1995 (5) TMI 212 - HC - Companies Law

Summary

Issues Involved:
1. Validity of the removal of the plaintiff as Chairman of the Board of Directors.
2. Compliance with the Articles of Association of the company.
3. Legality of the Board meeting held on 5-10-1994.
4. Applicability of the Consulting Engineers agreement.
5. Principles of natural justice and procedural fairness.
6. Jurisdiction of the Court to interfere in the internal management of the company.

Issue-wise Detailed Analysis:

1. Validity of the removal of the plaintiff as Chairman of the Board of Directors:
The plaintiff contended that his removal as Chairman was ultra vires the Articles of Association and the agreement with the Consulting Engineers. The court examined the Articles and found that the Board of Directors had the authority to remove the Chairman. The court noted that the plaintiff was initially nominated by the Consulting Engineers but was later elected by the Board, which also had the power to express no confidence and remove him. The court concluded that the removal was valid and within the powers of the Board of Directors.

2. Compliance with the Articles of Association of the company:
The plaintiff argued that his removal was contrary to Articles 2, 90, and 129 to 131 of the Articles of Association. The court examined these Articles and found that Article 90 allowed the Consulting Engineers to nominate a Chairman, but this did not confer a perpetual right to hold the position. The court also noted that the Board had the authority to appoint and remove the Chairman, as evidenced by the minutes of the Board meeting dated 31-1-1984. The court concluded that the removal was in compliance with the Articles of Association.

3. Legality of the Board meeting held on 5-10-1994:
The plaintiff contended that the Board meeting held on 5-10-1994 was illegal as there was no specific agenda for his removal. The court noted that under Section 286 of the Companies Act, notice of every meeting of the Board of Directors must be given in writing to every director. However, the court found that even if there was no specific agenda, any other business could be transacted with the permission of the Chairman. The court concluded that the meeting was legal and the business transacted was valid.

4. Applicability of the Consulting Engineers agreement:
The plaintiff argued that the Consulting Engineers agreement was still in force and that he could only be removed by the Consulting Engineers. The court examined the agreement and found that it had provisions for termination and was not perpetual. The court noted that there was no evidence to show that the agreement was still in force, and BICC (Consulting Engineers) had treated the contract as abandoned. The court concluded that the agreement did not apply to the plaintiff's removal.

5. Principles of natural justice and procedural fairness:
The plaintiff contended that his removal was in breach of the principles of natural justice as he was not given notice of the proposed act. The court noted that while it is prudent to give notice of the business to be transacted, it is not legally necessary. The court found that the plaintiff did not raise any objection to the discussion on his removal at the meeting and did not seek an adjournment. The court concluded that there was no breach of natural justice.

6. Jurisdiction of the Court to interfere in the internal management of the company:
The court noted that it is a well-settled principle that the court does not interfere with the internal management of a company if the acts complained of can be set right by the members or directors. The court found that the removal of the plaintiff was an internal matter of the company and did not warrant judicial interference. The court concluded that it would not be proper to interfere with the decision taken by the Board of Directors.

Conclusion:
The court dismissed the plaintiff's application for an injunction and vacated the ad interim order passed on 17-10-1994. The court held that the removal of the plaintiff as Chairman was valid, in compliance with the Articles of Association, and did not breach the principles of natural justice. The court also held that it would not interfere with the internal management of the company. The resolution passed on 5-10-1994 was not to be given effect for one week from the date of the judgment.