Skip to content

B.R. Kundra, Delhi Vs. Motion Pictures Association, Delhi and ors. - Court Judgment

LegalCrystal Citation
CourtDelhi High Court
Decided On
Case NumberCivil Petition Appeal No. 106 of 1974
Reported in[1976]46CompCas339(Delhi); ILR1975Delhi692; 1975RLR320
ActsCompanies Act, 1956 - Sections 166, 186, 255 and 283
AppellantB.R. Kundra, Delhi
RespondentMotion Pictures Association, Delhi and ors.
Advocates: K.K. Mehra,; Satish Chander,; I.N. Shroff and;
Cases ReferredUnited Breweries Ltd. v. Rustomji and Co. Ltd and
(i) companies act (1956) - section 255--scope of--failure of directors to call annual general meeting--effect of--de jure directors who would have retired at the said meeting vacate their office.; that in a company, where the directors have to retire by rotation, if they fail to call annual general meeting as and when due, then those who would have retired at the said meeting, had the said meeting been held, will vacate their offices on the last date of the year in which it should have been held. the defaulting directors cannot take advantage of their own wrong in the matter and must be deemed to have vacated their offices in such a case.; (ii) companies act (1956) - section 166--construction and scope of.; that the plain language of section 166 is that not more than 15 months shall.....s. rangarajan, j. (1) this order passed in c.p. 106 of 1974,which has been filed by b. r. kundra, will also dispose of c.p. 102. of 1974, which has been filed by j.s.sood.(2) the motion pictures association (hereinafter known as the company ) with whose affairs i had dealt previously in c.a. 565 of 1972 (1974) comp cas 298 is again said to require court's interventation in the circumstances which will be noted presently. this petition raises an interesting question of company law concerning the interpretation of section 255 of the companies act, 1956 (hereinafter known as the act), a question which was merely discussed by me in yet another case, but left open (smt. fain v. delhi flour mills co. ltd. and others 44 (1974) comp cas 228 as one of difficulty bui not being necessary for.....

S. Rangarajan, J.

(1) This order passed in C.P. 106 of 1974,which has been filed by B. R. Kundra, will also dispose of C.P. 102. of 1974, which has been filed by J.S.Sood.

(2) The Motion Pictures Association (hereinafter known as the Company ) with whose affairs I had dealt previously in C.A. 565 of 1972 (1974) comp cas 298 is again said to require Court's interventation in the circumstances which will be noted presently. This petition raises an interesting question of Company Law concerning the interpretation of section 255 of the Companies Act, 1956 (hereinafter known as the Act), a question which was merely discussed by me in yet another case, but left open (Smt. fain v. Delhi Flour Mills Co. Ltd. and others 44 (1974) Comp Cas 228 as one of difficulty bui not being necessary for decision of that case.

(3) The Company was formed under section 25 of the Companies Act, 1913 with no share capital and prohibiting the payment of dividend to its members. It had for its object the promotion of the interests of its members, who are engaged in the trade of exhibition, distribution and exploitation of motion pictures in the Union territories of Delhi and the State of Utttar Pradesh. Any person wanting to indulge in these (business) activities relating to motion pictures in the above areas has to become a member of this Company. The company according to its Articles, is to hold its Annual General Meeting within six months of the closing of its accounts, which is the 31st December each year; the last Annual General Meeting of the Company was held on 3rd May. 1969. Article 24 of the Company reads as follows:-

'ATevery Annual General Meeting all sitting members of the Executive Committee, shall retire from office. The retiring members shall be eligible for re-election in the Annual General Meeting in which they retire.'

ACCORDINGto Article 31 'the retiring member or members of the Executive Committee shall retain office till the the dissolution of the meeting at which his or their successor is/are elected'.

It is necessary to read sections 166 and 255 of the Act also at this stage :

'166.(1) Every Company shall in each year hold in addition to any other meetings a general meeting as its annual general meeting and shall specify the meeting as such in the notices calling it; and not more than fifteen months shall elapse between the date of one annual general meeting of a company and that of the next : PROVIDED that a company may hold its first annual general meeting within a period of not more than eighteen months from the date of its incorporation; and if such general meeting is held within that period, it shall not be necessary for the company to hold any annual general meeting in the year of its incorporation or in the following year:

(4) Provided further that the Registrar may, for any special reason,extend the time within which any annual general meeting (not being the first annual general meeting) shall be held, by a period not exceeding three months.

(5) (2) Every annual general meeting shall be called for a time during business hours, on a day that is not a public holiday, and shall be held either at the registered office of the company or at some other place within the city, town or village in which the registered office of the company is situate :

(6) Provided that the Central Government may exempt any class of companies from the provisions of this sub-section subject to such conditions as it may impose : Provided further that-

(A)a public company or a private company which is a subsidiary of a public company, may by its articles fix the time for its annual general meetings and may also by a resolution passed in one annual general meeting fix the time for its subsequent annual general meetings: and

(B)a private company which is not a subsidiary of a public company, may in like manner and also by a resolution agreed to by all the members thereof, fix the times as well as place for its annual general meeting.'

(7) '255. Unless the articles provide for the retirement of all directors at every annual general meeting, not less than two-thirds of the total number of directors of a public company, or of a private company which is a subsidiary of a public company, shall-

(A)be persons whose period of office is liable to determination by retirement of directors by rotation; and

(B)save as otherwise expressly provided in this Act, be appointed by the company in general meeting.

(8) (2) The remaining directors in the case of any such company, and the directors generally in the case of a private company which is not a subsidiary of a public company, shall, in default of an subject to any regulations in the articles of the company, also be appointed by the company in general meeting'.

(9) A member of the Company (G. S. Mayawala) had filed a suit (476 of 1960) against the Company in which there was an application for restraining it from holding the Annual General Meeting till the decision of the suit. The Company voluntarily appeared in that suit and undertook not to hold any annual general meeting till the suit was decided. The suit ended in a compromise.

(10) Subsequent to the compromise 134 members had demanded, by a requisition which had been left at the office of the Company on July 29. 1972, the holding of an Extraordinary General Meeting for consideration and adoption of certain resolutions as stated in that requisition. That requisition fell short of the minimum 10 per cent of a total membership because some signatures were found invalid and the rest were (subsequently) withdrawn. A body of 11 persons. purporting to be the Executive Committee, took steps to hold an Extraordinary General Meeting of the Company on the 7th October. 1972 in order to amend certain Articles in pursuance of the above compromise, as a preliminary to the holding of the Annual General Meeting. A circular letter was also issued by the Honorary General Secretary (B. N. Gupta) on September 16, 1972 setting out all these facts. Some asserted their faith in the said body while others asserted their want of faith in it. In this situation C.A. 496 of 1972 was filed in this Court under section 186 of the Act to call a meeting of the Company. With the consent of all those who had appeared in the proceedings the Extraordinary General Meeting, which had been called on September 9, 1972, was adjourned to the 7th of October, 1972 to take place under the chairmanship of Mr. Daljit Singh, Advocate directing certain resolutions, pertaining to the number of office bearers, to be moved at the said meeting in a particular manner. But it was discovered later to be subject to a certain infirmity. Hence a general meeting of the Company was ordered to be called on 21-10-1972 (vide order in C.A. 472 of 1972) for electing office bearers. Mr. P. A. Bahl, Advocate, was appointed Chairman to conduct the said meeting and supervise the election of Directors. After the election was held the Chairman submitted a report but certain persons who unsuccessfully contested the said election made an application (C.A. 565 of 1972) alleging fraud etc. besides other irregularities in the conduct of the meeting affecting the result of the election. During the hearing of that application, it was noticed that even apart from the allegations concerning the conduct of the elections at the said meeting, the meeting and the elections which took place on October 27, 1972 were not according to the directions which had been given by this Court and it would not, thereforee, 'deem' the meeting (held on 7-10-1972) as one called and conducted by the Company within the meaning of sub section (2) of Section 186 of the Act. A fresh meeting was directed to be called and elaborate and detailed directions were also given concerning how the meeting should take place and the election should be conducted. Such a meeting and elections took place on October 13, 1973, when the 18 persons mentioned in this petition were elected as members of the Executive Committee (Directors) of the Company.

(11) It is now stated that in spite of the petitioner in C.P. 102/74 (J.S.Sood, who was admittedly one of the 18 who was so elected) pressing for regularisation of certain defaults and a further election of members of the Executive Committee on or before June 30, 1974 (the financial year closing on December 31 each year) no such meeting was called. In the result, it is alleged, that by June 30, 1974 all the 18 must be deemed to have vacated the office of Directorship/membership of the Executive Committee by operation of law. In April. 1974 the petitioner had also communicated in writing to the Company that their term as elected Executive Committee had expired on June 30, 1974 and they should not continue thereafter to act. Though the receipt of this communication was denied by the Secretary of the Company after an application (Cr. 0.84 of 1974) to punish him was filed, Mr. 1. N. Shroff, learned counsel for the Company, did not wish to justify the Secretary's denial of the receipt of the said communication, but on the other hand apologised to the Court for the same.

(12) It is contended by the petitioner that it has become 'impracticable' to hold a meeting of the Company under the Articles of the Company or under the Act in the above circumstances : it is, thereforee, prayed that the Court may be pleased to direct, under section 186 of the Act, a meeting of the Company to be called where, in addition to electing the members of the Executive Committee, they should also be directed to adopt annual accounts ending 31st December, 1969 to 31st December, 1973 as a special business, and to appoint and fix remuneration of Auditors for 1974 also , a special business.

(13) It is obvious and it was also common ground before me that the Court has no power to call Annual General Meeting under section 186 of the Act; the items of business which can be transacted only at an. Annual General Meeting may not, thereforee, be ordered to be transacted at a meeting ordered to be held under section 186 of the Act; the election of office bearers, however, could place at a meeting other than an Annual General Meeting.

(14) This petition has been resisted on the same grounds on which C.P. 102 of 1974 (filed by J. S. Sood for the same reliefs) has been resisted; no separate reply has been filed in this petition.

(15) The following objections on behalf of the Company were raised by Mr. 1. N. Shroff. By way of preliminary objection it was stated that the assumption on which the present petition has been filed, namely, that the office bearers should be deemed to have retired on June 30, 1974 was not correct and that if this is not correct the very basis for invoking section 186 of the Act would not be available. It was pointed out that there is no express provision in the Companies Act of 1956 to the effect that if there is default on the part of elected Directors in holding the Annual General Meeting, as required by section 86 of the Act, the elected Directors shall be deemed to have retired on the last date on which the Annual General Meeting should be (or ought to have been) called and held. How this contention was developed by Shri Shroff will be discussed presently. It was further contended that moving the Central Government under section 167 of the Act was the remedy, if any, and that the jurisdiction of this Court under section 186 of the Act cannot be invoked.

(16) Since it is common ground that if the members of the Executive Committee/Directors did not retire and cease to be Directors, as claimed in this petition, or before June 30, 1974 the present petition under section 186 would not be competent, in the view that they themselves could call a meeting at which the Directors/Executive Committee members could be elected. It, thereforee, falls for consideration whether having regard to the relevant provisions of the Act and the Articles of the Company set out above the 18 Executive Committee members/Directors of the Company retired and ceased to hold office on or before June 30, 1974 and for that reason it has become impracticable to call a meeting of the company.

(17) In addition to the sections of the Act, noticed above, the following sections may also be noticed at this stage :

'168.If default is made in holding a, meeting of the company in accordance with section 166, or in complying with any directions of the Central Government under subsestion

(1)of section 167, the company, and every officer of the company who is in default, shall be punished with fine which may extend to five thousand rupees and in the case of a continuing default, with a further fine which may extend to two hundred and fifty rupees for every day after the first during which such default continues.'

'283-d) The office of a director shall become vacant if- (a) he fails to obtain within the time specified in sub-section

(1)of section 270, or at any time thereafter ceases to hold. the share qualifications, if any, required of him by the articles of the company;

(b) he is found to be of unsound mind by a Court of competent jurisdiction; (c) he applied to be adjudicated an insolvent; (d) he is adjudged an insolvent;

(E)he is convicted by a Court of any offence involving moral turpitude and sentenced in respect thereof to imprisonment for not less than six months;

(F)he fails to pay any call in respect of shares of the company held by him, whether alone or jointly with others, within six months from the last date fixed for the payment of the call unless the Central Government has, by notification in the Official Gazette, removed the disqualification incurred by such failure:

(G)he absents himself from three consecutive meetings of the Board of directors, or from all meetings of the Board for a continuous period of three months, which ever is longer. without obtaining leave of absence from the Board;

(H)he (whether by himself or by any person for his benefit or on his account), or any firm in which he is a partner or any private company of which he is a director, accepts a loan. or any guarantee or security for a loan, from the company in contravention of section 295;

(i) he acts in contravention of section 299; (j) he becomes disqualified by an order of Court under section 203; (k) he is removed in pursuance of section 284; or

(I)having been appointed a director by virtue of his holding any office or other employment in the company, or as a nominee of the managing agent of the company, he ceases to hold such office or other employment in the company or, as the case may be, the managing agency comes to an end.

(2) Notwithstanding anything in clause's (d), (e) and (j) of subsection (1), the disqualification referred to in those clauses shall not take effect- (a) for thirty days from the date of the adjudication, sentence or order;

(B)where any appeal or petition is preferred within the thirty day's aforesaid against the adjudication, sentence or conviction resulting in the sentence, or order until the expiry of seven days from the date on which such appeal or petition is disposed of; or

(C)where within title seven days aforesaid, any further appeal or petition is preferred in respect of the adjudication, sentence, conviction, or order, and the appeal or petition, if allowed, would result in the removal of the disqualification, until such further appeal or petition is disposed of.

(2A)Subject to the provisions of sub-section (1) and (2), if a person functions as a director when he knows that the office of director held by him has become vacant on account of any of the disqualifications, specified in the severalclauses of sub-section (1), he shall be punishable with fine which may extend to five hundred rupees for each day on which he so functions as a director.

(3)A private company which is not a subsidiary of a public company may, by its articles, provide, that the office of director shall be vacated on any grounds in addition to those specified in sub-section (1)'

(18) The plain language of section 166 is that not more than 15 months shall elapse between the date of one Annual General Meeting of a company and that of the next; the Registrar, for any special reasons, may extend the time at which the Annual General Meeting (not being the first Annual General Meeting) shall be held by a period not exceeding three months (this period was reduced from 6 to 3 months); the total period, thereforee, even if the Registrar is to use his power lo extend the period by three months, cannot be any thing more than 18 months between one Annual General Meeting and another. It is on this basis that the petitioner claims that the Annual General Meeting in this case should have been held on or before 30th June, 1974, the Company having to close its annual accounts by the end of December each year.

(19) In Smt. fain v. Delhi Flour Mills Co. (i), to which reference has been made already, I was concerned with a case where one third of the Directors retired by rotation at every Annual General Meeting. I had referred to a few Indian cases which discussed the question whether those Directors who have to retire by rotation also vacated their offices by reason of their own failure to call an Annual General Meeting. Venkatarama Iyer, .I. (as his Lordship then was) held on behalf of a Division Bench of the Madras High Court in Ananthalakshmi Animal V. Indian Trades and Investments Ltd. (1952) CompCas 324 that they must be deemed to have vacated their offices-this case arose under sections 76 and 79 of the Act of 1913-which view was followed by a Division Bench of the Bombay High Court in Krishna Prasad vs. Colaba Land and Mills Co. Ltd. (1959) Comp Cas 273 and by a single Judge of the Calcutta High Court in In re Hindustan Cooperative Insurance Society Ltd., (1961) Comp Cas 193, who had not noticed an earlier decision of the Division Bench of the same High Court in Kailash Chandra Dutt v. Jogesh Chandra Majurndar (1928) C W N 1084, which expressed a contrary view. In this Calcutta case the Division Bench held that a suit for declaration by one of the shareholders that the Directors were no longer Directors was not maintainable under section 92 of the old Specific Relief Act. On the merits the observation was made only in passing and without discussion that the Article provision concerning annual election of Directors did not mean that they could not continue after the year. No provision of the Companies Act was even discussed. The Bombay decision rightly dissented from Kailash Chandra and followed in in re Consolidated Nickel Mines Ltd. (1914) Ch. Div 833 and Ananthlaxmi Ammal (A Division Bench decision of the Madras High Court. A single Judge of the Madras High Court in V. Seleviraj V. Mylapur Hindu Fund (1968) Comp Cas 153 who did not refer to the Division Bench decision in Ananthalakshmi Ammal observed that the Directors retired at an Annual General Meeting but since in that case the meeting had not commenced at all owing to the confusion which prevailed the previous Directors must be deemed to continue in office. This decision which seems to proceed on the view, apparently, that there was no default on the part of Directors since a meeting had been called but could not be conducted owing to confusion, is even distinguishable.

(20) The Indian decisions which have held that a retiring Director vacates office if he fails to hold the Annual General Meeting are seen to be based on the view taken by the English Court in In re Consolidated Nickel Mines Ltd. In that case the Articles provided that general meetings should be held once every year; that at the ordinary meeting in 1906 all the Directors should 'retire from office' and that the Directors should be remunerated at certain rates per annum. Section 49 of the Companies Act of 1863 (which was then force) provided that an Annual General Meeting should be held once every year. No general meeting was held or called in 1906 or 1907 but the Directorate continued to act as such. Sargant J. held as follows:

'THEYcannot take advantage of their own default in that respect and say that they still remain as Directors'.

THISview docs not appear to have been challenged at any time before English courts. It is useful to refer to Morris v. Kanssen (1946) 1 All ELR (586). The House of Lords dismissed the appeal which arose from the decision of the Court of Appeal in Kanseen v. Rialto (Est End') Ltd., 1944 1 All ELR 751. Lord Green, M.R., specifically referred to In re Consolidated Nickel Mines Ltd., and noted that as per the said decision Director Cromie had vacated office on December 31, 1941 by reason of Article 73 of Company's Articles of Association, a fact which nobody at the time seems to have appreciated. The only other remaining Director Strelitz, the Master of Rolls pointed out, had never been validly appointed. It transpired, thereforee, that by virtue of Article 73 of Table A, as modified by the Company's Articles, there were at the relevant date no Directors in existence. On the above assumption that there were no such Directors the further question was discussed as to whether the rule in Turquand (Royal British Bank v. Turquand. (1856) 6E &B; (327) applied : not having had notice of the defect their actions purporting to act as Directors were held to be valid. It was pointed out that section 145 of the Companies Act of 1929 (section 180 of the Act of 1948) had validated the impugned actions by the sa,id two persons who were functioning as Directors despite the above infirmity. That Cromie had ceased to be Director on December 31, 1941 by reason of the Annual General Meeting which had to be called on or before that day was not questioned either before the Court of Appeal or before the House of Lords. Mr. Shroff made a vain bid to say that this question, which proceeded on a concession, should not be taken to have been decided ; greater weight has to be attached to the holding in re Consolidated Nickel Mines Ltd. which was specifically referred to before the Court of Appeal but was not questioned; on the other hand the correctness of the same was conceded before the Court of Appeal; the concession on a question of law was not even sought to be withdrawal when the case was argued before the House of Lords. This argument also overlooks the observations of Lord Simonds in that case (vide pages 467, 468 and 471 of 1946 A.C.-the ruling starts on page 458). The headnote as stated in 1946 A.C. 459 reads :

'No general meeting was held in 1941. . . there were thereafter no de jure directors.'

(21) Having thus noticed what the position in England is as we are able to sec that as per the above said two decisions, no other case having suggested any contrary point of view-it may also be rewarding to notice what a leading English author on Company Law has to say. In Pennington's Company Law (Third Ed., p. 478) the above said two cases have been noticed in the footnote as authority for the text which reads as follows :-

'IFno other Annual General Meeting is held the appropriate number of Directors will retire at the end of the calendar year in which it should have been held.'

Venkatarama, Iyer, J. had relied on a passage in Buckley on Companies Act (12th Ed. p. 883) to the effect :-

'SEMBLE,if in any calendar year an annual meeting is not held under an article in this form, those directors who would have retired at the meeting had the same been held will va,cate office on the last day of the year.'

The following cases are given in the footnote (j) as authority for this position:

'(J)Re Consolidated Nickel Mines (1914) 1 Ch. 883 ; Kanseen v. Rialto (West End), (1944) Ch. 346; (1944) 1 All E.R. 751 ; affirmed sub non. Morris v. Kanseen, (1946) A.C. 459 ; (1946) 1 All E.R. 586, 590.'

(22) Palmer Comp Law 21 Ed. 540 regards Morriss v. Kanseen as an authority for the position that a person who has not been duly appointed a Director, or who has become disqualified for being a Director not being a de jure Director but he may be a Director de facto for which section 180 of the English Act of 1948 makes a provision. But the question of any of these 18 Executive Committee members/Directors functioning as de facto cannot arise because they cannot function as Directors with knowledge of their having ceased to become Directors, if in fact they had ceased to become Directors. It is needless to quote from other leading authors.

(23) Mr. Shroff drew my attention to section 283 (set out earlier)and contended that the office of Director shall become vacant only in the eventualities mentioned therein and since the retirement of any Director is not one of those eventualities mentioned in section 283 of the Act it was not part of the legislative intent to regard a Director as having retired on the date on which the Annual General Meeting had to be held. The fallacy of this argument obviously lies in not perceiving the true scope of section 283 which provides only for cases where the office of the Director becomes vacant by reason of the disqualifications which a Director may incur in the eventualities contemplated by clauses (a) to (1) of sub-section (1) of section 283. That section 283 deals only with disqualification of Directors, incurred during their term as Directors, will become clearer if reference is made to sub-section (2) of section 283, which describes the eventualities in sub-clauses (a) to (1) of sub-section (1) of section 283 as 'disqualification'.

(24) It was next contended by Mr. Shroff that section 168 of the Act provides for default in the matter of complying with section 186 and 187 and that all that the Act intended to provide was a penalty for those Directors who did not comply with those sections and no more; in other words, that independently of the said penalty there was no other disability attaching to a Director functioning after the maximum period allowed under section 255 had expired. I find this contention difficult to follow. That a penalty has been prescribed for a defaulting Director is something totally distinct from the question how long a Director continues to hold office in the absence of his being elected. Again In re Consolidated Nickel Mines Ltd. has been followed in India also as an authority for the position that a Director cannot by his own default in not calling the Annual General Meeting, as he is bound to do, take advantage and still continue as Director and/or collect the remuneration payable to such Director. This view found favor with Venkatarama Iyer J. (as he then was) in Ananthalakhshmi Ammal. Section 166 of the Act replaced section 76 of the previous Act; the corresponding provision in the English Act is section 131. Mr. A. Ramiah in his book, which has run into several successive editions, 'A Guide to the Companies Act, 1971 (6th Ed.) 'has extracted, on page 292, the object of the amendment made by the Amending Act 55 of 1960 in this respect. Since the said source quoted by Mr. Ramiah has not been available to me, I , quoting the same as given by Mr. Ramiah on page 292.

(25) 'THE provisions of section 166 are not effective against delay in the holding of annual general meetings on the one hand, and on the other, cause unnecessary inconvenience to non-profit making and certain other companies in that they cannot hold annual general meetings at a time and place more convenient to their members, in view of the rigid requirements of the present section. It is proposed to remove these defects from the section on the lines suggested in para 69 of the Report.'

(26) It is worth recalling that the power of the Registrar to extend the time for holding the meeting which was 6 months normally was also reduced to 3 months by the above amended Act. The legislative policy obviously was, thereforee not to allow a person to continue as Director in spite of the maximum permissible time having elapsed between the holding of one Annual General Meeting and another; the Registrar's power to extend time was reduced from 6 to 3 months thus reducing the total period from 21 months to 18 months. It is not a case of causes omlssis, as contended by Mr. Shroff, who commented that the Legislature had not specifically stated that at the end of the period for which a Director is elected he will retire or vacate office. I do not see how such express mention was necessary. I do not see when the term of office is fixed with a further provision that the incumbent would retire on the day on which the Annual Meeting would have to take place coupled with a provision concerning the maximum interval that can elapse between one Annual General Meeting and another, we have all parameters, within which a Director functions, fully and comprehensively. There seems no scope at all, thereforee, for the contention of Mr. Shroff that even after the 30th June, 1974 the 18 Executive Committee members/Directors continued as dejure Directors Executive Committee members. The settled rule of interpretation is that a statute will have to be interpreted with reference to the object of the statute, the mischief to be remedied and the remedy provided. The object of the Legislature here was clearly to see that the Directors would not continue beyond the terms for which they were elected and also fixing the maximum time that can elapse between one Annual General Meeting and another with a further statement, as under Section 255, that at least one third of the Directors would, in the absence of Article provision to the contrary, retire at every Annual General Meeting. In this case Article 24 provides for the whole set of Directors retiring at the Annual General Meeting. The Articles (Art. 31) provide that when an Annual General Meeting takes place the persons concerned would retire at the end of such a meeting. This provision was to remove a possible anomaly of their having to retire either before the meeting or during the course of it. In the present case, when no Annual General Meeting had taken place for the maximum permissible period the Executive Committee members/Directors did retire a,t the expiry of the said period. To allow them to continue at the end of the said period as de jure Directors would be to invest them with a power to continue as Directors by defaulting to call an Annual General Meeting. That no defaulting Director could take advantage of his own wrong seems a fairly well established proposition; this was pointed out in In re Consolidated Nickel Mines, not questioned before the Court of Appeal or House of Lords and followed by Venkatarama lyer, J. in Ananthalakshmi Ammal. Even shorn of authority I will have no difficulty in upholding such a position.

(27) That is also another way of looking at this matter. The legal position established by in re Consolidated Nickel Mines Ltd. which was not only not disputed later but admitted to be correct both before the Court of Appeal and House of Lords in Kanssen shows that the accepted position in common law is that Directors could not, by reason of merely postponing the convening of annual general meeting, continue to be the de jure Directors after the expiry of the maximum permissible statutory period. If this is the position according to common law and if the subsequent statute, consolidating the pre-existing law in the field, was silent about it there is ample authority for the view that the statute must be read in consonance with the common law. It is sufficient to refer to a few passages in Maxwell on Interpretation of Statutes (12th Edition) and Craies on Statute law (17th Edition) in support of this well established proposition. The former contains passages, among others, to the following effect:

(A)'Few principles of statutory interpretation are applied as frequently as the presumption against alterations in the common law' (p. 116) ;

(B)In the case of a consolidating Act there is a, particularly strong presumption that it does not alter the law contained in the statute which it replaces, (p. 116).

(28) In the latter also there are plenty of passages in support of the said position, it would not be necessary to refer to all of them. It will be sufficient to notice the following :

(A)'To alter any clearly established principle of law a distinct and positive legislative enactment is necessary' (p. 121) ;

(B)'It must be remembered that it is a sound rule to construe a statute in conformity with the common law rather than against it, except where or in so far as the statute is plainly intended to alter the course of the law common law (p. 188) ;

(C)'If it is clear that it was the intention of the legislature in passing a new statute to abrogate the previous common law on the subject, the common law must give way and the statute must prevail, but there is no presumption that a statute is intended to override the common law' (p. 339).

(D)'The Courts will lean against any presumption that a consolidation Act was intended to alter the common law' (p. 363).

(29) Reference to another well-established rule of common law may also be made; it is that a person should be heard before his rights are affected; if there are any omissions in the statute in this regard 'the justice of the common law principle would supply the omission' (See above observation of Byles, J. which has become class in Cooper v.Wordsworth Board of Works, English Reports Vol. Cxliii Common Pleas Xxi 414. In that case the metropolitan statute empowered the District Board to alter or demolish .a house, where the builder has neglected to give notice of his intention to build, seven days before proceeding to lay or dig the foundation. It was held by all the three Judges that the statute did not empower them to demolish the building, without first giving the party guilty of the omission an opportunity of being heard. Mr. I. N. Shroff pointed out that the above said decision related to a rule of natural justice which does not fall for consideration in the present case. The question is not so much in what context the above said observation was made but it is one concerning the presumption of a statute not changing the common law unless it contains an express provision contrary to the common- law especially when a statute consolidated the previously existing position, this presumption becomes, even stronger.

(30) Looking at it from any angle it seems futile to contend that the members of the Executive Committee/Directors continued in this case after the expiry of the maximum permissible meeting, without their being elected as Executive Committee members/Directors in a manner known to law. Once the conclusion is reached that there are, at the moment, no de jure Directors who can convene a meeting for the election of office bearers the further question is whether the Court is to exercise its power under section 186, as it did previously in the affairs of the same Company, or merely direct that the Central Government alone should be moved for this purpose under section 167. It is no doubt true that under section 167 any member of the Company can apply to Government for the purpose of calling an annual general meeting. My attention has been drawn to the affidavit dated 19-12-1974 filed by Shri J. S. Sood in this petition that he had approached the Regional Director of the Company Law Board, Kanpur to call a general meeting in the year 1971-72 in view of the same not being held in 1970-71. Not only was no general meeting convened by the Central Government but even he did not inform of any action taken on such request. In the result he did purse the matter with the Regional Director of the Company Law Board, Kanpur. This fact was not disputed by Mr. I. N. Shroff even during the hearing. When a submission was made orally from the bar to the above effect by Shri K. K. Mehra on behalf of the applicant he Was directed to file an affidavit which was filed in this court on 19-12-1974. The Companies Act, as amended in 1973, provides for the powers exercised by the Court under Section 186 being exercised by the Central Government after the said Act comes into force; the said Act comes into force only from the appointed date, which is yet to be fixed. So far as the present case is concerned, thereforee, a meeting can be called by this Court under section 186.

(31) The scope of section 186 of the Act has been discussed by me elabor,a,tely on more than one occasion vide Smt. Jam v. Delhi Flour Mills Co. Ltd. in the matter of Companies Act, 1956 and in the matter of Motion Pictures Association : [1973]92ITR495(Delhi) I had referred, among other decisions, to that in United Breweries Ltd. v. Rustomji and Co. Ltd and others 1962 Ii CompLJ 155, Explaining the principles to be borne in mind while dealing with an (application under section 186 it was stated, inter alia, that even when there is doubt as to whether a meeting in the regular course could be called the company should not be exposed to difficulty and risk of litigation it would be a proper case thereforee for the exercise of the power conferred under section 186 to call a meeting of the Company. It is in the light of the facts discussed above that it seems imperative to call a meeting of the Company under section 186 of the Act.

(32) It seems needless to refer to the earlier attempts made to have only a Chairman appointed by Court for a meeting already called by the Company; it was probably thought that it was an inexpensive course to adopt. But when the Executive Committee members/Directors are not functioning de jure they could not call a meeting themselves. As such there is no other alternative to exercising powers under section 186 of the Act to call a meeting of the Company where office bearers (Executive Committee members/Directors) could be elected.

(33) Since the election held at a meeting called by the Court at the first instance resulted in several irregularities and difficulties consequently cropped up. I had to give specific directions in the matter of how the later meeting, which I had directed to be called, should be conducted and the election held. Since these directions proved to be effective and successful I propose to give similar directions now. A meeting of the Company is directed to be called/held conducted on Saturday, the 1st March, 1975, at the premises of the Company i.e. F-27, Darya Ganj, Delhi. Shri Prithvi Raj Sachdev, Advocate will be the Chairman of the meeting and Shri A. L. Joshi, Advocate will be the alternate Chairman. The following procedure shall be adopted for at the said meeting:

(1)Any application for new membership from today onwards will be put up before the Chairman and his initials obtained thereon before a new member is admitted.

(2)All the firms and limited companies, which are members of the Company (Association) will send written authorisations and duly authenticated copies of authorisations of needed resolutions, respectively, to reach the Secretary of the Company at least three days in advance of the date of the meeting, indicating who will vote at the meeting and what his position is in the firm or company, as the case may be.

(3)No member of the Company, which is a firm or limited liability company, will be entitled to vote unless such written authorisations or authenticated copies of resolutions, as the case may be, are sent by the companies or firms concerned and received by the Secretary of the Company within the aforesaid time. In the case of partnership firms the authorisations will be confined to one of the partners. If the same person is a partner in more than one member-firm he can on being authorised by the concerned firm or firms vote for the firm or firms concerned. In such cases (i.e.) where the person concerned is representing more than one member firm when signing the attendance register at the meeting he will indicate therein the firm/firms which he is representing.

(4) All proprietary concerns can vote only in person, subject to identity and membership being verified.

(5)The nominations along with the consent of the person nominated in the case of those wishing to be elected as office bearers will reach the Secretary of the Company on or before 5 p.m. on 13th February, 1975. The nominations will be scrutinised by the Chairman. The last date of receipt of objections to nominations will be on or before 5 p.m. on 15th February, 1975. The Chairman will go into the objections, scrutinize the nomination papers and make his decision concerning them. For this purpose he will attend the aforesaid premises of the Company on 17th February, 1975. The list of valid nominations will be dispatched, under Certificate of Posting, by the Secretary of the Company to all the members not later than the 19th February, 1975.

(6)Members attending the meeting will not be permitted to sign the attendance register after 12 noon. In other words, if any member does not sign the meeting register by 12 noon that member will not be entitled to vote.

(7)The requisition slips for the ballot papers will be actually signed by the person who has to record the vote on behalf of the concerned member; they (requisition slips) will not be issued to any one else. A register will be maintained concerning the issue of requisition slips and the signature of the person concerned will be taken in token of his having received the requisition slip. When the ballot paper is issued in pursuance of the requisition slip the signature of the person concerned will be taken on the requisition slip itself in token o' his having received the ballot paper.

(8)No ballot paper will be issued after 5 p.m. At 5 p.m. the Chairman will announce the time beyond which no person will be allowed to record his vote; this decision will be made by him in the light of the time that is likely to be taken by those to whom ballot papers have been issued but are yet to record their votes.

(9)The Chairman will exclude from the premises where the meeting and voting take place any person who has not to record his vote.

(10) The following Scrutinisers are appointed to help the Chairman: 1. Shri K. L. Budhiraja, Advocate. 2. Shri M. L. Sachdev, Private Secretary. 3. Shri Suhindar Singh, Reader. 4. Shri S. M. Saxena, Superintendent.

I have been able to take the consent of Shri K. L. Budhiraja Advocate only among the lawyers who were appointed at the last meeting, I am, thereforee, unable to include the name of any other Advocate. The Chairman will be at liberty to move for more Scrutineers to be appointed in case he wants any more.

(11) The Scratineers themselves will work under the guidance and help of the Chairman/Alternate Chairman and count the votes.

(12)The following persons are also appointed to help movement of files and to perform other petty earrands at the conduct of election on 1st March, 1975 :

1. Shri Sant Ram Restorer 2. Shri Krishan Chand Dafiri of this Court. 3, Shri Deep Chand peon 4. Shri 0m Parkash Peon of his Hazari 5. Shri Mangli Peon Bar Association. They will each of them be paid Rupees Fifty. (13) As soon as the voting is over the counting of votes will commence and the result will be announced that night itself. (14)After the election is over the Chairman will submit a report lo this Court concerning the meeting along with the requisition slips, ballot papers, the attendance register, nominations, authorisations and any other documents that may be considered relevant by the Chairman, all in sealed container, within a week after the meeting.

(15)Only the contesting candidates will be allowed to be present inside the premises when the polling and counting take place; no other person on his behalf to help the candidates will be allowed to be present. The Chairman will not allow the staff of the Company to participate in the matter of conducting the election.

(16)The Chairman (Shri Prithvi Raj Sachdev) will be paid a remuneration of Rs. 2000.00 , the Alternative Chairman (Shri A. L. Joshi) is Rs. 1000.00 and the four scrutineers (Sarvashri K. L. Budhiraja, M. L. Sachdev, Suhinder Singh and S. M. Saxena) Rs. 500.00 each, by the Company. Sarvashri M. L. Sachdev, Suhinder Singh and S. M. Saxena, Officers of this Court who have been appointed Scrutineers, will receive the said sum of Rs. 500.00 each as regard for this special service.

(17) The Secretary of the Company (Shri J. C. Basu) is authorised to make payments in respect of the above remunerations.

(18)Shri J. C. Basu in addition to Sarvashri (names to be mentioned before Chairman) will be allowed to be present along with the Chairman for the purpose of helping the identification of voters. They will not stand as candidates for the election.

(34) A copy of this order will be caused to be cyclostyled or printed by the Secretary of the Company (Association) and the same sent under Certificate of posting, to all the members within three weeks from today.

(35) The Chairman will have the necessary authority to visit the aforesaid premises of the Company, as often as he may wish, to see thal all the directions given herein are implemented by the Secretary of the Company.

Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //