1971 (2) TMI 76 - HC - Companies Law

Meetings and Proceedings Chairman s declaration of result of voting by show of hands to be conclusive, Directors - Right of person other than retiring director to stand for directorship

Summary

Issues Involved:
1. Validity of the election of a director at the annual general meeting.
2. Grant of interim injunction under Order 39, Civil Procedure Code.
3. Jurisdiction and propriety of the trial court and appellate court's orders.

Issue-wise Detailed Analysis:

1. Validity of the Election of a Director:
The primary issue was the validity of the election of Applicant No. 2 as a director during the annual general meeting held on January 24, 1970. Opponent No. 1 contended that the election was illegal because his nomination was ruled invalid by the chairman (Opponent No. 2) on the grounds that it was seconded by a proxy instead of a shareholder. The court noted that under Section 257 of the Indian Companies Act, the nomination of a director does not require seconding, only a proposal. The chairman's ruling that a proxy could not second the nomination and refusal to accept a poll demand from a proxy was deemed prima facie incorrect. The court referenced the case "In re Horbury Bridge Coal, Iron and Waggon Company [1879] 11 Ch. D. 109," which established that seconding a proposal in such meetings was unnecessary.

2. Grant of Interim Injunction under Order 39, Civil Procedure Code:
The court examined whether the interim injunction issued by the trial court and upheld by the appellate court was justified. Order 39, Rule 1 of the Civil Procedure Code provides for temporary injunctions to prevent threatened legal injury. The court emphasized that the injury must be legal and not fanciful. The court referred to the case "Jagannath Pundlik v. Sukhdeo Onkar [1967] Mah. LJ 126," which discussed the necessity of proving legal injury and the existence of a right. The court concluded that Opponent No. 1 had a prima facie case and that his right to stand for election and to insist on the observance of legal rules was justiciable. The court also cited "Joseph v. Jos [1964] 34 Comp. Cas. 931; A.I.R. 1965 Ker. 68," which highlighted the individual membership rights of shareholders, including the right to stand for election as a director.

3. Jurisdiction and Propriety of the Trial Court and Appellate Court's Orders:
The court reviewed the jurisdiction and propriety of the orders passed by the trial court and the appellate court. The applicants argued that the balance of convenience was in their favor and that the trial court had erred in granting the interim injunction. The court, however, found that the trial court and the appellate court had correctly assessed the balance of convenience. The business of the company could continue without the newly elected director, and allowing Applicant No. 2 to act as a director could inflict legal injuries on Opponent No. 1 and the company's interests. The court also noted that the revisional jurisdiction under Section 115 of the Civil Procedure Code has limits and can only be invoked if the subordinate court acted without jurisdiction or with material irregularity. The court found no such irregularity in the orders of the lower courts.

Conclusion:
The court dismissed the revision application with costs, upholding the interim injunction and the orders of the trial court and the appellate court. The court concluded that Opponent No. 1 had a prima facie case, his rights were threatened by the conduct of the meeting, and the balance of convenience favored granting the injunction to prevent potential legal injuries and uphold statutory provisions.