1952 (10) TMI 18 - HC - Companies Law

Summary

Issues Involved:
1. Competence of the board of directors to remove the plaintiff from the position of secretary and treasurer under the articles of association.
2. Whether the plaintiff's appointment as secretary and treasurer was governed by an independent contract or the articles of association.
3. Maintainability of the suit for a mere declaration without consequential relief.
4. Applicability of section 42 of the Specific Relief Act regarding the necessity of seeking further relief.
5. Specific performance of a contract of personal service under section 21 of the Specific Relief Act.

Detailed Analysis:

1. Competence of the Board of Directors to Remove the Plaintiff:
The plaintiff argued that under the articles of association, the board of directors did not have the authority to remove him from his position as secretary and treasurer. According to the plaintiff, only the general body of shareholders could remove him by a special resolution at an extraordinary general meeting. The defendants countered by citing article 112, which grants the directors wide powers, including the removal or suspension of managers and clerks, subject to the general control of the board of directors. The court noted that the proviso to the original article 111, which required a three-fourths majority for removal at an extraordinary general meeting, was specifically deleted when the plaintiff was appointed sole secretary and treasurer. Therefore, the board had the authority to remove the plaintiff.

2. Appointment Governed by Independent Contract or Articles of Association:
The court examined whether the plaintiff's appointment was governed by the articles of association or an independent contract. The court referenced several English decisions, including Eley v. Positive Government Security Life Assurance Co., which established that articles of association do not constitute a contract between the company and an outsider, nor do they give any individual member special contractual rights beyond those of the members generally. The court concluded that the plaintiff's appointment as secretary must be regarded as one de hors the articles and governed by an independent contract, as there was no other evidence apart from the articles themselves.

3. Maintainability of the Suit for Mere Declaration:
The plaintiff sought a declaration that his removal was invalid without seeking consequential relief. The court referred to section 42 of the Specific Relief Act, which states that no court shall make such a declaration where the plaintiff, being able to seek further relief, omits to do so. The court found that the plaintiff had not asked for relief by way of damages consequent on the wrongful termination of his services, which is a normal relief claimed in such cases. The court also noted that the pendency of proceedings under section 145 of the Criminal Procedure Code did not make the suit for mere declaration maintainable.

4. Applicability of Section 42 of the Specific Relief Act:
The court emphasized that section 42 of the Specific Relief Act requires the plaintiff to seek further relief when able to do so. The plaintiff had not sought damages for wrongful removal, which was a necessary consequential relief. The court found that the plaintiff's failure to seek such relief was a prima facie violation of the proviso to section 42.

5. Specific Performance of a Contract of Personal Service:
The court addressed the issue of specific performance of a contract of personal service under section 21 of the Specific Relief Act. The court noted that contracts dependent on personal qualifications or volition of the parties cannot be specifically enforced. The court concluded that the declaration sought by the plaintiff, along with the consequential relief for an injunction, was tantamount to specific performance of a contract of personal service, which is not enforceable.

Conclusion:
The court dismissed the plaintiff's appeal, finding that the plaintiff had no cause of action against the company based on the articles of association. The plaintiff's appointment was governed by an independent contract, and the suit for a mere declaration without seeking consequential relief was not maintainable. The court directed the parties to bear their own costs throughout.