1950 (9) TMI 11 - HC - Companies Law

Summary

Issues Involved:

1. Validity of votes by shareholders owning less than five shares.
2. Entitlement to a second poll of the whole company.
3. Competence of Palaniappa Gounder to act as chairman of the meeting.
4. Rejection of revocations of proxies.
5. Rejection of proxies based on insufficient stamping.

Issue-wise Detailed Analysis:

1. Validity of Votes by Shareholders Owning Less than Five Shares:

The primary contention was whether shareholders owning less than five shares were entitled to vote. The articles of association, specifically Article 88, provided that every shareholder not disqualified shall have one vote in respect of every five shares. There was a difference of opinion between the judges, with one holding that shareholders with less than five shares were entitled to one vote, while another disagreed. The third judge, Viswanath Sastri, J., agreed with the former, concluding that shareholders with less than five shares were entitled to vote.

2. Entitlement to a Second Poll of the Whole Company:

The plaintiffs argued that the demand for a poll of the whole company should have been allowed by the chairman. The court noted that the second poll was a unique feature of the company, intended to provide an opportunity for the entire company, including those not present in person or by proxy at the meeting, to express their opinion. The judges concurred that such a poll should be taken if demanded in the manner provided by the articles of association.

3. Competence of Palaniappa Gounder to Act as Chairman of the Meeting:

The plaintiffs contended that Palaniappa Gounder, the fifth defendant, was not competent to act as chairman since the confirmation of his co-option as a director was one of the subjects on the agenda. The court held that it was an elementary principle of justice that a person should not preside while the meeting is considering a question which personally affects him. Consequently, the court directed that he should vacate the chair when a resolution relating to his co-option was to be considered.

4. Rejection of Revocations of Proxies:

The plaintiffs argued that the revocations of proxies should not have been rejected. The court discussed that the right to vote by proxy is a contractual right governed by the articles of association. It was held that unless the articles expressly excluded the power of revocation, the principal had the right to revoke the proxy. The rejection of the revocations by the chairman was found to be wrong as the power of revocation was unfettered and should have been communicated in due time to the company.

5. Rejection of Proxies Based on Insufficient Stamping:

The proxies were rejected on the ground that they were insufficiently stamped, being considered as powers of attorney under Article 48 of the Indian Stamp Act, rather than proxies under Article 52. The court noted that the form of the proxy was prescribed by the articles of association and the stamp duty was paid on the footing that it was a proxy. The chairman's ruling on the 30th September, 1948, that the proxies were valid was considered final and binding. The rejection of the proxies by the chairman on the 5th September, 1949, was deemed unfair and incorrect. The court concluded that the proxies were properly stamped as per Article 52 and should have been accepted.

Conclusion:

The court allowed the appeal, setting aside the decree of the trial court. It declared the resolutions passed at the general body meeting as illegal and void, and restrained the newly elected and co-opted directors from acting. The plaintiffs were entitled to the declarations asked for and a permanent injunction, with costs awarded in their favor.