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M.R.S. Rathnavelusami Chettiar Vs. M.R.S. Manickavelu Chettiar and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtChennai High Court
Decided On
Case NumberSecond Appeal No. 599 of 1950
Judge
Reported inAIR1951Mad542; [1951]21CompCas93(Mad); (1951)IMLJ5
ActsCompanies Act, 1913 - Sections 23, 78, 79(3) and 86G - Schedule - Regulation 55; Evidence Act, 1872 - Sections 115
AppellantM.R.S. Rathnavelusami Chettiar
RespondentM.R.S. Manickavelu Chettiar and ors.
Appellant AdvocateK. Bhashyam and ;S.L. Venugopalachari, Advs.
Respondent AdvocateR. Gopalaswami Iyengar, Adv.
DispositionAppeal dismissed
Cases ReferredSubramania Aiyar v. United India Life Insurance Co. Ltd.
Excerpt:
.....one. bhashyam also urges that at best his client's conduct might be a matter for consideration on a question of costs and would not preclude an argument of the kind which has been advanced by learned counsel against the validity of the meeting held at door 286, kallukatti east street, and of the resolution passed at it, removing his client from the office of managing director and appointing defendant 1 in his place......at 286 kallukatti east street which is only a few yards off the registered office and there held a meeting at which a resolution removing the plaintiff from managing directorship was passed. the validity of the meeting so held and of the resolution so passed is the subject-matter of the present action. the plaintiff complains that the meeting and the resolution are altogether invalid and illegal. the answer of the defendants is firstly that a suit of this character is not maintainable and secondly that the meeting and the resolution are perfectly legal and valid. 2. the suit was disposed of by the learned district munsif of devakottai on the basis of a certain admission made by the pleader for the plaintiff on the plaint which is to the following effect : 'i admit for the purpose.....
Judgment:

Raghava Rao, J.

1. There are in the main two interesting questions of company Jaw involved in this case: (1) whether the suit out of which this second appeal arises is maintainable; and (2) whether a resolution of the share-holders of a company known as Vel Brothers Ltd. (hereinafter to be referred to as the company) of 3-11-48 removing the plaintiff from its Managing Directorship, and appointing defendant 1 as Managing Director instead, is invalidor illegal. The facts which require to be stated for appreciating the points arising for decision are these. Defendants 1 and 2 called upon the Managing Director, the plaintiff, by letter dated 28-9-1948 to convene a meeting for electing a new Managing Director in place of the plaintiff. The reply of 27-10-48 that was given to it by the plaintiff was that since the general meeting was anyhow going to be held on 30-12-1948 the matter might be considered at that juncture. Finding that the plaintiff did not take action on their letter within 21 days the requisitionists sent notices to all the members of a meeting proposed to be held on 3-11-1948 at the registered office of the company at 5 P.M. The subject, it was said, was the election of a Managing Director in place of the plaintiff. It may also be stated that in a letter written by the plaintiff, Ex. B. 11 of 27-10-1948, he himself had expressed an intention to move a resolution at the meeting to be held on 3-11-1948 that the company be wound up voluntarily. On 3-11-1948 it appears, however, that the meeting could not be held at the premises of the registered office at the time fixed because the premises were locked. As the lower appellate Court has found, the share-holders who were assembled at the registered office for the purpose of the meeting accordingly moved on to the premises at 286 Kallukatti East Street which is only a few yards off the registered office and there held a meeting at which a resolution removing the plaintiff from Managing Directorship was passed. The validity of the meeting so held and of the resolution so passed is the subject-matter of the present action. The plaintiff complains that the meeting and the resolution are altogether invalid and illegal. The answer of the defendants is firstly that a suit of this character is not maintainable and secondly that the meeting and the resolution are perfectly legal and valid.

2. The suit was disposed of by the learned District Munsif of Devakottai on the basis of a certain admission made by the pleader for the plaintiff on the plaint which is to the following effect :

'I admit for the purpose of this suit that the registered office of the Vel Brothers Ltd., Karaikndi, was not available for the meeting to be held at 5 p.m. on 3-11-1948 and that a meeting was held at 5-15 p. m. on 3-11-1948 in the premises of door No. 286 Kallukatti (East ?) Street and the resolutions complained of by the plaintiff were passed at that meeting.'

No evidence was taken by the learned District Munsif who proceeded on the basis of this admission to deal with the merits of the case after finding the suit to be maintainable as not being a matter of mere internal management or a mere domestic matter on which theCourt should not interfere. On appeal taken to the Court of the Subordinate Judge of Devakottai the judgment of the learned District Munsif has been reversed on both the points. The plaintiff accordingly files this second appeal against the decision of the lower appellate Court.

3. As regards the maintainability of the suit the learned Subordinate Judge has applied what he calls the well known rule in Foss v. Harbottle, (1843) 2 Hare 461 : 67 E. R. 189, which he defines as being that a Court will not interfere with the ordinary management of a company acting within its powers and has no jurisdiction to do so at the instance of the share-holders. He has quoted James L. J. from Macdougall v. Gardiner, (1876) 1 Ch. D. 13 : 45 L. J. Ch. 27 at pp. 21 and 25 to this, effect :

'I think it is of the utmost importance in all these companies that the rule which is well known in this Court as the rule in Mozley v. Alston, (1847) 1 Ph. 790 : 41 E. R. 833 and Lord v. Governor & Co. of Copper Miners Co., (1848) 2 Ph. 740 : 41 E. R. 1129 and Foss v. Harbottle, 1843-2 Hare 461 : 67 E. R. 189 should be always adhered to; that is to say, that nothing connected with internal disputes b3tween the share-holders is to be made the subject of a bill by some one share-holder on behalf of himself and others, unless there be something illegal, oppressive or fraudulent, unless there is something ultra vires on the part of the company qua company or on the part of the majority of the company, so that they are not fit persons to determine it; but that every litigation must be in the name of the company, if the company really desire it. In my opinion if the thing complained of is a thing which in substance the majority of the company-are entitled to do or if something has been done irregularly which the majority of the company are entitled, to do regularly, or if something has bsen done illegally which the majority of the company are entitled to do-legally, there can be no use in having a litigation about it, the ultimate end of which is only that a meeting has to be called and then ultimately the majority gets ita wishes.'

The respondents before me have reiterated their reliance upon this statement of the law before me. Mr. Gopalaawami Aiyangar has also drawn my attention to the fact that the resolution passed on 3-11-1948 was later on confirmed by a resolution of a geaeral body meeting held on 30-12-1948.

4. The rule in Foss v. Harbottle, (1843) 2 Hare 461 : 67 E. R. 189 has been considered by this Court in Nagappa Chettiar v. Madras Race Club : (1949)1MLJ662 and has been, with its limitations and exceptions, set forth in detail in Palmer's Company Law, Edn. 19, by A.F. Topham K.C. at pp. 228 to 230. I have considered the matter carefully and have come to the conclusion that what we are concerned with here is not really either the rule or any exception thereto. Thequestion which arises here is indeed a different matter and is governed not by the rule in Foss V. Harbottle, (1843) 2 Hare 461 : 7 E. E. 189but by what has been said by Sir George Jessel M. R. in Pulbrook v. Richmond Consolidated Mining Co., (1878) 9 Ch. D, 610 : 48 L. J. ch.65. The ruling of Sir George Jessel M, E. hasbeen considered in very close detail by Beasley J.as he then was in Subramania Aiyar v. United India Life Insurance Co. Ltd., 55 M. L. J. 385 : A. I. E. 1928 Mad. 1215. The case before the learned Judge related to the United India Life Insurance Co. Ltd., Madras. There the Articles of Association provided for the election or appointment of two directors by the policy holders of the company, the directors so elected or appointed to be known as ''policy holders' directors'. Two persons alleging themselves to have been validly elected 'policy holders' directors' sued the company and its directors for a declaration of the validity of their election as such directors and of their right to act as such and also an injunction restraining the other directors from interfering with their right to act as such directors. On objection taken by the defendants that individually the plaintiffs had no cause of action and that the suit should have been instituted by the policy holders as a body, the objection was overruled by the learned Judge who held that the plaintiffs alone could maintain the suit and that no other policy holders on their behalf could have maintained it, and that the Directorsof the company had properly been impleaded as defendants. Referring to the decision of Sir George Jessel M. E. in Pulbrook v. Richmond Consolidated Mining Co., (1878) 9 ch. d. 610 : 48 L. J. ch. 65 the learned Judge observes at p. 398, that that decision

'seems to be authority both for the statement that a director who has been excluded from acting as a director by the directors of a company can sustain an action in his own name on the ground of individual injury to himself and for the statement that such an action can be sustained against the other directors.'

The learned Judge quotes the following from Sir George Jessel M. R.'s decision :

'In this case a man is necessarily a share-holder in order to be a director, and as a director he is entitled to fees and remuneration for his services, and it might be a question whether he would be entitled to the fees if he did not attend meetings of the board. He has been excluded. Now, it appears to me that this is an individual wrong, or a wrong that has been done to an individual. It is a deprivation of his legal rights for which the directors are personally and individually liable. He has a right by the constitution of the company to take part in its management, to be present, and to vote at the meetings of the board of directors. He has a perfect right to know what is going on at these meetings.'

Reference may be made in this connection also 4o a Bench ruling of this Court (of Ourgenvenand Cornish JJ.) in Srinivasan v. Subramania Aiyar, 61 M. L. J. 724 : A. I. R. 1932 Mad. 100 where after pointing out the distinction between the class of cases illustrated by Pulcrook v. Richmond Mining Co., (1878) 9 Ch. d. 610 : 48 L. J. Ch. 65 on the one hand and the class of cases illustrated by Foss v. Harbottle, (1843) 2 Hare 461: 67 B. R. 189 on the other the learned Judges ruled that :

'The Court has jurisdiction to entertain a suit by share-holders against the Company in respect of an infringement of their individual rights as share-holders when the interests of justice so require and a suit in substance to establish and enforce the right of a shareholder to exercise his vote is therefore maintainable at the instance of a single share-holder.'

It is perfectly clear to my mind that in thei case before me the plaintiff is suing in respect of an individual wrong and not a wrong in which all the share-holders generally and as a body, only are interested. He is asking it to be declared--and that is principally a matter of concern for him--that he has not ceased to be the Managing Director and that defendant 1 has not become that in his place. The question of the maintainability of the suit must therefore be answered in favour of the appellant before me.

5. Turning to the other question arising for determination I must state that the lower appellate Court's finding as to what happened on 3-11-1948 is contained in para. 16 of its judgment which I may as well quote :

'There is no evidence as to what actually happened, as to whether the requisitionists and other members assembled for the meeting at the registered office and finding it locked adjourned to 286 Kallukatti East Street and there held the meeting. But it was admitted that the meeting was actually held there at 6-15 p. m. It is not disputed that 286 Kallukatti East Street is a residential place of the parties, who are close relations, within a few yards from the registered office of the company. Only appellants 1, 2, and 4 attended the meeting and respondent 1 did not attend it. It is not suggested that any other member turned up at the registered office and went away or was prevented from attending the meeting held at 286 Kallukatti East Street for want of notice. In view of respondent 1's volte face at the trial and in view of his admission, the appellants did not adduce any oral evidence. In the circumstances, in view of the pleadings and the admissions made by respondent 1 at the trial, it is quite likely that appellants 1, 2 and 4 assembled at the registered office for the meeting bat respondent 1 locked up the premises and made the registered office not available for the meeting to be held there at 5 p. m. and did not give them any facilities for holding the meeting and that consequently they adjourned to 286 Kallukatti East Street a few yards away and held the meeting there at 5-15 p. m. and passed the resolutions complained of there at that meeting to the knowledge of respondent 1. This could reasonably be presumed under Section 114, Evidence Act, having regard to the common course of natural events, human conduct, and public and private business, in their relation to the facts of this particular case.'

This, it is said, by Mr. Bhashyam, the learned advocate for the appellant, is not a finding of fact which I should accept; it is a mere surmise and speculation which should never be regarded as an effective substitute for proof. I am not prepared to accept the argument. It seems to me rather that what the learned Judge has recorded in para 16 is an inference of fact from the admitted circumstances of the case gleanable from the endorsement on the plaint, thecontents of the minutes book and the probabilities of the case.

6. Accepting this view of the lower appellate Court for the purpose of his argument Mr. Bhashyam urges (1) that the meeting actually held at 286 Kallukatti Bast Street was not the outcome of an adjournment of a meeting fixed for one place to another place so thatthe proceedings at the latter place may be regarded as a continuation of the meeting initiated earlier at the former place, and (2) that if on account of the plaintiffs conduct it became impracticable for the requisitionists toconduct the meeting of the company at its registered office, the proper remedy to be pursued was either to take steps for a fresh meeting under the Companies Act or to move theCourt under Section 79(3) of the Act to order themeeting to be held and conducted in such manner as the Court may think fit. Against the latter contention Mr. Gopalaswami Aiyangar has urged that Section 79(3) of the Act appliesonly to cases where for any reason it is impracticable to call for a meeting of a company or to conduct it and not to cases in which it is impracticable to hold it. Learned counsel seeks to make a distinction between the holding of a meeting which according to him applies to the stage preliminary to the choice of the Chairman and the conducting of a meeting which applies to the stage thereafter. I am not satisfied that this distinction which is undoubtedly subtle is at all sound. In my opinion the expression 'to conduct' in the provision of the statute includes the stage prior to the choice of the Chairman, and the impracticability in the conducting of the meeting did nonetheless exist in the present case because (sic though) in the matter of the assembling of the share-holders at the premises of the registered office there was no difficulty. The fact that the words 'held' and 'conducted' are both to be found used in the provision of the statute in relation to the order to be made by the Court if the impracticability contemplated by it arises, affords no ground in support of the contention of counsel. It became impracticable in the circumstances of this case to conduct the meeting of the company in the registered office. Whatever the reason for it might be, Sub-section (3) of Section 79 says that it would be open for the Courts either on its own motion or on the application of any director of the company or of any member of the company entitled to vote at the meeting to order a meeting of the company to be called, held and conducted in such manner as the Court thinks fit. The restricted interpretation sought to be put upon the statutory provision by learned counsel for the respondents must accordingly be repelled.

7. The contention of the learned counsel for the appellant that there was no adjournment from the registered office to No. 286 Kallukatte East Street arises on the pre-supposition that the adjournment must be after a regular meeting is first held with a Chairman. Eegulation 55 of Table A, Companies Act is referred to in this connection. That provides :

'The Chairman may with the consent of any meeting at wbich a quorum is present (and sba!l if so directed by the meeting), adjourn the meeting from time to time and from place to place.'

It is said that the place of meeting is very important and only the Chairman of the meeting has the privilege of adjourning it. As against this submission for the appellant Mr. Gopalaswami Aiyangar urges that the right to adjourn which is expressed through the Chairman where one exists is always a thing inherent! an in assembly which can be exercised by it where none exists. In support of their respective contentions learned counsel on both sides have relied upon the case in Subramania Aiyar v. United India Life Insurance Co. Ltd., 55 M. L. J. 385 : A. I. E. 1928 Mad. 1215, one relying upon what is to be found at p. 400 where a reference is made to 'the power of the meeting to adjourn itself' the other relying upon what is to be found said at p. 402 with reference to Lord Hardwicke C. J.'s pronouncement in the case of Stoughton v. Reynolds, 95 E. R. 176 : In this last case it was held that the adjournment of a vestry meeting was a common right vested in the parishioners at large and nob in the Vicar, unless by law or by custom it was shown that the Vicar himself had power to adjourn the meeting. I am on the whole of opinion that the reference to 'the power of the meeting to adjourn itself' at p. 400 of the Eeport does not involve and imply that there must in every case be a meeting held under a Chairman at one place before an adjournment can be said to take place by the actual holding and conducting of a meeting at another place.

8. In any case I am not satisfied that if there was a violation of law in the present case by reason of the people assembled at the regis-tered office of the company moving on to aplace hard by and holding their meeting therein view of the difficulty of the locking up ofthe registered office with which they were confronted when they were assembled there, theviolation is to be regarded as anything morethan an irregularity. It does not seem to mymind that the validity of the meeting actuallyheld at No. 286, Kallukatti East Street, mustnecessarily and ipso facto be pronounced againstin the absence of any proof that a differentresult would have necessarily followed on afresh meeting.

9. One other point which has been debated before me is whether by reason of his conduct in making the premises of the registered office of the company unavailable for the meeting to be held the plaintiff is precluded from complaining of the invalidity of the meeting actually held at 286, Kallukatti East Street. As to this, it is observed by the learned Subordinate Judge in para. 20 of his judgment as follows :

'It is urged for respondent 1 that there is no evidence to show that he was aware of the meeting held at 286, Kallubatti East Street, or of the resolution passed at that meeting and if notice were issued for a fresh meeting to all the members it could not be said that the same result could have followed, i. e., the same resolutions could have been passed at such a fresh meeting. But it is quite probable on the pleadings and the admissions of respondent 1 that he was aware of the meeting held at 286 Kallukatti East Street, and no fresh notice was necessary therefor and he could not be allowed to make the registered office unavailable for such a meeting to be held there and then contend that the consequent change of venue of the meeting invalidated the meeting and the resolutions passed at the meeting for want of notice. He came to Court with the case that he was waiting for the meeting to be held at the registered office at 5 p. m. anxious to preside at it and take part in it, but nobody came and nothing happened and no meeting was held that day at all either at 286 Kallukatti East Street or anywhere else. But he gave ib up as untrue and admitted that a meeting was actually held at 286 Kallukatti Street and the resolutions complained of were actually passed. It could little avail him to contend that the resolution was invalid for want of fresh notice of meeting.'

In support of the view of the learned Judge thus expressed Mr, Gopalaswami Aiyangar relies upon a passage in Broom's Legal Maxims, 8th Bdn., p. 233 and a passage in the judgment in Subramania Aiyar v. United India Life Insurance Co., Ltd., 55 M. L. J. 385 : A. I. r. 1928 Mad. 1215. In the case in Subramania Aiyar v. United India Life Insurance Co. Ltd., 55 M. L. J. 385 : A. I. E. 1928 Mad.1215) the venue of the meeting of the company had to be changed from its registered office to the Mahajana Sabha Hall on accounb of the failure of the company to give those facilities which had been promised by defendant 7 onbehalf of the company. What happened was that after defendant 7 had said that the company would give all facilities for the meeting, as a matter of fact the company proceeded to appoint its own directors in haste. Having done so, as the learned Judge observes :

'.... it is clear being that it refused to give the facilities for the meeting held in its office and the other facilities which the policy holders desired; in fact, it clearly and definitely declined to allow the office to be used for the purpose of the adjourned meeting. The policy holders therefore selected the Mahajana Sabha hall, It was the deliberate act of the . defendants that caused this change of venue and Mr. Alladi Krishnaswami Aiyar has argued with great force that it does not lie in the mouth of any one who has by his own act prevented something taking place afterwards to take exception to that state of affairs and to use that state of affairs for his own benefit. I think that that argument is a perfectly sound one. It seems to me that it would be a travesty of the law if a. person who has deliberately brought about a state of affairs should be allowed to take exception to that state of affairs and use that changed state for his owa advantage.'

10. The learned Judge then proceeds to discuss the two English cases, New Zealand Shipping Co. v. Societe des Ateliers Et Chantiers de France, (1919) A. c. 1: 87 L.j.k.b. 746 and Quesnel Forks Gold Mining Co. Ltd. v. Ward, (1920) A. C. 222: 89 L. J. P. C. 13 and winds up thus :

'I think that the defendants cannot be heard to say that the change of venue was an irregularity,. such as to make the meeting of the 5th May invalid.'

The passage in Broom's Legal Maxims relied upon before me is part of the discussion of the maxim 'Nttllus Commodum Capere Potest De Injuria Sua Propria'--No man can take advantage of his own wrong--to be found at pp. 191 to 200 of the tenth and latest edition of the work. There the rule and its limitations are pointed out in a very exhaustive treatment. The maxim which is based on elementary principles, as is said in that work, is fully recognised in Courts of law and equity and, indeed, admita of illustration from every branch of legal procedure. It is, therefore, a sound principle, as observed at page 193 that 'he who prevents a thing from being done shall not avail himself of the non-performance be has occasioned.' Then as observed at p. 195, the maxim applies also with peculiar force to that extensive class of cases in which fraud has been committed by one party to a transaction, and is relied upon as a defence by the other. It is pointed out at page 197 citing the Latin maxim 'Aliegans contraria non est audiendus' that

'a person who has expressly made a verbal representation, on the faith of which another has acted, shall not afterwards be allowed to contradict his former statement, in order to profit by that conduct which it has induced.'

Finally, it is said at page 199 :

'In Hooper v. Lane, (1857) 6 H. L. C. 443 : 27 L. J. Q. B. 75 which strikingly illustrates the rule that 'no man shall take advantage of his own wrong', various instances were put by Bramwell B. showing that the rule 'only applies to the extent of undoing the advantage gained, where that can be done, and not to the extent of taking away a right previously possessed' .'

It is argued by Mr. Bhashyam that the case in Subramania Aiyar v. The United India Life Insurance Co., Ltd., 55 M.l.j. 385: A.i.r. 1928 Mad. 1215 was one in which there was a separate meeting held in the changed venue after the earlier meeting had become frustrated, and that, therefore, it cannot be applied as being of sufficient parity on facts, to the case on hand. It is urged, therefore, that except that his client cannot dispute the necessity for the meeting which came to be actually held at 5-15 P. M. on 3-11-1948 in other premises he is not estopped from relying upon the invalidity of that meeting in order to invalidate the resolution passed at it. Mr. Bhashyam also urges that at best his client's conduct might be a matter for consideration on a question of costs and would not preclude an argument of the kind which has been advanced by learned counsel against the validity of the meeting held at door 286, Kallukatti East Street, and of the resolution passed at it, removing his client from the office of Managing Director and appointing defendant 1 in his place. I have carefully considered the matter and have come to the conclusion that the way in which Mr. Bhashyam seeks to get over the point of estoppel is not sound. The facts with reference to which he distinguishes the case in Subramania Aiyar v. The United India Life Insurance Co. Ltd., 55 M. L. J. 385 : A. i. r. 1928 Mad. 1215 do not in the least affect the principle which really falls to be applied to this class of cases. There is no reason why that principle which is so fully discussed in Subramania Aiyar v. The United India, Life Insurance Co. Ltd., 55 M.L.J. 385 : A.I.R. 1928 Mad. 1215 with reference to the English cases and which is of very extensive application in a variety of cases as pointed out in Broom should not be actually held applicable to the case on hand, as it was held applicableto the case in Subramania Aiyar v. United India Life Insurance Co. Ltd., 55 M. L. J.385 : A. I. R. 1928 Mad. 1215. The differentiation attempted by learned counsel betweenthat case and this is on an accident of fact andnot on an essential of legal principle.

11. In the result the second appeal failsand is dismissed with costs. No leave.


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