1987 (8) TMI 362 - HC - Companies Law

Court - Jurisdiction of, Meeting and Proceedings - Power of Company Law Board to Order Meeting to be Called, Quorum for meeting

Summary

Issues Involved:
1. Validity of the annual general meeting held on September 4, 1986, and the decisions taken therein.
2. Legality of the direction given by the District Judge to conduct the fifth annual general meeting through a commissioner.

Detailed Analysis:

1. Validity of the Annual General Meeting Held on September 4, 1986:

The primary issue was whether the annual general meeting held on September 4, 1986, and the decisions taken therein were valid. It was argued that the meeting was not legal because it was conducted while there was an injunction against defendants Nos. 2, 3, and 4. The interpretation of section 174(4) of the Companies Act was crucial. The court noted that section 174(4) deals with two situations: automatic statutory adjournment and adjournment by the board of directors. The court concluded that the meeting held on September 4, 1986, was legal under the first part of section 174(4), which provides for an automatic adjournment to the same day in the next week if no other date is fixed by the board.

Regarding the participation of defendants Nos. 3 and 4, the court observed that the injunction against them was a matter to be decided in the final decision of the suit. The court refrained from expressing a final opinion on the validity of the meeting and the decisions taken therein, leaving it to be determined by the trial court.

2. Legality of the Direction to Conduct the Fifth Annual General Meeting Through a Commissioner:

The District Judge's order to conduct the fifth annual general meeting through a commissioner was challenged. The court found that before declaring the meeting held on September 4, 1986, invalid, the District Judge should not have ordered the same meeting to be held again through a commissioner. This could lead to confusion and duplication if the meeting held on September 4, 1986, was ultimately found valid.

The court also addressed the authority of the District Judge to order such a meeting. It was noted that the relevant provisions in the Companies Act, specifically sections 186 and 633, did not empower the civil court to convene meetings. The inherent powers under rule 9 of the Companies (Court) Rules and section 151 of the Code of Civil Procedure could not be invoked when express provisions for relief are provided in the Companies Act. The court cited precedents, including the Supreme Court decision in R. Rangachari v. S. Suppiah, which clarified that the jurisdiction lies with the Company Law Board, not the civil court.

Conclusion and Directions:

The court partly allowed the civil revision petitions, canceling the District Judge's order to hold the fifth annual general meeting through a commissioner. Instead, the court directed the board of directors elected on September 4, 1986, to convene the sixth annual general meeting on September 30, 1987. This direction was given without prejudice to the parties' rights to challenge the validity of the fifth annual general meeting and the decisions taken therein, which would be considered on merits by the trial court. Notice for the meeting on September 30, 1987, was to be issued to respondents Nos. 3 and 4, allowing them to participate and vote, subject to the final decision of the trial court. Parties were directed to bear their own costs.