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Mohan Lal Mittal and ors. Vs. Universal Wires Ltd. and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtKolkata High Court
Decided On
Case NumberCompany Application No. 367 of 1976, Connected with Company Petition No. 507 of 1976
Judge
Reported in[1983]53CompCas36(Cal)
ActsCompanies Act, 1956 - Sections 2(45), 61, 291 to 293 and 397 to 399; ;Companies (Court) Rules, 1959 - Rules 21, 70 and 88; ;Comanies (Amendent) Act, 1974
AppellantMohan Lal Mittal and ors.
RespondentUniversal Wires Ltd. and ors.
Appellant AdvocateR.C. Nag, Adv.
Respondent AdvocateS.B. Mukherjee, Adv.
DispositionApplication dismissed
Cases ReferredJaipur Udyog Ltd. v. Union of India
Excerpt:
- salil k. roy chowdhury, j. 1. this is an application under sections 397, 398, etc., of the companies act, 1956, inter alia, for the appointment of a special officer and/or administrator, injunction restraining respondents nos. 2-5 to act as directors and for a declaration that the meetings dated may 14, 1976, and december 11, 1976, are illegal, null and void and of no effect and for other reliefs.2. this application is really one in the series of applications which are the outcome of family disputes of the mittals who are controlling a large number of companies and the respondent-company being the universal wires ltd. is one of them. petitioner no. 1, mohan lal mittal, is the eldest brother. he along, with his son, wife and other stooges and henchmen, who are holding a block of shares in.....
Judgment:

Salil k. Roy Chowdhury, J.

1. This is an application under Sections 397, 398, etc., of the Companies Act, 1956, inter alia, for the appointment of a special officer and/or administrator, injunction restraining respondents Nos. 2-5 to act as directors and for a declaration that the meetings dated May 14, 1976, and December 11, 1976, are illegal, null and void and of no effect and for other reliefs.

2. This application is really one in the series of applications which are the outcome of family disputes of the Mittals who are controlling a large number of companies and the respondent-company being the Universal Wires Ltd. is one of them. Petitioner No. 1, Mohan Lal Mittal, is the eldest brother. He along, with his son, wife and other stooges and henchmen, who are holding a block of shares in those companies, has constituted one group, and the other is constituted by the other brothers led by Inderson Mittal, Ratan Kumar Mittal, their relatives, henchmen and stooges. In the respondent-company, the shareholdings of the petitioners and their group are set out in para 6 of the petition in which it is alleged that a block of 5,000 equity shares in the capital of the respondent-company is held by Southern Steel Ltd., another company of the Mittal group which is supporting the present petition and thereby the qualification shareholding under Section 399 of the Companies Act, 1956, to make this application is acquired. In other words, if the said consent of the Southern Steel Ltd. to this application is not valid or legal the present application must be held to be not maintainable as the petitioner cannot acquire the necessary qualification share under Section 399 of the Companies Act, 1956. This position is admitted by both the parties and one of the main questions argued as a preliminary issue in this application is that it is not maintainable; as the alleged secretary of Southern Steel Ltd. who has signed the letter of consent which is annexed to the petition was not the secretary of the company and also he had not the authority to give such consent of the company, i.e., the said Southern Steel Ltd., by a resolution of the Board but alleged to be directed by petitioner No. 1, Mohan Lal Mittal, who signed such consent. Elaborate arguments were advanced as to the power of the secretary and a director of the company and also the procedure for taking the preliminary point of non-maintainability of the application under Section 399 of the Companies Act, 1956.

3. The facts relevant for the purpose of this application are that the respondent-company, Universal Wires Ltd., was incorporated on or about November 10, 1971, having its registered office at No. 2, Brabourne Road, Calcutta. The authorised capital being Rs. 2 crores divided into 7,50,000 equity shares of Rs. 10 each and 25,000 preference shares of Rs. 100 each. The issued and subscribed capital of the company is Rs. 24,00,000, paid up and/or credited as paid up share capital is Rs. 23,58,250 out of which Rs. 18,58,250 as equity capital of 1,85,250, equity shares of Rs. 10 fully paid up and of Rs. 5,00,000 preference capital of 5,000 equity shares of Rs. 100 each fully paid up. The company's object is to manufacture and deal in wires and wire ropes of every kind and description including steel wires, metal wires, etc.

4. Since its incorporation the company carried on and still carries on its trade and business in terms of the objects clause of the respondent-company. At present petitioner No. 1, Mohan Lal Mittal, and respondent No. 2, P.S. Guruva Reddy and respondent No. 8, K.S. Dutt, are also directors of the company along with the other directors being respondent No. 3, Chagan Lal Mittal, respondent No. 4, Ratan Kumar Mittal, respondent No. 5, Damodar Lal Mittal and respondent No. 7, Hira Khusiram Nathani. It is alleged that until May, 1976, the company was managed by the board of directors and had its registered office at No. 2, Brabourne Road, Calcutta. It is further alleged that all the meetings of the board were held at its registered office at No. 2, Brabourne Road, Calcutta, since January, 1972, and all the statutory books and minutes books, etc., were being kept and maintained at the said registered office of the company. It is alleged by the petitioner that on May 5, 1976, a notice dated May 3, 1976, was received by petitioner No. 1, Mohan Lal Mittal, from respondent No. 4, Ratan Kumar Mittal signed on behalf of the respondent-company calling a board meeting on May 14, 1976, at Hyderabad. It is alleged that petitioner No. 1, Mohan Lal Mittal, as a director issued a notice dated May 5, 1976, to all the directors that the said meeting scheduled to be held on May 14, 1976, had been postponed due to unavoidable circumstances. It is now alleged that in spite of such postponement respondents Nos. 2-5 held the meeting on the May 14, 1976, illegally and wrongfully. It is further alleged that one Mr. K.M. Gupta, alleged to be the secretary of the respondent-company, requested respondent No. 4, Ratan Kumar Mittal, for the particulars of the proceeding of the meeting and a copy of the said minute of the meeting for keeping the same at the registered office of the company and had various correspondence dated June.2, 1976, June 3, 1976, copies of which are annexed to the petition. It is further alleged that resp6ndent No. 4, Ratan Kumar Mittal, and/or Hyderabad office of the respondent-company did not send any copy of the minute or proceeding of the alleged meeting claimed to have been held on May 14, 1976. It is further alleged that by a notice dated June 2, 1976, the alleged secretary of the company, Mr. K.M. Gupta, duly called a meeting of the board of directors of the company on June 10, 1976, at the registered office of the company at No. 2, Brabourne Road, Calcutta, at 2 P.M. with an agenda, one of whichbeing to confirm and sign the minutes of the previous meeting. It is alleged that respondent No. 2, P.S. Guruva Reddy, intimated that he could not attend the said meeting for shortness of time.

5. It is further alleged that on June 10, 1976, the board meeting was held in terms of the notice dated June 4, 1976, and petitioner No. 1, Mohan Lal Mittal, respondent No. 6, Narendra Nath Kampany, respondent No. 7, Hira Khusiram Nathani and respondent No. 4, Ratan Kumar Mittal, attended the meeting. It is alleged that various transactions were carried out in the said meeting dated June 10, 1976, as would appear from the minutes of the meeting which is annexed to the petition. It is alleged that in the said meeting dated June 10, 1976, the last previous meeting was confirmed as held on February 11, 1976, and the copies of the minutes of the said meeting were duly circulated to all the directors of the company and there was no complaint or objection in respect of the same. It is alleged that by a notice dated November 25, 1976, issued by the alleged secretary, Mr. K.M. Gupta, another meeting of the board of directors was called to be held on December 11, 1976, at the registered office of the company for the transaction of various businesses as set out in the agenda. It is alleged that in the course of the said meeting on December 11, 1976, respondents Nos. 2-5 forcibly snatched and took away the minutes books, attendance register and other documents of the company and ran away from the registered office in spite of the request made by petitioner No. 1 and respondents Nos. 6 and 7 and it is alleged that thereafter, the said meeting stood abandoned and no business was transacted. It is alleged that the respondent-company through its alleged secretary complained before the Police Commissioner, Lalbazar.

6. It is alleged that disputes arose on the insistence of respondents Nos. 2-5 to approve the minutes of the meeting alleged to have been held on May 14, 1976, before approving the minutes of the meeting held on June 10, 1976. It was alleged that the meeting dated the May 14, 1976, was illegally held and it should be ignored. It is further alleged by the petitioner that the full facts and circumstances of the alleged wrongful and illegal acts of respondents Nos. 2-5 carried out at the meeting held on December 11, 1976, would appear from the letters dated December 13, 1976, and December 18, 1976, from respondents Nos. 6 and 7, respectively, addressed to the board of directors of the respondent-company which are annexed to the petition. It is further alleged that by a letter dated December 13, 1976, addressed to Mr. K.M. Gupta alleged to be the secretary of the company by respondent No. 4 it was alleged that the said Mr. Gupta had ceased to be the secretary of the company and called upon him to hand over all books, papers and documents of the company to one Mr. K. Gopal Rao, the alleged new secretary of the company, apart from the minutes of the board meeting which was already handed over at the meeting dated December 11, 1976. The said letter is also annexed to the petition. It is alleged that petitioner No. 1 received a letter dated December 17, 1976, from the said Mr. Gopal Rao alleged to be the secretary of the respondent-company enclosing a copy of the minutes of the meeting dated December 11, 1976. It is alleged that the said minutes are false and allegations contained therein are not correct. It is further alleged by the petitioner that the meeting alleged to have been held on May 14, 1976, was never taken up for consideration in the said meeting dated December 11, 1976, and all statements contained in the alleged minutes of the meeting dated December 11, 1976, are untrue, false and incorrect and the said minutes have never been signed by any one. The petitioner also disputes the contents of the minutes of the meeting dated December 11, 1976. It is further alleged that a notice dated December 14, 1976, which was received on December 18, 1976, by the first petitioner, Mohan Lal Mittal, of an alleged meeting of the board of directors to be held on the December 31, 1976, at Hyderabad purported to be issued by respondent No. 4 is wrongful, illegal and in violation of the provisions of the Companies Act, 1956, as it was alleged to be the adjourned meeting which was held on December 11, 1976. Petitioner No. 1 alleges that he received various other letters regarding the holding of the meeting of December 31, 1976, for the appointment of additional directors. There are various other allegations of deadlock and mismanagement as the directors are fighting amongst themselves and the respondent-company is alleged to be maintaining two sets of books by two groups of directors. Therefore, it is submitted that the affairs of the company is grossly mismanaged and the assets are in jeopardy and being wasted away. It is further alleged that the company is a public limited company and about 4,000 shareholders are all members of the general public and, therefore, public interest is prejudicially affected if the company is mismanaged in this fashion and the usual averments in Sections 397-398 application have been made as to oppression, mismanagement and acts prejudicial to the interests of the public and also to the company and its shareholders.

7. The main charges made out by Mr. R.C. Nag, appearing for the petitioners, are that the meeting dated May 14, 1976, was never held and the minutes of the same are false and fabricated. The secretary of the company has been wrongfully removed. The registered office of the company has been illegally and wrongfully shifted and the meeting dated December 11, 1976, has been illegally conducted and false and incorrect minutes have been prepared and all these constitute oppression, mismanagement and acts prejudicial to the public interests as well as to the company and its shareholders.

8. The respondents apart from disputing and denying all the allegations took up a preliminary objection as to the maintainability of the application as the alleged consent of Southern Steel Ltd., which is another company of the Mittal group, as the secretary who is alleged to have granted the consent was not the secretary of the company and was not authorised by the board of the said Southern Steel Ltd., to grant such consent, and, therefore, the said consent was invalid and if the said consent is invalid, then the petitioner has not the requisite qualification under Section 399 of the Companies Act, 1956, and the petition is not maintainable.

9. Mr. Nag in support of his contention that the consent is valid relied on the Companies Act, 1956, particularly the position of the secretary under the Companies Act, 1956, and his authority as denned under Section 234 and also powers of the director under Section 292 of the Companies Act, 1956. He also relied on the Supreme Court decision in Lakshmiratan Cotton Mills Co. Ltd. v. Aluminium Corporation of India Ltd. : [1971]2SCR623 , and English decisions in State of Wyoming Syndicate, In re. [1901] 2 Ch 431 (Ch D) and Haycraft Gold Reduction and Mining Co., In re [1900] 2 Ch 230, 231 (Ch D). Mr. Nag also relied on the Rajasthan High Court decision in Jaipur Udyog Ltd. v. Union of India , wherein it was held that under the provisions of the CPC, Order 29, Rule 1, the secretary can file a suit by signing and verifying the plaint without any resolution authorising him to do so. Relying on those provisions and principles Mr. Nag submitted that the secretary has the requisite authority to sign the consent letter supporting the present petition on behalf of the Southern Steel Ltd. Mr. Nag also relied on the Supreme Court decision in Hunger-ford's ease : [1972]85ITR607(SC) and Palmers' Company Law, Article 64.01 as to the secretary's power which is derived from the directors and Gorebrown, Article 5/17 and Order 29, Rule 1, the CPC, and submitted that the secretary had the requisite authority and the said consent letter is valid and the application is maintainable. Mr. Nag also submitted that this is a preliminary point which should have been taken by way of demurrer as laid down in Murarka Paints & Varnish Ltd.'s case : AIR1961Cal251 and also in In ye Bengal Luxmi Cotton Mills Ltd. : 69CWN137 . He also referred to the decision in Ramshankar Prosad v. Sindri Iron Foundry (P.) Ltd. : AIR1966Cal512 and Rajahmundry's case : [1955]2SCR1066 , in support of his proposition that the application which was maintainable when it was presented cannot become not maintainable due to subsequent withdrawal of consent or infirmity. Therefore, he submitted that the application is maintainable, and a case has been made out both under Sections 397-398 of the Companies Act, 1956, for oppression and mismanagement and wrongfulacts which are burdensome, harsh, unfair and prejudicial to the interests of the public. Therefore, relief should be granted as prayed for,

10. Mr. S.B. Mukherjee, appearing for the respondent-company, submitted that, in this case, the application is not maintainable as the alleged consent letter on behalf of the Southern Steel Ltd. signed by the alleged secretary is not valid, legal or of no effect. He submitted that assuming the said Mr. K.M. Gupta as the secretary at the time of signing of the alleged consent letter he had no authority without resolution of the board authorising him to do so and without any affidavit of competency. He referred to the provisions of Sections 2(45), 291, 292 and 399(3) of the Companies Act, 1956, read with the Companies (Court) Rules, 1959, Rules 19, 21 and 88 which make it clear that without the proper resolution and affidavit of competency a secretary has no power to sign the consent letter for making an application under Sections 397-398 of the Companies Act, 1956, to be a valid consent within Section 399. He also referred to Forms Nos. 3, 43 and 44 of the Companies Act, 1956, in support of his said proposition. Thereafter, Mr. Mukherjee referred to the articles of association of the company, definitions of secretary and director in Clause (2) and arts. 155 and 161 thereof. Mr. Mukherjee referred to a decision in Haycraft Gold Reduction and Mining Co., In re [1900] 2 Ch 230 at p. 236 (Ch D). He submitted that giving consent under Section 399 of the Companies Act, 1956, is not a statutory function of the secretary neither it is an administrative nor ministerial function. Therefore, he submitted that such consent must be backed by the authority of the board by a resolution or ratification. He referred to the decisions in State Wyoming Syndicate, In re [1901] 2 Ch 431 (Ch D) and George Whitechurch Ltd. v. Cavanagh [1902] AC 117 (HL) at pp. 124-125 and 139-140. Mr. Mukherjee referred to various decisions in Daimler Co. Ltd. v. Continental Tyre and Rubber Co. (Great Britain) Ltd. [1916] 2 AC 307, 326 ; [1917] 2 (sic) ER 16 at pp. 18-19 and Lakshmiratan Cotton Mills Co. Ltd. v. Aluminium Corproation of India Ltd. : [1971]2SCR623 ; Mr. Mukherjee also referred to Halsbury's Laws of England, 4th Edn., Vol. 7, paras. 546-547. In the said two paragraphs of the article the nature of employment of the secretary and the statutory duties of the secretary of a company have been summarised with reference to the various sections of the English Act and decisions.

11. Mr. Mukherjee referred to the affidavit-in-opposition of Mr. R.K. Mittal affirmed on the 13th January, 1977, para. 3 and submitted that it is an admitted position that the Southern Steel Ltd. is the owner and registered holder of 5,000 equity shares in the capital of the respondent-company, Universal Wires Ltd., and now the said consent alleged to have been given by the secretary of the Southern Steel Ltd. is invalid and void, then the present application would not be maintainable and the petitioner cannotbe said to be entitled to any relief whatsoever as the court has no jurisdiction to grant relief in an application which is not maintainable. He referred to the various decisions in In re Bengal Luxmi Cotton Mills Ltd. : 69CWN137 , Inder Kumar Jain v. Osra Bottling Co. (P.) Ltd. . Turner Morrison and Co. Ltd. v. Hungerford Investment Trust Ltd, : [1972]85ITR607(SC) , and submitted that there is no question of any ratification of the secretary's action by the company and its board at any stage in this case. Therefore, Mr. Mukherjee submitted that the present application is not maintainable as the consent of the Southern Steel Ltd. is not valid in fact or in law and, therefore, the requirement of Section 399 of the Companies Act, 1956, is not satisfied and the application under Sections 397 and 398 of the Companies Act, 1956, is not maintainable and should be dismissed.

12. Mr. Mukherjee next submitted that the petitioner is making a complaint qua director and, therefore, the petitioner is not entitled to any relief under Sections 397 and 398 of the Companies Act, 1956. He submitted that there is no material or any allegation that he has suffered as a shareholder of the respondent-company. Further, Mr. Mukherjee submitted that the interim order passed in this application from time to time has removed all the alleged acts complained of and regularised the irregularities, if any. Therefore, he submitted that there is nothing left of the present application save and except certain academic questions which are sought to be raised from the Bar.

13. Admittedly, since the present application was moved on December 21, 1976, various orders were made by this court from time to time appointing a special officer to supervise any board meeting to be held by the orders of the court empowering him to see that the meetings are conducted in a peaceful and proper manner and he was also given power to convene meetings by serving notice for a specified period which were to be held at an independent place to be selected by him. The said order dated January 4, 1977 and variation thereof dated January 12, 1977, are set out hereunder :

'The Court : The special officer to take possession of all books, papers, books of account and documents including the statutory books which are lying at Calcutta in any of the alleged two registered offices or with whomsoever it may be lying and keep the same in his custody until further orders of this court. The special officer will forthwith go to Hyderabad and initial the current books including the statutory books, if any, lying at the factory of the respondent-company at Hyderabad. The petitioner at the first instance will bear all costs, charges and expenses of the special officer including air passage and 1st class hotel charges. The special officer who has been appointed to supervise any board meeting to be held by the company by the order dated December 29, 1976, would be empowered only to see that the meeting is properly conducted and in a fair manner and he will also convene the said meeting by serving 10 days' notice and the meeting is to be held at a place to be selected by him but not at the alleged two registered offices of the company. The petitioner, at the first instance, will bear the costs and expenses of such meeting to be held.

It is made clear that the special officer's function is only to supervise the meeting so that it is held according to the Companies Act and properly without any interference or hindrance put forward by any of the parties. If he finds that any of the parties is behaving in a manner not congenial to create an atmosphere in holding a board meeting, he will have the power to remove the person concerned or cancel the said meeting forthwith as he may think fit under the circumstances.

It is recorded that if any effect is given to the resolution passed in the meeting dated May 14, 1976, that will be subject to the result of the interim application or the main application.

Appearance on behalf of the company is subject to objection.

Affidavit-in-opposition by 10-1-1977, affidavit-in-reply by 17-1-1977 and adjourned till 18-1-1977, Save and except what is modified by this order all other interim orders will continue.

Special officer and all parties to act on a signed copy of the minutes on the petitioner's solicitor undertaking to complete and file this order.'

'The Court : The order dated January 4, 1977, is varied to this extent that the provisions for bearing the cost at the first instance by the petitioner should be deleted and it is ordered that the cost to be paid out of the funds of the company at the first instance and the said order is further modified that the special officer appointed in the other companies under the control and management of Mittal group to fix the venue of such meeting of the board at a time convenient to the directors attending the same, i.e., the date, place and time should be so arranged as to make it convenient for them to attend at the same time during their visit at Calcutta. Save as modified aforesaid, the order dated January 4, 1977, will continue. The special officer and all parties to act on a signed copy of the minutes.'

14. It now appears that pursuant to the orders of this court there was a board meeting of the respondent-company held on February 12, 1977, The special officer was also directed to submit a report of the board meeting and pursuant to the same he duly filed the report being dated March 18, 1977. It appears that the petitioner made every attempt to frustrate the said meeting and took all sorts of objections solely with a view to frustrate the said meeting and raised all sorts of technical and legal objections to prolong the litigation between the parties, if possible. Further, it appears that at one stage the petitioners' group agreed to sell their shares to be purchased by the respondent, Ratan Kumar Mittal, at a valuation of Rs. 8 per share although the market price of the said shares were Rs. 6 per share at that time and the court fixed the said price. The said order was made by Ajoy K. Basu J. on August 10, 1977, and the said order is set out hereunder :

'The Court : Therefore, I order that the shares mentioned in the petition of Mohan Lal Mittal, Promode Kumar Mittal and Vinod Kumar Mittal may be purchased by Ratan Kumar Mittal at a valuation of Rs. 8 per share but as the parties are agreeable at the said price, I am fixing the price at Rs. 8 per share of Mohan Lal Mittal, Promode Kumar Mittal and Vinod Kumar Mittal. The said transaction should be completed within a fortnight from date and the price of the shares by cheque to be sent by Ratan Kumar Mittal to the petitioner's solicitors, M.G. Poddar, within that time. In case, Ratan Kumar Mittal is not in a position to buy the shares of Mohan Lal Mittal, Promod Kumar Mittal and Vinod Kumar Mittal within fortnight then the petitioner Mohan Lal Mittal will purchase the shares of Ratan Kumar Mittal, Chhagan Lal Mittal and Damodar Lal Mittal at the said valuation, that is, at the rate of Rs. 8 per share.

I am told that after filing of this application, at the meeting held in February, 1977, under the supervision of the special officer, Mr. P.S. Gurva Reddy, Chhagan Lal Mittal, Ratan Kumar Mittal, Damodar Lal Mittal, Kancharlal Subanarya Dutt, S.N. Mukherjee and S.B. Jain have been elected as Directors and it is better that these respondents buy the shares of the petitioners as mentioned in the petition.

After I delivered the judgment, Mr. A.N. Bose, tells me that his client, Mohan Lal Mittal, has come to the court and further submits that his client is prepared to buy the shares of all these respondents that is of Ratan Kumar Mittal, Chhagan Lal Mittal and Damodar Lal Mittal and also their group at Rs. 12 per share.

After the sale is completed the special officer will hand over all the documents tying with him to the person concerned, whoever buys the shares of the other.

Purchase price of the shares to be sent to the respective solicitors within a fortnight. There will be no further order on this application.

This order can be executable as a decree of court and should not beconstrued as violation of the order of court. . .

Mr. Bose asked for stay of operation of this order for one week,which is refused.

Further remuneration of 100 G.ms. be paid to the special officer by the company.

All parties to act on a signed copy of the minutes.'

15. The said order seems to have been modified on August 30, 1977, to the effect, that the order dated on August 10, 1977, was not a consent order. The said order dated on August 30, 1977, is set out hereunder :

'The Court : The order dated on August 10, 1977, passed by me was not a consent order. The only thing which was agreed to by and between the parties that the market price was Rs. 6 per share and that the court should fix the price. It is further recorded that after the judgment was delivered Mr. Bose, appearing for the petitioners, suggested for an open bidding, which I declined. Let this order be incorporated in the order dated August 10, 1977.

All parties to act on a signed copy of the minutes.'

16. Therefore, from the subsequent events which the court is bound to take notice of in granting relief it appears that the act complained of has been regularised assuming for a moment there were any illegality or irregularity in the holding of the said meeting as alleged by the petitioner. Therefore, in the present application, I am really dealing with academic questions for the satisfaction of the parties and their counsel with no practical result. It is certainly illuminating and interesting to hear Mr. Nag strenuously arguing to establish the secretary as a person all in all in modern company jurisprudence and also his proposition that the director of a company is all powerful to do what he thinks necessary in the interests of the company and his submission that in cases of necessity and emergency the director can authorise the secretary, to do any act which in his opinion is in the interest of the company, be it for his self-interest or satisfaction of his own personal vendetta or gain. It cannot be ignored that in the background of the family dispute when the petitioner, Mohan Lal Mittal, the eldest brother who felt that the position- of a karta in the Hindu Mitakshara joint family which is fast dwindling into oblivion leaving only some legal vestiges or remnants in some ceremonial, religious or social function has practically lost its ancient character. Now the junior members of the family can seldom tolerate the dictatorial, autocratic and despotic attitude of the karta and also the karta is not the karta of the past but now they are interested in personal gain and establishing their own children, friends, nominees and stooges to be put in position and power. Here also Mr. Mohan Lal Mittal, the eldest brother, possibly the karta in other fields is making an attempt to get control of all the Mittal group of companies through his sons, friends and stooges and, consequently, the family is divided into two groups and all the companies under the Mittal group are involved in litigations one after the other. In this back- ground, the disputes in respect of this respondent-company has also cropped up and with a view to enable himself to maintain the present application, Mohan Lal Mittal authorised the alleged secretary to sign the consent letter on behalf of the Southern Steel Ltd. without whose consent the present application under Sections 397 and 398 of the Companies Act, 1956, is not maintainable as the requisite qualification under Section 399 of the Companies Act, 1956, could not be fulfilled which is an admitted position. Mr. Nag's main contention that by the amendment of the provisions of the Companies Act, in the definition of secretary and the various powers, the secretary is now given under the Companies Act, and also by various judicial decisions it must be taken as a proposition that a secretary can sign the consent letter for supporting an application under Sections 397 and 398 of the Companies Act, 1956, without any resolution of the board or the company authorising him to do so. In my view, if that proposition is to be accepted there will be disastrous result and the conception of company management would be completely demolished and the secretary would become the company in no time.

17. According to Mr. Nag, the definition of secretary in Section 2(45) of the Companies Act, 1956, which runs as follows :

''Secretary' means any individual possessing the prescribed qualifications appointed to perform the duties which may be performed by a secretary under this Act and any other ministerial or administrative duties.'

18. The words 'any individual possessing the prescribed qualifications' and ministerial or administrative duties have been substituted by the Companies (Amendment) Act, 1974.

19. It appears that under the Act itself certain ministerial or administrative functions are to be discharged by the secretary as will appear from Section 161 for filing the annual return. It is required to be signed both by a director and the secretary where there is one. Sections 291 and 292 of the Companies Act, 1956, make it clear as to what are the powers of the board of directors and also of the directors individually. Rules 21, 70 and 88 of the Companies (Court) Rules, 1959, read with Forms Nos. 3, 43 and 44 make it quite clear that in case a secretary verifies any petition or files a proxy or any petition under Sections 397 and 398 of the Companies Act, 1956, it must be accompanied by an affidavit verifying the petition along with statement that he has been duly authorised by the company. Requirement of an affidavit of competency in company petitions under the rules and practice of the original side of this court is so well established that without the same applications are not maintainable. In the present case, in the articles of association of the company the definitions of secretary and director are in Clause (2) and Articles 155 and 161. In my view, consent under Section 399 of the Companies Act, 1956, to present a petition under Sections 397 and 398 ofthe Companies Act, 1956, is not a function of the secretary. It can neither be said to be a ministerial nor an administrative function in respect of a company. Such consent must be backed by the authority of the board by a resolution or by subsequent ratification by a board meeting : State of Wyoming Syndicate's case [1901] 2 Ch 431 (ChD) and George Whitechurch Ltd. v. Cavanagh [1902] AC 117 at pp. 124-125, 139-140 (HL). The position of a secretary, his power and function has been neatly summarised in Halsbury's Laws of England, 4th Edn., Vol. VII, paras. 546 and 547 and it will be useful to set out the said two paras, as the English Companies Act and the Indian Companies Act, so far as the powers, position and functions of the secretary are concerned in the modern company are more or less the same. These two paras, are set out hereunder.

'546. Nature of employment of secretary.--The Secretary, being an agent only, is in the same position as any other agent of a company. If his dealings are such that his company is not bound by them, he may himself be liable, either as principal or on the ground of breach of warranty of authority. Whereas it has formerly been held that he had no authority by virtue of his position to make representations to induce persons to contract with the company, his functions being ministerial only, his status has now greatly increased. He regularly makes representations on behalf of the company and enters into contracts on its behalf which come within the day-to-day running of the company's business, he signs contracts connected with the administrative side of a company's affairs ; and all these matters are now within his ostensible authority. But he is not, whilst merely performing the duties appropriate to his office, a party to the carrying on of the business of the company, so as to make him responsible without more for fraudulent trading.

He has no power, without the resolution of the directors, to call a meeting of the company or to commence proceedings on behalf of the company, nor can he alter the register of members ; but any such act may be ratified by the directors.

A secretary may not make a secret profit in connection with the affairs of the company.

A secretary may be a clerk or employee so as to be entitled to preferential payment in a winding-up.

547. Statutory duties of secretary.--Among the statutory duties which must be, or usually are, discharged by a secretary are signing the annual return and certifying the documents annexed to it ; delivering for registration returns of allotments, and contracts for the allotment of shares paid up otherwise than in cash ; making the statutory declaration required before the commencement of business ; giving notice to any proposed director that his liability is to be unlimited ; issuing certificates of shares, debentures and debenture stock ; delivering particulars of mortgages or charges for registration, when these duties have not already been performed by some other officer ; allowing inspection of the debenture register to debenture holders ; giving notice to the Registrar of an increase of share capital; allowing inspection of and sending copies of the register of members ; allowing inspection of the register of directors and secretaries ; and, in the case of winding-up by the court, assisting in making out the statement of the affairs of the company.'

20. From the above summary, it is quite clear that the secretary cannot usurp the functions and powers of the board or the company but due to the enormous growth of company activities he has been empowered to discharge various ministerial and administrative duties on behalf of the company which generally can be performed by an authorised agent. In due course of the company's business, the secretary has been given certain statutory powers like signing the annual return, etc. But under no circumstance he can discharge the functions of the board or act on behalf of the company in matters of policy or substantive steps which is not administrative or ministerial in nature. Otherwise, it is the board of the company which is empowered by the shareholders under the Companies Act and the articles of association of the company to discharge the functions of the company in carrying on its business and managing the affairs of the same. The Supreme Court decision in Lakshmiratan Cotton Mills Co. Ltd. v. Aluminium Corporation of India Ltd. : [1971]2SCR623 , which has been cited by both the parties before me on the question as to the authority of the secretary of a company to act on behalf of the company does not really deal with the question which has arisen before me as to whether 'the secretary has the power to give consent under Section 399 of the Companies Act, 1956, for moving a petition under Sections 397 and 398 of the Companies Act, 1956, on behalf of the company which holds shares in the capital of the company in respect of which the application under Sections 397 and 398 of the Companies Act, 1956, is made by the petitioner. In the Supreme Court decision, the question arose whether a letter written by the secretary on behalf of the company can constitute an acknowledgment within the meaning of Section 19 of the Limitation Act, 1908, as acknowledgment for saving the bar against limitation. In the facts of the case, it was found that the person who had written the letter in question was a secretary-cum-accountant and holder of a power-of-attorney of the Corporation, and the statement of accounts enclosed therewith was an admission of the jural relationship of debtor and creditor and of the Liability to pay the amount due at the foot of the account on finalisation of accounts. Therefore, it was held that the writer of the said letter had the implied authority to make the acknowledgment and he wrote the letter with the intention of doing so. In the said decision, at para. 22, at p. 1490 of AIR 1971 SC 1490, Shelat J. observed as follows :

'Ordinarily, the functions of Subramanyam as the secretary of the Corporation would be ministerial and administrative. As a secretary only, he would have no authority to bind the Corporation by entering into contracts, or other commitments on its behalf.'

21. It is true that the said decision is before the 1974 amendment in the definition of 'secretary' under Section 2(45) of the Companies Act, wherein the words 'any individual possessing the prescribed qualification' and 'any other ministerial or administrative duties' has been incorporated in the definition. But, in my view, that has not altered the fundamental position of the secretary in a company to discharge certain statutory duties as laid down in the said Act and the Rules made thereunder and the prescribed forms under the Companies (Court) Rules, 1959, and empowered the secretary to usurp the function of the directors. In my view, signing the consent letter for an application under Sections 397 and 398 by no stretch of imagination could be a ministerial or administrative duty of a secretary of a company within the meaning of the Companies Act.

22. Mr. Nag very strongly relied on a single Bench decision of the Rajasthan High Court in Jaipur Udyog Ltd. v. Union of India , where a writ petition was made on behalf of the company which was signed and verified on behalf of the company by the secretary and it, was held that the same was not defective merely because there was no resolution of the company empowering the secretary to present the petition. The learned judge observed in as follows :

'Regarding the preliminary objection of the respondents that the first two petitions are not maintainable as they have not been filed by the authorised persons, I may mention that Rule 1 of Order 29, Civil P.C. would be applicable for the presentation of the petitions by or on behalf of the Corporations. Rule 1 lays down that in suits by or against a Corporation, any pleading may be signed and verified on behalf of the Corporation by the secretary or by any director or other principal officer of the Corporation who is able to depose to the facts of the case. The requirement of this rule is not that the principal officer must be empowered by a specific resolution to present the suit in a court of law. The only requirement of this rule is that the principal officer must be in a position to depose to the facts of the case. In the case of Jaipur Udyog Ltd., the petition has been signed by one Sri G.P. Gogla who has in his affidavit deposed that he is the senior executive officer (quarry) of the Jaipur Udyog Ltd. and that he was fully conversant with the facts of the case and was competent to swear to the affidavit. In petition No. 11 of 1971 of M/s. Hindusthan Sugar Mills Ltd., Bombay, the affidavit has been sworn by one Shri Rangnath Kabra who hasdescribed himself as the administrative manager of the petitioner-company and has stated that he was fully conversant with the facts of the case. These averments of the aforementioned two officers clearly show that the petitions were signed and verified on behalf of the companies by their principal officers who were able to depose to the facts of the cases and as such, they were entitled to sign the petitions and present them in the court. The preliminary, objection has, therefore, no force and it is rejected.'

23. But, in my view, the said decision does not lay down the proposition that the secretary can himself decide to institute the writ petition in question but it relates to the verification and signing of the petition on behalf of the company by the secretary. From the said decision, it does not appear that the writ petition was filed by the secretary himself on his own decision without any resolution of the board to institute the same, as signing and verifying a pleading is quite different from the decision to file the writ petition which in that case might have been by a resolution of the board prior to the filing of the petition which was signed and verified by the secretary on behalf of the company.

24. There is nothing wrong or irregular or illegal in signing and verifying a petition on behalf of the company by a secretary if the said writ petition is filed pursuant to a resolution of the board as no further resolution is necessary empowering the secretary to sign and verify the writ petition. The said act of signing and verifying is merely a ministerial act pursuant to the resolution of the board to institute such writ petition. Therefore, the said decision, in my view, has not been correctly interpreted by Mr. Nag as haying laid down the proposition that the secretary is all in all in a company and he can institute proceeding himself without any resolution of the board of the company on behalf of the company. There is a clear distinction between an institution of a proceeding and verifying and signing a pleading in such proceeding. If it is held that the said decision has laid down the proposition which Mr. Nag has submitted, then with great respect I disagree with the same as that would completely upset the administration of the company under the Companies Act, and in effect the secretary would supersede the board in all matters apart from ministerial or administrative functions as provided under the Companies Act, by the amendment of 1974. In my view, the definition of 'secretary' under Section 2(45) of the Companies Act, and the statutory functions to be discharged by him under the said Act has been clearly laid down and it cannot be said that he can override the board of directors of the company whose powers are defined under Sections 291-293 of the Companies Act, read with the articles of association of the company.

25. Further, Rule 21 of the Companies (Court) Rules, read with Form No. 3 thereof makes it clear that any petition or pleading filed on behalf of the company must make an averment that the person verifying the petition must state that he has been duly authorised by the petitioner-company to make the said affidavit on behalf of the company and that appears to be the affidavit of competency as it is known in the original side practice of this court. It is true that in the note to Form No. 3 such a statement is necessary when the petition is verified by an affidavit sworn to by any person other than a director, agent or secretary or other officer of the company. But invariably in all petitions filed by the company an affidavit of competency is required to be filed by the person verifying the said petition. Then again in Rule 70 of the Companies (Court) Rules, 1959, dealing with the proxy for voting at the meeting of a company where the shareholder is the member or creditor, it has been specifically provided that a copy of the resolution of the board of directors of the corporate authorities authorising such person to file the proxy shall be lodged with the company at its registered office within a specified time before the meeting. Further, in Rule 88 of the Companies (Court) Rules, which prescribed the procedure for the presentation of a petition under Sections 397 and 398 of the Companies Act, requires the letter of consent signed by the member, authorising the petitioner or petitioners to present the petition, must be annexed to the petition. The said letter of consent constitutes the required qualification under Section 399 of the Companies Act, 1956, and is of a substantive right of a petitioner who is a member of the company in respect of whose affairs the petition under Sections 397 and 398 of the Companies Act, was presented. Therefore, such a letter of consent to present the petition under Sections 397 and 398 of the Companies Act, can never be said to be a matter of administrative or ministerial character like verifying and signing a pleading. The decision must be taken by a resolution of the board of the company on whose behalf the letter of consent is to be issued. It cannot be done by an individual director or the secretary of the company unless he is so authorised by a board's resolution to issue such letter of consent for the presentation of a petition under Sections 397 and 398 of the Companies Act, 1956, by the petitioner. It is an admitted position- that there is no such resolution of the Southern Steel Ltd., which is alleged to have issued a letter of consent signed by the secretary at the instruction of one of the directors, Mohan Lal Mittal, petitioner No. 1, in this case. Further, there is no question of any ratification of the said letter of consent by the Southern Steel Ltd., which is a member of respondent No. 1, Universal Wires Ltd., and without the said letter of consent the requisite qualification under Section 399 of the Companies Act, 1956, is not satisfied. This is an admitted position and, therefore, in my view, the present application under Sections 397 and 398 of the Companies Act, 1956, is not maintainable as it has failed to comply with the provisions of Section 399 of the Companies Act, 1956, and the petitioner has not the requisite qualification and as such, this court has no jurisdiction to entertain the said application.

26. In that view of the matter as I have already held that the application is not maintainable, the same is liable to be -dismissed with costs. Further, I have discussed the merits of the application and I am also of the view that no case has been made out by the petitioner against the respondents either on oppression or mismanagement either under Section 397 or Section 398 of the Companies Act and the present application is absolutely mala fide vexatious and harassing.

27. In that view of the matter, the application is dismissed with costs and the special officer will stand discharged. It appears that the special officer has already been paid 130 G.ms. and a further amount of 100 G.ms. is to be paid to him by the company out of the funds of the company and the special officer will stand discharged.

28. The special officer and all parties to act on a signed copy of the minutes.


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