1978 (6) TMI 152 - HC - Companies Law

Summary

Issues Involved:
1. Injunction restraining defendants from interfering with petitioner's services as branch manager.
2. Injunction restraining defendants from interfering with petitioner's position as a director.
3. Validity of the petitioner's appointment as a director.
4. Validity of the allotment of shares to defendants Nos. 1, 2, and 3.

Detailed Analysis:

1. Injunction Restraining Defendants from Interfering with Petitioner's Services as Branch Manager:
The petitioner sought an injunction to prevent the defendants from interfering with his position as the branch manager of the Bombay branch. The court noted that the petitioner's service was governed by the ordinary law of master and servant, which allowed termination by giving three months' notice or salary in lieu of notice. The court cited the Supreme Court's ruling in *Executive Committee of Vaish Degree College v. Lakshmi Narain* (AIR 1976 SC 888), emphasizing that a contract of personal service cannot ordinarily be specifically enforced. The court concluded that the plaintiff's remedy in case of wrongful dismissal would be damages, not specific performance or an injunction. Consequently, the court denied the injunction, stating that the law does not support enforcing a contract of personal service through an injunction.

2. Injunction Restraining Defendants from Interfering with Petitioner's Position as a Director:
The petitioner claimed an oral agreement with the defendants for his appointment as a director on equal terms. However, the court found that under the company's articles of association, only the company at a general meeting could appoint new directors, not the board of directors. The court also noted that the petitioner failed to acquire the necessary qualification share within the stipulated time, disqualifying him under the articles of association. Additionally, there was no special resolution exempting the petitioner from the disqualification under section 314 of the Companies Act. Thus, the court held that the petitioner was not entitled to an injunction to prevent interference with his position as a director.

3. Validity of the Petitioner's Appointment as a Director:
The court examined whether the petitioner's appointment as a director was valid. It was found that the board of directors did not have the authority to appoint directors, which was a power reserved for the company in a general meeting. The court also noted that the petitioner did not meet the qualification share requirement and was disqualified under section 314 of the Companies Act due to his position as branch manager, which constituted an office of profit. The court concluded that the petitioner's appointment was not legally valid.

4. Validity of the Allotment of Shares to Defendants Nos. 1, 2, and 3:
The petitioner challenged the allotment of shares to the defendants, arguing that no returns were filed with the Registrar of Companies. The court clarified that non-filing of returns does not invalidate the allotment of shares, as the penal provisions under section 75 of the Companies Act do not affect the validity of the allotment itself. The court found no basis to invalidate the share allotment and dismissed the petitioner's challenge on this ground.

Conclusion:
The court dismissed the petitioner's application, denying all requested injunctions and upholding the validity of the defendants' actions regarding the petitioner's employment and the allotment of shares. The petitioner was not entitled to any relief, and the application was dismissed with costs.