1984 (5) TMI 227 - HC - Companies Law

Company Membership of, Power of court to rectify register of members, Meetings and proceedings - Annual General Meeting, Extra Company Law Board s power to call annual general meeting, Representation of corporation at meetings of companies & creditors, Appointment of directors and proportion of those who are to retire by rotation, Oppression and Mismanagement Right to apply under section 397 and 398, Interim order by Tribunal

Summary

Issues Involved:
1. Validity of the executive committee's function beyond September 30, 1982.
2. Amendments to articles and election rules for a fair and legal meeting.
3. Correction of the register of members and removal of bogus members.
4. Supervision of elections by an impartial and independent chairman.
5. Legality of holding elections at multiple locations.
6. Amendments to the election rules and their implications.
7. Appointment and role of the chairman for elections.
8. Procedure for settling the register of members and voters list.
9. Validity of directions and amendments under the Companies Act.

Issue-wise Detailed Analysis:

1. Validity of the Executive Committee's Function Beyond September 30, 1982:
The petitioners claimed that the existing executive committee became functus officio on September 30, 1982, and could not legally function beyond that date. The court acknowledged the continuous disputes since 1973 and the delay in holding the annual general meeting, leading to the necessity of rethinking the matter practically.

2. Amendments to Articles and Election Rules for a Fair and Legal Meeting:
The court analyzed the drastic changes made in the election rules and the method of elections. The amendments included allowing representatives of companies and partnership firms to stand for election, requiring authorizations in a prescribed form, and introducing a gap of one year for members of the executive committee to contest again. The court found these changes to be drastic departures from the Companies Act and difficult to implement.

3. Correction of the Register of Members and Removal of Bogus Members:
The court directed that the voters' list be correctly made to represent the membership, with an authenticated list of members prepared and objections invited. The court emphasized that investigating the register of members from past years is unnecessary and impractical for holding an annual general meeting.

4. Supervision of Elections by an Impartial and Independent Chairman:
The court appointed a committee to hold the elections, with Shri R.K. Kaul as the chairman. The chairman was tasked with ensuring the elections were conducted impartially and independently, with assistance from other court officials.

5. Legality of Holding Elections at Multiple Locations:
The court found the direction to hold the annual general meeting at three places (Delhi, Kanpur, and Allahabad) to be inconsistent with the Companies Act, which requires the meeting to be held at the registered office or within the same city, town, or village where the registered office is situated.

6. Amendments to the Election Rules and Their Implications:
The court analyzed the amendments to the election rules, including allowing representatives of companies and partnership firms to vote and stand for election, and the introduction of a gap of one year for members of the executive committee to contest again. The court found these amendments to be unnecessary and inconsistent with the Companies Act.

7. Appointment and Role of the Chairman for Elections:
The court appointed Mr. R.K. Kaul, Joint Registrar of the court, as the chairman of the meeting, with a fee of Rs. 2,500. He would be assisted by Shri S.M. Saxena and other court staff. The chairman was responsible for ensuring the elections were conducted fairly and impartially.

8. Procedure for Settling the Register of Members and Voters List:
The court directed that the register of members be treated as conclusive for the purpose of the meeting unless rectified by an order of the court. The voters' list would consist of natural members, partners of firms authorized to vote, and authorized representatives of company members. The chairman was tasked with addressing objections and ensuring the integrity of the voters' list.

9. Validity of Directions and Amendments Under the Companies Act:
The court noted that the directions regarding the meeting and amendments to the election rules were ultra vires the Companies Act. The court emphasized that the annual general meeting must be held in accordance with the provisions of the Companies Act, including sections 166, 167, and 168, which outline the requirements for holding the annual general meeting and the consequences of not holding it.

Conclusion:
The court set aside all the directions and amendments to the election rules given by the learned single judge, except for the necessary amendment to enable partnership firms and companies to cast their votes. The court directed the annual general meeting to be held within the shortest possible time, with Mr. R.K. Kaul as the chairman. The court emphasized the importance of holding the meeting in accordance with the Companies Act and ensuring a fair and impartial election process.