1993 (4) TMI 221 - HC - Companies Law

Meeting and Proceedings Length of notice for calling meeting Presumptions to be drawn where minutes duly drawn and signed Removal of director,

Issues Involved:
1. Maintainability of the appeals by the appellant-bank.
2. Legality of the notice for the annual general meeting issued on the basis of unconfirmed minutes.
3. Validity of the special notices for removal of directors under sections 188 and 190 of the Companies Act.
4. Allegations of mala fide actions by the chairman-cum-managing director in collecting proxies.
5. Contempt of court by the appellant-bank for holding the meeting in breach of an injunction.
6. Legality and sustainability of the impugned orders.
7. Reliefs entitled to the appellant.

Detailed Analysis:

1. Maintainability of the Appeals:
The court held that the appellant-bank is an aggrieved party and the appeals are maintainable. The board of directors acts on behalf of the shareholders, and the company, through its chairman-cum-managing director, has the right to appeal to enforce the resolutions passed by the shareholders. The impugned orders were passed under Order 39, rules 1 and 2 of the Civil Procedure Code, making them appealable under Order 43, rule 1(r) of the Code.

2. Legality of the Notice for the Annual General Meeting:
The court found that the notice for the annual general meeting issued on September 16, 1992, was legal despite the contention that the minutes of the board meeting held on that date were not confirmed in the subsequent meeting on October 3, 1992. The court observed that there is no provision in the Companies Act requiring confirmation of the decisions of a previous meeting in a subsequent meeting. The minutes of the meeting are presumed valid under sections 193, 194, and 195 of the Companies Act.

3. Validity of the Special Notices for Removal of Directors:
The court held that section 284 of the Companies Act, which deals with the removal of directors, is an independent provision and not subject to section 188. The special notices issued by the shareholders were valid as section 284 allows any shareholder to move a resolution for the removal of a director without the need to comply with the provisions of section 188. The court relied on the decision in Gopal Vyas v. Sinclair Hotels and Transportation Ltd. [1990] 68 Comp Cas 516 and the observations in Palmer's Company Law.

4. Allegations of Mala Fide Actions by the Chairman-Cum-Managing Director:
The court found that the trial court's finding of mala fides against the chairman-cum-managing director was not sustainable. The allegations of collecting proxies through branch managers by promising loans were denied by the chairman in his affidavit. The court noted that findings on mala fides, fraud, and bad faith cannot generally be arrived at on mere affidavits and require a trial. The trial court's observations were therefore perverse.

5. Contempt of Court by the Appellant-Bank:
The court rejected the contention that the appellant-bank should not be heard for allegedly holding the annual general meeting in breach of an injunction issued by the Munsiff's Court at Holenarasipur. The court noted that the contempt proceedings must be taken in the same cause of action, and the alleged contempt in a different suit (O.S. No. 204 of 1992) does not affect the present appeals. The court also referred to the stay order on further proceedings in the said suit by the High Court.

6. Legality and Sustainability of the Impugned Orders:
The court found the impugned orders to be illegal and perverse. The trial court's findings regarding prima facie case, balance of convenience, and irreparable injury were not sustainable. The court emphasized that no injunction can be issued to restrain the holding of a general meeting to remove a director and appoint another. The democratic process of the company should not be set at naught by restoring ineligible directors to the board.

7. Reliefs Entitled to the Appellant:
The court allowed the appeals, setting aside the impugned orders passed on November 11, 1992, and November 16, 1992, in Original Suits Nos. 6835 of 1992 and 6843 of 1992 respectively. The applications for interim injunction filed under Order 39, rules 1 and 2 of the Civil Procedure Code were dismissed.

Order:
The Miscellaneous First Appeals Nos. 2385 of 1992 and 2386 of 1992 are allowed. The impugned orders passed on November 11, 1992, and November 16, 1992, by the trial court in Original Suits Nos. 6835 of 1992 and 6843 of 1992 respectively are set aside, and the applications for the interim injunction filed under Order 39, rules 1 and 2 of the Civil Procedure Code stand dismissed.

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