1996 (9) TMI 491 - HC - Companies Law

Issues Involved:
1. Compliance with Section 188 of the Companies Act, 1956.
2. Validity of the petitioners' requisition.
3. Allegations of mala fide intentions and abuse of process.
4. Adequacy of statutory remedy and writ jurisdiction.
5. Withdrawal of consent by shareholders.
6. Defamatory nature of the proposed resolutions.
7. Compliance with procedural requirements for circulating resolutions.

Detailed Analysis:

1. Compliance with Section 188 of the Companies Act, 1956:
The petitioners sought to compel the respondent company to include four resolutions in the agenda for the AGM scheduled on September 30, 1996, as per Section 188 of the Companies Act, 1956. Section 188 mandates that a company must circulate members' resolutions if requisitioned by a sufficient number of members, representing either one-twentieth of the total voting power or at least one hundred members holding shares of the paid-up value of Rs. 1 lakh. The petitioners claimed compliance with these requirements.

2. Validity of the petitioners' requisition:
The respondent company rejected the petitioners' requisition, citing non-compliance with Section 188 and defects in the authorization letters. The court noted that the requisition letter dated August 12, 1996, and the resolutions were only signed by petitioner No. 1, not by the other members. The court emphasized that full compliance with Section 188(4) is mandatory, including the requirement for signatures from all requisitionists.

3. Allegations of mala fide intentions and abuse of process:
The respondent company argued that the petition was mala fide and aimed at achieving needless publicity. They contended that the petitioners had alternative statutory remedies under the Companies Act or civil law and that the writ jurisdiction should not be invoked. The court acknowledged these arguments but focused on the compliance with Section 188.

4. Adequacy of statutory remedy and writ jurisdiction:
The respondent company argued that the petitioners should have pursued remedies under the Companies Act rather than invoking the writ jurisdiction of the High Court. The court agreed, stating that the extraordinary jurisdiction under Article 226 of the Constitution of India is not suitable for resolving disputed questions of fact, which require evidence appreciation.

5. Withdrawal of consent by shareholders:
The respondent company presented evidence that several shareholders who had initially authorized petitioner No. 1 had withdrawn their consent after realizing the nature of the proposed resolutions. The court noted that some members had not signed the requisition letter or the resolutions, and some had withdrawn their consent, undermining the petitioners' claim of compliance with Section 188.

6. Defamatory nature of the proposed resolutions:
The respondent company argued that the proposed resolutions were defamatory and against the company's interests, potentially harming its national and international reputation. The court did not delve deeply into this issue, focusing instead on the procedural compliance with Section 188.

7. Compliance with procedural requirements for circulating resolutions:
The court highlighted the procedural requirements under Section 188, including the need for signatures from the requisitionists, timely deposit of the requisition at the company's registered office, and payment of expenses for circulation. The court found that these requirements were not met, as the requisition was only signed by petitioner No. 1, and the necessary expenses were not tendered.

Conclusion:
The court concluded that the petitioners failed to comply with the mandatory provisions of Section 188 of the Companies Act, 1956. The petition raised disputed questions of fact that could not be adjudicated under the court's extraordinary writ jurisdiction. Consequently, the writ petition was dismissed, with no order as to costs.

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