1956 (8) TMI 7 - HC - Companies Law

Summary

Issues Involved:
1. Validity of the resolution passed by the board of directors on 7th April 1956.
2. Whether a writ of mandamus can be issued to enforce the petitioners' rights under the memorandum and articles of association.
3. Applicability of Article 226 of the Constitution in issuing a writ of mandamus.
4. Adequacy of alternative legal remedies available to the petitioners.
5. Whether the petitioners' rights fall under the category of public duties enforceable by mandamus.
6. Violation of fundamental rights under Article 19(1)(f) of the Constitution.

Detailed Analysis:

1. Validity of the Resolution Passed by the Board of Directors on 7th April 1956:
The resolution stated that with the coming into force of the Indian Companies Act, 1956, the secretaries and bankers of the company ceased to be entitled to their office, and as a consequence, the local agent's office also became vacant. The court noted that the petitioners had withdrawn from their managing agency and surrendered the management to Somasundaram Chettiar as per the resolution of March 1954. The petitioners were not in possession of their office as managing agents, making it difficult to see how the resolution could be enforced against them. The court concluded that the object of the writ was reduced to seeking a declaration that the resolution was invalid and inoperative, which is not a proper purpose for a writ of mandamus.

2. Whether a Writ of Mandamus Can Be Issued to Enforce the Petitioners' Rights:
The court examined whether a writ of mandamus could be issued to enforce the petitioners' rights under the memorandum and articles of association. It was determined that the rights claimed by the petitioners were contractual obligations and not statutory duties imposed by any law for the time being in force. The court held that a mandamus does not lie to enforce a contractual obligation, referencing cases such as P.K. Banerjee v. L.J. Simonds and Dubar Goala v. Union of India.

3. Applicability of Article 226 of the Constitution:
The court discussed the scope of Article 226, noting that although it confers wide powers, these powers should be exercised according to well-established principles. The court cited several precedents, including In re Nagabhushana and Indian Tobacco Corporation v. State of Madras, which held that Article 226 should not replace ordinary remedies available under the general law. The court concluded that it could issue a writ of mandamus only in accordance with the principles formulated in section 45 of the Specific Relief Act.

4. Adequacy of Alternative Legal Remedies:
The court emphasized that a writ of mandamus should not be issued when there is an alternative specific and adequate legal remedy. It was noted that the petitioners could file a regular suit for a declaration that the resolution was invalid and for consequential reliefs such as an injunction. The court referenced Halsbury's Laws of England, stating that the court will refuse an order of mandamus when there is an alternative specific remedy at law which is not less convenient, beneficial, and effective.

5. Whether the Petitioners' Rights Fall Under Public Duties:
The court examined whether the duties sought to be enforced were of a public nature. It was concluded that the passing of the resolution by the company was not in the nature of a public duty but rather a private matter between the company and the petitioners. The court referenced several cases, including Surajmul v. Commissioner of Income-tax and Ganapathi v. T.B.A. and P. Ltd., which supported the view that mandamus is used principally for public purposes and to compel the performance of public duties.

6. Violation of Fundamental Rights Under Article 19(1)(f):
The court considered whether the petitioners' rights as managing agents were protected under Article 19(1)(f) of the Constitution. It was argued that the managing agency rights were analogous to hereditary trusteeship, which is considered property. However, the court rejected this analogy, stating that the managing agency rights were contractual and did not constitute property within the meaning of Article 19(1)(f). The court referenced Shamdasani v. Central Bank of India Ltd., which held that Article 19(1)(f) and Article 31(1) were intended to protect against State action and not private conduct.

Conclusion:
The court dismissed the petition, holding that the petitioners had adequate legal remedies available and that their rights did not fall under the category of public duties enforceable by mandamus. The court also concluded that the managing agency rights were contractual and did not constitute property protected under Article 19(1)(f) of the Constitution.