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Natendra N. Chowdhury and anr. Vs. the Institute of Engineers India and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtKolkata High Court
Decided On
Case NumberSuit No. 5 of 1963
Judge
Reported inAIR1964Cal73,67CWN960
ActsConstitution of India - Article 372
AppellantNatendra N. Chowdhury and anr.
RespondentThe Institute of Engineers India and ors.
DispositionSuit dismissed
Cases ReferredAshbury Rly. Carriage and Iron Co. v. Riche
Excerpt:
- .....dated august 13, 1935,on the report of the committee of the lords of his majesty's most hon'ble privy council dated august 1, 1935. originally the institution was a body incorporated under the indian companies act, 1913.2. the suit was instituted for a declaration that certain bye-laws passed by the general bodyof corporate members of the institution at a meeting specially convened for the purpose on november 26, 1960 are ultra vires, illegal, not according to law, and not binding on the plaintiffs, the defendant institution and/or members. thedeclaration is also asked for that the bye-laws made by the general body of the defendant institution on january 31, 1950 and approved by the privy council on october 17, 1951 are valid,effective, operative and binding on the defendant.....
Judgment:

A.N. Ray, J.

1. The plaintiff is a member of the Institution of Engineers. The Institution is a body incorporated under a charter containing a Grant by the Crown of the United Kingdom in the form of Letters Patent under the King's Sign Manual dated September 9, 1935 under an Order in Council of His Majesty dated August 13, 1935,on the report of the Committee of the Lords of His Majesty's most Hon'ble Privy Council dated August 1, 1935. Originally the Institution was a body incorporated under the Indian Companies Act, 1913.

2. The suit was instituted for a declaration that certain bye-laws passed by the general bodyof corporate members of the Institution at a meeting specially convened for the purpose on November 26, 1960 are ultra vires, illegal, not according to law, and not binding on the plaintiffs, the defendant Institution and/or members. Thedeclaration is also asked for that the bye-laws made by the general body of the defendant Institution on January 31, 1950 and approved by the Privy Council on October 17, 1951 are valid,effective, operative and binding on the defendant Institution. The other declarations are that the Resolution of the Council at its 426th meeting on August 12, 1962 are ultra vires and illegal, and that the direction of defendant No. 3 to defendant No. 4 to issue nomination forms for election to the Council is ultra vires and illegal, and thenotice issued by defendant No. 4 is illegal, and an injunction is asked for to restrain the defendants from giving effect to the alleged bye-laws.

3. In short, the plaintiff's suit is that certain bye-laws which were passed at the General Meeting held on 28th November 1960, namely, new Bye-laws numbered 4(a), 4 (b), 37 and 50 areultra vires, because the bye-laws were not submitted to the Privy Council and thereby Clause 18 of the Charter of the defendant Institution wasviolated.

4. On behalf of the defendants it has beendenied in the written statement that the bye-laws, which were passed, arc ulira vires and furtherthat it is not possible under the law of the land and particularly in view of the Constitution of India to ask for approval by the Privy Council.

5. The following issues were framed at the trial:

1. Is the suit as framed maintainable?

2. (a) Are the new bye-laws invalid or ultra vires as alleged in the plaint?

(b) Do the new bye-laws require approval of the Privy Council as alleged?

3. Have the plaintiffs ceased to be corporate members as alleged?

4. Are the plaintiffs entitled to any declaration or relief in this suit?

6. The only oral evidence is that of Birendra Kanta Dutt who said that in the year 1960 the Institution revised certain bye-laws and the Council thereafter decided to give effect to the bye-laws without having the approval of the Privy Council, and that is why the suit was instituted by the plaintiffs. He further said that he apprehended that if the bye-laws were not passed as laid down in the charter, the charter might be revoked, and the witness would lose his membership and prestige as an Engineer. In cross-examination he said that it was a mere apprehension on his part, and he did not find out whether there had been any cancellation of the charter.

7. The most 'important question is whether the Institution can pass and give effect to the bye-laws. On behalf of the plaintiff reliance is placed on the proviso to Clause 18 of the charter. That proviso is as follows:

'Provided that no such bye-law, revocation, alteration or amendment shall take effect until the same has been allowed by the Lords of our Privy Council of which allowance a Certificate under the hand of the Clerk of our Privy Council shall be conclusive evidence.'

8. Counsel on behalf of the plaintiffs contended that giving effect to the bye-laws without the approval of the Privy Council was ultra vires the charter, and therefore the plaintiffs were entitled to an injunction restraining the defendant Institution from giving effect to the bye-laws. Reliance was placed on the decision in Jenkin v. Pharmaceutical Society of Great Britain (1921) 1 Ch. 392. The defendant society in that case was incorporated by Royal Charter in 1843 for the purpose of advancing Chemistry and Pharmacy and promoting a uniform system of education of those who should practise the same, and also for the protection of those who carried on the business of chemists and druggists. The charter was subsequently confirmed by the Pharmacy Act, 1852. The Pharmacy Act provided for the appointment of a Registrar whose duty it was to keep a register of members, for the conduct of examination and the grant of certificates of competent skill and knowledge, and prohibited persons not duly registered as pharmaceutical chemists from using the title of pharmaceutical chemists. By Section 1 of the Pharmacy Act of 1852 the charter of 1843, except such parts as were by the Act varied or repealed, was confirmed and declared to be in full force and virtue, and Section 2 provided that the Council of the Society might make and establish bye-laws for the purpose contemplated by the charter or by that Act. The society took part in promoting an industry council committee for drug or industry and applied part of its fund in promoting that committee and proposed to expend further fund in, the establishment and working of the committee. The objects of the committee were to include the regulation of wages, hours and working conditions in the drug industry, regulation of production, and employment in that industry, the securing the settlement of disputes between the parties in that industry and certain other measures. The defendant society proposed various functions. The most controversial of the proposed functions were set out in paragraph 7 of the statement of claim in that case.

9. It was contended in that case that a corporation created by charter can at common law do with its property all such acts as an ordinary person can do, and bind himself to, and even if the charter expressly prohibits a particular act the corporation can at common law do the act. But if the corporation did that which was prohibited or was not authorised by the charter, the charter might be recalled by the Crown by proceedings on a scire facias. It was held that though there was a difference between a statutory company and an association incorporated by charter it did not follow that a member of a chartered society could not take legal proceedings for the purpose of preventing the society or its governing body from doing acts outside the purposes authorised by the charter which might lead to the destruction of the corporation by the forfeiture of its charter. At page 400 of the Report (1921) 1 Ch. 392 it will appear that the objects of the society there were being tested more on the anvil of the Pharmacy Act of 1852 than on that of the charter. There was a statutory limitation of the objects of the society. The objects were being transgressed. In the present case there is no allegation that any object of the society is being violated or there is any activity outside the purposes for which the corporation was created. What is being contended is that Clause 18 of the Charter lays down the submission of bye-Jaws for approval of 'the Privy Council and if the Institution does not do that, the Institution is doing something ultra vires its constitution. There again it is noticeable that the Institution has power to make bye-laws. The proviso to Clause 18 states that no bye-law shall take effect until the same has been allowed by the Privy Council. The short question is that if no approval is taken, what is the effect thereof.

10. Counsel for the plaintiffs relied on the statement of law in Halsbury's Laws of England, 3rd Edition, Vol. 6, page 414, paragraph 802 on the meaning of 'ultra vires' and contended that the law is that a corporation incorporated by a charter is amenable to the doctrine of ultra vires. 'The term 'ultra vires', in short means an act or transaction beyond the powers of the corporation as-defined by the statute under which it is formed or statutes which are applicable to it or by its charter or memorandum of association.' It should be noted that the word 'charter' is used as synonymous with the memorandum because the memorandum is the charter of a company.

11. The statement of law in Palmer's Company Law, 20th Edition, 1959 at page 779 is that there is a difference of fundamental character between a chartered company and a company formed by or under an act of Parliament: at common law a corporation created by Royal Charter has power to deal with its property, bind itself by contracts, and this corporate autonomy is unaffected even by a direction contained in the creating charter in limitation of the corporate powers. It is the view of Palmer that common law has always held that such direction of the Crown--though it might give the Crown a right to annul the charter if the direction is disregarded -- cannot derogate from that plenary capacity with which the common law endows the company, even though the limitation is an essential part of the so-called bargain between the Crown and the Corporation. It is the view of Palmer that ultra vires doctrine docs not apply to chartered Corporation. I do not find that there is any discrepancy between the statements of law in Palmer and Halsbury. In Halsbury's. Laws of England Vol. 9 page 62 a reference is made to limitation of powers of a chartered corporation in contrast with the limitation of powers of a statutory corporation. In the case of Bonanza Creek Gold Mining Co. Ltd. v. R. (1916) I AC 566: (AIR 1916 PC 193) Viscount Haldane said that the doctrine of Ashbury Rly. Carriage and Iron Co. v. Riche (1875) 7 HL 653 does not apply where the company purports to derive it's existence from the act of the Sovereign and not merely from the words of the regulating statute. At page 583 of the report (1916) 1 AC 566 Viscoung Haldane said,

'In the case of a company created by charter the doctrine of ultra vires has no real application in the absence of statutory restriction added to what is written in the charter. Such a company has the capacity of a natural person to acquire powers and rights. If by the terms of the charter it is prohibited from doing so, a violation of this prohibition is not an act beyond its capacity, and is therefore not ultra vires, although such a violation may well give ground for proceedings by Way of scire facias for the forfeiture of the charter. In the case of a company the legal existence of which is wholly derived from the words of a statute, the company does not possess the general capacity of a natural person and the doctrine of ultra vires applies.'

12. Counsel for the defendant Institution is in my view right in his contention that the ultra vires doctrine does not apply to a Chartered Corporation. The unrestricted corporate capacity of the Chartered Company is of such a character that even if the Charter by expression of word forbids any particular act the Corporation can nevertheless at common law to the act. (See Buckley Companies Act 13th Edition, page 25).

13. Counsel for the plaintiff contended that on the authority of Jenkin case, (1921) 1 Ch. 392 an injunction could be asked for if the acts of the Society exposed the Corporation to destruction or forfeiture of the Charter. Counsel for the defendant Institution is in my view right in his contention that here is no evidence that there is any such peril of destruction or forfeiture of the charter. Furthermore, counsel for the defendant is also right in his contention that the remedy against a Chartered Corporation in respect of acts which are in excess of the objects or in violation of prohibition contained in the Charter is for the Attorney General to issue a writ of scire facias. It is needless to say that the said course is impracticable in the country.

14. The plaintiff contended that it was irrelevant that India became a republic and that there was nothing to prevent the Institution from seeking the approval of the Privy Council in accordance with Clause 18. I am unable to accept the contention in that abstract form. Counsel for the plaintiff contended that the law which was enforced prior to 1950 continues to be the law subsequent to 1950 and the Charter of this Institution continues to be the law after 1950 and therefore in accordance with such law the defendant Institution can go to the Privy Council. What is lost sight of by the plaintiffs is that the creation of a Chartered Corporation is an act of the Royal Prerogative. It is true that what has been created by the act of the prerogative exists but the destruction or forfeiture of the Charter is also an instance of exercise of that prerogative. Counsel for the defendant rightly contended that in view of the Constitution of India the Crown in the United Kingdom would not exercise any prerogative power in our country. Nor would the Crown recall the Charter for it might amount to repeal a law in force in India. It cannot be discounted that the Crown has now no constitutional function to perform in relation to India. (See Wade and Phillips Constitution Law 6th Ed. 455). Clause 18 of the Charter in the present case refers to the Privy Council. The function relating to approval of bye-laws is done by a Committee of Her Majesty's Privy Council under the prerogative -- (See Halsbury Vol. 7, p. 366, paragraph 774). In my view counsel for the defendant is right in his contention that the defendant Institution cannot approach the Privy Council in exercise of prerogative powers.

15. There was a contention on behalf of the plaintiff that as a result of Clause 22 of Adaptation ofLaws Order read with Article 372 of the Constitution Clause 18 of the Charter in the present case remains law and the defendant Institution is bound to follow it. Under Clause 22 of the Adaptation of Laws Order it is stated that save as otherwise provided by the order all powers which under any law in force in India or any part thereof were immediately before the appointed date vested or exercised by any person or authority shall continue to be so vested or exercisable only when the provision is made by the Legislature or authority appointed to regulate the matter in question. It cannot be said that by virtue of this provision in law the Crown will exercise any authority. The Constitution of our country is supreme. The Royal Prerogative does not operate in this country.

16. The making of Bye-laws is in my opinion not a matter which can be described as I going beyond the objects of the Corporation. It is a procedural matter. Counsel for the defendant Institution rightly contended that Clause 18 was a provision which should be interpreted in the light of surrounding circumstances and context of even's as directory and not mandatory and further that the non-observance of the proviso would at its worst be a procedural irregularity and not a matter going to the root of the objects or vires of the Corporation.

17. It was contended on behalf of the plaintiff that after the year 1950 the defendant Institution once asked for sanction by the Privy Council of certain Bye-laws. In my opinion no right can be founded on that course of action nor can any estoppel follow from it. The question is whether the plaintiff can insist at law on the defendant Institution requiring the sanction of the Privy Council with regard to Bye-laws. It is a principle of the interpretation of statutes that if it is impossible or even impracticable to comply with the provision of the Statute such non-compliance does not vitiate the transaction but is excused. See Maxwell on Statutes 11th Ed. p. 314. It is stated there that the provision or condition is dispensed with when compliance is impossible in the nature of things. It was contended that it was not physically impossible. The question is not that. If the defendant Institution has not acquired the sanction of Privy Council does it follow that the act is illegal? As I have already indicated the making of Bye-laws is not ultra vires. The Institution need not approach the Privy Council for the matter of approval of bye-laws in an exercise of prerogative power. The Institution is not amenable to the doctrine of ultra vires. The making of Bye-laws is undoubtedly for the benefit of the Members of the Society as will appear from the Minutes which were not challenged and above all the defendant Institution cannot be compelled to ask for approval under Clause 18. The non-performance of the proviso is as I have already held a procedural matter.

18. Counsel for the defendant also raised a question as to the maintainability of the suit. The suit is not instituted in a representative character. The rights which are being asserted are corporate rights. Counsel for the defendant is in my view right in his contention that the suit suffers from fatal defect of the action not being brought in a representative character. The result of such a suit is that it is not a judgment binding on all the members nor is it a judgment in rem. For all these reasons I am of opinion that the plaintiff is not entitled to any relief. The suit is dismissed with costs. Certified for counsel.

19. Counsel for the plaintiff submits that the plaintiff instituted this suit to obtain a decision of this court on the conroversies and that the institution of the suit was in the interest of members. Counsel for the plaintiff states that his instructions are which are hereby recorded that the plaintiff will not prefer an appeal and on that basis submits that each party should pay and bear its own costs. In that view of the matter I direct that each party will pay and bear its own costs.


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