1985 (2) TMI 227 - HC - Companies Law

Company Service of documents on members by, Meeting and Proceedings Length of notice for calling meeting, Contents and manner of service of notice and persons on whom it is to be served, Appointment of directors and proportion of those who are to retire by rotation

Issues Involved:
1. Whether the defendant was enjoined in law to frame fresh rules for holding elections of the defendant council after they were struck down by a judgment of this court?
2. Whether this court has the jurisdiction to try this suit?
3. Whether fourteen days' notice of the proposed fourth annual general meeting of the defendant council was not served on the plaintiff in accordance with law?
4. Whether the defendant was bound to hold elections to all the 27 posts of executive committee members in view of the judgment of this court in Suit No. 873 of 1981, when the articles of association and rules for election of the defendant council were struck down? In any case, was the defendant enjoined to hold election for at least 18 members of the executive committee as the annual general meeting was being held after two years?
5. Whether the delay in the despatch of the notice shows mala fides and oblique motives on the part of the defendant council to secure re-election of the retiring members. If so, to what effect?
6. Whether the list of members as circulated by the defendant council contained the names of some members from whom certain sums were still payable to the defendant council and its effect?
7. Whether the suit of the plaintiff is bad for delay and laches and/or otherwise the conduct of the plaintiff is such as to disentitle her to any relief in the suit as alleged in paras 13 and 14 of the written statement?
8. Relief.

Issue-wise Detailed Analysis:

Issue No. 1:
The plaintiff did not press this issue during arguments, nor did they address any arguments or refer to the provisions indicating that the defendants were enjoined in law to frame fresh rules for holding elections after the previous rules were struck down by the judgment dated May 19, 1983. Therefore, this issue was decided against the plaintiff.

Issue No. 2:
The court examined whether it had jurisdiction to try the suit. The court noted that Section 10 of the Companies Act defines the jurisdiction of the court to entertain suits in such matters. The court observed that the Companies Act does not bar the jurisdiction of civil courts in all matters and that shareholders could decide which court to approach for remedies. The court referenced cases such as R. Prakasam v. Sree Narayana Dharma Paripalana Yogam and Panipat Woollen and General Mills Company Ltd. v. P. L. Kaushik to support its view. The court concluded that it had jurisdiction to entertain the present suit and decided this issue in favor of the plaintiff.

Issue No. 3:
This issue was crucial in determining the fate of the parties. The court examined whether the plaintiff was duly served with a clear 14 days' notice of the proposed fourth annual general meeting. The court referenced Section 171(1) of the Companies Act, which requires not less than 21 days' notice, but noted that the Central Government had reduced this period to 14 days for the defendant council. The court also considered Section 53(2), which deems service of a notice to be effected 48 hours after posting. The court found that the notice was posted on April 27, 1984, and deemed served on April 29, 1984, thus providing clear 14 days' notice. The court also noted that the plaintiff had not raised any grievance about the notice period in the prayer clause and that the notice complied with Section 173 of the Companies Act. Therefore, the court decided this issue against the plaintiff.

Issue No. 4:
The court considered whether the defendant was bound to hold elections for all 27 posts of executive committee members. The court noted that the defendant council had 27 elected members and four Government officials, with one-third retiring every year. The court observed that the defendant council had not held annual general meetings for two years due to various legal challenges and injunctions. The court found that the defendant council was not negligent and had complied with the court's directions. The court noted that the fifth annual general meeting had already been held, except for the election of executive committee members. The court decided not to issue directions for holding elections for 18 members, as it would create complications. Therefore, this issue was decided against the plaintiff.

Issue No. 5:
The plaintiff contended that the defendant council acted with mala fides and oblique motives in despatching the notices. The court found no substance in these arguments, noting that the plaintiff had not named any specific officers or provided particulars of fraud or mala fides. The court observed that the defendant council had complied with Section 53(2) of the Companies Act and had issued notices and advertisements in various newspapers. The court found no evidence of mala fides or oblique motives and decided this issue against the plaintiff.

Issue No. 6:
The plaintiff did not press this issue, and it was decided against the plaintiff.

Issue No. 7:
The defendant argued that the plaintiff's conduct disentitled her to any relief, as she had delayed serving the ad interim injunction. The court noted that the plaintiff was aware of the annual general meeting from other sources and had delayed filing the suit and serving the injunction. The court found that the plaintiff's conduct showed an intention to disrupt the annual general meeting and decided this issue against the plaintiff.

Relief:
Based on the findings on the above issues, the court dismissed the suit with costs.

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