1989 (11) TMI 230 - HC - Companies Law

Summary

Issues: Application under Order 39, rules 1 and 2 of the Code of Civil Procedure to restrain the respondent from enforcing or implementing impugned Election Rules exceeding statutory requirements.

Analysis:
The judgment by Mahinder Narain, J. addressed the application in Suit No. 1564 of 1988 concerning the respondent, a guarantee company under the Companies Act, and its Election Rules passed on August 4, 1988. The petitioner challenged rules 6(c), 7, and 8 of the Election Rules, arguing that they went beyond the provisions of section 176(6) of the Companies Act, which specifies the form of proxy set out in Schedule IX as the only requirement. The rules in question imposed additional conditions on proxies, such as invalidating proxies not in the printed form sent by the Council (rule 6(c)), issuing duplicate proxies for lost ones (rule 7), and revoking proxies (rule 8).

The judgment referenced the principle established in Nazir Ahmad v. King Emperor, emphasizing that when a statute prescribes a specific method of action, deviation from that method is not permissible. It was held that the Election Rules contravened the Companies Act by imposing requirements beyond the statutory form of proxy. The judgment clarified that any action by the respondent conflicting with statutory provisions, whether in articles, rules, resolutions, or memoranda, would be void. The principle of ultra vires was invoked, asserting that the Companies Act prevails over any inconsistent actions by the respondent.

Furthermore, the judgment highlighted the significance of Section 9 of the Companies Act, reiterating that actions contrary to statutory terms are not legally sustainable. It emphasized that members of the respondent company were entitled to use proxies conforming to the form prescribed in Schedule IX at general meetings. The judgment concluded that the impugned Election Rules, exceeding statutory requirements, were ineffective, and the petitioner was granted an injunction restraining the respondent from enforcing rules 6(c), 7, and 8.

In the final disposition, the court clarified that the right of revocation did not necessitate using the printed form provided by the company. The application was disposed of, and the suit was scheduled for a hearing before the Deputy Registrar on January 22, 1990.