1991 (9) TMI 256 - HC - Companies Law

Meeting and Proceedings Power of Company Law Board to Order Meeting to be Called, Contents and manner of service of notice and persons on whom it is to be served, Meetings and proceedings - Explanatory statement to be annexed to notice, Directors - Right of person other than retiring director to stand for directorship, Compromise and arrangement

Issues Involved:

1. Validity of the notice convening the meeting under Section 173(2) of the Companies Act.
2. Compliance with Section 257(1A) of the Companies Act.
3. Jurisdiction of the court to convene an extraordinary general meeting under Section 186 of the Companies Act.

Detailed Analysis:

1. Validity of the Notice Convening the Meeting under Section 173(2) of the Companies Act:

The appellant contended that the notice convening the meeting was defective due to the lack of an explanatory statement as required under Section 173(2) of the Companies Act. Section 173(2) mandates that a statement setting out all material facts concerning each item of business, including the nature of the concern or interest of every director and manager, must be annexed to the notice of the meeting.

The court noted that the chairman appointed by the company court sought directions for conducting the meeting, and the notice was issued following the provisions of the articles of association. The purpose of the meeting was clearly stated as the election of the board of directors and the managing director. The court emphasized that the notice complied with the articles of association and the provisions of the Companies Act.

The court referenced the Calcutta High Court's decision in Sitaram Jaipuria v. Banwarilal Jaipuria, which held that provisions like Section 173(2) should not be construed rigidly and should be interpreted in a realistic and businesslike manner. The court concluded that the notice was valid as it informed the members of the company's general nature of the business to be transacted, and the meeting should not be invalidated on technical grounds.

2. Compliance with Section 257(1A) of the Companies Act:

The appellant argued that Section 257(1A) of the Companies Act, which mandates informing members of the names of persons standing for election to the board of directors, was not complied with. The court examined Section 257, which outlines the procedure for the appointment of directors, including the requirement for a notice in writing signifying a candidate's intention to stand for election.

The court clarified that Section 257(1A) is interlinked with Section 257(1) and applies to public companies, not private companies. Since the company in question is a private company, Section 257(1A) does not apply. The court supported this interpretation by referring to the judgment of Justice John Mathew, who elaborated on the relationship between subsections (1) and (1A) of Section 257. The court affirmed that the provisions of Section 257(1A) were not applicable to the private company involved in this case.

3. Jurisdiction of the Court to Convene an Extraordinary General Meeting under Section 186 of the Companies Act:

The appellant contended that the court lacked jurisdiction to convene an extraordinary general meeting, citing Section 186 of the Companies Act, which was amended to substitute the word "court" with "Company Law Board." The court rejected this contention, stating that the power of the court to exercise control over extraordinary general meetings in pending proceedings was not taken away by the amendment.

The court referenced the Delhi High Court's decision in Dineker Rai D. Desai v. R.P. Bhasin, which held that the court retains such power. Additionally, the court noted that the meeting was convened under the supervision of the court as part of implementing a scheme sanctioned under Section 392(1) of the Companies Act. The court emphasized that Section 392 confers broad powers on the court to supervise and modify the scheme for the proper working of the compromise or arrangement.

The court concluded that the power under Section 392 is not affected by Section 186, and the court has the authority to call a meeting for electing directors if necessary for the proper working of the scheme. The court dismissed the appellant's contention, affirming that the court's jurisdiction to convene the meeting was valid.

Conclusion:

The court found no merit in the appellant's arguments and upheld the validity of the notice convening the meeting, the inapplicability of Section 257(1A) to the private company, and the court's jurisdiction to convene the extraordinary general meeting. The appeal was dismissed.

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