1952 (3) TMI 16 - HC - Companies Law

Company Service of documents on members by, Meetings and proceedings Contents and manner of service of notice and persons on whom it is to be served and Explanatory statement to be annexed to notice

Issues Involved:
1. Jurisdiction under Clause 12 of the Letters Patent.
2. Validity of the notice and alleged non-disclosure/fraud.
3. Balance of convenience for trial location.
4. Allegations of mala fide intent.

Detailed Analysis:

1. Jurisdiction under Clause 12 of the Letters Patent:
The primary issue revolves around the jurisdiction granted under Clause 12 of the Letters Patent, which allows the plaintiffs to file a suit if part of the cause of action arises within the local limits of the court's jurisdiction. The leave granted under this clause is a condition precedent to jurisdiction. If the leave is revoked, the court loses jurisdiction to try the suit. The plaintiffs, small shareholders of the defendant company, obtained leave to file the suit as parts of the cause of action allegedly arose within the jurisdiction of the Calcutta High Court.

2. Validity of the notice and alleged non-disclosure/fraud:
The plaintiffs allege that the notice for the extraordinary general meeting did not disclose material changes, including the appointment of a managing agent and alterations to voting rights. The notice was received by the plaintiffs in Calcutta, and it was argued that the notice was misleading and intended to mislead, amounting to fraud. The court referred to precedents, including Baillie v. Oriental Telephone and Electric Co., which held that notices must fully and frankly disclose facts to shareholders. The court found that the notice did not meet this requirement, as it did not disclose the controlling interest of certain partners in the company, constituting a potential fraud.

3. Balance of convenience for trial location:
The court considered whether the leave granted should be revoked based on the balance of convenience. The plaintiffs argued that the trial should remain in Calcutta, where they reside and received the misleading notice. The court emphasized that the convenience of the parties must not be weighed too delicately but should consider whether the trial location would cause significant injustice to either party. The court found that the necessary evidence (the notice and articles of association) could be easily examined without requiring extensive witness testimony from Kanpur, thus not justifying a change in trial location.

4. Allegations of mala fide intent:
The defendants contended that the suit was filed with mala fide intent, allegedly instigated by rival business interests. The court examined the plaintiffs' petition and found no evidence supporting the claim that the suit was filed in bad faith. The court held that even if the plaintiffs received external financial or material support, it did not render the suit mala fide if the plaintiffs had a legitimate cause of action.

Conclusion:
The court concluded that part of the cause of action arose within the jurisdiction of the Calcutta High Court, as the misleading notice was received there. The court rejected the argument that the service of the notice was completed at the place of posting (Kanpur), emphasizing that the misrepresentation occurred where the notice was received and read. The court also found no substantial inconvenience or injustice in holding the trial in Calcutta and dismissed the allegations of mala fide intent. Consequently, the order revoking the leave was set aside, and the leave granted to the plaintiffs to file the suit under Clause 12 of the Letters Patent remained. The appeal against the refusal to grant an injunction was remanded for reconsideration by the trial judge.

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