1967 (7) TMI 98 - HC - Companies Law

Meeting and Proceedings Power of Company Law Board to Order Meeting to be Called, Removal of Director, Notice for meeting

Issues Involved:
1. Impracticability of calling a general meeting under Section 186 of the Companies Act, 1956.
2. Validity of the adjourned annual general meeting held on the 5th and 6th October, 1965.
3. Alleged cessation of directorship under Section 295 of the Companies Act, 1956.
4. Disputes between the two groups (Bhesania group and Mallya group) regarding the management and control of the company.
5. Request for court intervention to call a general meeting and remove existing directors.

Issue-wise Detailed Analysis:

1. Impracticability of Calling a General Meeting under Section 186 of the Companies Act, 1956:
The court examined the conditions under which it can exercise its discretion to call a general meeting under Section 186. The court must be satisfied that it is "impracticable" to call a meeting in the usual manner. The court noted that there were serious disputes between the Bhesania group and the Mallya group, but found no prima facie evidence that the Bhesanias had ceased to be directors or that it was impracticable to call a meeting. The court emphasized that the power under Section 186 should be used sparingly and with caution, and that the court should not interfere in the domestic management of the company unless it is absolutely necessary.

2. Validity of the Adjourned Annual General Meeting Held on the 5th and 6th October, 1965:
There was a significant dispute between the parties regarding the validity of the adjourned annual general meeting held on the 5th and 6th October, 1965. The Bhesania group contended that the meeting was invalid due to lack of proper notice and quorum, while the Mallya group asserted that the meeting was valid and that new directors were duly elected. The court found that there was no clear evidence to support either contention and noted that the matter was already the subject of pending litigation. The court held that it could not conclusively determine the validity of the meeting in the context of the present application.

3. Alleged Cessation of Directorship under Section 295 of the Companies Act, 1956:
The Mallya group contended that the Bhesanias had ceased to be directors due to contravention of Section 295, which prohibits loans to directors without prior approval of the Central Government. The court examined the available materials and found that there was no prima facie evidence to support the allegation that the Bhesanias had ceased to be directors. The court emphasized that it was not expressing any views on the merits of the pending suit regarding this issue, but for the purposes of the present application, the materials did not justify the conclusion that there had been a contravention of Section 295.

4. Disputes Between the Two Groups Regarding Management and Control:
The court acknowledged that there were serious disputes and differences between the Bhesania group and the Mallya group regarding the management and control of the company. These disputes included issues such as payment of royalties to the United Breweries Ltd. and the appointment of directors. The court noted that these disputes had led to a deadlock in the functioning of the company, but found that the appropriate forum for resolving these disputes was not the court in the context of an application under Section 186. The court emphasized that it should not be a party to the removal of directors without concrete, precise, and specific charges against them.

5. Request for Court Intervention to Call a General Meeting and Remove Existing Directors:
The petitioner requested the court to call a general meeting with an agenda to remove all existing directors and appoint new directors. The court examined the motives of the petitioner and found that the request was not made bona fide in the larger interests of the company. The court noted that the Mallya group appeared to be determined to eliminate the Bhesania group from the board without any positive complaint against them or giving them an opportunity to answer any charges. The court held that it would not exercise its discretion under Section 186 to call a meeting and remove directors in these circumstances.

Conclusion:
The court dismissed the application, holding that it was not satisfied that it was impracticable to call a general meeting in the usual manner or that the Bhesanias had ceased to be directors. The court emphasized the need for a bona fide application made in the larger interests of the company and found that the present application did not meet this criterion. The petitioner was ordered to pay the costs of the respondents.

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