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Joginder Singh Palta Vs. Time Travels Pvt. Ltd. - Court Judgment

LegalCrystal Citation
SubjectCompany;Service
CourtKolkata High Court
Decided On
Case NumberSuit No. 4480 of 1982
Judge
Reported in[1984]56CompCas103(Cal)
ActsCompanies Act, 1956 - Sections 170 and 173; ;General Clauses Act, 1897 - Section 27
AppellantJoginder Singh Palta
RespondentTime Travels Pvt. Ltd.
Appellant AdvocateSujit Sinha, Adv.
Respondent AdvocateRathin Nag and ;Hirak Mitter, Advs.
DispositionApplication dismissed
Cases ReferredBently Stevens v. Jones
Excerpt:
- .....amrita bazar patrika, dated may 16, 1982, that a resolution had been passed at an extraordinary, general meeting of defendant no. 1, dated may 14, 1982, for the removal of the petitioner as director of defendant no. 1. the petitioner denied and disputed the factum, validity and the genuineness of the said resolution passed at the extraordinary general meeting inasmuch as, according to the petitioner, no board meeting was held for the purpose of considering the said purported resolution or convening the extraordinary general meeting of defendant no. 1. according to him no notice of the said resolution or of the said extraordinary general meeting was given by defendant no. 1 to him or by any other defendants. according to him, no special notice had been served on the petitioner and,.....
Judgment:

Padma Khastgir, J.

1. This application had been made by Joginder Singh Palta for an order of injunction restraining the defendants. Time Travels P. Ltd, and others, from in any manner giving effect or further effect to the resolution, dated May 14,1982, restraining the defendants from interfering in any manner with the right of the petitioner to act as the managing director of defendant No. 1 and for other consequential reliefs.

2. It was the petitioner's case that at all material times he was and still is the managing director of defendant No. 1. The company was incorporated on or about March 8, 1978, under the Companies Act, 1956, as a private company limited by shares. Defendants Nos. 2, 3 and 4 at all material times were and still are directors of defendant No. 1 and the petitioner along with the said directors constituted the board of directors of defendant No. I. The petitioner and defendants Nos. 2 and 4 were the first named directors of the company in its articles of association. According to the petitioner, he was duly appointed as the managing director of defendant No. 1 by the board of directors for the initial period of three years with effect from June 1, 1978, and subsequently from June 1,1981, he was duly appointed as the managing director of the defendant on various terms and conditions as set out in paragraph 9 of the petition. Since June 1,1976, the petitioner has been duly acting as the managing director of defendant No. 1 and performing his duties as such. It was the petitioner's case as made out in the petition, that on May 23, 1982, the petitioner for the first time came to know from an advertisement caused to be published by the defendants in an issue of Amrita Bazar Patrika, dated May 16, 1982, that a resolution had been passed at an extraordinary, general meeting of defendant No. 1, dated May 14, 1982, for the removal of the petitioner as director of defendant No. 1. The petitioner denied and disputed the factum, validity and the genuineness of the said resolution passed at the extraordinary general meeting inasmuch as, according to the petitioner, no board meeting was held for the purpose of considering the said purported resolution or convening the extraordinary general meeting of defendant No. 1. According to him no notice of the said resolution or of the said extraordinary general meeting was given by defendant No. 1 to him or by any other defendants. According to him, no special notice had been served on the petitioner and, under the circumstances, he was not given any opportunity to be heard on the proposed resolution or at the meeting. Under those circumstances, the petitioner had no opportunity to make any representation with regard to the said proposed resolution for his removal as the director of defendant No. 1. It was the petitioner's further case that such resolution had not been notified to the Registrar of Companies removing the petitioner from the directorship of defendant No. 1.

3. Mr. Sujit Sinha, Barrister-at-Law, appeared in support of this application and submitted that the removal of his client as a director was illegal, void and of no effect. First of all, on the ground that no notice of the said resolution or of convening of the said extraordinary general meeting was given, no board meeting was ever held for the purpose of considering the said resolution. No special notice had been given to the petitioner nor any particulars were given to the petitioner to make any representation in respect of the said resolution for his removal as a director of defendant No. 1. The meeting held and the resolutions passed on May 14, 1982, were contrary to and in violation of the provisions of the Companies Act as also the articles of association of defendant No. 1. According to the petitioner, no effect whatsoever had been given to the resolution inasmuch as the petitioner had been attending the office of defendant No. 1 and performing and/or discharging his duties as the managing director of defendant No. 1 by receiving visitors and callers and making arrange, ments on their behalf by way of booking air passage with the diverse airlines and also making hotel accommodation for the passengers. He gave particulars of the visitors and/or representatives of different airways whom he met during that period and also relied on a few letters written by the third parties to him as the managing director. Under the circumstances, the petitioner was apprehensive, since defendant No. 1 and other directors have threatened to invade the right of the petitioner to act as the managing director of defendant No. 1.

4. The petitioner instituted this suit for a declaration that the petitioner is the managing director of the defendants and is entitled to act as such, for a declaration that the resolution is illegal, void and of no effect, and for a perpetual injunction restraining defendant Nos. 1, 2, 3 and 4 and/or their agents or servants from in any way or manner interfering with the right of the petitioner to act as the managing director of defendant No. 1 or from giving effect to the resolution, dated May 14, 1982. The petitioner alleged that the defendants have given instruction to the office stafi not to carry out any instructions of the petitioner and they in fact appointed security staff from the Security Service of India for preventing the petitioner from attending or having any access to his office from May 31, 1982. Mr. Sinha relied on the cases in Bimal Singh Kothari v. Muir Mills Co. Ltd. [1952] 22 Comp Cas 248 (Cal) and Richard B. T. H. Chow v. James Chow Wakin [1970] 75CWN 173.

5. The learned lawyers, Mr. Ra'thin Nag with Mr. Hirak Mitter, appeared on behalf of the company and opposed this application.

6. It appears that the petitioner, on his own admission, is not a member of the company inasmuch as he has no shareholding of defendant No. 1. Under the circumstances, he, being a non-member of the company, is not entitled to challenge the non-compliance of Section 173 of the Companies Act, 1956, which provides as follows :

' 173(1). For the purposes of this section-

(a) in the case of an annual general meeting, all business to be transacted at the meeting shall be deemed special, with the exception of business relating to (i) the consideration of the accounts, balance-sheet and the reports of the board of directors and auditors, (ii) the declaration of a dividend, (iii) the appointment of directors in the place of those retiring, and (iv) the appointment of, and the fixing of the remuneration of, the auditors; and

(b) in the case of any other meeting, all business shall be deemed special.

(2) Where any items of business to be transacted at the meeting are deemed to be special as aforesaid, there shall be annexed to the notice of the meeting a statement setting out all material facts concerning each such item of business, including in particular the nature of the concern or interest, if any, therein, of every director, the managing agent, if any, the secretaries and treasurers, if any, and the manager, if any '.

7. In view of the provisions of Section 173 of the Companies Act, the petitioner is not entitled to any notice under Section 173. Apart from that, factually, it had been the case of defendant No. 1 as made out in the affidavit-in-opposition affirmed by Rajendra Prosad Khaitan on June 7, 1982, that the petitioner had been served with the notice accompanied by the requisition letter given by one of the shareholders having more than 10% shareholding as also the explanatory statement of the said notice by registered covers with acknowledgment due. The said cover was tendered to the petitioner on more than one occasion by the postal delivery peon and the petitioner refused to accept such cover, as a result whereof the said cover was returned to the company. The sealed envelope was opened by the court's officer in the presence of the learned lawyers appearing for both the parties and the contents of the said cover were brought out which corroborated the affidavit testimony of Rajendra Prosad Khaitan. Under the circumstances, the petitioner's submission that he had not 'been served with any notice whatsoever of the proposed meeting to be held on May 44, 1982, as also the proposed resolution to be passed at such meeting is untenable and equally unacceptable is his submission that he did not get any chance of making any representation against the proposed resolution which was going to be passed at such meeting removing him from acting as a director. Under the General Clauses Act, 1897, under Section 27 such tender of the registered cover and his refusal to accept the same is valid service in accordance with law.

8. Mr. Sujit Sinha submitted that the explanatory statement given by the company was not sufficient inasmuch as the special notice given by the requisitionists should also have been accompanied by the explanatory statement. In support of his contention he relied on an unreported judgment of Mr. Justice Salil K. Roychowdhury (as he then was) and submitted that inasmuch as there was no explanatory statement annexed to the special notice given by the shareholder, it was contrary to law and as such any resolution passed on the basis of such special notice and/or requisition was void.

9. The suit filed by the defendant seems to be not maintainable in law inasmuch as he has asked for a declaration to the effect that he is still the managing director of the company and he is liable to remain there. Such relief is not tenable in law inasmuch as the managing director is an employee of the petitioner. In the cases reported in Catherine Lee v. Lee's Air Farming Ltd, [1961] AC 12 (PC), Boulting v. Association of Cinemato graph. Television 6- Allied Technicians [1963] 2 QB 606 at,607, it had been held that a managing director is merely an employee of a company Under the circumstances, no injunction could be passed restraining the company from removing him as the managing director inasmuch as the court of law will not compel a company to keep one of its employees ' inasmuch as the court does not enforce an agreement for employment specifically in case of personal service. No court can compel an unwilling employer to keep a particular employee in whom the employer has lost confidence. Mr. Nag craves reference to a judgment of this court passed in the matter in Gobind Pritamdas Malkani v. Amarendra Nath Sircar [1980] 50 Comp Gas 219 (Cal), and submitted that in view of the observation there, this court should not pass an order of injunction restraining the company from dispensing with the service of the petitioner as its managing director.

10. The petitioner's submission that there had been some irregularities in the conduct as also in convening the said meeting cannot be a ground for an order of injunction inasmuch as the company is at liberty to remove those irregularities at the next meeting of the company and cure such irregularities and set at naught the order. Under those circumstances, relying on the principles as laid down in Bentley-Stevens v. Jones [1974] 2 All ER 653; [1974] 1 WLR 638 (Ch D) no order of injunction could be passed against the defendants from interfering with the right of the petitioner to act as the managing director.

11. Palmer's Company Law, 22nd edn., page 651, Article 59/25, Article 59/30, page 554, observes that what applies to directors applies with greater force to managing directors. In the event of any breach of contract of employment of a managing director, in the opinion of Palmer, at Article 60/11 at page 668, is the remedy for damages for such breach of contract.

12. The decisions relied by Mr. Sinha have no application to the facts and circumstances of this case.

13. Section 170 of the Companies Act provides as follows:

' 170(1). The provisions of Sections 171 to 186-

(i) shall, notwithstanding anything to the contrary in the articles of the company, apply with respect to general meetings of a public company, and of a private company which is a subsidiary of a public company; and

(ii) shall, unless otherwise specified therein or unless the articles of the company otherwise provide, apply with respect to general meetings of a private company which is not a subsidiary of a public company.

(2)(a) Section 176, with such adaptations and modifications, if any, as may be prescribed, shall apply with respect to meetings of any class of members, or of debenture holders or any class of debenture holders, of a company, in like manner as it applies with respect to general meetings of the company.

(b) Unless the Article s of the company or a contract binding on the persons concerned otherwise provide, Sections 171 to 175 and Sections 177 to 186 with such adaptations and modifications, if any, as may be prescribed, shall apply with respect to meetings of any class of members, or of debenture holders or any class of debenture holders, of a company, in like manner as they apply with respect to general meetings of the company.'

14. Pursuant to such provision this particular company in its articles of association under Article 40 provides in the manner following :

' The provisions contained under Sections 171 to 186 of the Act shall not apply to the company.'

15. Under those circumstances, as per the Article s of association of the company, there need not be any explanatory statement as provided under Section 173 of the Companies Act, 1956, for the purpose of convening a meeting by a shareholder by giving any special notice annexing therewith any explanatory statement. Mr. Sinha's submission is that the expression ' unless otherwise specified ' in Clause (ii) of Sub-section (1) of Section 170 does not mean omission of the provisions of the Companies Act inasmuch as under art. 40 it does not make any other provision but only excludes the application of certain sections of the Companies Act. In that respect he craved reference to Black's Law Dictionary. So far as the word ' otherwise ' is concerned, he submitted that the company should have made some provisions in a different manner and in some other way so far as Sections 171 to 186 were concerned. From the various provisions made in the articles of association of the defendant company it would appear that from Articles 40, 41, 42, 43, 44, 45, 46, 47, 48 and 49, various provisions have been made so far as general meetings were concerned. Mr. Sinha's submission is that by virtue of Section 9 any provision made in the articles of association which is contrary to the provisions of the Companies Act shall be void. That submission of Mr. Sinha is also unacceptable inasmuch as the opening words of Section 9 provides ' save as otherwise expressly provided in the Act'. Under the circumstances, by, virtue of Section 170, the company was entitled to frame its articles of association by making other provisions and/or specifying otherwise.

16. Considering the balance of convenience, it seems that the members of the company had unanimously resolved to remove the petitioner as the managing director. Under the circumstances, to insist on the company to engage such a managing director would be disastrous for the company. There are allegations of removal of minutes of board meetings, register of shareholdings and other statutory documents including the common seal of the company. The. company had duly notified to the Registrar of Companies and the Officer-in-Charge of the Park Street Police Station to that effect.

17. As a result, in view of the peculiar facts and circumstances of this case and the principles as laid down in the case of Bently Stevens v. Jones [1974] 2 All ER 653; [1974] 1 WLR 638 (Ch D), no order of injunction should be passed even if there are irregularities, which can be rectified by the company at its next general meeting. Under the circumstances, this application is dismissed with costs.


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