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N.V.R. Nagappa Chettiar and anr. Vs. the Madras Race Club by Its Secretary, Mr. H.L. Raja Urs and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtChennai
Decided On
Reported in(1949)1MLJ662
AppellantN.V.R. Nagappa Chettiar and anr.
RespondentThe Madras Race Club by Its Secretary, Mr. H.L. Raja Urs and ors.
Cases ReferredSee The Queen v. White
Excerpt:
- - they also recommended the abolition of the proxy system of voting. and (2) resolved also that this committee recommends that the spirit of the letter of the government of madras be observed by refraining from using proxies at to-day's meeting and subsequent meeting as well as the annual general body meeting. natesan, was clearly illegal as he was disqualified to preside at the meeting, being himself a candidate for election to the managing committee. 8. the learned judge who tried the suit held, that, though there were some irregularities at the meeting and though he was not prepared to accept in their entirety the contentions put forward by the club relating to 'waiver',estoppel' and the like, the plaintiffs had failed to substantiate their contention on the material issues. it is.....1. this appeal arises out of an action by the members of the madras race club. the action was tried on the original side by bell, j., and by his judgment he dismissed the suit of the plaintiffs. hence this appeal by the plaintiffs.2. the madras race club is a body corporate registered under the indian companies act of 1913 before it was amended in 1936. the object of the club, as its name indicates, is to carry on the business of a race club and to provide certain amenities to its members. the memorandum of association and the articles of association are contained in ex. p-29. the memorandum of association prohibits the division of profits by way of dividend amongst the members, and they have to be utilised only for the purpose of the club. there are two classes of members, namely, club.....
Judgment:

1. This appeal arises out of an action by the members of the Madras Race Club. The action was tried on the original side by Bell, J., and by his judgment he dismissed the suit of the plaintiffs. Hence this appeal by the plaintiffs.

2. The Madras Race Club is a body corporate registered under the Indian Companies Act of 1913 before it was amended in 1936. The object of the Club, as its name indicates, is to carry on the business of a race club and to provide certain amenities to its members. The Memorandum of Association and the Articles of Association are contained in Ex. P-29. The Memorandum of Association prohibits the division of profits by way of dividend amongst the members, and they have to be utilised only for the purpose of the club. There are two classes of members, namely, club members and stand members. There are about 260 club members, and they alone are entitled to vote, while the stand members have certain other privileges, but not the right to vote. The management of the business of the Club is vested in six Stewards who must be club members. They occupy the position of the directors of a company and discharge similar functions in respect of the Club. The Articles provide as usual for the qualification for Stewards, for their retirement by rotation, filling up of vacancies, and also their powers and duties. After every annual general meeting of the Club the senior Steward is elected at the first meeting of the Stewards, who is to preside at every meeting of the Stewards. The quorum for a meeting of the Stewards is fixed at three. They are charged with the duty of calling for a general meeting annually and also, on the requisition of a prescribed number of members, calling for an extraordinary general meeting for special business. Article 50 prescribes the period of notice and the manner of issuing the notice for a general meeting. The senior Steward also presides as chairman at a general meeting. Article 73 lays down the manner of serving notices on members. After the Companies Amending Act of 1936 was passed the Articles of this Club were also amended in 1941, and Ex. P-29 contains the articles which were in force in 1947.

3. Sometime in April, 1947, 45 members of the Club sent a requisition to the Club for convening an extraordinary general meeting, inter alia, to appoint a committee to consider the revision of the Articles of Association and to suggest changes wherever necessary (Ex. P-1). In pursuance of this an extraordinary general meeting was duly held on the 21st of June, 1947, and in that meeting a special committee of seven members besides the Stewards, who were ex officio members thereof was constituted for the specific purpose of the revision of the Articles of Association and the suggestion of changes. They were required to submit a report on that behalf by the end of September, 1947, and it was also decided that a meeting of the general body should be called for not later than 31st of October, 1947, for the consideration of the report. The special committee had several sittings, and in the meeting of the 13th of September, 1947, they proposed several alterations to the Articles, the most important of which were that the management of the business of the Club should vest in a Managing Committee of 12 members instead of the Stewards, and that from among the members of the Managing Committee a senior Steward and five other Stewards should be elected, who should be solely responsible for the racing. They also recommended the abolition of the proxy system of voting. Under a licence granted by the Central Government under Section 26(2) of the ndian Companies Act, 1913, the Club was permitted to be registered as a company with a limited liability without the addition of the word ' limited ' to its name: The Provincial Government on whom the duty of issuing licences subsequently devolved framed regulations under the said section governing the issue of licences (vide Development Department Notification, Fort St. George March 6th, 1937, G. O. No. 549). Under Clause 8 of this Notification.

If the Memorandum and Articles of Association are altered without the previous approval of the Government having been obtained in that behalf, the licence granted by the Government shall be deemed to have become void.

In view of this requirement the special committee directed the solicitors of the Club to draft the necessary resolutions in proper form altering the Articles of Association in the manner suggested, and at a subsequent meeting of the 26th of September, 1947, in which some more alterations were suggested, the Club's solicitors were also requested to further revise the draft and send it to the Government for approval. The solicitors sent the revised draft to the Government on the 29th of September, 1947 (Ex. P-5). On the 11th of October, 1947, the Government approved the revised Articles of Association proposed by the Club but with one modification. relating to Article 69. The Government also pointed out that the revised Articles of Association should be adopted by passing a special resolution under Section 81(2) of the Indian Companies Act. Section 20 of the Indian Companies Act also requires a special resolution to alter or add to the existing Articles. On the 15th of October, 1947, the special committee at its meeting considered the order of the Government and resolved that an extraordinary general meeting of the members by convened on the 7th of November, 1947, at 6-30 p.m. to consider the report and pass a special resolution and requested the solicitor, Mr. Small to draft the resolutions. The Committee was adjourned to meet again at 5 p.m. on 7th November, 1947 (P-I). At this meeting of the special committee were present nine members of whom one was the senior Steward, Mr. Annamalai Chetti, and two Stewards. On the 16th of October, notice was issued to the Club members of the extraordinary general meeting on the 7th of November, 1947, at 6-30 p.m. The contents of this, notice (P-8) are material for the decision of this case, and therefore it is necessary to set them out in extenso:

Notice is hereby given, that an Extraordinary General Meeting of Club members of the Madras Race Club will be held at the Members' Stand of the Club at Guindy, on Friday the 7th day of November, 194.7, at 6-30 o'clock in the evening for the following purpose:

(1) To receive the report of he Chairman of he Special Committee constituted to revise the Articles of Association of the Club and to suggest developments of the Club's present amenities;

(2) To consider and, if thought fit, to pass as a Special Resolution ' That the Articles in the printed document submitted to the meeting, and for the purpose of identification subscribed by the Chairman thereof, be approved, with or without modification, and adopted as the Articles of Association of the Club in substitution for and to the exclusion of all the existing Articles of Association thereof;

(3) If the said Special Resolution be duly passed then to elect twelve Club members as the first Managing Committee of the Club, to hold office until the Annual General Meetnig of Club Members to be held in November 1948; and

(4) To consider the Special Committee's following proposals for development of the Club's amenities and to give directions to the Managing Committee thereon:

(a) That the present Lunch Room be furnished suitably to serve as a Lounge for Club members;

(b) That the northern corner of the verandah adjoining the Lunch Room be equipped to serve as a Card room for Club members;

(c) That the present Billiards room be reserved for use only by Club members when a separate Recreation room can be provided for Trainers and Jockeys; and

(d) That arrangement be made to serve Refreshments also.

N.B.--(1) A print of the proposed amended Articles of Association will follow shortly.

(2) Each nomination of a Club member as a candidate for election to the Managing Committee should be signed by two Club members and sent to the Secretary fourteen clear days before the date of meeting.

This notice, it is common ground, was posted at Guindy on the 16th October. About the same time notice of the annual general meeting of the Club fixed to 18th November, 1947, was also issued to the members. The extraordinary general meeting was also advertised in the Hindu of 18th October, 1947 (Ex. P-10) and the Madras Mail of even date (Ex. P-II). In pursuance of the notice, Ex. P-8, the Club received 24 nominations for the membership of the Managing Committee which was communicated to the members by notice, dated 27th October, 1947 (Ex. P-12). By 29th October, 1947, the Club received notice of amendments to the Articles of Association from Messrs. T. T. Krishnamachari, G. Narasimham, A. R. Srinivasan and the Rajah of Vizianagaram, and these were notified to the members by a notice of 29th October, 1947 (Ex. P-13). On the 21st of October., 1947 (it is admitted before us by both sides, though there is no evidence regarding it) the Club sent the printed draft of the proposed amendments to the Articles of Association, Ex. P-30, to all the members. On the 5th of November, 1947 the Government of Madras suggested that the Articles of Association might be suitably amended to eliminate voting by proxy and to delete Articles 55, 56 and 57 altogether with a view to make the members of the Race Club take full responsibility for the proper conduct of racing. In the light of this suggestion the Government wanted a fresh draft on those lines, or alternatively that the existing Articles suitably altered and approved by the general body be submitted to them through the Registrar of Joint Stock Companies, Madras, for approval before 'it is finalised '. At 5 P. M. on the 7th November, 1947, the special committee met and considered the proposal of the Government. They passed at that meeting two resolutions:

(1) Resolved that the letter be placed before the General Body Meeting to be held at 6-30 p.m. with the recommendation that the suggestion of the Government be accepted; and

(2) Resolved also that this Committee recommends that the spirit of the letter of the Government of Madras be observed by refraining from using proxies at to-day's meeting and subsequent meeting as well as the Annual General Body Meeting.

These resolutions were passed, one member Mr. Annamalai Chettiar dissenting. The extraordinary general body meeting was held on the 17th November, 1947, at 6-30 p.m. which was presided over by Mr. P. Natesan as the senior Steward, Mr. Annamalai Chettiar expressing his unwillingness to take the chair. What exactly happened at that meeting is a matter of serious controversy between the parties, and the fate of this case mostly depends upon our decision on this point. What purported to be the proceedings of the meeting of the 7th November were communicated by the Club to the members, and the plaintiffs filed the communication received by them, which is marked as Ex. P-18. The solicitors of the Club by their letter of 10th November, 1947, communicated to the Registrar of Joint Stock Companies the proposed revised Articles which, it was alleged, were adopted at the meeting of the 7th November. The Registrar of Joint Stock Companies through a telephonic message of 14th of November, 1947, asked the solicitors whether the revised set of Articles was adopted by a special resolution at the meeting of the 7th, and that, if so, a copy of the resolution and a copy of the notice convening the meeting should be sent to him for reference. It was also pointed out by the Registrar that if the Articles were adopted by a special resolution, prior sanction of the Government ought to have been obtained and the Government might have to be addressed to condone the omission. To this the solicitors replied by their letter of 15th November, 1947, pointing out that there was no such necessity. The general meeting was held on the 18th at which some formal business was transacted, and the members were informed that there was no necessity to elect the Stewards as at the first meeting of the Managing Committee held on the 10th of November, 1947, Mr. P. Natesan was elected Chairman and five persons were elected as Stewards. Mr. Annamalai Chettiar wrote to the Registrar of Joint Stock Companies on the 18th (Ex. p-20) that the proposed special resolution had not been put to the meeting at all by the Chairman, Mr. Natesan, on the 7th of November, 1947 and that it had not been passed by the requisite statutory majority. The present plaintiffs issued through their lawyers a notice to the Club questioning the legale of the meeting of the 7th November and of the election of the members of the Managing Committee on that date on the grounds elaborately specified in that notice including the fundamental objection that the special resolution was not moved or put before the meeting and was not voted upon. The notice demanded the Managing Committee to accept the invalidity of the proceedings of the meeting of 7th November failing which it was intimated a suit would be instituted for appropriate reliefs. The reply of the Club is Ex. P-23, dated 25th of November, 1947, and was sent through their solicitors. In this the allegations in the notice, Ex. P-21 were denied.

4. This was followed by the present suit which was filed on the 8th of December, 1947 by two members of the Club for themselves and on behalf of the other members of the Club other than those who were originally impleaded as defendants in the suit after obtaining the necessary permission under Order 1, Rule 8, Civil Procedure Code. The first defendant is the Race Club. Defendants 2 to 13 are members of the Club who were elected as members of the Managing Committee. The suit was originally filed impleading only defendants 1 to 13. Defendants 14 to 90 who are some of the other members of the Club were impleaded as parties at their own request, as they wanted publicly to dissociate themselves from the plaintiffs.

5. The main reliefs claimed in the plaint were : (1) a declaration that the meeting of the general body of the members of the Club held on the 7th November, 1947, was invalid and void and that all business transacted thereat was invalid null and void; (2) a declaration that the Managing Committee comprising defendants 2 to 13 purported to have been elected at the said meeting was not lawfully or validly elected and were not entitled to assume office; (3) a declaration that the proposed amended Articles have not been duly passed and are ineffective; (4) a declaration that the Stewards who were in office prior to 7th November, 1947, still continue to be in office and are the persons legally and lawfully entitled to be in management and control of the Club; and (5) a declaration that the proceedings of the general meeting of the 18th of November, 1947, are illegal, invalid and void. There is also a relief for an injunction against defendants 2 to 13.

6. The grounds on which the reliefs claimed in the plaint were sought to be sustained before us may be catalogued as follows : (1) The meeting of the 7th of November, 1947, was not convened by the proper authority under the Articles, viz., the Stewards. (2) The notice of the meeting, Ex. P-8,which was posted on the 16th October, 1947, contravened the provision of Section 81(2) of the Indian Companies Act as 21 days were not allowed between the date of the meeting and the receipt of the notice. (3) The notice of the meeting did not contain the necessary particulars as it did not comply with the requirement that the general nature of the business should be indicated in it, the proposed amended Articles of Association not having been sent along with the notice so as to give notice thereof of 21 clear days. (4) Item No. 2 in the agenda, the special resolution relating to the proposed amendment of the Articles was not moved or put before the meeting for being voted upon. (5) In any event even if the voting of 66 members at that meeting was in support of the special resolution, that did not constitute the statutory three-fourths majority of the members present, who numbered according to the plaintiffs 105. (6) The amendments moved were not within the scope and ambit of the original resolution and could not have been validly made. (7) The election of the 12 members of the Managing Committee was illegal as the notice regarding it was insufficient as regards the time and was also defective as the members were not informed of the qualifications and the functions of the Managing Committee before they were called upon to submit nominations. (8) The election of the entire Managing Committee was illegal, or in any event that of Mr. Natesan, was clearly illegal as he was disqualified to preside at the meeting, being himself a candidate for election to the Managing Committee. (9) If the meeting of 7th November, 1947, was void, the annual general meeting of 18th November; 1947, was equally void, as proxies were illegally excluded.

7. These charges are of course denied by defendants 2 to 8, 10, 12 and 13. In paragraph 5 of the written statement filed on behalf of the first defendant, the first defendant stated with reference to the allegations in paragraph 6 of the plaint that although 105 members signed the attendance sheet during the period of the meeting and 49 proxies were registered, only 66 members were actually present at the time when the resolution to adopt the new articles was put to vote. The other defendants 2 to 8, 10, 12 and 13 filed a separate written statement practically adopting the written statement filed on behalf of the first defendant. Defendant 9 seems to have signed the written statement of defendants 2 to 8, 10, 12 and 13 but without looking into the written statement filed on behalf of the first defendant. Mr. Vijayaraghavan, the 9th defendant wanted to see the written statement of the first defendant before their written statement was actually filed into Court. For this purpose he wrote to his solicitors on the 10th of January, 1948, communicating his intention to see the written statement of the first defendant before the written statement bearing his signature was actually put into Court. To this the reply of the solicitors dated 12th January, 1947, was that their written statement was filed in Court on that day as Mr. Small was otherwise engaged that morning and that it was too late to withhold the filing of their written statement. Mr. Vijayaraghavan was informed that the written statement signed by him merely adopted the written statement filed on behalf of the Club. On the 15th January, 1948, Mr. Vijayaraghavan by his letter protested against this action of the solicitors and pointed out that paragraph 5 of the first defendant's written statement was highly misleading and even incorrect. According to him, when the resolution was put to vote at the meeting, 66 persons voted for, one member said he was neutral and about 30 to 35 other members did not vote either way. He pointed out that the statement in paragraph 5 of the written statement of the Club that only 67 members were present at that time was not true and that therefore he could not subscribe to it. After this protest when the written statement of the defendants 2 to 8, 10, 12 and 13 was returned the solicitors scored out his name. Mr. Vijayaraghavan filed a separate written statement engaging another counsel. Mr. Vijayaraghavan in his written statement denied the allegations in paragraph 5 of the written statement, reaffirmed the facts as stated in his letters and left other questions to be decided by the Court. Annamalai Chettiar also filed a separate written statement setting out his contention.

8. The learned Judge who tried the suit held, that, though there were some irregularities at the meeting and though he was not prepared to accept in their entirety the contentions put forward by the Club relating to 'waiver', 'estoppel' and the like, the plaintiffs had failed to substantiate their contention on the material issues. He was of opinion that there was no illegality in the proceedings of the meeting of 7th November, and that the special resolution was validly passed at that meeting. He characterised the action as a case of 'a storm in a tea cup ' and dismissed the plaintiffs' suit.

9. At the outset it is necessary to consider the question whether the suit as framed is maintainable. The action was brought by two plaintiffs who are the members of the Club for themselves and also on behalf of the other members after obtaining the requisite leave under Order 1, Rule 8, Civil Procedure Code. The learned Judge was of opinion that the suit was incompetent as what is known as the rule in Foss v. Harbottle (1843) 2 Hare 461 : 67 E.R. 189, applied to the case. The rule in Foss v. Harbottle (1843) 2 Hare 461, is 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 shareholders. A shareholder is entitled to institute a suit to enforce his individual rights against the company such as his right to vote, or his right to stand as a director of a company at an election. If the shareholder however intends to obtain redress in respect of a wrong done to the company or to recover monies as damages alleged to be due to the company, the action should ordinarily be brought by the company itself. In order therefore to enable a shareholder to institute a suit in the name of the company; in such a case, there must be the sanction of the majority for corporate action. In ordinary cases, therefore, this principle implies the supremacy of the will of the majority. It is open to a majority always to set right a thing which was done by the majority either illegally or irregularly, if the thing complained of was one which the majority of the company were entitled to do legally and was within the powers of the company by calling a fresh meeting. That is the reason why in such cases the Court refuses to interfere at the instance of a a shareholder even in a representative action brought by him. If the majority however acts in an oppressive manner, it is not as if the minority are without a remedy. This possibility was foreseen by Sir James Wigram, Vice-Chancellor who delivered the judgment in Foss v. Harbottle (1843) 2 Hare 461 : 67 E.R. 189. the Vice-Chancellor says:

If a case should arise of injury to a corporation by some of its members, for which no adequate remedy remained, except that of a suit by individual corporators in their private characters and asking in such character the protection of those rights to which in their corporate character they were entitled, I cannot but think that the principle so forcibly laid down by Lord Cottenham in. Wallworth v. Holt (1841) 4 Myl. & Cr. 619 : 41 E.R. 238, and other cases would apply and the claims of justice would be found superior to any difficulties arising out of technical rules respecting the mode in which corporations; are required to sue.

In such a case where action by a shareholder is permitted, the plaintiffs would not have a larger right to relief than if the company itself were the plaintiff' and are not entitled to complain of acts which are valid, if done with the consent of the majority of the shareholders or are. capable of ratification by the majority.

10. The later decisions however have recognised exceptions to what is conveniently known as the rule in Foss v. Harbottle (1843) 2. Hare 461 : 67 E.R. 189. James, L.J., in MacDougall v. Gardiner (1875) 1 Gh.D. 13, considered the rule and stated the exceptions in the following passages at page 21 which has since become classic:

I think it is of the utmost importance in all these companies that the rule which is well known in this Court as the rules in Motley v. Aston (1847) 1 Ph. 790 : 41 E.R. 833 and Lord v. 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 between the shareholders is to be made the subject of a bill by some one shareholder 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.

From this it follows that a shareholder or shareholders are entitled to bring an. action (1) in respect of matters which are ultra vires the company and which the majority of shareholders, were incapable of sanctioning; (see Burland v. Earle (1902) A.C. 83) ; (2) where the act complained of constitutes a fraud on the minority; and (3) where the action of the majority is illegal. The decisions in Baillie v. Oriental Telephone and Electric Co. Ltd. (1915) 1 Ch. 503. and Cotter v. National Union of Seamen (1929) 2 Ch. D. 58, recognised a fourth exception where a special resolution was required by the Articles of the company and the company obtained the assent of the majority to such special resolution by a trick, or even where a company authorised to do a particular thing only by a special resolution does it without a special resolution duly passed as in such a case to deny a right of suit to the shareholders without using the name of the company would in effect result, the company doing the thing by an ordinary resolution. In other words, this means that where a special resolution was improperly passed, if the rule that the company alone is the proper plaintiff to institute a suit questioning such resolution were to be enforced, the shareholders by a bare majority could defeat and prevent the minority from using the name of the company. The result of such a course would be indirectly to uphold the validity of a special resolution which was otherwise invalid. To avoid this result this exception was recognised in the two decisions. The rule and the exceptions thereto are also stated in Palmer's Company Law, 17th Ed., at pages 236 and 237 and Halsbury's Laws of England (2nd Ed.), Vol. 5, page 445 paragraph 728. The appellants' learned advocate; placed before us the authorities bearing on the rule and the exceptions, and the respondents' learned advocate did not challenge the position contended for by the appellant. It is needless to consider the authorities in detail as the substance of the decisions is as stated above.

11. The attempt of the learned advocate for the appellants is to bring the present case under two exceptions, namely, that the acts complained of are illegal acts, and secondly that if the special resolution was not passed or was passed illegally the effect of applying the rule in Foss v. Harbottle (1843) 2 Hare 461 : 67 E.R. 189, to this case would be indirectly to sanction by an ordinary resolution that which the law requires to be passed only by a special resolution. For reasons given below, in our judgment the present suit falls within these two exceptions and that it is maintainable.

12. It will be convenient to deal first with the objection that the special resolution, item 2 in the agenda, was not put to the meeting and was not passed, for this question goes to the root of the matter. If we find that no special resolution was passed at the meeting of the 7th November, 1947, the whole proceedings of that meeting fall to the ground. Section 20 of the Indian Companies Act requires a special resolution to alter the articles. If there was no special resolution sanctioning the alteration, the action of the Club in altering the Articles without authority would be void and the alterations would have no legal effect. It is unfortunate that in this case notwithstanding the presence of the solicitor of the Club, Mr. Small, at the proceedings of the meeting and notwithstanding the fact that the chairman of the meeting and the shareholders were men of status in life there is no authentic record of the proceedings of the meeting. This has made our task more difficult. According to the plaintiffs one and only one resolution was put before the meeting on that day, that is, resolution No. 1 of the special committee in Ex. P-16, and that it was this resolution that was passed by 66 voting for, and one remaining neutral out of the members present. The plaintiffs categorically asserted in the plaint that the special resolution (items in the agenda) was not put to the meeting and was not passed. This of course was denied by the defendants. According to the version of the defendants the special resolution alone was put to the meeting, and it was in respect of that that the counting of the votes took place and it was carried by 66 votes, one remaining neutral. According to both versions it would be clear from the evidence that there was only one counting of the votes at which it was found that 66 were in favour of the resolution, whether it was the resolution of the special committee that was put to the meeting or the special resolution itself. As regards the number of persons present at that sole count, there is also conflicting evidence.

[After discussing the evidence bearing on this question their Lordships concluded.]

13. We therefore hold agreeing with the contention of the plaintiffs that the soecial resolution was not put to the meeting and was not passed.

14. If the special resolution was, in fact, put to the meeting and was passed by 66 voting for, we have no doubt on the evidence adduced even by the plaintiffs that there were no more than about 10 or 20 members who did not take part in the voting and therefore the 66 would constitute the required majority for declaring the resolution carried. In view of the finding that the special resolution was not passed, the amendment of the Articles and the consequent election of the members of the Managing Committee are wholly void.

15. This really disposes of the suit in favour of the plaintiffs. In this view it may not be necessary to consider the other objections to the meeting. However we will deal with the other objections also as in our opinion, some of them are well-founded.

16. We now proceed to consider them in the order in which they were enumerated earlier. The first of the objections is that the meeting was not convened by the proper authority. The Stewards constitute the authority under the Articles (Art.49) to call for an extraordinary general meeting as well as the annual general meetings. The quorum for the meeting of Stewards is fixed at three. The notice, Ex. P-8, was signed by the Secretary. It is common ground that there was no separate meeting of the Stewards in which they decided that an extraordinary general meeting should be convened on the 7th November. No minutes of any such meeting have been placed on record. Of the six Stewards Mr. Lawrence died sometime ago, Mr. Chidambaram Chettiar was out of India and according to Mr. Small, Mr. Hume was at the time of the notice in Ceylon, though he had no personal knowledge of it. Mr. Hume was present on the 7th both at the special committee meeting and also at the extraordinary general meeting. It may be assumed that Mr. Hume also was not available at the time Ex. P-8 was issued. The notice, Ex. P-8 did not indicate the authority under which the meeting was called. The extraordinary general meeting decided on the 2 1st June, 1947 (Ex. P-2) that after the report of the special committee then constituted for revising the Articles was submitted, a meeting of the general body should be called for not. later than 31st October, 1947, for the consideration of the report. This authority would not avail, because the time fixed had expired, and the meeting was subsequently convened only on the 7th November, 1947. The defendants relied on Ex. P-7 which contains a resolution of the special committee passed on 15th October, 1947, that an extraordinary general body meeting should be convened on the 7th November, 1947. This meeting of the special committee was attended by 9 members of whom three were Stewards who were ex officio members of the special committee. As three of the Stewards who constituted the quorum for a meeting of the Stewards and who were the only persons available in India at that time took part in the special, committee meeting, it is urged on behalf of the defendants that the resolution of that meeting may be deemed to be a resolution of the Stewards and therefore justified the calling of the meeting. Alternatively, it is also contended that in any event this is at the most an irregularity and not an illegality which justifies the; setting aside of the resolution. If a general meeting is convened by the Secretary without proper authority it is not valid. See Haycraft Gold Reduction and Mining Company, In re (1900) 2 Ch.D. 230 and Stale of Wyoming, Syndicate, In re (1901) 2 Ch.D. 431. Where the directors however met and decided to convene a general meeting; but the meeting of the directors itself was not properly convened, it was held in Browne v. La Trinidad (1887) 37 Ch.D. 1, that by reason of the irregularity of the Board meeting the general meeting was not incapacitated from acting. In the case in Harbon v. Phillips 23 Ch.D. 14, a Board meeting of the directors was held which decided to convene an extraordinary general meeting. At the Board meeting the plaintiffs who were the directors were refused admittance to the meeting by the Secretary under the direction of persons in possession of the Board room. The plaintiffs protested and withdrew. The persons in possession of the Board room purporting to act as a Board adjourned their meeting to the next day to a different place, the office of their solicitor, and on the requisition presented to the meeting on the next day which was attended by three of the defendants appointed a special committee to convene an extraordinary general meeting. At the meeting of the Board there was unquestionably a person who took part in the meeting and who was not a director. It was held that the meetings of the Board of Directors on the two days were unlawful and that everything that was done at those meetings was invalid. The consequence was that the appointment of the special committee and the notice convening the meeting were also invalid. It was pointed out in answer to an argument that there was a quorum of the directors and therefore the meeting was lawful that it was not enough that there was a quorum as the lawfully constituted directors were prevented from attending the meeting. The convening of the meeting, according to this decision, was not a mere ministerial act, The. directors have to exercise their discretion and have to fix the time within which and the place at which the meeting should be held, and whether a meeting should at all be held. In the light of these decisions it is difficult to say that there was a valid meeting of the Stewards. There is no doubt some force in the argument of the respondents that the proceedings of the special committee in which three of the Stewards who were available in India were present may be deemed to be a valid meeting of the Stewards. The objection of the plaintiffs is technical. The mere presence of the other members of the special committee at that meeting may not vitiate the resolution to which the Stewards were a party. We do not however think it necessary to express any final opinion on this question.

17. The next question for consideration is whether the notice, Ex. P-8, posted on the. 16th October, 1947, complied with the requirement of Section 81, Sub-clause 2 of the Indian Companies Act that there should be a notice of ' Not less than 21 days.' There were 260 Club members of whom 23 were living outside British India. 51 members who were absent members and 59 members lived at places-which could be served through post after more than a day had elapsed from the date of posting. 127 members were within one day's reach from the date of posing. The notice of the meeting therefore posted on the 16th at Guindy could have been received by less than half the members only on the 17th. More than a day was required at least in respect of 59 members. Excluding therefore the date of service of notice and the date of the meeting there was only an interval of 20 days in respect of 127 members and a still less interval in the case of others. Section 81(2) of the Indian Companies Act provides:

A resolution shall be a special resolution when it has been passed by such a majority as is-required for the passing of an extraordinary resolution and at a general meeting of which not less than twenty-one days' notice specifying the intention to propose the resolution as a special resolution has been duly given.

Provided that, if all the members entitled to attend and vote at any such meeting so agree, a resolution may be proposed, and passed as a special resolution at a meeting of which less than twenty-one days' notice has been given

18. It is obligatory to serve notice of the meeting of a company with a statement of the business to be transacted at the meeting on every member in the manner laid down for service of notice under the Articles. Article 49 of Table A of the Indian Companies Act which is the same as Article 50 of the Articles of the Club lays down:

Subject to the provisions of Sub-section (2) of Section 81 of the Indian Companies Act, 1913, relating to special resolutions, fourteen days' notice at the least (exclusive of the day on which the notice is served or deemed to be served, but inclusive of the day for which notice is given) specifying the place, the day and the hour of meeting and, in case of special business the general nature of that business, shall be given in manner hereinafter mentioned, or in such other manner if any, as may be prescribed by the company in a general meeting to such persons as are under the Indian Companies Act 1913, or the regulations of the company, entitled to receive such notices from the Company; but the accidental omission to give notice to or the non-receipt of notice by any member shall not invalidate the proceedings at any general meeting.

The manner of serving notices is provided by Article 112 of Table A which is the same as Article 73 of Ex. P-29. It states:

112. (1) A notice may be given by the Company to any member, either personally or by sending it by post to him to his registered address or (if he has no registered address in British. India) to the address if any within British India supplied by him to the Company for the giving of notice to him.

(2) Where a notice is sent by post, service of the notice shall be deemed to be effected by ' properly addressing, prepaying and posting a letter containing the notice and, unless the contrary is proved to have been effected at the time at which the letter would be delivered in the ordinary course of post.

19. It is admitted on behalf of the respondents that if regard be had to the expression ' not less than twenty-one days ' occurring in Section 81(2) there should be an interval of 21 clear days and indeed this position could not be disputed as it was established by decisions where similar expressions occurring in the Companies Act and also other statutes were considered. See Railway Sleepers Supply Company, In re (1885) 29 Ch.D. 204, and Rex v. Turner (1910) 1 K.B. 346 The argument however that was presses on the half of the respondents was that the section should be construed in the light of Article 49 of Table A which includes the date of the meeting in caseswhere only 14 days' notice is required. It was also argued that it was permissible to refer to the Articles for the purpose of ascertaining the intention of the legislature in the body of the Act. In support of this contention the decisions in Barnad's Banking Co. In re, Ex parte The Contract Corporation 3 Ch. A. 105, Lock v. Queensland Investment and Land Mortgage Company (1896) AC 461 and Halsbury's Laws of England, Vol. 5, Second Edition, page 292, para. 504 were referred to. There can be no dispute that the principle of construction contended for on behalf of the respondents is correct. As Article 49 is expressly made subject to the provisions of Sub-section 2 of Section 81 it cannot be inferred that in construing that Sub-section the Legislature intended to include the the date of the meeting within the period of 21 days. It cannot be assumed that because that date was included in other cases the Legislature intended to include it also in case of special resolutions covered by Sub-section 2 of Section 81. The very fact that a specific reference is made in Article 49 to include the date of the meeting within 14 days in cases in which a notice of 14 days is required is a clear indication that it was not intended to apply to cases of meetings which require 21 days' notice. Under the corresponding provisions of the English Companies Act of 1929 the Court of Chancery had to consider a similar question. Sub-section (2) of Section 117 of the English Act corresponds to Sub-section (2) of Section 81 of the Indian Act, and Article 42 of the English Act corresponds to our Article 49. In the case reported in Hector Whaling Limited, In re, a notice convening an extraordinary general meeting of the Company on 30th May, 1935, was dated 8th May, 1935 and was posted on that day. By virtue of the Articles of Association of the company the notice is deemed to have been served on the following day, that is, 9th May, 1935. Excluding the date of the meeting it would be noticed that in that case the interval was only 20 days. Article 138 of the company in question stated:

Any notice or other document if served by post shall be deemed to have been served on the day following that on which the letter containing the same is put into the post, and in proving such service it shall be sufficient to prove that the ietter containing the notice or document was properly addressed and put into the post office as a prepaid letter or prepaid registered letter as the case may be.

20. On the authority of the decisions in Rex v. Turner (1910) 1 K.B. 346 and Chambers v. Smith (1843) 12 M. & W. 2 : 152 E.R. 1085, Bennett, J., held that the expression 'not less than twenty-one days ' notice ' contained in Sub-section (2) of Section 117 meant 21 clear days exclusive of the day of service and exclusive also of the day on which the meeting was to be held. It was also pointed out that it was not open by the Articles of Association to curtail the length of time which the statute had fixed. No doubt in that decision, specific reference was not made to the language of Article 42, and the contention now advanced was not raised and considered. It cannot however be assumed that the Counsel who argued the case and the learned Judge who decided it were not aware of the language of Article 42. In view of the clear language of the Article the point does not admit of any doubt, and perhaps that was the reason why the contention was not raised as of no substance.

21. It was next argued that in any event we should count 21 days from the date of posting, and that if that was done, there was an interval of clear 21 days even if the date of the meeting was excluded. The argument, in our opinion, is opposed to the clear language of Article 112. The Article states that unless the contrary is proved the notice must be deemed to have been effected at the time at which the letter would be delivered in the ordinary course of post, and this would be the 17th in the case of at least half the number of the members. This extraordinary contention is not supported by any decisions. Form No. VIII in which a special resolution has to be communicated to the Registrar of Joint Stock Companies was relied on. In the Form one of the columns is 'Date of dispatch of notice specifying the intention to propose the resolution as a special resolution or extraordinary resolution.' We do not think that it is permissible to rely on the language of the form to interpret the section and the Article. The date of the meeting and the date of service of notice are therefore to be excluded, and in between the dates there should be an interval of 21 days. The notice issued to all the members therefore was inadequate and did not comply with the statutory requirement and is therefore illegal. The meeting therefore was not legally convened.

22. The next branch of argument on behalf of the respondents in this part of the case was that as none of the members including the plaintiffs, who though absent appointed proxies on their behalf, objected at the time of the meeting, it must therefore be deemed that the members present either in person or by proxy had waived the objection. This plea was not. specifically raised in the written statement nor in the issues. All that was said in paragraph 3 of the written statement was that the plain-, tiffs had received the notice of the meeting in due time and raised no objection to the validity of the notice at any time at or about the meeting though they were present by proxy at the meeting. Issue 3 raises in a general form the question whether the plaintiffs were entitled to quesion the validity of the notice of the meeting or the proceedings of the meeting at the general body of the 7th November, 1947, as stated in paragraph 3 of the written statement. As the facts have been pleaded in the written statement, though the point was not specifically raised in the form of waiver, we thought that the respondents should be allowed to argue the question The respondents wanted also to raise a point based on the proviso to Sub-section (2) of Section 81; but as it was nowhere raised we refused to grant them permission to raise and argue it for the first time in appeal. In 31 Halsbury, 2nd Edition at page 559 it is stated that,

a statutory right which is granted as a privilege may be waived either altogether or in a particular case.

23. If the plaintiffs had waived their right to question the legality of the notice, it is urged that they are precluded from maintaining the suit not only on their behalf but also on behalf of other members. Strong reliance was placed on the decision in Burt v. The British Nation Life Assurance Association (1859) 4 De.G. & J. 158: 45 E.R. 63 where it was held that a plaintiff who has a right to complain of an act done to a numerous society of which he is a member, is entitled to sue on behalf of himself and all others similarly interested, though no other may wish to sue, so although there are a hundred who wish and are entitled to sue, still, if they sue by a plaintiff who is personally precluded from suing, the suit cannot proceed, although other persons on whose behalf the suit was instituted might maintain the action as plaintiffs. The question therefore resolves itself into this, namely, whether in view of the imperative provision regarding the notice in Section 81(2) it is open to the plaintiffs to waive their right to object to an illegality, the right being certainly not their personal right but a right belonging to them in their corporate character. The proviso to Section 117(2) of the English Act was added for the first time in 1929 in view of the decision in Oxford Motor Co., In re (1921) 3 K.B. 32, which decided, that it was competent for the shareholders of the company acting together to waive the formalities required by Section 69 of the Companies (Consolidation) Act, 1908 as to notice of intention to propose a resolution as an extraordinary resolution. In that case all the share-holders met and passed a resolution without objection and it was held that the want of notice could be waived. The Indian Companies Amending Act of 1936 introduced a similar proviso in Section 81(2). Under this proviso, it would be seen that the requirement as to 21 days' notice may be dispensed with by an agreement of all the members entitled to attend and vote and not merely of all the members entitled to vote and present in person or proxy at the meeting. It requires therefore an agreement of all the members of the Club in older to dispense with the requirement of 21 days' notice. The proviso in other words indicates the. intention on the part of the Legislature that the provision in Sub-section (2) is mandatory and that it can be dispensed with only by the agreement of all the members. It is not enough that the members present at the meeting indicated either expressly or impliedly they consented to or acquiesced in shortening the period of notice. An express consent of all the members to waive the notice has not been established in this case. Even if the members present agreed to waive the defect in the notice the meeting would not be a valid meeting. The plaintiffs therefore are not precluded from raising the contention that the notice contravened the provisions of Sub-section (2) of Section 81.

24. The next objection is that the notice was insufficient, in that it did not give full particulars of the nature of the business. Under the Articles the notice should indicate the general nature of the business intended to be transacted at the meeting. The draft proposed amendments to the Articles of Association did not accompany the notice and were in fact posted only on the 21st October, and therefore must have been received on the 22nd. On this question there is no evidence on record, but it was agreed before us by the learned advocates appearing for the appellants and the respondents as that the printed draft was posted on the 21st of October. It is therefore urged that the notice did not indicate the general nature of the business. We are not prepared however to agree with this contention. It was on the initiative of the general body that a special committee was appointed to consider the amendments, if any, to the Articles of Association. The notice clearly stated that a print of the proposed amended Articles of Association will follow shortly. From the 22nd to 7th of November the members had ample time to consider the proposed amended Articles. We do not think that the notice was insufficient and therefore bad on this ground. No useful purpose would be served by referring to the decisions to which our attention was drawn, as the decision of the question would invariably rest on the facts of each case.

25. In Palmer's Company Precedents, Part I, at page 1002 it is pointed out that,

Where a large number of alterations have to be made, it is generally more convenient to adopt a new set of articles altogether. Where this course is adopted, a copy of the new regulations should lie for inspection at the office, and the notice convening the meetings should state the fact; and in some cases it may be deemed expedient to send printed copies of the proposed new articles with the notices. According to the decision of Kekewich, J., in Normandy v. Ind. Coope & Co. (1908) 1 Ch. 84, the notice should call attention to any material alterations; and in Baillie v. Oriental Telephone and Electric Co. (1915) 1 Ch. 503 the Court of Appeal held that a notice of a proposed resolution to alter articles involving a large increase in the remuneration of the directors was invalid on the ground that the proposed increase was not fully and frankly disclosed....

The notice should state that a copy of the new articles is enclosed, or that a copy of the proposed new articles may be seen at the Company's office.

26. In this case in the notice it was stated that the proposed Articles would be sent shortly, and they had been posted within six days from the date of posting of the notice. In the light of the principles stated above we think that there is substantial compliance with this requirement of law and that the notice was not bad on this ground.

27. Nor is there any force in the objection that the amendments moved relating to the proxies were not within the scope and ambit of the original resolution. Notice of the amendments was given in Exhibit P-13 by Mr. T. T. Krishnamachari and others, and the Government later pointed out that it would be advisable in the interests of racing that proxies should be abolished to make the members take active interest in racing. The amendments proposed by Mr. Eswara Aiyar cannot be said to be outside the scope of the original resolution.

28. The next. objection relates to the election of 12 members of the Managing Committee, If our view that the special resolution was not at all moved and the amendments were not passed by a special resolution is correct, the meeting had no authority to elect 12 members to the Managing Committee, as the old Articles continued to be in force. Apart from this, we think that the election was illegal, as the notice was not sufficient in the circumstances of the cage. Exhibit P-8 was posted on the 16th October, and it required nominations for election to the Managing Committee to be submitted to the Secretary 14 clear days before the date of the meeting. That means, the nominations should be posted by a member either on the 21st October or on the 22nd to reach the Secretary. The members were not made aware of the functions and the duties of the Managing Committee, and in fact they did not receive the proposed alterations earlier than the 22nd, taking the view most favourable to the defendants. It is impossible for the members to make up their mind with no data before them and to submit nominations. Practically they had no valid notice of the election and the election was rushed through at the meeting of the 7th. The election is also invalid on the further ground that Mr. Natesan presided at the meeting. He was himself a candidate for the Managing Committee. There were 24 nominations and 19 actually contested the election. Objection was raised at the meeting that the new rule came into existence only on that day and that nominations were proposed 14 days before the passing of the rule. The chairman had to give a ruling on the question, and he decided in favour of the validity of the nominations including his own. The chairman's ruling may be correct or may be incosect. Perhaps in view of the decision in Pacific Coast Coal Mines Ltd. v. Arbuthnot (1917) A.C. 607. 48 , a notice for election of the members of the Managing Committee may retrospectively be validated by passing a special resolution, but that is not the question. Here is an instance where the chairman was in the position of a quasi-judicial officer, and he had to be a Judge in his own cause. There was clearly a conflict between his duty and his interest. In the normal course he should have vacated the chair and requested another member who was not a candidate to take it, and this was not done. That a person cannot be a judge in his own cause is an elementary rule, and if an authority is wanted it is to be found in Rag v. Owens (1858) 28 L.J.Q.B 316. In Fanagan v. Kernan (1881) L.R. (Ireland) 8 : C.P. 44 at pp. 48 and 49, it is stated:

There is no more sacred maxim of our law than that no man shall be a judge in his own cause, and such force has that maxim that interest constitutes a legal incapacity to a person being a judge in every case....It is impossible for a Court of Law to allow him to exercise the function of presiding at that election of which he could influence the result.

29. No man can preside at his own election and return himself. See The Queen v. White (1867) L.R. 2 Q.B. Cases 557. These principles are well established, ad it is unnecessary to deal with them elaborately. In fact, the respondents' advocate does not dispute the propositions, but contends that those principles apply to meetings other than the meetings of a company. Under the Articles provision is made for the appointment of a chairman, and he continues to preside at the meeting whether the meeting is one for transacting ordinary business, or passing a special resolution or for the election of members to the Board, and the mere fact that the chairman is also a candidate for a committee or a Board of management will not vitiate the proceedings. So ran the argument. No authority in support of this distinction was placed before us, and we do not see any reason for making a distinction between meeting of Company and other meetings. The principles above referred to are elementary and are of universal application. We therefore hold that the election of the 12 members of the Managing Committee was illegal, even apart from the question whether the special resolution was put to the meeting and passed or not.

30. We therefore hold that the special resolution 'item 2 in the agenda ' was not passed, that the meeting of the 7th November was not legal and that the members of the Managing Committee were not duly elected. From this it follows that the proceedings of the general meeting of 18th November, 1947, are void, and, in any event, the exclusion of proxies at that meeting was not warranted by the Articles, then in force. Differing therefore from the learned trial Judge we hold that the plaintiffs are entitled to the reliefs asked for.

31. The appeal is therefore allowed and the decree dismissing the suit is set aside. There will be a decree in favour of the plaintiffs as prayed for. The plaintiffs are entitled to the costs of this appeal and the costs of the suit, payable by the first defendant. Having regard to the trouble involved and the time taken we fix under Rule 12 of Order 6, High Court Fees Rules, a fee of Rs. 2,500 for the plaintiffs' advocates in the appeal and Rs. 2,500 for them in the. suit.


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