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The Provincial Bank, Ld Vs. Ghanga Mal - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtAllahabad
Decided On
Judge
Reported in(1914)ILR36All412
AppellantThe Provincial Bank, Ld;The Provincial Bank, Ld.;The Provincial Bank, Ld.
RespondentGhanga Mal;durga Prasad;jagmandar Das
Excerpt:
.....contention that such an allotment is invalid at law the learned counsel for the appellants has relied on the case of the british empire match company, limited, exparte ross (1) 49 law times, 291. we think that the objection of the learned counsel as to the irregularity in the appointment of fakir chand and abdul majid is well founded. the provisions of article 96 sufficiently cover, in our opinion, the irregularity complained of by the appellants and validate the allotments made by the directors. 6. in view of our findings the result is that the appeals of changa mal and durga prasad fail and that of jagmandar das succeeds......17th of september, 1910, at which three persons were present, viz. shafiq ilahi, e. a. roberts and abdul majid. the first two were among the first three directors originally appointed and named in the articles of association, abdul majid was, according to the directors minute book, appointed at a meeting of the original directors held; on the 1st of may, 1910. at that meeting only two directors were present, namely, e a., roberts and shafiq ilahi, and it was resolved that, as the third director parbhu dayal could not always attend, fakir chand and abdul majid should be added to the board of directors. under the articles of association in case of an occasional vacancy among the directors the remalning directors could appoint a properly qualified member of the company as director pending.....
Judgment:

Muhammad Rafiq and Piggott, JJ.

1. The three appeals of Changa MaL, Durga Prasad and Jagmandar Das, marked as Nos. 196, 197 and 198 respectively of 1913, arise out of the proceedings in liquidation of the Provincial Bank, Limited, Meerut. It appears that the official liquidator called upon the three appellants to contribute the balance of the price of shares which had been allotted to them at different times by the board of directors of the bank. The appellants objected to be put on the list of contributories and supported their objections on several technical pleas. The learned Judge disposed of their objections in a very summary manner without discussing the objections or giving any reason for rejecting them. In appeal three objections are urged on behalf of the appellants, namely, that the board of directors which allotted the shares to the appellants was not properly constituted, that the allotment was made after an unreasonable delay and that no notice of allotment was given to or received by the appellants.

2. The first objection is founded on an alleged defect in the constitution of the board of directors which allotted the shares to the appellants. It is said that under the articles of association the least number of directors required to form a quorum was three. The board that allotted the shares to the appellants was composed of three persons, two of whom only were regularly appointed directors. Changa Mal was allotted shares at a meeting held on the 17th of September, 1910, at which three persons were present, viz. Shafiq Ilahi, E. A. Roberts and Abdul Majid. The first two were among the first three directors originally appointed and named in the articles of association, Abdul Majid was, according to the directors minute book, appointed at a meeting of the original directors held; on the 1st of May, 1910. At that meeting only two directors were present, namely, E A., Roberts and Shafiq Ilahi, and it was resolved that, as the third director Parbhu Dayal could not always attend, Fakir Chand and Abdul Majid should be added to the Board of Directors. Under the articles of association in case of an occasional vacancy among the directors the reMalning directors could appoint a properly qualified member of the company as director pending the confirmation of his appointment at a general meeting of the share-holders. But there was no vacancy, as Parbhu Dayal had not resigned, and, even if he had, only one person could be appointed in his place and not two. Moreover, the name of Abdul Majid must have been added after the meeting of the 1st of May, 1910, and probably at the meeting of the 17th of September, 1910. The proceedings of the 17th of September, 1910, as recorded in the directors' minute book, at first mention the name of Fakir Chand as one of the three directors present. But his name is scored off in pencil and that of Abdul Majid added in ink at the end. The appellants suggest that the name of Fakir Chand was written at first in the hope that ho could be present at the meeting, but as he did not come the name of Abdul Majid, a share-holder, who was probably sent for at the time, was added, and in order to show that he was a director regularly appointed, his name was added to the proceedings of the 1st of May, 1910. That the suggestion as to the interpolation of Abdul Majid's name in the proceedings of the meetings of the 1st of May, 1910, and the 17th of September, 1910, is not unfounded, reference is made to the circulation of a printed notice convening a general meeting for the confirmation of Fakir Chand's appointment and the absence of any such notice about Abdul Majid. The shares allotted to Durga Prasad and Jagmandar Das Were allotted at a meeting held on the 7th of April, 1912, at which E. A. Roberts, Fakir Chand and H. Hassan were present. It is said that there is nothing to show that Fakir Chand's appointment was confirmed at a general meeting and his provisional appointment at the meeting of the 1st of May, 1910, was irregular. As to H. Hassan he was appointed in place of Shafiq Ilahi who resigned on the 4th of January, 1912. The Board that appointed H. Hassan consisted of E. A. Roberts and Fakir Chand and the approval and signature of Parbhu Dayal were obtained subsequently. The allotment of shares to Changa Mal was thus by two regularly appointed directors only, viz., B. A. Roberta and Shafiq Ilahi and to Durga Prasad and Jagmandar Das by one director only, viz., E. A. Roberta. As no business of the company could be transacted without a quorum of three directors the allotment of shares to the appellant was, therefore, clearly invalid and the latter are not bound by such allotment. In support of his contention that such an allotment is invalid at law the learned Counsel for the appellants has relied on the case of the British Empire Match Company, Limited, exparte Ross (1) 49 Law Times, 291. We think that the objection of the learned Counsel as to the irregularity in the appointment of Fakir Chand and Abdul Majid is well founded. But we cannot say on the evidence in the case that the name of Abdul Majid was inserted in the proceedings of the meeting of the 1st of May, 1910, after the meeting. The appointment of H. Hassan seems to hive been regular as there was a vacancy in the board of directors and he was appointed to the vacancy by the reMalning directors. However, the objection for the appellant reMalns that on both the occasions, viz., the 17th of September, 1910, and the 7th of April, 1912, there were only two regularly appointed directors, as Abdul Majid in one ease and Fakir Chand in the other was not a properly appointed director.

3. It may also be conceded that the case relied upon by the learned Counsel supports his contention that allotment of shares by an irregularly constituted board of directors is invalid, But other cases, some of them later, lay down that if the articles of association of a company validate an act done by a de facto director in a bond fide manner the courts will uphold his act; vide, In re Scottish Petroleum Company (2) (1883) 23 Ch. D. 413. Dawson v. African Consolidated Land and Trading Company (3) (1898) 1 Ch. D., 6. British Asbestos Company Ld. v. Boyd (4) (1903) 2 Ch. D. 439. In the present case Article 96 of the articles of association-of the bank is directly in point. It is as follows: 'The Bond fide acts of the board of directors and of any committee appointed by it shall, notwithstanding any vacancy in the board or committee or any defect in the appointment of any director or member, be as valid as if no such vacancy or defect had existed, provided they wore done in the case of any defect before its discovery.' Now it is not said, or at least not proved, that the appointment of Fakir Chand and Abdul Majid was made by the directors with the knowledge that they were acting against the rules of the company or that the allotment of shares was made to the appellants by the directors who were conscious of the defect in the constitution of their board. It is neither alleged nor proved that the directors who allotted shares to the appellants acted in a Mald fide manner. They, no doubt, thought that the hoard was regularly constituted and acted in a bond fide manner in allotting shares to the appellants. The provisions of Article 96 sufficiently cover, in our opinion, the irregularity complained of by the appellants and validate the allotments made by the directors.

4. The second objection, that of unreasonable delay in awarding the shares, has no force. If the appellants had declined to accept the shares allotted to thorn on the ground of unreasonable delay, their objection might have succeeded. They cannot raise that objection against their being put on the list of contributories when the bank has gone into liquidation.

5. The third objection as to the receipt of the notice of allotment must, we think, prevail in the case of Jagmandar Das. It has not been shown to us that any notice of allotment was received by him.

6. In view of our findings the result is that the appeals of Changa Mal and Durga Prasad fail and that of Jagmandar Das succeeds. The appeals of Changa Mal and Durga Prasad are dismissed with coats and the appeal of Jagmandar Das is decreed with costs.


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