1974 (8) TMI 75 - HC - Companies Law

Memorandum of association - Act to override Meetings and Proceedings - Extra Ordinary General Meeting Disqualification of directors

Summary

Issues Involved:
1. Validity of the proposed amendment to Article 74.
2. Validity of the requisition.
3. Obligation of the executive committee to call an extraordinary general meeting.

Detailed Analysis:

1. Validity of the Proposed Amendment to Article 74:
The core issue revolves around whether the proposed amendment to Article 74 of the Cricket Club's Articles of Association would be invalid as being repugnant to Section 274 of the Companies Act, 1956. The plaintiffs argued that the proposed amendment would be invalid, invoking Section 274(3) and Section 9 of the Companies Act. They contended that the amendment would introduce additional grounds of disqualification not permitted under Section 274(1), which lists six disqualifying conditions for directors. The defendants countered that the proposed amendment did not amount to a disqualification but rather a non-qualification and that Section 274(3) did not apply to public companies or their subsidiaries.

The court considered the legislative history and previous laws, particularly Section 86-I of the Indian Companies Act, 1913, which allowed any company to provide additional grounds for vacation of office. The court also examined the Bhabha Committee's recommendations and the Notes on Clauses of the Bill that led to the Companies Act, 1956. The court concluded that the provisions of Section 274(3) implied a prohibition on public companies and their subsidiaries from adopting additional grounds of disqualification. The court held that the proposed amendment to Article 74 would be invalid as it was repugnant to Section 274 of the Companies Act, 1956.

2. Validity of the Requisition:
The plaintiffs argued that the requisition was not valid as it proposed a resolution that would be illegal and invalid if carried. They contended that Section 169(6) of the Companies Act only comes into operation on the deposit of a valid requisition. The court examined the provisions of Section 169, which deals with the calling of extraordinary general meetings on requisition. The court noted that the word "valid" in Section 169(6) referred to compliance with the procedural and numerical requirements of the section, rather than the legality of the object of the requisition. The court concluded that the requisition satisfied the requirements of Section 169 and was therefore valid.

3. Obligation of the Executive Committee to Call an Extraordinary General Meeting:
Given the validity of the requisition, the court addressed whether the executive committee of the Cricket Club was bound to call an extraordinary general meeting. The court held that since the requisition met the procedural and numerical requirements of Section 169, the executive committee was bound and liable to call the meeting as provided by the section. The court did not express an opinion on the course to be adopted by the requisitionists or the chairman of the meeting, as this would depend on the resolution's validity, which had already been determined to be invalid under Section 274.

Conclusion:
- Question (a): The proposed amendment to Article 74 is invalid as it is repugnant to Section 274 of the Companies Act, 1956.
- Question (b): The requisition is valid as it meets the procedural and numerical requirements of Section 169 of the Companies Act, 1956.
- Question (c): The executive committee is bound and liable to call an extraordinary general meeting as per Section 169 of the Companies Act, 1956.