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Mrs. A. Ananthalakshmi Ammal, by Power-of-attorney Holder, A. Ramachandran Vs. the Hindustan Investment and Financial Trust Ltd. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtChennai High Court
Decided On
Case NumberOriginal Side Appeal No. 17 of 1951
Judge
Reported inAIR1951Mad927; [1951]21CompCas210(Mad); (1951)2MLJ586b
ActsCode of Civil Procedure (CPC) , 1908 - Order 47, Rules 4, 4(2), 7 and 7(1); Companies Act, 1913 - Sections 76, 79 and 79(1)
AppellantMrs. A. Ananthalakshmi Ammal, by Power-of-attorney Holder, A. Ramachandran
RespondentThe Hindustan Investment and Financial Trust Ltd.
Appellant AdvocateG. Vasantha Pai, Adv.
Respondent AdvocateO. Radhakrishnan, Adv.
DispositionAppeal allowed
Cases ReferredGovinda Chetti v. Rangammal
Excerpt:
.....meeting alone entitled to take part in meeting and have voting right. - - on 24-1-1951. the learned judge was not satisfied that the first of the reasons, namely, the issue of a circular by mr. he thought it better to issue fresh notice giving 14 days time, intimating that a chairman had been appointed to preside over the meeting with power to scrutinize the proxies. 190 of 1951. we agree with the learned judge that there was nothing in the first reason given by the applicant therein, namely, the managing director, for adjourning the meeting scheduled to take place on 28-1-1951. we are further of opinion that there is equally nothing of substance in the second reason too which was clearly in the nature of an afterthought & which had not been assigned in the affidavit originally..........been subsequently put forward in the further affidavit was more substantial. he thought that the shareholders must be given due notice of the appointment of an independent chairman by the court. he thought it better to issue fresh notice giving 14 days time, intimating that a chairman had been appointed to preside over the meeting with power to scrutinize the proxies. objection was taken on behalf of the appellant before us that the court had no power to adjourn the meeting, but this was overruled. it was then pointed out on her behalf that prejudice is likely to be caused by reason of the possibility of new share-holders who had registered themselves within two months from the date of the meeting would also be entitled to vote. otherwise, only those share-holders who were on the list.....
Judgment:

Rajamannar, C.J.

1. This appeal relates to the affairs of a company incorporated under the Indian Companies Act called the Hindustan Investment & Financial Trust Ltd., Madras. The managing director of the company convened the annual general meeting of the company for 31-12-1950 by notice dated 14-12-1950. On 26-12-1950 one Mrs. Ananthalakshmi Animal, a shareholder of the company, who is the appellant before us, filed an application (No. 4988 of 1950) on the original side of this Court for the appointment of an independent chairman to hold & conduct the annual general meeting to be held on 31-12-1950, with power to scrutinize all the proxies & record the proceedings of the meeting. The application first came up before the Judge sitting in the Christmas vacation (one of us, Somasundaram J.) who made an interim order on 27-12-1950 adjourning the meeting to 28-1-1951 and posting the application for final disposal after reopening of the Court. The application itself was eventually disposed of on 16-1-1951 by Krishnaswami Nayudu J. who appointed an advocate of this Court to preside over the annual general meeting to be held on 28-1-1951 with power to scrutinise the proxies. On the same day the managing director on behalf of the company filed an application (No. 190 of 1951) praying that the meeting scheduled to take place on 28-1-1951 should be adjourned to a convenient date after the disposal of an application which he had taken out for committing one Mr. Ramachandran, the son of the appellant, for contempt of court. The ground on which the adjournment was sought was that the said Mr. Ramachandran had issued a circular containing false & defamatory allegations against him to which he could not reply pending the disposal of the application for contempt. This application was opposed. Evidently the learned Judge, when this application first came up considered that this reason was not adequate enough to justify an adjournment of the meeting. Therefore time was taken for filing a further affidavit & the managing director filed subsequently on 22-1-1951 a further affidavit in which he gave an additional reason, namely, that the share-holders should be informed of the fact that the Court had appointed an independent chairman to preside over the meeting. The application ,was heard & disposed of finally by Krishnaswami Nayudu J. on 24-1-1951. The learned Judge was not satisfied that the first of the reasons, namely, the issue of a circular by Mr. Ramachandran was sufficient to grant an adjournment of the meeting. The learned Judge, however, considered that the second reason which had been subsequently put forward in the further affidavit was more substantial. He thought that the shareholders must be given due notice of the appointment of an independent chairman by the Court. He thought it better to issue fresh notice giving 14 days time, intimating that a chairman had been appointed to preside over the meeting with power to scrutinize the proxies. Objection was taken on behalf of the appellant before us that the Court had no power to adjourn the meeting, but this was overruled. It was then pointed out on her behalf that prejudice is likely to be caused by reason of the possibility of new share-holders who had registered themselves within two months from the date of the meeting would also be entitled to vote. Otherwise, only those share-holders who were on the list of share-holders two months prior to the original date of the meeting, namely, 31-12-1950 would be entitled to partake & vote at the meeting. This result was a direct consequence of Article 48 of the Articles of Association of the Company which is in the following terms:

'No member shall be entitled to vote nor be reckoned in a quorum when his name has not been in the register for a continuous period of two months immediately preceding the date of the meetings nor whilst any call or other sums shall be due & payable to the company in respect of any of the shares of such member.'

2. The learned Judge appears to have been impressed with this aspect & observed:

'This could be avoided if it is made clear that only those share-holders who are on the list of share-holders prior to two months of the adjourned date of the meeting, viz., 28-1-1951, that is all share-holders who are on the list of share-holders as on the 28-11-1950 will alone be entitled to participate & vote at the meeting.'

It was urged on behalf of the appellant that the relevant date would be 31-10-1950, but the learned Judge held that as the meeting had been adjourned by the Court to 28-1-1951, that should be the material date. On behalf of the managing director, it was contended that having regard to the provisions of Section 79(1) (e), Companies Act (hereinafter referred to as the Act) there could be no such discrimination among the share holders & that all share-holders would be entitled to take part whether their names have been in the list for two months prior to the date of the meeting or not. The learned Judge was of the opinion that it was not open to the company to go behind the Articles of Association; but he thought it was not necessary for the purpose of the application to give any finding on the question. In the end he directed the meeting scheduled to take place on 28-1-1951 to be adjourned to 11-2-1951 & directed that such share holders as were on the list of share holders on 28-11-1950 shall alone be entitled to vote at the meeting. Against this order the managing director filed an appeal (O. S. A. No. 12 of 1951) & an application for stay of the operation of the order pending the appeal on 9-2-1951. The application for stay was urgently moved before us on the same day, but we refused to grant interim stay & only directed notice to the other side. Meanwhile, the managing director had also filed an application for review of the order of 24-1-1951 (No. 572 of 1951). The ground on which review was sought was that the order of the learned Judge was inconsistent with Section 79 (1) (e) of the Act, & there was an error apparent on the face of the record. This application was taken up & disposed of on the same day on which we refused to grant interim stay. The learned Judge came to the conclusion that in view of the clear language of Section 79 (1) (e) of the Act, the order passed by him on 24-1-1951 was in error & therefore the application was sustainable under Order 47 Rule 1, Civil P. C. He held that all the share-holders who were on the register on the date of the meeting would be entitled to take part & vote at the meeting. As the share-holders who would have come into the list after 28-11-1950 could not have had notice of the meetingbecause of his prior order of 24-1-51, the learned Judge held that it was necessary to adjourn the meeting, which he did to 4-3-1951. It is against this order Mrs. Ananthalakshmi Ammal, the share-holder, has filed the above appeal.

3. A preliminary objection was taken on behalf of the company by its managing director, that the appeal was not maintainable, as the conditions of Order 47, Rule 7, Civil P. C. were not fulfilled. According to that rule, an order granting an application for review could be objected only on the ground that the order was in contravention of the provisions of Rule 2 or Rule 4 or that the application for review was barred by limitation & there was no sufficient cause. This objection, though very plausible & has some support in decided cases, does not appear to us to be invulnerable. An appeal would lie on the ground that an order granting review was in contravention of the provisions of Rule 4. Rule 4 (1) says that,

'Where it appears to the Court that there is not sufficient ground for a review it shall reject the application.'

So if the Court does not reject the application where there is no sufficient ground for review but grants the application, then it contravenes Rule 4. We do not see any justification for construing 'Rule 4' in Rule 7 (1) (b) as confined to Rule 4 (2). But we do not think it necessary to finally decide this question, because even assuming that an order permitting a review, that is to say, allowing the case to be reopened, is not by itself appealable, there is nothing to prevent an appeal being filed against the final order passed after a reconsideration. That order on review can be attacked on the merits in an appeal, see 'Govinda Chetti v. Rangammal', AIR 1929 Mad 261.

4. On the merits we are of opinion that the learned Judge ought to have dismissed Appln. No. 190 of 1951. We agree with the learned Judge that there was nothing in the first reason given by the applicant therein, namely, the Managing Director, for adjourning the meeting scheduled to take place on 28-1-1951. We are further of opinion that there is equally nothing of substance in the second reason too which was clearly in the nature of an afterthought & which had not been assigned in the affidavit originally filed along with the application. With respect to the learned Judge, we are unable to imagine why. the share-holders must be given due notice of the fact that the Court had appointed an independent chairman before they could take part in the meeting. The appointment of an independent chairman which does not affect their rights in any manner cannot have any possible effect on the way in which they should cast their votes. The meeting must of course have a chairman & it does not matter in the least to the share-holders, if the chairman happens to be a chairman appointed by this Court. It is most undesirable that the meeting fixed for a particular date should be adjourned on this insubstantial ground, especially when strong objection was taken to an adjournment. The learned Judge, in our opinion, erred in granting the application for adjournment.

5. It is impossible, however, to set that right now. The date originally fixed for the meeting has expired & still the meeting has not been held. It therefore becomes necessary to deal with the point specifically raised in the review application, namely, the effect of Section 79 (1) (e), Companies Act. Counsel were unable to cite any decision, bearing on the point. The learned Judge has made a reference to a passage from the Select Committee Report, but we think that our decision should depend entirely on the construction of the language of the enactment. We are of opinion that Section 79 (1) (e) of the Act must override any provision made in the Articles of the company & therefore Article 48 also. If a share-holder's name is entered in the register of share-holders of the company, he cannot be prevented from enjoying the right to vote on the ground that his name has not been on the register for any specified time. It was contended by Mr. Venkatarama Aiyar that there is no discrimination really between the share-holders, because every share-holder is subject to the same disability, namely, that he has no right to vote till after the expiry of two months from the time his name is entered in the register of share-holders. We do not agree, because logically that would mean that there could be an article to the effect that additional qualifications should be satisfied before a share-holder can exercise his right to vote. We are inclined to think that this provision which was inserted by the amending Act of 1936 was designed to prevent the denial to share-holders duly brought on the register of the full exercise of their rights as share-holders which would include the right to vote.

6. Now, what is the position? The annual general meeting was originally called for 31-12-1950. It was thereafter adjourned to 28-1-1951 by the Court & it was not contended before us that the Court had no power to adjourn the meeting. The meeting so adjourned has not till now been held but is being adjourned from time to time. Now, Article 26 of the Articles of Association of the company provides that the transfer books of the company shall be closed during 14 days immediately preceding the ordinary general meeting in each year. Presumably therefore, the transfer books must have been closed on & from 17-12-1950. The meeting convened for the 31st was adjourned on the 27th December to 28-1-1951 & thereafter to subsequent dates. But meeting nevertheless is, in our opinion, the meeting originally convened for 31-12-1950 which however is being adjourned from time to time. If the meeting had been held on 31-12-1950 as originally convened, then those persons who were entered in the list of share-holders as on 17-12-1950 would alone have been entitled to take part & vote at the meeting. We think it neither legal nor equitable that merely because of adjournments due to the action of one party or the other, there should be any prejudice to the entire body of share-holders as on the material date namely, 17-12-1950. We therefore hold that only such of the share-holders who were entered in the list of share-holders on 17-12-1950 would be entitled to vote at the meeting to be held on the adjourned date. This direction does not in any way contravene the provisions of Section 79 (1) (e) of the Act.

7. The appeal is accordingly allowed. The order of the learned Judge is set aside & there will be an order adjourning the meeting to 1-4-1951 with a direction that only those shareholders whose names are found entered in the register of share-holders as on 17-12-1950 will be entitled to take part & vote at that meeting.There will be no order as to costs.


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