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In the Matter Of: Companies Act, 1956 Vs. in the Matter Of: Motion Pictures Association, Delhi - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtDelhi High Court
Decided On
Case NumberCivil Appeal Nos. 496 and 565 of 1972
Judge
Reported in[1974]44CompCas298(Delhi); ILR1973Delhi624b
ActsCompanies Act, 1956 - Sections 186, 186(2) and 257
AppellantIn the Matter Of: Companies Act, 1956
RespondentIn the Matter Of: Motion Pictures Association, Delhi
Advocates: K.K. Mehra,; Ved Vyas,; A.N. Khanna,;
Cases ReferredGrundt v. Great Boulder Proprietary Mines
Excerpt:
company - annual general meeting - sections 186, 186 (2) and 257 of companies act, 1956 - amendment moved at meeting without any prior notice as required for special resolution - amended resolution fixing number of directors passed unanimously - amendment to be made by special resolution after giving requisite notice - amended resolution rendered illegal due to non-compliance - court under duty to call another meeting where directors would be elected in accordance with law. - - 565 of 1972) was filed on 23rd october, 1972 supported by an affidavit of joginder singh sood, who unsuccessfully contested the election, making allegations of fraud also. 675 of 1972). 17 out of 18 persons said to be elected as members of the executive committee on 21st october, 1972 issued notices, on 22nd.....s. rangarajan, j.(1) it would be necessary to state the facts leading to the present application. (2) an application had been made (c.a. 496 of 1972) under section 186 of the companies act, 1956 (hereinafter called the act) for calling a meeting of m/s. motion pictures association, delhi (hereafter called the company, a company registered under the companies act, 1913. the company had no share capital and the payment of dividend to its members was prohibited. the company was formed with the object of promoting the interest of its members engaged in the trade of exhibition, distribution and exploitation of motion pictures in the union territory of delhi and' uttar pradesh. any person wanting to indulge in these business activities relating to motion pictures in this area has to become a.....
Judgment:

S. Rangarajan, J.

(1) It would be necessary to state the facts leading to the present application.

(2) An application had been made (C.A. 496 of 1972) under section 186 of the Companies Act, 1956 (hereinafter called the Act) for calling a meeting of M/s. Motion Pictures Association, Delhi (hereafter called the Company, a company registered under the Companies Act, 1913. The Company had no share capital and the payment of dividend to its members was prohibited. The Company was formed with the object of promoting the interest of its members engaged in the trade of exhibition, distribution and exploitation of motion pictures in the Union Territory of Delhi and' Uttar Pradesh. Any person wanting to indulge in these business activities relating to motion pictures in this area has to become a member of this Company. The accounts of the Company are closed at the end of December of every year. The last annual general meeting of the Company was held on 3rd May, 1969. Subsequently no such meeting was held. In the result no election of office bearers could be held.

(3) A member of the Company (G.S. Maya Wala) had filed a suit (No. 476 of 1970) against the Company in which there was also an application for restraining the Company from holding its annual general meeting till the decision of the suit. The Company appeared voluntarily in that suit and undertook not hold any annual general meeting till the dispute was decided. Ultimately there was a compromise. Subsequent to the compromise, on 29th July, 1972; a requisition had been left at the office of the Company signed by 134 members demanding the holding of an extraordinary general meeting of the Company for consideration and adoption of certain resolutions incorporated in the said requisition. But the Executive Committee of the Company allegedly found that 43. signatures out of 134 were invalid, that 38 had been withdrawn by means of separate letters addressed to the Association and that only 53 members had validly signed the same, thus falling short of the 74 signatures, being 10 per cent of the total membership strength of the Company. A body of Ii persons, purporting to be the Executive Committee, is said to have taken steps to hold an extraordinary general meeting of the Company on 7th October, 1972 in order to amend certain Articles of Association in terms of the compromise as a preliminary to holding the annual general meeting. This was sought to be done because the effect of not holding the extraordinary general meeting would be to revive the suit which had been compromised and until the suit was finally decided it would be impossible to hold elections. A circular letter in the name of the Company had also been issued by the Hony. General Secretary (B. N. Gupta) on 16th September, 1972 setting out all these facts. While certain persons asserted that they had full faith in the said body (Executive Committee) there were some others who did not have faith in it; this led to a piquant situation. It was in these circumstances that C.A. 496 of 1972 was filed invoking this Court's powers to call a meeting under section 186 of the Act.

(4) When C.A. 496 of 1972 came up for admission on 20th September, 1972, notice, returnable by 26th September, 1972, was ordered. With the consent of all those who appeared and who had been made parties to the said application, the extraordinary general meeting of the Company which had been called for 30th September, 1972 was adjourned to take place on 7th October, 1972 under the Chairmanship of Shri Daljit Singh, Advocate, appointed by the Court to consider, inter alia, the question of the number of office bearers pursuant to a framed resolution fixing the number as 16. The existing Article (No. 23) of the Articles of Association provided for not less than eight and not more than 18 Executive Committee members being elected. The framed resolution (by Court) fixing the number at 16 was to be moved as a special resolution.

(5) All the parties being unanimously of the opinion-this being clear even otherwise-that it was not practicable in the circumstances prevailing to call a general meeting for electing Executive Committee members in the ordinary manner a general meeting of the Company was ordered to take place on 21st October, 1972 (in C.A. 496 of 1972) for electing office-bearers, their number having to be resolved upon at the meeting to be held on 7th October, 1972 under the Chairmanship of Shri Daljit Singh. For the meeting to be held on 21st October, 1972, Shri P. A. Behl, Advocate was appointed as Chairman to conduct the said meeting and also supervise the election of the directors, which was to take place at that meeting.

(6) Since only Ii directors of the Company were said to be functioning at the date of the said order five more persons (to make up the number 16) were also appointed to constitute an interim Board of Management with effect from 7th October, 1972 (after the meeting which was fixed to take place on that date). Shri Daljit Singh filed a report, dated 18th October, 1972, in this Court stating that instead of the resolution as proposed by this Court pertaining to Article 23, an amended resolution, fixing the members of the Executive Committee as 18 had been passed. I shall revert to this again later.

(7) Shri P. A. Behl, the Chairman of the meeting directed to take place on 21st October, 1972, submitted his report, dated 24th October, 1972, stating that he held and conducted the meeting at which 18 members of the Executive Committee were elected.

(8) The present application (C.A. 565 of 1972) was filed on 23rd October, 1972 supported by an affidavit of Joginder Singh Sood, who unsuccessfully contested the election, making allegations of fraud also. But these allegations were not persisted in. In 'particular, he stated that more ballot papers were issued than the members present at the meeting; 347 persons had signed the meeting register whereas ballot papers were issued to 442 persons; no record was kept to whom ballot papers were issued and no check was made to verify whether the eligible persons voted.

(9) It is needless to set out the details of how the said application was contested and evidence was partly recorded because a statement was ultimately made by all the counsel appearing for the concerned parties. The following order was made on 13th December, 1972 :

'COUNSELfor both sides stated yesterday that they wanted little more time to think over the extent to which the oral evidence could be obviated and have today expressed their agreement that no oral evidence need be recorded in view of the following, on account of their agreement regarding the mode in which both the objections to the election held on 21st October, 1972, are to be disposed of. They state as follows : (1) All the affidavits of Mr. J. S. Sood excepting the affidavit filed in support of his objection application dated 23rd October, 1972 are treated as withdrawn. (2) The evidence on oath of Shri J. S. Sood which has been recorded thus far will also be not read as evidence. This course is adopted in order to save further cross-examination of Mr. Sood.'

Mr. Mehra states that he will rely only on the following documents which are already before the Court :

'(A)The attendance register of the Company showing the attendance at the meeting on 21st October, 1972. (b) The Memorandum and Articles of Association. (c) The Chairman's report. (d) Requisition for ballot slips and ballot papers. (e) Cyclostyled list of members of the Association showing the proprietors of the various concerns and their representatives.'

Mr. Ved Vyas says that he will also be relying upon documents showing authorisation of Companies and Firms regarding representation of which he will give inspection to Mr. Mehra. Mr. Mehra requests that Mr. Ved Vyas may, at the adjourned date. make a statement concerning the following matters :

'(1)Whether the cyclostyled list of members already filed is a complete list of all members of Association and if it is not, who are the other members (2) That it may be clarified as to who among those mentioned in the said cyclostyled list are members or representatives.'

(10) During the hearing of the application certain subsequent events were brought to this Court's notice by means of an application (C.A. 675 of 1972). 17 out of 18 persons said to be elected as members of the Executive Committee on 21st October, 1972 issued notices, on 22nd November, 1972. convening what was called the '26th Annual General Meeting' of the Company for 16th of December, 1972, staling that the above meeting was being convened only for the purpose of adopting the income and expenditure account and the balance-sheet for the year ending 31st December, 1969. But two days before the said meeting was about to be held the concerned persons appear to have realised that if an annual general meeting was held according to the article provision as well as section 166 of the Act all the members would automatically retire and not having offered themselves for re-election would not also be re-elected. The said meeting was, however, cancelled. This cancellation, two days prior to the meeting, is said to be illegal and unauthorised. (A contention also seems to have been raised that all the members were not served with the said notice issued on 22nd November, 1972). 18 (other) members are nonetheless alleged to have been elected on 16th December, 1972 in pursuance of the said notice which announced an annual general meeting on that date. Out of the said 18 persons one of them has filed a suit (No. 81 of 1972) on the file of this Court claiming that he and 17 others are the properly elected directors and that those who were elected on 21st October, 1972 had also ceased to be directors by reason of the annual general meeting having been called. This suit, which is resisted, is pending.

(11) The scope of section 186 of the Act has been discussed by me at length in the judgment pronounced by me on 10th May, 1973 (Smt. Shrimati Jain v. Delhi Flour Mills Co. Ltd. & Others, C.P. 96 of 1972) There is no need to repeat here the entire discussion or refer again to all the decided cases noticed therein. It will be sufficient to refer to the aspects which alone matter for the present controversy. Section 186 reads :

'186(1) If for any reason it is impracticable to call a meeting of a company, other than an annual general meeting, in any manner in which meeting of the company may be called, or to hold or conduct the meeting of the company in the manner prescribed by this Act or the articles, the Court may, either of its own motion or on the application of any director of the company, or any member of the company who would be entitled to vote at the meeting,- (a) order a meeting of the company to be called, held and conducted in such manner as the Court thinks fit; and (b) give such ancillary or consequential directions as the Court thinks expedient, including directions modifying or supplementing in relation to the calling, holding and conducting of the meeting, the operation of the provisions of this Act and of the company's articles. Explanationn :-The directions that may be given under this sub-section may include a direction that one member of the company present in person or by proxy shall be deemed to constitute meeting. (2) Any meeting called, held and conducted in accordance with any such order shall, for all purposes, be deemed to be a meeting of the company duly called, held and conducted.'

(12) Only a meeting other than an annual general meeting could be called by the Court in exercise of this power. The power to call an annual general meeting has, under the Act of 1956, been vested in the Central Government under Section 167. The act of 1913 had (vide section 79(3) given the power to call such an annual general meeting to the Court. This change in India followed the change which was made in England where following the recommendation of a Committee headed by Mr, Justice Cohen the power to convene an annual general meeting was taken away from the court and vested in the Board of Trade in order 'to save expense.'

(13) At the annual general meeting the following items of business (which shall be deemed to be special) have to be set out on the agenda :

(1)Consideration of accounts, balance-sheet and reports of the Board of Directors and Auditors; (2) declaration of dividend; (3) appointment of directors in the place of those retiring ; (4) appointment and fixing the remuneration of auditors (section 173).

(14) The above items are within the purview of the annual general meetings. Section 257 enables a person to stand for directorship at any general meeting, which may be held, and not necessarily only at an annual general meeting. So long as the company is not having the maximum number of directors fixed by its Articles, additional directors may be appointed at general meeting up to the maximum limit. The only effect of introducing sub-section I-A to section 257 seems to be that no one other than a director can stand as a candidate for appointment unless not less than 14 days notice is given to the company, the company not having the power to waive such notice. There does not appear to be any impediment, thereforee, in directors being elected at a general meeting of the company even other than the annual general meeting.

(15) The expression 'impracticable' is not to be considered as 'impossible' (vide Lothian Mills Ltd. 55 C.W.N. 646), but has to be understood from a 'reasonable point of view' (re Malhati Tea Syndicate 55 C.W.N. 653). When there is doubt as to the existence of a Board of validly appointed directors and there is possibility of interminable troubles and prejudice to the interest of the company if a meeting is held otherwise than under the direction of the Court, it will be expedient for the Court to call a meeting of the Company.

(16) The principles to be borne in mind while dealing with an application under Section 186 were summarised by S. P. Mitra, J. in United Breweries Ltd. v. Ruttonjee & Co. Ltd. and others 1962 2 Com. L.J. 155. These principles have also been restated by me in Delhi Flour Mills. Not only was the meeting not held and conducted under the Chairmanship of Shri P. A. Behl on 21st October, 1972 as directed by this Court and thereforee could not be deemed to be a meeting of the Company, but even their continuance in office has itself become doubtful at least subsequent to 16th December, 1972. A suit having been filed by those 18 persons who claim to have been elected at the meeting held on 16th December, 1972 there is bound to be interminable litigation affecting the will-being of the Company, which is engaged in the trade of exhibition, distribution and exploitation of the motion pictures in such a vast area as the Union Territory of Delhi and Uttar Pradesh. For this additional reason also it has become necessary to call a meeting of the Company under Section 186. Tough the Court will not convert itself into a shareholder of the Company or be concerned with the internecine squables of the Company it is nonetheless the duty of the Court even of its own motion, to call a meeting of the Company when it is impracticable to call such a meeting. In this view by order dated 8th March, 1973 I directed the issue of notice to those persons who claimed to have been elected as members at the meeting said to have taken place on 16th December, 1972 (who are parties to suit No. 81 of 1973) as well as to the persons who are said to have been elected as members of the Executive Committee at the meeting dated 21st October, 1972, (except Shri Desai, among them, who was imp leaded earlier on his own application) for 27th March, 1973. Notices were accordingly served upon all of them and they were duly represented by their counsel who also filed their representations in writing. Their counsel were also heard.

(17) The contention that the original order calling a general meeting of the Company for 21st October, 1972 was itself one without jurisdiction in the sense that it had not become impracticable to call a meeting and that a general meeting could not be called for the purpose of electing directors does not seem to deserve serious consideration. The facts, which are not disputed, noticed above clearly show that not only was it impracticable to call a meeting of the Company, but there was no other way of resolving the deadlock concerning the management of the Company's affairs an annual general meeting (not having been held for a period of nearly 3 years) except by calling a meeting under section 186. It was also seen that even though the Court cannot call an annual general meeting there is no impediment whatever in the way of calling a general meeting of the Company; according to section 257 the directors could also be elected at such a meeting. Once a meeting is called under Section 186 there does not appear to be any need for what happens at the general meeting being confirmed by the court as Shri K. K. Mehra, learned counsel for the applicant, contended but only to start with. Nor does there appear to be any need for an application to actually set aside the proceedings of the meeting called by the Court in cases where such a meeting is not conducted according to the Court's directions. But for sub-section (2) of section 186 the meeting called by the Court under section 186 could not become a meeting of the Company. Only a meeting called, held and conducted in accordance with the directions of the Court could be deemed to be a meeting called, held and conducted, by the Company.

(18) In the light of the above what happened from and after 7th October, 1972 may now be examined. Article 23 (existing at the time of filing C.A. 496 of 1972) read as follows :

'UNLESSand until otherwise determined by a General Meeting, the number of the Executive Committee members shall not be less than 8 nor more than 18, including the coopted members as hereinafter provided.'

(19) The extraordinary General Meeting which had already been convened for 30th September, 1972 had been adjourned to 7th October, 1972 with a direction that the following resolution be moved as a special resolution :

'RESOLVEDthat Article 23 of the Articles of Association be deleted and a new article reading as under be substituted : Unless and until otherwise determined by a General Meeting, the number of Executive Committee members shall be 16.'

(20) This was done as preliminary to calling, holding and conducting a meeting, under section 186 of the Act, on 21st October, 1972 for the purpose of electing such number of office bearers to the Executive Committee as may be resolved upon. Without this direction being strictly complied with there could not be, as I shall explain presently, a meeting of the Company and consequently there could be no valid election either.

(21) It is seen from the report of Shri Daljit Singh, who presided at the said meeting held on 7th October, 1972, that B. R. Kundra moved a resolution as directed by me, and that the same was seconded by O. P. Verma. An amendment was moved at the meeting by Jogindar Singh without any prior notice as required for a special resolution, that instead of 16 the number of members of the Executive Committee should be 18. This amendment was accepted by B. R. Kundra and carried unanimously. It is worth-recalling that what had been directed to be considered at the said meeting was the resolution fixing the number of directors as 16 and that the same had been directed to be considered as a special resolution of the Company. This was the only resolution on the agenda for the meeting on 7th October, 1972 pertaining to Article 23. If any other amendment had to be moved it had to be moved by way of a special resolution after giving the requisite notice which was admittedly not done. On this ground alone the amended resolution though passed unanimously, is seen to be illegal.

(22) The same result may follow even if a somewhat different approach is adopted. While ordering a meeting to be called, held and conducted on 21st October, 1972, a direction had been given that the number of office bearers to be elected would be as resolved at the meeting held on 7th October, 1972 in pursuance of the resolution framed by the Court with a further direction that it be moved as a special resolution. It seems worth repeating that the fact of a meeting being called by Court under section 186(1) would not make that meeting one called, held and conducted by the Company, but for section 186(2). The deeming provision incorporated in section 186(2) provides the vinculum Jurisdiction by reason of which a meeting ordered by the Court becomes the meeting of the Company. A deeming provision can be invoked only when the conditions which are prescribed for giving rise to it are present, but not where the factual situation is different from what is necessary for applying the deeming provision. In the case of a meeting called by Court there cannot be variation of or deviation from the directions given by it even if the variation or deviation is unanimously agreed to by all the parties concerned, though at a meeting which the members themselves call unanimity of opinion or of even that of the majority will prevail unless the same is ultra virus of Articles of the Company. It is worth emphasizing that the only means in law [as enacted by sub-section (2)] by which such a meeting can be deemed to be a meeting of the company would be by complying with the directions given by the Court in the matter of calling, holding and conducting the meeting. The fact, thereforee, that the amendment was proposed by one who, ironically speaking, happens to be one who was defeated in the elections and yet complains about the way in which the meeting (when the election) was held on 21st October, 1972 or even that the amendment was accepted by the mover of the resolution (as directed by this Court) could not make that meeting one conducted in accordance with the directions of the Court by reason of the deeming provision, namely, section 186(2). It was Jogindar Singh, strangely enough who made an application (C.A. 150 of 1973) bringing the above fact to the Court's notice; he urged that there was no valid resolution supporting the election of 18 office bearers and hence the meeting (and the election) held on 21st October, 1972 was not legally effective. Shri Ved Vyas filed a reply on behalf of those who were then contesting (the present application) on the ground that this was an entirely new plea which was not taken earlier and that it could not, thereforee, be allowed to be raised; it was also asserted that the resolution passed at the meeting held on 7th October, 1972 pertaining to Article 23 was valid. The persons who were newly added by my order dated 8th March, 1973 had not even referred to this aspect, but Jogindar Singh had again referred to this aspect in the rejoinder which he filed to the reply to the representations made by the newly added parties. No attempt was made before me to justify the deviation from the Court's directions concerning the resolution pertaining to Article 23 passed at the meeting held on 7th October, 1972. I take it that no justification has even been attempted for the reason that no justification seems possible.

(23) I am conscious that it may in a sense be somewhat absurd to regard the resolution pertaining to Article 23 passed unanimously at the meeting held on 7th October, 1972 as invalid (the said resolution had been proposed at the meeting without prior notice, by way of amendment) at the instance of the party who is now calling the validity of the resolution in question. I can only recall the observation of Lord Green, M.R. in Grundt v. Great Boulder Proprietary Mines, Limited 1948 Ch. D. 145

'ABSURDITY,I cannot help thinking, like public policy, is a very unruly horse.'

(24) The question that had to be considered in that case was whether the retiring directors could be deemed to be re-elected at an annual general meeting which had by show of hands rejected their claim to be re-elected. It was held that the deeming provision concerning the re-election could not be invoked as a matter of statutory construction and the argument of absurdity could not, in the circumstances prevail.

(25) Even if it is possible to regard the election of 18 members to the Executive Committee as being within the purview of Article 23, as it originally stood, before the amendment made on 7th, difficulty would still arise by reason of not being able to deem the meeting (and the election) held on 21st as that of the Company within the meaning of section 186(2) for there was no compliance with the direction of the Court, which was that the resolution fixing the number of members of the Executive Committee as sixteen should have been moved as a special resolution at the meeting on 7th and the further meeting (and election) to take place on 21st should have been on the basis of the voting on the resolution framed by the Court. This resolution was no doubt duly proposed and seconded at the meeting held on 7th, but was not put to vote; on the other hand the amended resolution which had been proposed at the meeting itself, even without the requisite notice for a special resolution was put to vote. In the view explained at length that only a meeting which is conducted according to the direction given by the Court while calling a meeting under section 186(1) could attract the deeming provision under sub-section (2) it does not seem possible to deem the meeting (and the election) held and conducted on 21st as that of the Company.

(26) If it became necessary on the part of these to deviate from the directions given by the Court in the matter of holding or conducting such a meeting the only appropriate course would have been to apply to the Court itself to alter the directions or give such further directions as may be considered necessary. The members of their own accord, once a meeting is called under section 186, cannot choose to even agree among themselves regarding how the meeting should be conducted other than by way of carrying out the directions given by the court.

(27) I am free to state, however, that what happened at the meeting on 7th October, 1972 seems to have been done perfectly bona fide, but it seems obvious that what happened on 7th October, 1972 does not conform to the requirements of law and/or the directions of Court. There can be no question of estoppel either for there can be no estoppel against statute or law or against the directions given by the Court.

(28) What is the course, then, that has to be adopted in these circumstances Section 186 has been worded so widely and such extensive powers also have been given to the Court. The-Court, even of its own motion, can direct a meeting to be called under section 186. The directions can go to the extent of even departing from the provisions of the statute and the Articles to meet the exigencies of any situation; section 186 itself, for instance, provides for the Court fixing the quorum of the meeting as one.

(29) One of the principles stated by S. P. Mitra, J. in United Breweries Ltd., with which I concurred in Delhi Flour Mills Ltd., is that where a meeting can be called only by the directors of a company and there are serious doubts and controversies as to who are the directors or there is a possibility that one or two or both the meetings called by the rival groups have been invalid the Court ought not to expose the shareholders to uncertainty and should hold that a position has arisen which makes it impracticable to convene a meeting in any manner in which the meeting may be called. In such a situation when considering all the facts and circumstances the Court can with reasonable approach to certainty and even prima fade say that the manner in which meetings previously called under the Act and/or under the Articles would be invalid it would not hesitate to call a meeting under section 186. That a meeting has been previously called by the Court under section 186 may not be a reason by itself to refuse to call another meeting when a meeting was not conducted according to the directions given. If the meeting held on 21st October, 1972 was not properly conducted then the elections conducted at the said meeting, for which purpose the meeting was called, would also fail for that very reason.

(30) Much of the opposition to the calling of a fresh meeting for electing office bearers of the Company has been only on the ground that the elections were fairly and properly conducted and hence could not be challenged. Once the elections are seen to have been not conducted according to the direction given by the Court then there would not be any need to go into the question of whether the election was conducted properly or not. Nonetheless, it seems desirable to go into the said question, at least broadly, for two reasons : firstly, that a fresh election would have to be ordered even for the sole reason that the declared result is not acceptable to Court for the reason that the election itself was not properly conducted; secondly, that the mistakes committed may not be repeated and the precautions not taken may be taken.

(31) Analysing the voting that is stated to have taken place it is seen that there is discrepancy between the number of members who have signed the register in token of their having been present at the meeting and the number of requisition slips issued: while 442 requisition slips appear to have been issued only 347 have signed the register. This is explained by Shri Ved Vyas as being possibly due to the considerable interval of time between the meeting and the voting. The meeting commenced at 10.30 a.m. ; it was presided over by Shri P. A. Behi. According to his report he read out to the members present the list of the names of the candidates whose nominations had been received in the Association's office in time and obtained the consent of the concerned candidates. Two scrutineers, to whom no one objected were appointed. It was announced at the meeting (at 12 noon) that voting would commence at 2 p.m. and that the members could have lunch during the interval. The list of the candidates contesting the election was finally drawn up and sent for cyclostyling. A copy of the list was also issued to whoever wanted it and also attached with the ballot paper. Since the ballot papers were not ready the actual voting commenced only at 2.30 p.m.; it was announced that voting would come to end at 7 p.m. Though the Chairman says that he had directed that the ballot papers should be issued by the scrutineers to each of the members on his/her presenting a requisition slip duly signed by the member and after his/her membership being checked and scrutinised with the roll of members placed at the table, the scrutiny or check does not appear to have been adequate. By 7 p.m. 442 ballot papers were issued. A few members (it is not stated how many) who had left their requisition slips with the scrutineers, did not turn up to collect their ballot papers. The voting was finally announced to be closed at 7.02 p.m. The rest of the report relates to the manner in which the counting took place, about which both parties had practically nothing to say before me. The Chairman has arranged, in alphabetical order, the names of the 32 candidates along with the votes secured by them and he has underlined in red pencil the number of votes secured by each of them. Joginder Singh Sood is seen to have got 198 votes and K. K. Khanna the next higher number of votes, namely, 205. While K. K. Khanna was declared elected, J. S. Sood was not declared elected; he is seen to have secured 7 votes less than those secured by K. K. Khanna; Wazir Singh Chachaji secured 208, D. N. Pancholi and Lakhmi Chand Sethi 211 each B. M. Shah 219, Saranjit Singh Wadalia 234, Wishwa Nath Sahni (Sahni Enterprises) 235 and M. B. Mathur 239 votes etc. 442 requisition slips are stated to have been issued, the number of ballot papers issued was 442. There are signatures only in respect of 347 members in the attendance register. Out of these 347, 13 are conceded to be duplicated. thereforee, only 334 members had signed as against 442 requisition slips issued, which means that 101 requisition slips were issued to those who did not sign the attendance register. Deducting 435 (334 plus 101) from 442 (ballot papers issued, the difference is seen to be 7; Shri Ved Vyas had to concede even on this basis that at least 7 unauthorised persons had voted. This by itself is something which calls for strict Explanationn and serious scrutiny of the entire voting. In the absence of any Explanationn it has to be taken that the control exercised in the matter of seeing that only authorised persons recorded their votes was not adequate. The requisition slips for ballot papers do not appear to have been signed by many voters. The ballot papers were handed over to the voters without getting their signatures on the requisition slips. Not much effort appears to have been made to ensure that every voter signed the requisition slip after signing the attendance register as well; it was not possible, thereforee, to make checks in order to find out whether the particular person who voted on behalf of the concerned member had authority to do so in cases where the member did not vote in person. In the case of firms, which are members, duly written authorisations had to be obtained from the firm to enable the person who turned up to vote on behalf of the concerned firm.

(32) Shri K. K. Mehra submitted a list of 33 limited companies who are members but had recorded their votes without producing authenticated copies of resolutions passed under section 187 of the Act to enable them to vote on behalf of these companies.

(33) In the result at least thirty-three votes, cast by members which were limited companies, have not been shown to have been properly cast in the sense no resolution (or authenticated copy thereof) under section 187 had been filed. The arguments went on for several days in this case; Mr. Ved Vyas was content to take the stand that this point had not been specifically taken by Joginder Smgh who questioned the election; even those who were subsequently added in pursuance of my order dated 8-3-1973 did not do any better. Lists had been furnished by Shri K. K. Mehra pointing out the above, as well as other, defects. The commissioner has not filed any such resolutions or authenticated copies of them, nor has he even made a reference to the same having been filed with or shown to him. The commissioner had also stated that some persons who had signed requisition slips and to whom ballot papers had been issued had not turned up; there was no statement therein about the precise number who had done so. Even among the requisition slips (for ballot papers) we find atleast 26 such slips have been left unsigned. This throws further light on the absence of proper checks. In addition to those, Shri K. K. Mehra filed a list calling out forty instances where unauthorised persons had signed the meeting (Attendance) register. A further question may arise regarding how many among them did exercise their franchise and how many among them were not authorised to vote on behalf of the members. There seems to be no need to burden this order with those details in the view I am taking of the question of not regarding the meeting (and election) held on the 21st as that of the Company. The other facts noticed, even by themselves, concerning the manner in which the election was held, prevents the Court from regarding the election as a proper election. When the Court directs an election to be held and calls a meeting for that purpose under section 186 it is implicit that it will be held and conducted by taking all necessary safeguards; if it appears even prima facie that the election, by reason of the manner in which it was conducted especially in the context of the closeness of voting materially affects the result of the election, a fresh meeting for holding the election, will have to be ordered. Otherwise the purpose of the Court in ordering a meeting, for election of office bearers to take place, would be frustrated. This is not to say, however, that the election has to be set aside, in the narrow sense in which elections are ordinarily set aside on petitions being filed to set them aside.

(34) This Court having called a meeting of the Company under section 186 to take place on 21-10-1972, the correctness or legality of which has not even been seriously called in question until recently, this Court is under a duty to call another meeting of the Company when it is not possible to resolve the deadlock concerning the affairs of the Company in any other manner by reason of the manner in which it was conducted. The company is seen to deal with so many motion picture distributors and exhibitors in this vast area, who cannot carry on their business except by becoming members of this important organisation. A situation, which was thought, on all hands to be capable of being resolved by the simple process of calling a meeting of the Company under section 186 has for various reasons-most of which were not even anticipated-failed to resolve the conflicts and tensions which prevailed previously; I am afraid, it has even made matters worse. This evil result, I am satisfied, was not due to the meeting itself being called by the Court-which was and still is seen to be the only way out of the difficulty-but by reason of the necessary checks not being exercised and precautions not taken in the matter of conducting the meeting (and the elections). The only way of putting the company on a normal footing and thus enabling it to function smoothly seems to be by way of calling another meeting where the office bearers would be elected and by giving sufficient directions in this regard.

(35) In the light of past experience, however, I propose to give the following detailed directions: The meeting will be in two stages: First stage:-The general meeting of the Company will be held at the premises of the Company i.e. F-27, Darya Ganj, Delhi on Saturday, the 18th August, 1973 at 10 A..M. Shri Prithvi Raj Sachdev, Advocate, will be the Chairman of the meeting and Shri A. L. Joshi, Advocate will be the Alternate Chairman. I direct that the following resolution will be moved at the said meeting :

'RESOLVEDthat the previously existing Article 23 (both prior to 7-10-1972 and as amended on 7-10-1972 will be deleted'.

In place of existing Article 23 a new article 23 will be substituted as follows:

'UNLESSand until otherwise determined by a general meeting the number of Executive members shall be 18'.

(36) Even though no difficulty is apprehended in the matter of the resolution being passed as it is now framed today it seems necessary to also make a provision out of abundant caution for the eventuality of the said resolution, as framed, not being passed at the meeting at all. In that eventuality I direct that even if the said resolution is not passed at the meeting on 18-8-1973, 18 office bearers would be elected; it is worth recalling that Article 23, as it stood prior to 7-10-1972, permitted the maximum of 18 office bearers.

(37) The general meeting of the Company will be held at the aforesaid premises of the Company on Saturday, the 13th October, 1973 at 9 A.M. and will not be adjourned except for a lunch break between I and 2 P.M.

(38) The following procedure will be adopted at the meeting to be held on 13-10-1973 :-

(1)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. (2) 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 aforeside 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. (3) All proprietary concerns can vote only in person, subject to identity and membership being verified. (4) 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 27th September, 1973. 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 29-9-1973. The Chairman will go into the objections, scrutinise the nomination papers and make his decision concerning them. For this purpose he will attend the aforesaid premises of the Company on 1-10-1973 at 3 P.M. 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 4th October 1973. (5) 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. (6) 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 of his having received the ballot paper. (7) 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. (8) The Chairman will exclude from the premises where the meeting and voting take place any person who has not to record his vote. (9) The following four Scrutineers are appointed to help the Chairman. 1. Shri B. Mohan, Advocate. 2. Shri R. N. Dikshit, Advocate. 3. Shri Rishi Kesh, Advocate. 4. Shri K. L. Budhiraja, Advocate. (10) The Scrutineers themselves will under the guidance and help of Chairman/Alternate Chairman count the votes. (11) As soon as the voting is over the counting of votes will commence and the' result will be announced that night itself. (12) After the election is over the Chairman will submit a report to this Court concerning the meeting along with the requisition slips, ballot papers, the attendance register, nominations, authorisations and any other document that may be considered relevant by the Chairman, all in sealed container, within a week after the meeting. (13) 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. (14) 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. (15) The Chairman (Shri Prithvi Raj Sachdev) will be paid a remuneration of Rs. 2000, the Alternate Chairman (Shri A. L. Joshi) Rs. 1000 and the four Scrutineers (Sarvashri B. Mohan, R. N. Dikshit, Rishi Kesh and K. L. Budhiraja) Rs. 500 each, by the Company.

(39) 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.

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

(41) The application is order in the above terms detailed above. There will be no order as to costs.


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