2), says: 'An amendment may not be moved which has merely the effect of a negative vote.' See Bombay Legislative Manual 1920, at p. 204. The proviso proposed to be added to the resolution would necessarily involve a rejection of the conditional agreement submitted to the meeting, because the consent of the Central Bank of India would be necessary to the alterations that were suggested in this proviso, and unless and until that consent were obtained the amendment would have no effective operation. It was not a practical proposition that the agreement should be approved subject to this particular proviso, and there would therefore be no definite decision on the matter before the meeting. I may in this connection refer to the case of Wall v. London and Northern A sets Corporation. [1898] a Ch, 460. It will be seen from the report at page 472 that a somewhat similar amendment was proposed at a confirmatory meeting in that case, viz., that the following be added to the resolution, ' subject to the purchaser agreeing to allow any individual or any body of dissentient shareholders to have their share of the assets agreed to be sold in lieu of the London Northern Debentures shares due to them.' That amendment involved that the purchaser, as here, should agree to a certain change, but the chairman ruled the amendment out of order and moved that the resolution should be confirmed. This was objected to in the arguments before the Court of Appeal. Lindley M.R. (at p. 480) summarily dismissed the objection as being a point with which the Court had nothing to do. Chitty L.J. (at p. 483) mentions this refusal of the chairman to put the amendment at the meeting, and says:--'His refusal, in my opinion, was right, because that meeting was called for one purpose only, and that was to confirm or reject the original resolution which had been passed, and any amendment would be wholly irrelevant, because the single purpose of the meeting was to say Aye or Nay, is the original resolution to stand or fall?' I quite recognise that this relates to an amendment proposed at a confirmatory meeting, and not to one proposed at the first meeting, but I think that logically the same reasoning applies to the latter case with some slight alterations, viz., that the one purpose for which this meeting was called was to confirm or reject the particular agreement submitted to the meeting, and an amendment of the kind proposed was inadmissible in view of that particular object. I think that at the most all that could be moved was to adjourn the meeting in order to enable the directors to enter into further negotiations with a view to the suggested alteration of the conditional arrangement between the two companies. No doubt in Palmer's Company Precedents, Part I, at pp. 668-9 a reference is made to Wright's case. 1871 L.R. 12 Eq. 331, 341. These remarks at first sight seem to support the propriety of an amendment of this kind, suggesting modifications in the conditional agreement, provided such modifications were not more onerous on the company; but if the report of this particular case be referred to, it will be clearly seen from pages 338, 339 and 340 that the modifications there referred to were not modifications of the actual agreement that was put to the meeting, but modifications, connected with the agreement but in regard to matters which were entirely independent of the consent of the other party to the agreement, for they referred to the second and third resolutions mentioned in that report, which dealt with certain arrangements dependent merely on the approval of the shareholders of the company. It seems clear, therefore, that this is not a case, which really supports the contention of the appellants that the amendment was improperly ruled out of order.

40. The next serious objection taken in this appeal is the alleged denial of appellant No. 1's right of speech at the first extraordinary general meeting. On this point I agree entirely with what has been said by my learned brother. The Court has a discretion as to whether it should, or should not, grant a declaration or an injunction of the kind sought in this suit under Sub-section 42 and 54 of the Specific Relief Act of 1877, and the plaintiffs are not entitled to such a declaration or injunction merely because of an irregularity of the kind that is under consideration. Of course that discretion must be exercised on accepted judicial principles, but it is a case where we have English decisions to guide us, and these show that the Court should not interfere on the ground of an irregularity in the case of acts which are valid if done with the approval of the majority of shareholders, unless the acts complained of are of a fraudulent character or are ultra vires. In the present case, I think it is important to bear in mind that there are special circumstances, which at any rate give an insight into the point of view of the majority of the shareholders, who refused to hear appellant No. 1. We have his admission, that he used to be in the employ of the Tata Bank and was dismissed by them in 1922. Then we have the case to which appellant No. 1 himself drew our attention, viz., Parashuram v. The Tata Industrial Bank, Limited (1923) I.L.R. 47 Bom. 915, s.c. 25 Bom. L.R. 1083. from the report of which it appears that the appellant No. 1 brought a suit against the company in regard to a general meeting held on May 1, 1923, at which he objected to the accounts and the directors' report submitted to that meeting and wanted to have a committee of inspection appointed to examine them. Then the point of order that he drew up clearly shows that he was objecting to the whole meeting on the ground that it was illegal. It certainly shows a sprit of obstruction and non-co-operation rather than a bona fide effort to help towards a satisfactory solution of the difficulties that confronted the company; and in these circumstances, the majority of the shareholders may have thought his action was not bona fide find that he would thereby waste their time in bringing reckless charges against the directors and arguing in support of the views contained in his point of order. I think these facts should be taken into consideration in determining whether we should or should not interfere with the resolution on this particular ground. Another point to be borne in india is that appellant No. 1 might have persisted in trying to speak, and if he had done so might possibly have succeeded. Such a result is not unknown in political meetings. Finally we have the fact that he had a further opportunity of putting forward his objections to this agreement at the confirmatory meeting held in August, but he did not attempt to avail himself of that opportunity. I, therefore, agree with my learned brother that this is not a case where we should hold the resolution invalid because the appellant was prevented from speaking. AS regards the objections to the appointment of the liquidators at the meeting in August, the learned Judge below has held that there was an irregularity on the reasoning of the judgment in The Queen v. Roberts (1863) 3 B. & S. 495. but, if that case is looked at, it will be seen that it contemplates a succession of amendments before the result of the poll is known, so that there would be no finality to the meeting. That is an argument ab inconvenienti which does not apply to the present case, because there was a settlement of the dispute about the persons who should be appointed liquidators, and hence it resulted in finality. The argument based on inconvenience thus falls to the ground, and in my opinion there is nothing in law which makes such a compromise illegal or invalid, even at the stage at which it was arrived at in this particular case. The case is analogous to one where the Court is about to deliver judgment, or even in the act of delivering judgment where it is still open to the parties to come to a compromise, at any rate before the 87judgment is finally delivered. I have already referred to the case of In re Trench Tubelesa Tyre. Company a which is ample authorfty for the view that the liquidators proposed at the special meeting could be changed or added to, as was done in this case. Under sub-section (3) of Section 83 of the Indian Companies Act, 1913, the appointment of these liquidators is deemed to be valid, until the contrary has been proved. This has not been done, and this objection therefore fails.

41. In conclusion, I would only say that I agree entirely with my learned brother in regard to the objection taken about the poll. As to the objections based on the alleged misconduct of the directors, I may refer to In re Irrigation Company of France, Ex parte Foxm where it is pointed out that a case of fraud or over-bearing influence is necessary to justify interference by the Court. Here it is quite clear that there is no indication of the directors getting any secret profit, and the conditional agreement provided for their not getting any compensation for loss of office. I think there is no substance in the objections which the two appellants have raised to the validity of the resolution, and that therefore the appeal should be dismissed with costs.

Lallubhai Shah, Acting C.J.

42. AS regards costs, we confirm the order of the lower Court, but we order that there will be only one set of costs in appeal.


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