1933 (11) TMI 20 - HC - Companies Law

Summary

Issues Involved:

1. Whether the resolutions were duly passed in accordance with Section 153 of the Companies Act, 1929.
2. Whether the explanatory circulars sent out by the directors were fair and provided sufficient information.
3. The validity and use of proxies in the meetings.
4. The conduct of the meetings and the role of the chairman.
5. The approval of the schemes based on the above considerations.

Issue-wise Detailed Analysis:

1. Whether the resolutions were duly passed in accordance with Section 153 of the Companies Act, 1929:

The court's primary function is to ensure that the resolutions are passed by the statutory majority in value and number, as per Section 153, sub-Section 2. The court must confirm that the meetings were duly convened and held. The resolutions in Dormans' case were carried by proper majorities for shareholders but not for stockholders due to misleading circulars. In the South Durham case, the improper rejection of proxies meant the resolutions were not passed by the requisite majorities.

2. Whether the explanatory circulars sent out by the directors were fair and provided sufficient information:

The court emphasized the importance of explanatory circulars being perfectly fair and providing all necessary information to enable recipients to determine how to vote. In Dormans' case, the circular was found misleading for stockholders, thus invalidating the scheme for them. The court scrutinizes these circulars to ensure they contain a statement of all main facts necessary for an informed decision.

3. The validity and use of proxies in the meetings:

The court discussed the nature of proxies, noting that Section 153 allows for voting in person or by proxy but is silent on the form of the proxy. The court acknowledged the challenges faced by objectors in organizing opposition and emphasized that proxies should be allowed whether lodged before the meeting or at the meeting itself. The court found no sufficient ground for holding that proxies filled out before the meeting are invalid if presented at the meeting.

4. The conduct of the meetings and the role of the chairman:

The court examined whether the meetings were properly conducted under the chairmanship of Mr. Mitchell. Despite conflicting evidence and some procedural issues, the court concluded that the chairman intended to and did conduct the meeting fairly and properly. However, the court noted that the chairman left the meeting before votes were counted and did not adequately explain how to fill out voting cards, which was a concern.

5. The approval of the schemes based on the above considerations:

The court's discretionary power involves determining whether the scheme is reasonable and beneficial to the concerned parties. The court must ensure that the proposal is one that an intelligent and honest member of the class might reasonably approve. In Dormans' case, the scheme was approved for shareholders but not for stockholders due to misleading information. In the South Durham case, fresh meetings were required due to the improper rejection of proxies.

Conclusion:

The judgment concluded that fresh meetings should be summoned for the South Durham case and the Dorman Long stockholders to address the issues of improperly rejected proxies and misleading circulars. The court underscored the necessity of fairness and adequate information in explanatory circulars and the proper use of proxies to ensure valid resolutions.