1995 (7) TMI 315 - HC - Companies Law

Summary

Issues Involved:
1. Validity of the memorandum of understanding dated 14-2-1995.
2. Requirement of notice for the adjourned meeting.
3. Plaintiffs' equitable expectations and their positions in the company.

Issue-wise Detailed Analysis:

1. Validity of the memorandum of understanding dated 14-2-1995:

The plaintiffs argued that the memorandum of understanding entered into with the defendants on 14-2-1995 was not a concluded contract. They contended that it was merely an arrangement still under negotiation and could not be used to amend the articles of association. They emphasized that since time was the essence of the contract and the time schedule was not adhered to, the move to amend the articles should not be allowed. The court agreed with the plaintiffs that the memorandum was not a concluded contract, citing the principle that a contract must settle everything necessary to be settled and leave nothing to be settled by agreement between the parties. Since the price was yet to be negotiated, the memorandum did not result in a concluded contract. However, the court noted that the plaintiffs themselves extended the period and asked for another valuer, distinguishing this case from the precedents cited by the plaintiffs. The court concluded that the memorandum, whether a concluded contract or not, did not affect the merits of the controversy as nobody sought to take away the plaintiffs' holdings or remove them from their positions. The changes proposed were aimed at the smooth functioning of the management and did not affect the plaintiffs' legitimate expectations.

2. Requirement of notice for the adjourned meeting:

The plaintiffs contended that a notice of the adjourned meeting scheduled for 19-7-1995 was required in terms of the regulations contained in Table A in the First Schedule to the Companies Act, 1956. The court acknowledged that no fresh notice was issued after 9-5-1995, which seemed to be envisaged by the regulations in Table A. However, the court pointed out that the articles of association of the company indicated that Table A did not apply. Therefore, the objection regarding notice was dismissed.

3. Plaintiffs' equitable expectations and their positions in the company:

The plaintiffs argued that having worked for the company from its inception and being assured of their positions in the articles of association and the tripartite agreement, their equitable expectations should not be frustrated by the proposed amendments/deletions of the articles. The court noted that the plaintiffs' holdings and positions in the company would remain unaffected by the proposed changes. The proposed amendments were intended to protect the interests of the majority shareholders and ensure the smooth functioning of the management. The court emphasized that the matter was ultimately left to the shareholders to decide in the meeting whether to adopt or reject the proposals. Consequently, an injunction could not be granted to restrain the holding of the meeting as it was the only way for the shareholders to decide the matter.

Conclusion:

The court dismissed the application for an interim injunction, allowing the extraordinary general meeting to proceed as scheduled. The proposed amendments to the articles of association were left to the wisdom of the shareholders to either adopt or reject.