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TMI Blog1933 (1) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... denied by the plaintiffs, according to whom most of the defendants had either never been appointed directors by any lawful authority or had ceased to be such prior to the institution of the suit. The plaintiffs' case, as set forth in the plaint, is that the defendants have practically excluded the plaintiffs from participation in the management of the affairs of the company, the actual control of the business being with defendant 8, who is in collusion with defendants 1 to 7. The reliefs prayed for in the plaint include one for a declaration that plaintiffs 1 to 7 are directors of the company. The position of plaintiff 8 as a lawfully appointed director was never disputed by the defendants but the plaintiffs pray for a declaration that plaintiff 8 is also the chairman of the board of directors. A further declaration is sought to the effect that defendants 1 to 6 are not the directors of the company and that defendant 8 is no longer the general manager thereof. The suit was instituted on August 18, 1932. On September 3, 1932, the plaintiffs presented an application asking for a temporary injunction in somewhat indefinite terms. In substance they prayed for an injunction directing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntiff No. 6. (6) B. Behari Lal, defendant No. 5, and (7) B. Sri Ram Khanna, since resigned. Parshotam Das died sometime before March 29, 1930, so that there were only six directors left, and three more could be appointed. Three new directors were elected by the Board of directors on that date. They were Mr. Gur Prasad Kapoor, defendant 1, Mr. Ranjit Singh, plaintiff 2, (who is the son of R.B. Vikramajit Singh, plaintiff 8) and Mr. Sri Kishen Khanna. Sometime afterwards, but before the next general meeting of the shareholders, Sri Kishen Khanna resigned. On March 21, 1931, L. Harcharan Das, defendant 2, was elected by the board of directors in place of Sri Kishen Khanna. The general meeting of the shareholders took place on April 18, 1931, when the appointment of Gur Prasad, Ranjit Singh and Harcharan Das was brought up for confirmation. Gur Prasad and Harcharan Das were duly elected by the shareholders, but Ranjit Singh was not. It should be mentioned at this stage that the election of a person by directors as a director entitles him to hold office till the next general meeting; while if he is elected at the general meeting of the shareholders, he is entitled to hold office for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellants, I think that merely increasing the numbers of directors does not involve any alteration in Article 98, which itself gives latitude to the shareholders in that respect. The words "Until otherwise determined by a general meeting" clearly imply that it was open to the shareholders to alter the number of directors mentioned in Article 98. If the shareholders do alter it, their action is in pursuance of Article 98 and not otherwise. If the contention put forward on behalf of the appellants be accepted, the article will have to be read as if the aforesaid words were not part of it. No clear authority was quoted in support of the view urged on one side or the other. The cases that were referred to in course of the argument are those in which the question did not directly arise and no opinion was definitely expressed. It is, therefore, unnecessary to examine them in this connection. In my opinion the right construction of the articles is, as already indicated, that it is open to the shareholders to vary the number of directors therein referred to without in any way necessitating an alteration in the article itself. In the view of the case I have taken, it must be held that pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power to do so and that R.B. Vikramajit Singh became vested with the authority which was conferred on him by the power of attorney. This being so, his order terminating the services of defendant 8 as general manager is unquestionable, and defendant 8 ceased in law to be the general manager of the company from the date of that order. It is, of course, true that some other persons, who were either directors or claimed to be such, took a different view and continued to recognise defendant 8 as the general manager, who has had the control of the affairs of the company up to date. We are, however, concerned with the legal aspect of the matter and as already indicated, defendant 8 was lawfully dismissed by the order of R.B. Vikramajit Singh. July 16, 1932 is another eventful date. A general meeting of shareholders took place on that date. A meeting of directors had also been fixed for that date to be held at 2 p.m., at the registered office of the company. Defendants 1 and 2 issued a notice calling another meeting of the directors to be held at 1-45 p.m. at the residence of L. Gur Prasad Kapoor, defendant 1. It is in evidence that the meeting which was to be held at the registered offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declared at the meetings of directors and shareholders held on July 16, 1932, is highly controversial, and it is not desirable to express a definite opinion on it. That question will have to be decided after the entire evidence, oral and documentary, have been examined by the lower court. L. Kamlapat and L. Balmakund Burman, defendants 3 and 4, claim to be the directors by virtue of a resolution passed at the meeting of directors held at the residence of L. Gur Prasad Kapoor, defendant 1, on July 16, 1932, the regularity of which has been already considered in relation to the appointment of L. Gur Prasad, as chairman of the board of directors. For the same reasons, defendants 3 and 4 cannot be considered to have been fully elected directors of the company. The learned advocate for the appellants impugned the elections held on February 6, and 14, 1932, also on the ground that the proceedings on those dates had not been taken in good faith to further the interests of the company but had been designed merely to give a clear majority to the party of R.B. Vikramajit Singh. His contention was that any proceeding, not taken in good faith for advancing the interests of the company, is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Cotton Mills Co., Ltd. I direct B. Panna Lal Burman, defendant 8, to refrain from performing the functions of the general manager. I further direct the defendants to refrain from interfering with R.B. Vikramajit Singh, plaintiff 8, in performing the function of the chairman of the board of directors. B. Gur Prasad, defendant 1, is directed to refrain from acting as chairman of the board of directors. Subject to the directions set out above, I confirm the order appealed from and dismiss this appeal with costs. Bennet, J.-I agree with the judgment of my learned brother and desire to add a few words on the argument of the appellants on Article 98 of the Articles of Association. The appellants correctly pointed out that, under Section 20 of the Indian Companies Act, any alteration or addition to the Articles of Association must be by a special resolution. The chief points about a special resolution are that, under Section 81 of the Indian Companies Act, a special resolution must be passed by a majority of not less than three-fourths of the members entitled to vote at a general meeting, and the special resolution must be confirmed by a majority of the members entitled to vote at a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... article gives the English practice, and apparently under this article the number of directors is altered by a general meeting, as a note given by Palmer states that there is only a doubt in the absence of the first seven words as to whether a special resolution is necessary. Palmer, therefore, considers that, when these first seven words were present, there was no doubt that a general meeting could make the alteration required. Lastly, in regard to the ruling quoted by the lower court, Navnitlal Chabildas v. Scindia Steam Navigation Co., Ltd., that ruling has been reported more fully in 29 Bom. L.R. 1362. In the Law Reporter the terms of the article in question are given, and we find that the words "unless otherwise determined by a general meeting" do not appear in the article which was the subject-matter of that case. That case, therefore, is no authority for the case before us. For these reasons I consider that the number of directors was validly altered by the resolution of the general meeting of February 14, 1932. By the Court-We grant an injunction to the plaintiffs directing the defendants to refrain from interfering with the discharge by the plaintiffs 1 to 6 and 8 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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