1972 (11) TMI 104 - HC - Companies Law

Summary

Issues Involved:
1. Validity of Regulation 47 of the 1966 Articles of Association of the Yogam.
2. Applicability of the Companies Act, 1956, to the Yogam.
3. Right of shareholders to attend and vote at general meetings.
4. Compliance with Table C of Schedule I of the Companies Act, 1956.
5. Practical difficulties in convening large meetings.

Issue-wise Detailed Analysis:

1. Validity of Regulation 47 of the 1966 Articles of Association of the Yogam:
The appellant contended that Regulation 47 of the 1966 Articles of Association of the Yogam is illegal and void. Regulation 47 restricts the general meeting to only certain representatives of the Yogam, excluding many shareholders from participating. The learned single judge had upheld the validity of Regulation 47, but upon appeal, it was determined that Regulation 47 is violative of the provisions in Table C of Schedule I and the Companies Act, 1956, and is therefore void.

2. Applicability of the Companies Act, 1956, to the Yogam:
The Yogam was registered under the Travancore Regulation I of 1063, which corresponds to the Companies Act, 1956. The court confirmed that the Yogam is bound by the provisions of the Companies Act, 1956, including the provisions applicable to existing companies as per Section 58V of the Act. The Yogam was assumed to be a company limited by guarantee for the purpose of the discussion.

3. Right of Shareholders to Attend and Vote at General Meetings:
The court emphasized the inherent right of every member of a company to attend and vote at general meetings. This right is fundamental and cannot be restricted except by explicit provisions in the Companies Act. The court found no provision in the Companies Act that expressly takes away this right. Therefore, Regulation 47, which restricts this right, was deemed invalid.

4. Compliance with Table C of Schedule I of the Companies Act, 1956:
Table C, applicable to companies limited by guarantee, states that every member shall have one vote. Regulation 47 of the 1966 Articles of Association was found to be contrary to this provision. The court held that the Articles of Association must comply with Table C and cannot include provisions inconsistent with it. Therefore, Regulation 47 was declared void.

5. Practical Difficulties in Convening Large Meetings:
The learned single judge had noted the practical difficulties in convening a general meeting for the 60,000 members of the Yogam. However, the court held that practical difficulties do not justify the infringement of shareholders' inherent rights to participate in the administration of the company. The court suggested that the company could utilize Section 25(6) of the Companies Act to address such difficulties.

Conclusion:
The appeal was allowed, and Regulation 47 of the 1966 Articles of Association was declared void. The current Board of Directors, elected based on the invalid Regulation 47, would continue for the remaining part of their term. A fresh election must be conducted without considering Regulation 47 before the expiry of the current term. If the existing Board fails to conduct the election, the administrators appointed by the learned single judge will take control and conduct the election. The direction making the appellant liable for costs was set aside, and no order as to costs was made.