1988 (9) TMI 271 - HC - Companies Law

Summary

Issues:
1. Authority of managing director to terminate the services of a company secretary.
2. Interpretation of the memorandum and articles of association regarding the appointment and removal of officers.
3. Delegation of powers to the managing director.
4. Approval of termination orders by the board of directors.
5. Judicial review of termination orders.

Analysis:

1. The main issue in this case was the authority of the managing director to terminate the services of the company secretary, as challenged by the writ petitioner. The single judge had set aside the termination order on the grounds that only the board of directors, not the managing director, had the competence to terminate the services of a company secretary.

2. The interpretation of the memorandum and articles of association was crucial in determining the appointment and removal of officers. Article 125A specifically provided that the directors could appoint and remove a secretary. The power to appoint secretaries and other officers was vested in the board of directors and not the managing director, as claimed by the appellant.

3. The delegation of powers to the managing director was discussed, with reference to annexure R-7, which authorized the managing director to appoint, suspend, and dismiss officers, staff, and workmen. However, the court held that under the memorandum and articles of association, only the board of directors had the authority to appoint the company secretary.

4. The argument that the termination orders, passed by the managing director, were later approved by the board of directors was also considered. The court rejected this argument, stating that the managing director had usurped the powers of the board, and the approval did not validate the termination as it amounted to surrendering powers to the managing director.

5. The judicial review of the termination orders concluded that the order of termination was illegal due to the lack of authority of the managing director to terminate the services of the company secretary. The court maintained the decision of the single judge, dismissing the appeal and upholding the costs.

In summary, the judgment emphasized the importance of adherence to the memorandum and articles of association in determining the authority to appoint and remove officers, specifically highlighting that the managing director did not have the power to terminate the services of the company secretary.