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Murarka Paint and Varnish Works Ltd. Vs. Mohanlal Murarka and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtKolkata High Court
Decided On
Case NumberSuit No. 426 of 1960
Judge
Reported inAIR1961Cal251,[1961]31CompCas301(Cal),65CWN32
ActsCode of Criminal Procedure (CrPC) - Section 144; ;Companies Act; ;
AppellantMurarka Paint and Varnish Works Ltd.
RespondentMohanlal Murarka and ors.
Cases ReferredBurland v. Earle
Excerpt:
- a.n. ray, j.1. this suit has been instituted by murarka paint and varnish works (private) ltd. against mohanlal murarka, chunilal murarka, purushottamalal murarka, beharilal murarka, radheylal murarka, kunjlal murarka and hiralal murarka. the plaintiff has its registered office at 4e, dalhousic square, east, calcutta; the plaintiff uses the said office in common with 5 other limited companies. at the last annual general meeting of the plaintiff company, sohanlal murarka,, kissenlal murarka, shankarlal murarka and mohanlal murarka were appointed directors.2. article 111 of the company states that every director shall vacate his office, inter alia, on his being requested in writing by all his co-directors to resign. on or about february 24, 1960 sohanlal murarka, kissenlal murarka and.....
Judgment:

A.N. Ray, J.

1. This suit has been instituted by Murarka Paint and Varnish Works (Private) Ltd. against Mohanlal Murarka, Chunilal Murarka, Purushottamalal Murarka, Beharilal Murarka, Radheylal Murarka, Kunjlal Murarka and Hiralal Murarka. The plaintiff has its registered office at 4E, Dalhousic Square, East, Calcutta; the plaintiff uses the said office in common with 5 other limited companies. At the last annual general meeting of the plaintiff company, Sohanlal Murarka,, Kissenlal Murarka, Shankarlal Murarka and Mohanlal Murarka were appointed directors.

2. Article 111 of the Company states that every director shall vacate his office, inter alia, on his being requested in writing by all his co-directors to resign. On or about February 24, 1960 Sohanlal Murarka, Kissenlal Murarka and Shankarlal Murarka acting under Article 111 requested Mohanlal Murarka in writing to resign. The plaintiffs case is that Mohanlal Murarka immediately thereafter ceased to be director of the plaintiff. On or about February 25, 1960 the Board of Directors of the plaintiff at a meeting held by it on the same day appointed in accordance with the Articles one Mahabir Prasad Murarka in place and stead of Mohanlal Murarka. The plaintiff alleges that in the premises on and from February 25, 1960 the lawful directors of the plaintiff were and are: Sohanlal Murarka, Kissealal Murarka, Shankarlal Murarka and Mahabir Prassad Murarka.

3. On or about February 25, 1960 the plaintiff through its solicitors, Messrs. Khaitan and Co. issued notices in various newspapers to the effect that all power and authority of the defendant Mohanlal Murarka as a director had been terminated. The defendants Chunilal Murarka, Radheylal Murarka, Beharilal Murarka, Hiralal Murarka and Kunjalal Murarka, it is alleged, are not registered shareholders of the plaintiff. The defendant Mohanlal is the joint registered owner of 6250 ordinary shares in the plaintiff company along with the defendants Purushottamlal Murarka and Shankarlal Murarka.

4. On or about March 23, 1960 at about 2 p.m. It is alleged, the defendants Mohanlal Murarka, Chunilal Murarka, Purushottamlal Murarka and Beharilal Murarka accompanied by about 25 unknown persons and police officers forcibly entered into the office of the plaintiff and attempted wrongfully and illegally to take possession and charge of the affairs and properties of the plaintiff including its books of accounts papers, documents and monies etc. The plaintiff on March 23, 1960 lodged a complaint at Hare Street Police Station in Calcutta. On March 24 1960 an application was made before the Chief Presidency Magistrate, Calcutta praying for the issue of process against the defendants Chunilal Murarka, Mohanlal Murarka, Purushottamlal Murarka and Beharilal Murarka. A report was called for by the Chief Presidency Magistrate by April 9, 1960. After the passing of the order, it is alleged, the defendants with the help of unknown persons started dismantling almirahs, fixtures etc. situate in the office of the plaintiff. Another application was made before the Chief Presidency Magistrate for an order under Section 144 of the Criminal Procedure Code. Another report was called for by the Chief Presidency Magistrate by March 26, 1960 and it was directed that there was to be no breach of peace meanwhile.

5. The plaintiffs solicitors received a letter dated March 23, 1960 from Radheylal Murarka whereby Radheylal Murarka purporting to act as a director of the plaintiff informed the plaintiff's solicitors that Sohanlal Murarka, Kissenlal Murarka and Shankarlal Murarka had been removed from the Board of Directors of the plaintiff.

6. It is further alleged in the plaint that on Mareh 24, 1960 the plaintiffs law agent went to the office of the plaintiff company when it was discovered that Kunjlal Murarka was asserting that he and his father Hiralal Murarka were directors. The plaintiffs law agent further discovered almirahs to be broken and tampered with, cash monies having been forcibly taken away by Mohanlal Murarka and Chunilal Murarka, and that several unknown persons were sitting and/or standing in the office room.

7. The plaintiff alleges that none of the defendants could be validly or at all appointed director and that the defendants acted illegally and without any authority or jurisdiction. It is alleged that the only persons entitled to manage the affairs in the business and properties in accordance with the Memorandum and Articles of Association and the provisions of the Companies Act are the present Board of Directors as mentioned in paragraph 9 of the plaint. It is further alleged that the defendants trespassed into the office and interfered with the management of the affairs, business and properties.

8. The plaintiff company asks for a permanent injunction restraining the defendants, their servants, nominees and/or agents from occupying the office of the plaintiff and from interfering with the management and control of the plaintiff and also injunction restraining the defendants from usurping the management and control of the affairs, business and properties of the plaintiff and further injunction restraining the defendants, their servants, nominees and/or agents from in any way acting as directors of the plaintiff and reliefs regarding books, furniture and cash monies.

8a. Defendants Nos. 1 to 6 filed a joint written statement. One of the points taken in the written statement is that the suit has been instituted without the authority of the Board of Directors and against the decision of the shareholders. At present it is not necessary to deal with other defences in this suit.

8b. This suit came up before me on June 3, 1960. None of the counsel on behalf of the plaintiff and the defendants was present in court. Only the plaintiff's solicitor and the defendants' solicitor were present in Court. The solicitor for the defendants suggested that a meeting be convened to ascertain the wishes of the share-holders as to whether they wished to continue the suit. The solicitor for the plaintiff was unable to show any reason as to why that should not be done. I made an order to that effect.

8c. A couple of days thereafter counsel on behalf of the plaintiff expressed regret that they were not present when the suit was called on and prayed for rehearing of the matter. Counsel for the defendant also stated that the matter could be heard under those circumstances.

8d. Counsel on behalf of the plaintiff contended that there were groups of shareholders on the side of the defendants and some of such shareholders had no title to the shares. To illustrate, it was contended that Mohanlal Murarka who was shown to be holding 12,500 shares was restrained by orders of this court from asserting rights in respect of such shares. These 12,500 ordinary shares standing in the name of Mohanlal Murarka originally belonged to Radheylal Murarka and Chunilal Murarka and were forfeited in exercise of lien and were allotted to Mohanlal Murarka. Two suits were filed by Radheylal Murarka and Chunilal Murarka Nos. 3264 of 1947 and 3265 of 1947 respectively. In those suits it was ordered that the defendants to the suit were prohibited and restrained until the determination of the suit or until further orders of this court from in any way interfering with the rights of the plaintiff as registered shareholder in respect of the shares. The suits are still pending. Under these circumstances counsel for the plaintiff contended that no rights could be asserted in respect of those shares by Mohanlal Mururka. Counsel for the defendants submitted that Chunilal and Radheylal Murarka were supporting the defendants and therefore those shares were in any event in support of the defendants. These suits are still pending decision.

8e. Counsel for the defendants similarly contended that 6250 shares standing in the name of Maniklal Murarka and others jointly were registered in violation of the provision contained in Article 14. Maniklal Murarka and others are supporting the plaintiff. These 6250 shares are in the names ot Maniklal Murarka, Lachmiprasad Murarka, Ajit Prasad Murarka, Iswari Prasad, Narayan Prasad and Mani Bai. Article 14 states that shares may be registered in the names of any limited, company but not in the name of a minor nor usually more than 4 persons be registered as joint holders of any share. Counsel for the plaintiff contended that Article 14 referred to allotment of shares but did not relate to transmission of shares on death et cetera. It was contended on behalf of the plaintiff that under Article 47 there could be no limitation upon the numbers of heirs to be registered in respect of any share.

9. It was also contended on behalf of the plaintiff that 6250 shares which were shown to be standing in the name of Beharilal Murarka and which were alleged to be transferred on March 24, 1960 were so done wrongfully. Similarly it was contended that 2750 shares standing in the name of Kunjlal Murarka were purported to be transferred wrongfully. Beharilal Murarka and Kunjlal Murarka are supporting the defendants. It was contended on behalf of the plaintiff that Article 84 did not apply to cases where persons claimed share by inheritance, and that Article 84 was confined to transmission of shares under Article 48. It was contended on behalf of the plaintiff that Article 47 related to transmission of shares of deceased persons. It was further contended that only executors or administrators of the deceased could apply under Article 47. Beharilal Murarka and Kunjlal Murarka who claim shares on the death of Laloolal Murarka, it was contended by counsel for the plaintiff, had further to satisfy the directors under Article 84 of right to act in that capacity. It was contended by counsel for the plaintiff that there was no evidence that Beharilal Murarka or Kunjlal Murarka satisfied the directors of their right to act in that capacity.

10. Counsel on behalf of the defendant contended that Beharilal Murarka was entitled to vote and whether the shares in the name of Laloolal Murarka belonged to joint family or were held individually Beharilal Murarka would be entitled to vote in consequence of the death of Laloolal Murarka.

11. it is manifest under these circumstances that the share-holding bristles with disputes as to rights and counsel for the plaintiff, in my view, rightly characterised such disputes relating to title to the shares as containing seeds of litigation concerning the shares and assertion of rights in respect thereof. Counsel for the defendants contended that if a general meeting were ordered it would not be relevant at this stage to take any notice as to disputes to title of the shares. I am unable to accept the contention of counsel for the defendant. I cannot allow a meeting to be held without deciding who the shareholders are and who will vote. I am extremely doubtful if I can inquire into these questions either in this suit or at this stage.

12. Counsel for the defendants contended first that it was specifically pleaded in the written statement that the suit was bad in the name of the plaintiff company and that there was no resolution disclosed by the plaintiff showing the authority of the plaintiffs to institute the suit. It was secondly contended that even if the initiation of the suit was good the company might discontinue and equally if initiation were bad the company might continue the suit by ratification. A general meeting would be necessary to find out if the suit is to be continued or discontinued. It was thirdly contended that the dispute in the present case related purely to the internal management and therefore the court would not interfere.

13. As to the first point, namely, the use of the name of the company by the plaintiff, counsel for the plaintiff contended that it was not open to the defendants to take the objection as a defence to the suit and that they should have proceeded by way of motion to stay the suit. On behalf of the defendants counsel contended that it was not an absolute rule that the objection should be by way of motion to stay the suit but that it could be brought to the notice of the court that the plaintiff was not authorised to sue in the name of the company. Reliance was placed by the defendants on the decisions of La Compagnie de Mayville v. Whitley, (1896) 1 Ch. 788, Daimler Co. Ltd. v. Continental Tyre and Rubber Co. (Great Britain) Ltd., 1916-2 AC 307, Danish Mercantile Co. Ltd. v. Beaumont, 1951-1 Ch. 680. It is well settled that if authority is wanted to use the name of the company, it must be authority got from the proper quarter, either from the directors or from the shareholders convened for the purpose. In the Daimler company case, 1951-1 Ch. 680 it was found that no authority was conferred upon the secretary to institute the action and it was under these circumstances ordered to be struck out. It was contended in that case that the objection should have been raised by a motion to strike out the writ but Lords Parker and Parmoor said that the action was altogether irregular and that no steps necessary to confer authority on the secretary had been taken. In the Danish Mercantile company case there was an application to stay the proceedings. The Managing Director under an agreement was to manage and conduct the affairs. He instructed solicitor to start an action in the name of the company. The action was approved neither by the company on general meeting nor by the Board of Directors before it was started, in the meantime liquidation commenced. The defendants thereafter applied by motion to strike out the name of the plaintiff. It was held that the liquidator had ratified the bringing of the action. In that case reference was made to the decision in London and Blackwell Railway v. Cross, (1886) 31 Ch. D. 354 where a distinction was drawn between an application for an injunction restraining the unauthorised use of the company's name in certain proceedings and an application in an action to stay the proceedings or strike out the plaintiff's name on the ground that the proceedings were brought without the plaintiff's authority. The principle established there is that if a person without authority brings an action in the name of another it is an abuse of the process of the court, and the court can stop it. Counsel for the defendants thus contended that the court had power whether there was a motion to stay the suit or not, to stop the proceedings when it was unauthorised use of the name of the company.

14. Counsel for the plaintiff relied on the decision of Russian Commercial and Industrial Bank v. Comptoir d' Escompte de Mulhouse, 1925 AC 112. One of the disputes there was as to whether it was open to the defendants to raise by way of defence to the action the objection that the London branch manager had no authority to bring the action in the name of the plaintiff. Dealing with the contention Viscount Cave said,

'I do not think that it is open to the defendants to raise this question by way of defence to the action. If the defendants desire to dispute the authority of Mr. Jones to commence these proceedings in the name of the plaintiffs their proper course was to move at an early stage of the action to have the name of the company struck out as plaintiff and to bring the proceedings to an end.'

Again in the case of Shaw and Sons (Salford) Ltd. v. Shaw and Shaw, 1935-2 KB 113 a question arose as to whether a suit was properly instituted in the name of the company. In the trial Court no objection was taken that the court could not decide the question of the authority of the directors to commence the action as a defence to the suit but only on a motion to stay the action. On appeal Greer, L. J. held that where the power to commence an action is vested by the Articles in the permanent directors then ordinary resolution of the company would not control their exercise of that power. Slesser, L. J. held otherwise. Roche, L. J. held that the onus was on the defendant to prove that the action was unauthorised and that the defendant failed to discharge the onus and failed to produce material information. It was indicated that the minute books should have been produced and information should have been given to the court whether before the meeting at which action was decided upon the permanent directors had conferred any, and, if so, what, power was upon the ordinary directors. Information should also have been available as to whether the meeting purported to be the meeting of the directors and appeared as such in the minute book or whether it was in form as well as in fact a meeting of the directors on a matter within a class of matters previously excluded by them from the purview of the ordinary directors.

14a. In the present case counsel for the plaintiff opposed any right of the defendants to contend as a defence to the suit that it was an unauthorised suit. The plaintiff insisted that there should have been a motion to stay the action. Counsel for the defendants submitted that not much time had elapsed since the institution of the suit and that since the plaintiff did not disclose any resolution authorising the institution of the suit, it should be stopped. I am unable to accept the contentions of the defendants. To my mind the majority of the decisions shows that an objection as to the user of the name of the company by the plaintiff cannot be raised as a defence but should be on a motion to stay the action. Furthermore, the defendants have not furnished the necessary information to discharge the onus that there is no resolution. The plaintiffs contend that the directors are empowered under the Articles to institute an action and that there is also a resolution to that effect. There is no conclusive evidence that the plaintiff has not the right to proceed in the name of the company or that the suit has been instituted without authority in the name of company. On the contrary the directors are empowered by the Articles to institute suits but the defendants contend that the exercise of such powers by the directors is subject to the control of the members.

15. As to the contentions of the defendants that the court will not interfere in disputes as to internal management or that the court will allow a general meeting to be convened for the purpose of continuing or discontinuing the suit, counsel for the plaintiff contended that Articles 121 and 122(6) confer sufficient authority on the Board to commence the suit and such power conferred on the Board could not be taken away by any general meeting. It was contended that the only way by which the management in the hands of the Board could be controlled was by virtue of the provisions in the Act or provisions in the Articles and by alterations of the Articles. Under Article 121 it is stated that the management of the business of the company shall be vested in the managing agents or directors, who, in addition to the powers and authorities by these presents or otherwise conferred upon them, may exercise all such powers and do all such acts and things as may be exercised or done by the company as are not hereby or by statutes expressly directed or required to be exercised or done by Company in general meeting but subject nevertheless to the provisions of the statute and all these presents and to any regulations from time to time made by the company in general meeting. Counsel for the defendants laid emphasis on the words 'any regulations from time to time made by the company in general meeting' as empowering the shareholders by a general meeting to continue or discontinue the suit. Counsel for the plaintiff on the other hand contended that the word 'regulations' was synonymous with Articles and that the shareholders could control the acts of the directors only by alteration of the Articles.

16. The directors and the shareholders in general meeting arc primary organs of the company between whom the company's powers are divided. The general meeting retains ultimate control, but only through its powers to amend the Articles, to take away powers from the directors and to remove the directors and to substitute others to the taste of the shareholders. Until one or other of the aforesaid steps be taken, the directors, under the Articles, according to the contention of the plaintiff, can disregard the wishes of the members and that the general meeting cannot restrain the directors from conducting actions in the name of the company.

17. in the case of Isle of Wight Rly. Co. v. Tahourdin, (1883) 25 Ch D 320 the court refused an application by the directors of a statutory company for an injunction to restrain the holding of a General Meeting. Cotton, L. J. said 'It is a very strong thing indeed to prevent shareholders from holding a meeting of the company, when such a meeting is the only way in which they can interfere, if the majority of them think that the course taken by the directors, in matter intra vires of the directors, is not for the benefit of the company'. In Automatic Self-cleansing Filter Syndicate Co. v. Cunninghame, 1906-2 Ch 34 the directors of a registered company refused to carry out a sale agreement resolved upon in general meeting. The powers of management in that case were entrusted to the Board under Article 98 comparable to Article 121 in the present case. Under Article 96 there the management in the hands of the directors was subject to 'such regulations, not being inconsistent with these presents as may from time to time be made by extraordinary regulations.' It was therefore held that the genera] meeting would be a nullity inasmuch as Article 96 contemplated extraordinary resolution. it was thus held to be incompetent for the majority of the shareholders in an ordinary meeting to affect or alter the powers Originally given to the directors. in the case of Marshall's Valve Cear Company v. Manning Wardle and Co., 1909-1 Ch 267 the management was vested in the directors under Article 55 which was similar to Article 121 in the present case. A and three other persons were the four directors of the Company and they held substantially the whole of the subscribed share capital of the company. A held a majority but not a three-fourth majority of the shares. Disputes arose at a meeting between A and the other three directors who were interested in a patent vested in the N company which, so A was advised, infringed the M company's patent and was admittedly a competing patent. The three directors bona fide declined to sanction any proceedings against N company in the name of M company to restrain the alleged infringement. Thereupon the three directors moved in the name and on behalf of the M company to strike out the name of that company as plaintiff and to dismiss the action on the ground that the name of the M company had been used without authority. It was held that under Article 55 in Marshall's case the majority of the shareholders in the company at a general meeting had a right to control the action of the directors so long as they did not affect to Control any direction contrary to any of the provisions of the Article which bound the company.

18. In the case of Salmon v. Quin and Axtens, 1909-1 Ch 311 the Court of Appeal followed Cumninghame case, 1906-2 Ch 34 and the House of Lords upheld the decision as will appear in Quin and Axtens, Ltd. v. Salmon, 1909 AC 442. In Salmon's case, 1909-1 Ch 311 under Article 75 the business of the company was to be managed by the Board subject to the provisions of any Act of Parliament or of the Articles and to such regulations as might be prescribed by the company in general meeting. Article 80 in that case regulated that no resolution of a meeting of the directors having the object of borrowing money, the acquisition by purchase, lease or otherwise was to be valid or binding unless not less than 24 hours' notice in writing by letter or telegram specifying the business proposed to be transacted thereat had been given to each of the managing directors. A and B the managing directors held the bulk of the ordinary shares in the company. Resolutions were passed by the directors for the acquisition of certain premises and for the letting of certain other premises, but B dissented from each of these resolutions in accordance with the Articles. At a general meeting of the company resolutions to the same effect were passed by a simple majority of the shareholders. It was contended that the resolutions were ot no effect. The resolutions were held to be inconsistent with. Article 80 as an attempt to alter the terms of contract between the parties by a simple resolution instead of by a special resolution. Farwell L. J. said that the directors were not servants to obey directions given by the shareholders as individuals but that they were persons entrusted by the regulations with the control of the business and could be dispossessed from that control only by the statutory majority which could alter the Articles. In the two recent decisions of 1935-2 KB 113 and Scott v. Scott, 1943-1 All ER 582 the modern doctrine is that a resolution of the members disapproving the commencing of an action by the directors would be a nullity, for, if powers and management are vested in the directors they and they alone can exercise these powers. Greer L.J. said in Shaw's case 1935-2 KB 113. 'The only way in which the general body of the shareholders can control the exercise of the powers vested by the Articles in the directors is by altering the Articles, or, if opportunity arises under the Articles by refusing to re-elect the directors of whose action they disapprove. They cannot themselves usurp the powers which by Articles arc vested in the directors, nor the directors can usurp the powers vested by the Articles in the general body of the shareholders'. Similarly, in the case of 1943-1. All ER 582 it was held that when powers had been delegated to the directors the members at the general meeting could not interfere with their exercise until they were taken, away by the amendment of Articles.

19. The law is laid down in Halsbury's Laws of England 3rd Edition Vol. VI at page 445 is as follows:

'As regards litigation by an incorporated company, the directors are, as a rule, the persons who have authority to act for the company; but, in the absence of any contract to the contrary in the Articles of Association, the majority of the members of the company are entitled to decide, even to the extent of overruling the directors, whether an action in the name of the company should be commenced or allowed to proceed.' The pre-eminent question, therefore, is as to whether the directors under the Articles in the present case can be controlled by a general meeting with regard either to the commencement or to the continuance of this suit. Counsel for the defendants contended that in the absence of any contract to the contrary in the Articles the majority of shareholders are entitled to decide the course of action and that in the present case there is no contract to the contrary. The words 'subject to any regulation from time to time made by the company in general meeting' occurring in Article 121 in the present case cannot, in my opinion, overrule the directors' powers by prescribing a regulation or passing a resolution inconsistent with the Articles. In Gramophone and Typewriter v. Stanley, (1908-2 KB 89 at p. 105) Buckley, L. J. said that even a resolution of numerical majority at a general meeting of the company could not impose its will upon the directors when the Articles had confided to them the control of the company's affairs. As I have already indicated the law is that directors can be denuded of their powers of control and management either by alteration of the Articles or by their removal. Marshall's case, 1909-1 Ch 267 is the only one on which counsel for the defendants laid considerable emphasis. Marshall's case, 1909-1 Ch 267 appears not to have been approved by the House of Lords in 1909 AC 442. Furthermore, the view expressed in Palmer's Company Precedents 17th Edition Vol. 1 at pages 543 to 545 is that where it is desired to give general meeting more effective control the Articles should be so framed that the exercise of such powers should be subject to the control and regulation of a general meeting specially convened for the purpose. Such an Article will have the effect of being construed as a 'contract to the contrary' of powers of the directors. Furthermore, Marshall's case, 1909-1 Ch 267 seems to suggest that the general meeting can commence proceedings on behalf of the company if the directors failed to do so. Ordinarily, the appropriate authority to start an action on the company's behalf is the Board of Directors to whom this power is delegated as an incident to the management of the company. If the directors cannot or will not start proceedings in the company's name the power to do so reverts to the general meeting.

20. In the present case, I am of opinion, that the power of management is vested under the Articles in the Board. This power is subject to alteration of the Articles. The word 'regulation' in Article 121 in the present case is, in my opinion, synonymous with Articles and the result is that the powers of the management can be challenged only by alteration of the Articles. In my opinion, there is a contract providing for management by the Board and such a contract is contrary to regulation of the exercise of the powers of directors by the general meeting.

21. Counsel for the defendants contended that under Section 284 of the Companies Act, the directors could be got rid of at a general meeting and therefore, if a general meeting were convened, it would appear whether the shareholders would accept the acts of the directors. Under Section 284 of the Companies Act it is provided that a company may by ordinary resolution remove a director before the expiry of his period of office. A special notice is contemplated under that section of any resolution to remove a director or to appoint somebody instead of a director so removed. It is further contemplated in that section that on receipt of a notice of a resolution the company is to send a copy thereof to the directors concerned and the director shall be entitled to be heard on the resolution at the meeting. Counsel for the plaintiff, in my view, rightly contended that no general meeting should be allowed to be convened in the present suit for obtaining any relief under Section 284 of the Act. I am of opinion that no meeting convened for the purpose of ascertaining the wishes of shareholders as to whether a suit should be allowed to proceed or not should be converted for another indirect purpose of removal of the directors.

22. Counsel for the plaintiff relied on Ram Kissendas Dhanuka v. Satya Charan Law, 77 Ind App 128 : (AIR 1930 PC 81). In that case there was an ordinary resolution at a requisitioned general meeting and several persons were appointed directors in addition to the four existing directors. There was an action on behalf of the shareholders and others alleging that the resolution was invalid on the ground that under the Articles it should have been passed only by a special resolution A question arose as to whether the Court would interfere in the internal management of the company. Dealing with that contention their Lordships' opinion was that to treat the resolution as effective would mean that the company could terminate the appointment of managing agents by ordinary resolution contrary to the Articles which required an extraordinary resolution. in other words, an infraction of the Article was not permitted. Counsel for the plaintiff on the authority of Dhanuka's case, 77 Ind App 128 : (AIR 1950 PC 81) contended that to allow a general meeting and to get rid of directors under section 284 of the Companies Act would be to allow by ordinary resolution what had to be done only after observing formalities contemplated in section 284. if is true that the directors can be removed in a general meeting but any proposed resolution for such removal of directors is conditional upon Certain prior notice. In the present case there has been no such notice. I am of opinion that the defendants cannot resort to the purpose of removal of directors under the garb of a general meeting to be convened to ascertain the wishes of shareholders as to the continuance of a suit. Counsel for the plaintiff further contended relying on the decision of Cook v. Decks, reported in 1916-1 AC 554 ; (AIR 1916 PC 161) that to allow the holding of a meeting in the present case would be to allow an alleged exercise of tyranny over the minority. Under these circumstances it will not be a case of internal management but an infraction of the Article for the majority would get hold of the company and get rid of the management, which is being exercised by the present Board under the Articles. Such use of voting power would be to allow the members to usurp powers of management which are entrusted to the Board by the Articles.

23. Counsel for the defendants made a distinction between a general and particular delegation of powers to directors. As to particular delegation of powers counsel conceded that they could not be taken away from the directors without amendment of Articles. Instances of such particular delegation were illustrate with reference to Articles 20, 26 and 45 which related to calls on shares, forfeiture of shares and transfer of shares. Counsel for the defendants, contended that Articles 121 and 122 were instances of general delegation and related to the general management. Counsel for the defendants contended on the authority of Burland v. Earle, 1902 AC 83, that the court would not interfere with the internal management. The two principles laid down in that case are, first, that the court would not interfere with the internal management of the company acting within their powers and secondly, that in order to redress a wrong done to tile company or to recover money or damage alleged to be due to the company, the action would prima facie be brought by the company itself. The doctrine of supremacy of shareholders would apply provided first it is within their powers and secondly, that the acts of the shareholders are to cure mere informality and irregularity as opposed to the infraction of Articles or Statutes. In the present case the directors have instituted the suit against persons who have invaded the powers of directors and/or their management. The acts complained of by the directors are an infraction of Articles. Such acts are impeached by the company as violation of the Articles by persons described as trespassing upon the powers of the Board.

24. I am of opinion first that it is not open to the defendants as a defence to the suit to object to the use of the name of the company by the plaintiff. Secondly, there is no conclusive evidence showing that the plaintiffs are not authorised to institute the suit. Thirdly, the Articles confer sufficient powers on the plaintiffs to maintain this suit. Fourthly, no general meeting should be held to deprive the directors of their powers under the Articles.

25. For those reasons I am of opinion thatno general meeting in the present case should beallowed to be held. I recall the order which Imade on June 3, 1960. The suit will appear inthe list on August 25, 1960 subject to any partheard suit. Costs cost in the cause. Certificate fortwo counsel.


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