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S. Pazhamalai Vs. Aruna Sugars Ltd. and anr. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtChennai High Court
Decided On
Case NumberCompany Application Nos. 210 and 211 of 1983
Judge
Reported in[1984]55CompCas500(Mad)
ActsCompanies Act, 1956 - Sections 153, 171, 173, 173(1), 173(2), 177, 257, 257(1) and 257(1A)
AppellantS. Pazhamalai
RespondentAruna Sugars Ltd. and anr.
Appellant AdvocateP.R. Rangarajan, Adv.
Respondent AdvocateC. Harikrishnan and ;A.K. Mylswami, Advs.
Excerpt:
.....is concerned, i do not propose to advert to this as on merits the applications..........pending disposal of the former. 3. the undisputed facts, in brief, are given below : at the annual general meeting of the company held on march 30, 1983, at hotel dasaprakash, madras, the second respondent was elected as director. the statutory notice dated february 16, 1983, issued under s. 171 of the companies act, 1956 (hereinafter referred to as 'the act'), did not contain any reference to the election of the second respondent as director. the company received three notices, one from k. r. sevugan chetty, while the rest from s. thiagarajan and s. venugopalan. the details of the first notice are not necessary for the present occasion as it has no impact on the points to be determined now. under the second and third, thiagarajan and venugopalan, respectively, proposed the second.....
Judgment:

1. The applicant in both the applications is a shareholder of the public limited company, Aruna Sugars Ltd.

2. The relief claimed in the former is to declare that the election of the second respondent as director of the first respondent company as void, while that in the latter is to restrain the second respondent from functioning as director pending disposal of the former.

3. The undisputed facts, in brief, are given below : At the annual general meeting of the company held on March 30, 1983, at Hotel Dasaprakash, Madras, the second respondent was elected as director. The statutory notice dated February 16, 1983, issued under s. 171 of the Companies Act, 1956 (hereinafter referred to as 'the Act'), did not contain any reference to the election of the second respondent as director. The company received three notices, one from K. R. Sevugan Chetty, while the rest from S. Thiagarajan and S. Venugopalan. The details of the first notice are not necessary for the present occasion as it has no impact on the points to be determined now. Under the second and third, Thiagarajan and Venugopalan, respectively, proposed the second respondent for appointment as a director on the board of directors. The first respondent company, in turn, sent a notice dated March 16, 1983, informing its members of the receipt of the above notices. Before the said annual general meeting only two vacancies in the board of directors arose by the retirement of P. Maruthai Pillai and B. S. Adityan. The said retiring directors have sought re-election. The company, therefore, pointed out in its notice dated March 16, 1983, that if the second respondent were to be elected in the above meeting, the strength of the board of directors would rise to 9. Till then, the board consisted of eight directors.

4. The main contention of Mr. Rangarajan, learned counsel for the applicant, proceeded thus : The strength of the directors was only eight. As the company had not raised the strength of board of directors from eight to nine as provided under art. 109, the election of the second respondent as director is invalid. I find this contention is not well founded. In the foremost, it has to be noticed that though art. 93 provided that, until otherwise determined by the general meeting, the number of directors shall be not less than three and not more than 12, including any ex-officio members. It is not the case of the applicant that in any general meeting the strength of the directors were fixed at eight.

5. In the absence of even an averment to the above effect, it is not open to the applicant to submit that the fixed strength of the board of directors is eight and that, therefore, unless as provided under art. 109, the strength is increased, there cannot be a valid appointment of a ninth director in the annual general meeting. On the other hand, according to art. 93, any number of directors, not exceeding 12, can be appointed by the members at the annual general meeting. Further, it is seen from the balance-sheets for the year ending September 30, 1981, and September 30, 1982, the strength of the board of directors was 9 and 10 respectively. Such constitution is consistent with art. 93.

6. The other contention is that the election of a director otherwise than in the vacancy caused by the retiring director is a special subject and that, therefore, the statutory notice issued under s. 173(1)(a) shall contain explanatory notes in relation to such special subject. The argument proceeded further to the effect that in this case as admittedly the statutory notice dated February 16, 1983, did not contain any explanatory note, the meeting held on March 30, 1983, pursuant to such defective notice, is illegal and, consequently, the election of the second respondent is also void. Even here I find no merit for factually in the statutory notice dated February 16, 1983, the reference to the nomination of the second respondent was not possible because it is only after the issue of the said notice, the company was in receipt of the three notices under s. 257(1) of the Act.

7. It is necessary to examine sections 171 and 257.

Section 171 reads as follows :

'171. Length of notice for calling meeting. - (1) A general meeting of a company may be called by giving not less than twenty one days' notice in writing.

(2) A general meeting may be called after giving shorter notice than that specified in sub-section (1), if consent is accorded thereto -

(i) in the case of an annual general meeting, by all the members entitled to vote thereat; and

(ii) in the case of any other meeting, by members of the company (a) holding, if the company has a share capital, not less than 95 per cent. of such part of the paid up share capital of the company as gives a right to vote at the meeting, or (b) having, if the company has no share capital, not less than 95 per cent. of the total voting power exercisable at that meeting :

Provided that where any members of a company are entitled to vote only on some resolution or resolutions to be moved at a meeting and not on the others, those members shall be taken into account for the purposes of this sub-section in respect of the former resolution or resolutions and not in respect of the latter.'

Section 257 reads thus :

'257. Right of persons other than retiring directors to stand for directorship. - (1) A person who is not a retiring director shall, subject to the provisions of this Act, be eligible for appointment to the office of director at any general meeting, if he or some member intending to propose him has, not less than fourteen days before the meeting, left at the office of the company a notice in writing under his hand signifying his candidature for the office of director or the intention of such members to propose him as a candidate for that office, as the case may be.

(1A) The company shall inform its members of the candidature of a person for the office of director or the intention of a member to propose such person as a candidate for that office, by serving individual notices on the members not less than seven days before the meeting :

Provided that it shall not be necessary for the company to serve individual notices upon the members as aforesaid if the company advertises such candidature or intention not less than seven days before the meeting in at least two newspapers circulating in the place where the registered office of the company is located, of which one is published in the English language and the other in the regional language of that place.

(2) Sub-section (1) shall not apply to a private company, unless it is a subsidiary of a public company.'

The use of the expression 'not less than fourteen days' before the meeting, obviously referring to the general meeting by the framers of the Act, is a clear indication that in respect of the general meeting of which notice under s. 171 had been issued, a member can exercise his option to nominate any person as a candidate for the office of a director provided he had not less than fourteen days before the meeting, left at the office of the company a notice in writing under his hand signifying his candidature for the office of director or the intention of such member to propose him as a candidate for that office, as the case may be. Section 257 does not contemplate a case of adjournment of that meeting on any ground. If the contention of Mr. Rangarajan were to be accepted, it would mean that whenever any notice under s. 257(1) is received by the company, the company shall invariably adjourn the general meeting because the notice containing the explanatory note must have 21 clear days preceding the date of the meeting. Such a position is against the express language employed in s. 257. A longer period fixed under s. 171 and a lesser period under s. 257 will also justify the conclusion that there was no statutory obligation on the company to adjourn the general meeting simply because it was served by a member with a notice under s. 257(1) and it owed a duty to inform its members of such notice. Further, it is well settled that, while interpreting the two provisions in a statute, one should not be allowed to operate as to render the other otiose and that they are intended to cover two different fields. Then the reasonable interpretation is that when a special subject were to be included in the agenda for the general meeting, the notice itself should contain an explanation, while, when the company was found to act under s. 257(1A), it is enough the later notice issued contained the explanatory note. In this case, the notice dated March 16, 1983, did contain a note 'if he (Arumugam) is elected, the number of directors on the board of Aruna sugars Ltd. will go up from the present 8 to 9'. In my opinion, there is thus compliance of both the provisions of ss. 173 and 257 of the Act.

8. The learned counsel laid emphasis on the following expression 'subject to the provisions of this Act' found in the opening sentence of s. 257 and submitted that s. 257, is therefore, subject to s. 173. I am unable to countenance the said argument. For, the expression 'subject to the provisions of this Act' will only qualify the person who is not a retiring directors. He must otherwise possess the requisite qualification for being nominated as a director. It does not, therefore, follow that s. 257 is in any way controlled by s. 173. I have already pointed out that the two sections cover two different areas. If a subject has to be shown in the agenda in the notice under s. 173, there is a statutory obligation on the part of the company to refer to the explanation with reference to the special subject. While the company was obliged to act under s. 257(1A) it can validly act by sending a notice intimating its receipt of the notice from a member or members proposing the candidature of any person as a director by serving individual notices to the members not less than seven days before the meeting. This time factor, one referred to in s. 171, while the others referred to in s. 257 and s. 257(1A), will serve as a guiding factor as to reasonably infer that, while the company were to act under s. 257(1A), it cannot practically comply with s. 173(2). At the same time, the requirement of s. 173(2) was complied with by appending a note to the second notice. I have already pointed out that it had been complied with in the instant case.

9. The other complaint averred in the affidavit is that the applicant was denied of an opportunity to offer himself as a candidate to the office of the director at the meeting held on March 30, 1983. It is stated in the counter-affidavit filed by the company that it is not disputing that the applicant became a member only on March 22, 1983. Therefore, factually he could not have offered himself as a candidate for the office of director at the meeting held on March 30, 1983. Hence, this contention also fails.

10. Here, there is another factor which will be disadvantageous to the applicant, that is, the majority of the shareholders had expressed their mind and elected the second respondent as a director. In my opinion, in the above conspectus, it is not open to the applicant to have the election of the second respondent as director declared void on an interlocutory petition. So far as the maintainability is concerned, I do not propose to advert to this as on merits the applications fail.

11. The result is the applications are dismissed. But I make no order as to costs.


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