1980 (7) TMI 215 - HC - Companies Law

Directors - Power of, Amendment of provision relating to managing director, Managing director - Approval of Government for appointment

Summary

Issues:
- Refusal to grant an interim injunction to restrain interference with the managing director's rights.
- Dispute regarding the removal of the managing director.
- Validity of the managing director's removal by the board of directors.
- Prima facie case and balance of convenience considerations for granting interim injunction.

Analysis:
The judgment pertains to a petition filed by the plaintiffs against the refusal of lower courts to grant an interim injunction restraining respondents from interfering with the managing director's role in a public limited company. The managing director, appointed for five years with Central Govt. approval, faced removal following disputes with other directors. The plaintiffs sought injunction based on unauthorized removal claims. The trial court and the District Judge held that the board had the authority to remove the managing director, rejecting the plaintiffs' arguments. The courts found that the defendants were effectively managing the company, impacting the balance of convenience against granting an injunction.

The plaintiffs contended that the managing director's removal required Central Govt. concurrence under section 269 of the Companies Act, but the court disagreed, citing the Act's provisions. The courts upheld the board's power to revoke the managing director's appointment, supported by legal authorities. The plaintiffs' reliance on section 268 of the Companies Act for Central Govt. approval was deemed inapplicable. The judgment affirmed the lower courts' findings that the plaintiffs lacked a prima facie case and the balance of convenience favored the defendants due to their effective control over the company.

Additionally, the court noted the managing director's term ending soon, further justifying the denial of the injunction. The plaintiffs' argument that respondents' failure to deny allegations was significant was dismissed. The court emphasized deciding based on evidence before lower courts rather than new claims. Ultimately, the petition was dismissed, with no costs awarded. The judgment highlights the legal principles governing managing director appointments, board authority in removal decisions, and the importance of evidence in injunction cases.