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Kunwar Brij Bhushan Vs. Dehradun Tea Company Ltd. and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany;Civil
CourtAllahabad High Court
Decided On
Case NumberCivil Revision No. 3428 of 1978
Judge
Reported in[1982]52CompCas271(All)
ActsCompanies Act, 1956 - Sections 185; Code of Civil Procedure (CPC) , 1908 - Sections 115
AppellantKunwar Brij Bhushan
RespondentDehradun Tea Company Ltd. and ors.
Appellant AdvocateL.P. Naithani, Adv.
Respondent AdvocateRavi Kant, Adv.
DispositionRevision dismissed
Excerpt:
.....part of which he is continuing as a director even though he was due to retire on june 6, 1977. learned counsel for the opposite party also urged that the finding of the court below even on the question whether the plaintiff-applicant had a prima facie case were perfectly correct in law and were not liable to be set aside. i am clearly of the view that this revision has no substance and it must be dismissed. i am clearly of the opinion that, being an equitable relief, this was a legitimate consideration for the court below to refuse to grant an injunction to the plaintiff-applicant. further resolved that the election of the directors be proceeded with and the poll ballots and the proxies received for this meeting be sealed and kept in the safe custody of the allahabad bank in the..........the appellate court has endorsed the above findings of the trial court and hence this revision.8. learned counsel for the applicant has mainly concentrated his argument on attacking the correctness and legality of the finding recorded by the courts below to the effect that the plaintiff-applicant did not have a prima facie case. on the question of balance of convenience, the learned counsel for the applicant urged that as a director and shareholder of the company, he had a fundamental right in the management of the company and the findings of the court below that the balance of convenience was not in favour of the plaintiff-applicant was incorrect.9. learned counsel for the opposite party on the other hand urged that the findings of the court below on the question whether the.....
Judgment:

A.N. Verma, J.

1. This is a plaintiff's application in revision directed against concurrent orders passed by the courts below refusing to grant a temporary injunction sought by the plaintiff-applicant in a suit instituted by him against the defendant-opposite parties for an injunction restraining them from declaring the result of the elections held at an annual general meeting of the above-named company on June 6, 1977, for electing two directors of the company including the applicant who was retiring on June 6, 1977. The temporary injunction was sought also for restrainingthe defendant from taking into account the proxies rejected on June 4, 1977.

2. Facts relevant for the disposal of the revision are these: DehradunTea Co. Ltd., opposite party No. 1, is a public limited company having anauthorised capital of Rs. 50,00,000 divided into 50,000 equity (ordinary)shares of Rs. 100 and the issued capital of the company is Rs. 8,78,000divided into 8,780 equity (ordinary) shares of Rs. 100 each. Under thearticles of association of the company, the number of directors is limited tosix. It is provided in the articles of association that one-third of thedirectors shall retire every year by rotation at the annual general imeeting.The applicant and one Sri Kirti Prasad Manglik were due to retire onJune 6, 1977. An annual general meeting was called for that purpose.The election was to be decided by poll. A meeting of the board of directors was held on June 4, 1977. The company received 117 proxies. Thesecretary of the company put up a note before the board rejecting fiveproxies of th'e shareholders, namely, Mrs. D. B. Thomas, Mr. J. R. Hollander, the principal of Christian College, Lucknow, and Sri. Amal Dutta.The proxy of Shrimati Santra Devi was, however, accepted as valid by thesecretary. It may be noted here that Mr. J. R. Hollander and the principal of the Christian college had each sent 3 and 2 proxies respectivelybearing different dates. From the facts found by the court below, itappears that the board of directors itself did not pass any resolutionaccepting or rejecting any proxies.

3. The annual general meeting was held on June 6, 1977, for the election of directors in place of the abovementioned retiring directors under the chairmanship of Sri. K. P. Manglik. The shareholders and the proxies present at the meeting cast their votes. However, as some dispute appeared to have arisen at the meeting with regard to the rejection of the abovementioned proxies, the matter relating to the abovementioned proxies of the abovementioned shareholders was referred by the general body to a sub-committee consisting of three persons, namely, Sri Jai Narain Gupta, Sri. Mulk Raj Batra and Dr. Jai Hari Har, who were incidentally also the scrutineers appointed by the chairman of the meeting. The sub-committee was authorised to obtain the opinion of the Company Law Board, failing which that of Sri K. L. Gosain; a former judge of a High Court, on the validity or otherwise of the disputed proxies and thereafter to announce the result of the election. It has been found by the courts below that the disputed proxies did not cast their votes, at the meeting held on June 6, 1977.

4. It appears that the Company Law Board declined to give any opinion on the validity of the proxies whereupon the above mentioned sub-committeeobtained the opinion of Sri K. L. Gosain. Sri. K. L. Gosain gave his opinion to the effect that the last of the proxies sent by the abovementioned shareholders were the valid ones. Sri K. L. Gosain gave his opinion on the validity or otherwise of the proxies sent to him for his opinion. After the opinion of Sri K. L. Gosain had been obtained, the sub-committee invited, by means of letters, the proxies adjudged valid to indicate the candidates in whose favour they wished to vote. At this stage, it is pertinent to mention that under the resolution by which the sub-committee was authorised to obtain the opinion of the Company Law Board, Sri K. L. Gosain, and thereafter to announce the result of the election, the petitioner and Sri K. P. Manglik were also permitted to continue as directors till the results were announced by the sub-committee. It is not disputed that the plaintiff-applicant has been continuing to function as a director under that resolution though he was due to retire on June 6, 1977, in accordance with the articles of association. Immediately after fhe sub-committee proceeded to obtain the votes of proxies adjudged valid, the plaintiff-applicant filed the present suit for the following reliefs :

1. An injunction restraining the sub-committee from announcing the result;

2. An injunction restraining the sub-committee from taking into account the votes of the proxies rejected by the secretary of the company on June 4, 1977.

5. Along with the suit, an application for a temporary injunction in the same terms as the reliefs claimed in the suit was moved by the plaintiff. This was contested by defendants Nos. 1 to 3, defendant No. 1 being the company and defendants Nos. 2 and 3 being the rival candidates for the election of the office of directors.

6. The trial court rejected the application of the plaintiff-applicant on the following findings:

1. The plaintiff-applicant had no prima facie case for restraining the sub-committee from announcing the result. The sub-committee was prima facie acting within the ambit of its powers conferred upon it under the abovementioned resolution.

2. The rejection of the proxies by the secretary Of the company on June 4, 1977, was illegal and unauthorised and consequently the plaintiff has no prima facie case for the grant of an injunction restraining the subcommittee from taking into consideration these proxies. The rejected proxies were in any case adjudged valid by the sub-committee appointed specifically to go into that question and consequently the injunction could not be granted to the applicant in any case ;

3. The balance of convenience was not in favour of the plaintiff applicant. The terra of office of a director was three years; the applicanthas already acted as director under the resolution, the validity of which he was now challenging and under the circumstances the plaintiff could not be permitted to approbate and reprobate, taking advantage of one part of the resolution and challenging that part which was inconvenient to him.

4. It was not a fit case for the grant of a temporary injunction.

7. Aggrieved, the plaintiff-applicant filed an appeal. The appellate court has endorsed the above findings of the trial court and hence this revision.

8. Learned counsel for the applicant has mainly concentrated his argument on attacking the correctness and legality of the finding recorded by the courts below to the effect that the plaintiff-applicant did not have a prima facie case. On the question of balance of convenience, the learned counsel for the applicant urged that as a director and shareholder of the company, he had a fundamental right in the management of the company and the findings of the court below that the balance of convenience was not in favour of the plaintiff-applicant was incorrect.

9. Learned counsel for the opposite party on the other hand urged that the findings of the court below on the question whether the plaintiff-applicant had a prima facie case or not is not open to question in a revision under Section 115 of the CPC. Learned counsel contended that this court is not exercising the powers of an appellate court and consequently the orders of the court below could not be set aside merely on the ground that this court might come to a different conclusion on the question whether the plaintiff-applicant had a prima facie case or not. Learned counsel urged that all that this court had to satisfy is that the court below should have applied the correct test for the grant or refusal of a temporary injunction, and if this court came to the conclusion that the courts below have refused temporary injunction to the plaintiff-applicant after applying the established judicial principles applicable to the grant or refusal of temporary injunction there would be no scope for interference under Section 115 of the CPC. Learned counsel for the opposite party further urged that the concurrent findings of the courts below to the effect that it was not a fit case in which the sub-committee should be restrained from announcing the result, and that the balance of convenience was not in favour of the plaintiff-applicant were sufficient to non-suit the plaintiff-applicant so far as this court is concerned, and having regard to the nature of the jurisdiction conferred on it under Section 115, CPC, it is not open to a High Court to correct errors of fact, however gross or even errors of law unless the said error have relation to the jurisdiction of the court to try the suit itself.

10. Learned counsel lastly urged that the plaintiff-applicant ought not to be permitted to challenge the correctness of a part of the resolution under another part of which he is continuing as a director even though he was due to retire on June 6, 1977. Learned counsel for the opposite party also urged that the finding of the court below even on the question whether the plaintiff-applicant had a prima facie case were perfectly correct in law and were not liable to be set aside.

11. Having heard learned counsel for the parties. I am in full agreement with the submissions of the learned counsel for the opposite parties. I am clearly of the view that this revision has no substance and It must be dismissed. It has been repeatedly held by their Lordships of the Supreme Court and this court that a revision under Section 115, CPC, is not directed against the conclusions of law or fact in which a question of jurisdiction is not involved. Their Lordships of the Supreme Court have further held that while exercising the jurisdiction under Section 115, CPC, it is not open to a High Court to, correct errors of fact, however gross or even errors of law unless the said errors have relation to the jurisdiction of the court to try the suit itself. Even under Clause (c) of Section 115, CPC, their Lordships have interpreted the words ' illegality ' and 'with material irregularity' as used in that clause and held that these do not cover errors of fact or law which are not relatable to the jurisdiction of the court or the procedure adopted at the trial of the cause. In D. L. F. Housing and Construction Co. (P) Ltd. v. Sarup Singh : [1970]2SCR368 , their Lordships of the Supreme Court set aside an order passed by the High Court under Section 115, CPC, by which the High Court had set aside the orders passed by the courts below refusing to grant a temporary injunction on this very ground, namely, that it was not permissible for the High Court to interfere with the orders passed by. the lower courts merely because the High Court differed from the courts below on the question whether an injunction should be granted or not. This view of their Lordships of the Supreme Court has been reiterated in Hindustan Aeronautics Ltd. v. Ajit Prasad : (1972)ILLJ170SC , and again in State of Orissa v. Pyarimohan Sawantary : AIR1976SC2617 . Their Lordships of the Supreme Court have, therefore, made the position of law abundantly clear that it is not permissible for a High Court exercising jurisdiction under Section 115, CPC, to set aside orders passed by the courts subordinate to it merely on the ground that the High Court chooses to take a different view in regard to the issues involved in the case where the issues do not relate to the jurisdiction or procedure adopted by the courts subordinate to the High Court.

12. In view of the law laid down by the Supreme Court and in view of the fact that both the courts below have upon a full consideration of the material on the record arrived at the conclusion that the plaintiff-appli-cant has neither a prima facie case, nor is the balance of convenience in his favour, this revision is liable to be dismissed on the ground that the case does not fall under any of the three clauses of Section 115, CPC.

13. The grant of a temporary injunction is an equitable relief. The courts below have refused to grant the same on legitimate grounds. Learned counsel for the plaintiff-applicant sought to challenge the findings of the court below on the question of balance of convenience on the ground that the plaintiff-applicant had a fundamental right as a shareholder in the management of the company. In my view, it is equally the fundamental right of the entire body of shareholders to choose their own management and that the result of the election held as far back as June, 1977, should not be withheld at the instance of a single, individual particularly when that individual is a direct beneficiary of the resolution, the validity of which he has challenged in so far as it goes against him. In my view, the applicant was a party to the resolution by which the sub-committee was authorised to announce the result and by the same resolution, the plaintiff-applicant was authorised to continue as a director till the results were announced. The plaintiff did not choose to challenge that resolution immediately. On the other hand, he has undisputedly been functioning as a director under that resolution and it was only after the sub-committee was on the point of announcing the result after it had obtained the opinion of Sri K. L. Gosain that he has chosen to stall the announcement of the result. This aspect of the case has greatly weighed with the court below, and in my view quite rightly so.

14. Learned counsel for the applicant urged that he was continuing as a director not only under the resolution but also under Article 62 of the articles of association of the company. The argument is fallacious. Article 62 of the articles of association reads :

' The continuing directors may act notwithstanding any vacancy in their body, but if the number falls below the minimum above fixed, the directors shall not, except for the purpose of filling up vacancies or convening a general meeting of the company, act so long as the number is below the minimum.'

15. In my view, Article 62 has nothing whatsoever to do with the continuance of a director who has retired. Article 62 speaks only about the continuance of the directors not retiring as provided under the articles of association of the company. I have perused the articles of association and I do not find any provision whereunder a retiring director is empowered to continue till the results are announced. Learned counsel for the applicant also placed reliance in this connection on Articles 46, 47, 49 and 52 of the articles of association which too have no bearing on the question. These articles do not authorise or provide for the continu-ance of a retiring director till the results of the poll held for the election of directors in place of the retiring directors are announced. It is, therefore, clear that the applicant is continuing as a director only under the resolution, and the courts below have rightly held that the plaintiff-applicant ought not to be allowed to approbate and reprobate. I am clearly of the opinion that, being an equitable relief, this was a legitimate consideration for the court below to refuse to grant an injunction to the plaintiff-applicant. Learned counsel for the applicant, however, urged that the sub-committee is attempting to exceed its powers in inviting the proxies adjudged valid to cast their votes. Learned counsel contended that the sub-committee was empowered under the resolution only to determine the validity or otherwise of the disputed proxies and to declare the result. Learned counsel urged that it was open to the plaintiff-applicant to contend that the sub-committee was exceeding its power. He submitted that such an objection is not barred by any principle of estoppel. Both the courts below have repelled this contention and have held that the sub-committee was authorised under the resolution to call upon the proxies adjudged valid to cast their votes. In order to appreciate this argument, it will be necessary to reproduce here the relevant portion of the resolution passed at the meeting of 6th June, 1977 :

' Resolved that the committee of the shareholders consisting of M/s. Jai Narain Gupta, Mulk Raj Batra and Jai Hari Har Lal be and hereby appointed. This committee will refer the cases of the rejected proxies of Mr. J. R. Hollander of U. K. Christian College, Lucknow, and R. P. Mission, Roorkee, Mrs. D. B. Thomas and of Amal Datta to the Company Law Board, for their adjudication. In case the Company Law Board is unable to adjudicate in the matter, the Committee is empowered to refer the case to an eminent lawyer of their choice.

Further resolved that the election of the directors be proceeded with and the poll ballots and the proxies received for this meeting be sealed and kept in the safe custody of the Allahabad Bank in the joint names of the committee members.

This committee will give the election results after they have obtained the ruling of the Company Law Board and/or the lawyer consulted by them, on the above-mentioned proxies and the votes cast at the poll for the election of directors today. The decision of this committee will be final and binding on all the candidates contesting for the post of directors. Till then all the present six directors will continue on the board of directors and function as such. All the expenses incurred by this committee will be borne by the company. '

16. In my view, when the sub-committee was being authorised to adjudicate upon the validity of the disputed proxies and thereafter to declare theresult after taking into consideration the votes cast at the poll and further when the decision of the sub-committee was to be regarded as final and binding on all the contesting candidates, it followed by necessary implication that the sub-committee was also authorised to allow the proxies adjudged valid to cast their votes. For otherwise the question of going into the validity of the proxies who had not been allowed to vote at the meeting of June 6, 1977, would not have arisen and it would become totally meaningless. The courts below were, therefore, right in holding that the sub-committee was acting within its powers to call upon the proxies, which were held to be valid by it, to cast their votes.

17. There is, therefore, no force in the above contention of the learned counsel for the applicant. The above discussion is sufficient for disposing of the revision inasmuch as I have come to the conclusion on its basis that the courts below have committed no error of jurisdiction in refusing to grant injunction to the plaintiff-applicant. As, however, considerable arguments were addressed by the learned counsel for the applicant on the correctness of the findings of the court below on the question whether the plain tiff-applicant had a prima facie case, I may deal with that aspect of the matter as well.

18. Briefly stated the submission of the learned co'unsel on the merits of the findings of the courts below was that the proxies had to vote only at the poll and the poll could not be held piecemeal. According to the learned counsel, the poll concluded on June 6, 1977, itself, and consequently the proxies could not be permitted to vote after the meeting had concluded on June 6, 1977. Elaborating his argument, learned counsel submitted that the proxies could cast their votes only at a meeting and in person, and not otherwise. The courts below have repelled this contention relying inter alia, on a decision in the case of M. K. Srinivasan v. Watrap S. Subrahmanya Ayyar [1932] 2 Comp Cas 147; AIR 1932 Mad 100. In that case, it has been held that the actual process of holding the poll is not a meeting at all. I am inclined, prima facie, to agree with the view of the courts below. In my view, the poll had not concluded on June 6, 1977, and neither had the meeting. For the purpose of the poll, the original meeting would be deemed to be continuing till the results are announced. In my opinion, learned counsel for the applicant is wrong in assuming that meeting and poll are synonymous terms. Disputed proxies had not been permitted to vote at the meeting of June 6, 1977, and as the sub-committee upon the opinion given by Mr. K. L. Gosain came to the conclusion that the proxies sent, by Mr. Hollander and the principal of the Christian College alone were valid, it became necessary to ask those proxies to cast their votes. Further, as the poll had not concluded on June 6, 1977, it was permissible for the committee to invite the proxies to cast their votes, evenafter June 6, 1977. It has been held in the case of Queen v. Wimbledon Local Board [1882] 8 QBD 459 (CA) that the taking of a poll is very much different from holding a meeting and that a poll is nothing but a mode of ascertaining the sense of the electorate. It is, therefore, not correct to say that it was not open to the sub-committee to try and obtain the votes of the proxies after June 6, 1977, as, in my view, the poll had not concluded on that date.

19. Learned counsel next contended that legally proxies could cast their votes only in a meeting, and that too in person, and not through postal ballots. For this proposition, learned counsel cited the following passage from Halsbury's Laws of England, IV Edn., para. 496, which runs as follows:

' A person voting as proxy for an elector must do so in person at the elector's polling station except in so far as a proxy is entitled to vote by post.'

20. This enunciation is based upon and has been made in the context of the provisions of the Representation of the People Act, 1949 (of England) and is of no assistance in dealing with the present case which is governed by the specific provisions of the Companies Act. Even in the aforesaid passage, it has been observed that a proxy may in certain cases be permitted to vote by post.

21. On the other hand, learned counsel for the opposite-party placed reliance upon the provisions of Section 185 of the Companies Act and urged that in India, there is a statutory provision which is wide enough to allow casting of vote by proxy even by post. Section 185 of the Companies Act is as follows:

' 185. (1) Subject to the provisions of this Act, the chairman of the meeting shall have power to regulate the manner in which a poll shall be taken.

(2) The result of the poll shall be deemed to be the decision of the meeting on the resolution on which the poll was taken.'

22. The provisions of Section 185 of the Act are wide enough to permit casting of votes by proxies by post. The resolution empowering the sub-committee to declare the result after determining the validity of the disputed proxies necessarily included within it the power to obtain the votes of such proxies even by post. At any rate, there was nothing in the resolution to bar this procedure.

23. Learned counsel for the applicant also quoted a passage from Corpus Juris Secundum, Vol. 29, para 118, at p. 3031, which is as follows :

' When permitted by statute, absentee may vote for a primary election. However, the statutory requisites must be complied with, at least as to matters to which compliance is mandatory.'

24. In my view, this passage is of no relevance for the determination of the question with which we are concerned. As mentioned above, the provisions of Section 185 of the Companies Act are wide in amplitude, and it is permissible for the chairman to regulate the manner of taking poll as a result thereof. The manner which was prescribed by the resolution is by no means inconsistent with or in derogation of any provision of the Companies Act. Prima facie, therefore, the view taken by the courts below that the plaintiff-applicant does not have a prima facie case cannot be said to be unsustainable in law or perverse. I may add that at best the question raised by the learned counsel for the applicant can be said to be a debatable one and the view taken by the courts below is a possible view based on some legal authorities and the provisions of law.

25. The upshot of the above, discussion is that the courts below have not committed any error of jurisdiction in refusing to grant injunction to the plaintiff-applicant and that the view of the courts below that the plaintiff does not have a prima facie case cannot be said to be a view which is not possible or which is perverse.

26. In the result, the revision fails and is dismissed with costs. The interim orders passed by this court are vacated hereby.


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