1965 (11) TMI 69 - HC - Companies Law

Summary

Issues Involved:
1. Interpretation of the rule for retirement of directors in one-third proportion under section 256 of the Companies Act.
2. The rule for the retiring age for directors under section 280 of the Companies Act.
3. The penal provision under section 282(2)(b) of the Companies Act.
4. Validity of the appointment and continuation of a director past the age of 65 without a special resolution.

Issue-wise Detailed Analysis:

1. Interpretation of the Rule for Retirement of Directors in One-Third Proportion (Section 256):
The petitioner was elected as a director before reaching the age of 65 and was due to retire by rotation under section 256 at the general body meeting on April 24, 1965. Due to an ad interim injunction by the City Civil Court, the election of directors was not considered, and the meeting was adjourned. The lower court held that the petitioner lost his directorship at the commencement of the meeting on April 24, 1965, despite the adjournment and the pending agenda item.

2. Rule for the Retiring Age for Directors (Section 280):
Section 280(2), second proviso, allows a director appointed before the age of 65 to continue for three years despite reaching the age limit. The lower court ruled that this proviso did not save the petitioner from the retirement rule under section 256, thus he was considered to have vacated his directorship on April 24, 1965.

3. Penal Provision under Section 282(2)(b):
Section 282(2)(b) penalizes a person who acts as a director under an invalid appointment or one that has terminated due to age. The lower court found the petitioner guilty under this section for continuing as a director after April 24, 1965. The court cited previous decisions to support its view that directors cannot continue in office beyond their mandatory retirement date even if a general body meeting fails to address the retirement and re-election.

4. Validity of Appointment and Continuation Past Age 65 Without Special Resolution:
The petitioner's reappointment required a special resolution under section 281, which was not passed due to the adjournment of the meeting. The board of directors noted on May 6, 1965, that the petitioner "continued as director," but this was not considered a valid reappointment. The court held that the petitioner's functioning as a director after April 24, 1965, violated section 282(2)(b).

Judgment Analysis:
The petitioner argued that his appointment on July 28, 1962, was valid and that his continuation was not terminated due to age but due to the rotation rule. The court found that the penal provision in section 282(2)(b) did not apply to the petitioner's case because his termination was not age-related. The argument that the board's note on May 6, 1965, constituted an invalid appointment was rejected, as the term "appointment" in the Companies Act context implies "election," which the board did not have the power to perform.

Conclusion:
The court concluded that the petitioner's case did not fall within the scope of section 282(2)(b). Therefore, the revision case was allowed, the conviction was set aside, and the petitioner was acquitted. The fine amount, if paid, was ordered to be refunded.