1985 (1) TMI 254 - HC - Companies Law

Summary

Issues Involved:
1. Locus standi of Respondent No. 2 to move the Company Law Board.
2. Delay in filing the application before the Company Law Board.
3. Impracticability of calling a meeting of the trust association.
4. Determination of members eligible to attend the meeting.
5. Agenda of the meeting.
6. Principles of natural justice.

Issue-wise Analysis:

1. Locus Standi of Respondent No. 2:
The petitioners argued that Respondent No. 2, in his capacity as the secretary of the trust association, was not entitled to apply to the Company Law Board under section 186 of the Companies Act, 1956. However, it was found by the Company Law Board that there was no dispute that Respondent No. 2 was a member of the trust association. His membership was neither challenged before the Company Law Board nor before this court. Additionally, section 186 empowers the Company Law Board to order a general meeting of a company even on its own motion. Therefore, the contention that the application should have been dismissed in limine was not accepted.

2. Delay:
The petitioners contended that the disputes in the trust association arose in 1974, and the application was made only in 1982, which should have been dismissed on the ground of delay. The court noted that the condition precedent for ordering a meeting under section 186 is the impracticability of calling such a meeting in the usual course for any reason. Since the disputes in the trust association continued from 1974 and did not come to an end in 1982, the cause of action was deemed to have continued, and there was no question of limitation. Thus, the contentions regarding delay were rejected.

3. Impracticability:
The Company Law Board held that it was not practicable to call a meeting of the trust association in the usual course due to the trust association being divided into two rival groups, each claiming to manage the association through its own committee and office bearers. There was also a dispute regarding the lawful location of the registered office. The court found that there was sufficient material before the Company Law Board to conclude that calling a meeting through the domestic forum would be impracticable and lead to further litigation and confusion. The court upheld the Company Law Board's conclusion as it was based on cogent grounds and not perverse.

4. Determination of Members Eligible to Attend the Meeting:
The petitioners argued that the Company Law Board wrongfully determined and nominated the members who could attend the meeting. The Company Law Board primarily sought to ascertain if there were internal disputes in the nominating bodies entitled to nominate members. It found that several bodies had internal disputes, resulting in litigation and two parallel contesting groups. Therefore, the Company Law Board accepted the members nominated by bodies functioning without dispute and permitted them to attend the meeting. The court found this approach and decision of the Company Law Board to be practical and feasible. The contention that the Baptist Missionary Society had an overriding power to nominate seven members was also held to be correct based on the plain reading of the articles of the trust association.

5. Agenda of the Meeting:
The petitioners contended that no agenda of the proposed meeting was annexed to the application before the Company Law Board, and the Company Law Board had no power to dictate the agenda. The court noted that section 186 allows the Company Law Board to give all ancillary and consequential directions in relation to the holding of a meeting. The Company Law Board has the power to direct the corporate body to consider matters as suggested, and it had not dictated any agenda but left it to the chairman to issue notices containing a suitable agenda.

6. Principles of Natural Justice:
The petitioners invoked the principles of natural justice to impugn the nominations made by the Baptist Missionary Society and the Churches of Mizoram. However, the court found that Petitioner No. 2 had no connection with either the Baptist Missionary Society or the Churches of Mizoram. The nominations were confirmed by the Baptist Missionary Society of London through Respondent No. 2. The court rejected the contention that the petitioners were denied an opportunity to make representations against the nominations as it was without substance.

Conclusion:
The court dismissed the application, discharged the rule, and vacated all interim orders. The meeting was to be held as directed by the Company Law Board. A limited stay was granted, allowing the new committee of management to function under the supervision of the chairman acting as a special officer for twelve weeks. The special officer would ensure the protection of the trust association's finance, properties, and assets during the interim period.