1994 (9) TMI 359 - HC - Companies Law

Summary

Issues Involved:
1. Authority to institute the suit.
2. Suppression of material facts.
3. Disputes between the directors and shareholders.
4. Validity of the general and board meetings.
5. Jurisdiction and applicable law.

Issue-wise Detailed Analysis:

1. Authority to institute the suit:
The court determined that the Managing Director of the plaintiff company did not have the authority to institute the suit on behalf of the company. The Articles of Association required the Managing Director to act under the control and supervision of the Board of Directors and in consultation with the Chairman. There was no evidence that the Board of Directors authorized the institution of the suit or the appointment of a constituted attorney. The court cited the judgment in AIR1991Delhi25 (Nibro Limited v. National Insurance Company Ltd.) to support the argument that a suit on behalf of the company can only be filed by a director specifically empowered by the Board. The court concluded that the suit was instituted without due and proper authority and was liable to be dismissed on this ground alone.

2. Suppression of material facts:
The plaintiff was found to have suppressed material facts and made deliberate false statements in the petition. It was falsely stated that the shares of the defendant were still held in the name of Ahmed and Chowdhury, giving the impression that the agreement dated 30th April 1988 was not given effect. It was also suppressed that the entire control of Loyal Shipping Pvt. Ltd. had come into the hands of the plaintiff and that the vessel was owned by Loyal Shipping Pvt. Ltd. at the time. The court emphasized that a person who makes an ex parte application to the court is under an obligation to make the fullest possible disclosure of all material facts within his knowledge.

3. Disputes between the directors and shareholders:
The court noted that there were serious disputes between the two groups of directors and shareholders of the plaintiff company. The Board of Directors and members were divided into two groups with equal shareholding. The Chairman had a casting vote, making it impossible for the Managing Director to get any resolution passed without the Chairman's consent. The court highlighted an agreement between the Chairman and the Managing Director dated 12th September 1990, which indicated that there were ongoing disputes and that money due from Loyal Shipping Pvt. Ltd. was not to be recovered.

4. Validity of the general and board meetings:
The court found that the notice for the general meeting issued by the Secretary was null and void as the Secretary had no power to issue such notice. The meetings held pursuant to the notice were also void, and the resolutions passed thereat were of no legal effect. The court referred to the judgment in AIR1966Cal512 (Ramshankar Prosad v. Sindri Iron Foundry (P) Ltd.) to support its conclusion that the purported meetings were not properly held and the resolutions were null and void.

5. Jurisdiction and applicable law:
The court held that the entire alleged cause of action arose in Bangladesh, and the municipal laws applicable were those of Bangladesh. The court decided not to exercise its admiralty jurisdiction and left the parties to pursue their remedies in the appropriate courts having municipal jurisdiction in the matter.

Conclusion:
The suit was dismissed with costs, and the interim order dated 7th July 1994 for the arrest of the vessel 'M.V. Loyal Bird' was vacated. The court ordered the release of the vessel without security and appointed a special referee to determine the quantum of losses and damages suffered by the petitioner due to the interim order. The plaintiff was held liable for the costs, charges, and expenses incurred by the petitioner, including the remuneration of the Marshall.