1952 (11) TMI 8 - HC - Companies Law

Summary

Issues: Compliance with the requirements of section 153C of the Indian Companies Act for filing an application regarding mismanagement and foul play against a company.

In this judgment, the court addressed an application under sections 153C and 153D of the Indian Companies Act, where the petitioners, shareholders in a company, alleged mismanagement and foul play by the company, its directors, and managing agents. The court highlighted the requirement of sub-section (3) of section 153C, which mandates obtaining consent in writing from a specified number of members before making such an application. The petitioners failed to meet this requirement as they did not hold one-tenth of the issued share capital of the company, as required by clause (ii) of the sub-section. They claimed to have obtained consent from over a hundred shareholders, but the court scrutinized the nature of this consent. The petitioners submitted sheets with signatures of 117 shareholders, but these individuals did not write anything indicating their consent on the sheets. The court emphasized that "consent in writing" implies a clear indication that individuals have applied their minds and consented to a specific action. The court drew an analogy to section 92 of the Civil Procedure Code, emphasizing the importance of the document itself indicating consent. The court also referred to section 91 of the Evidence Act, highlighting the requirement for matters to be reduced to the form of a document when the law demands written consent. The court concluded that obtaining signatures on blank sheets did not constitute valid written consent, as the document itself did not indicate the purpose of the signatures.

Furthermore, the court analyzed subsequent consents obtained from additional shareholders. These consents were deemed invalid as they were given after the petition had been filed, contrary to the requirement that consent must precede the application. The court reiterated that the obtaining of written consent is a condition precedent to filing the petition, and subsequent consents do not fulfill this requirement. Consequently, the court held that the petition did not comply with the legal requirements for obtaining consent in writing and deemed it not maintainable. The court ruled in favor of the opposite parties, awarding them costs for the proceedings. Opposite parties 1 and 2 were granted a higher sum as costs compared to the remaining opposite parties who had engaged separate counsel.