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TMI Blog1950 (9) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... the leader. The annual meeting of the company, which is the first defendant in the case, for the year ending 1947 was held on 30th September, 1948. The agenda paper for that meeting contained four subjects: (1)to receive and adopt the directors' report and the audited profit and loss account for the year ended 31st December, 1947, and the audited balance sheet as at 31st December, 1947; (2)to elect directors in the place of the two directors who retired by rotation; (3)to appoint a n auditor or auditors and to fix his or their remuneration; (4)to approve the co-option of Messrs P.K. Palaniappa Gounder and A.L.A.R. Arunachalam Chettiar. The company was incorporated under the Indian Companies Act, 1882, in or about 1906. Its main object was to manufacture cotton goods. Among the signatories to the memorandum of association are included the legal luminaries of the Madras Bar at the time, viz., Sri V. Bhashyam Aiyangar, P.R. Sundaram Aiyar, V. Krishnaswami Aiyar and S. Srinivasa Ayyangar, besides business magnates. The articles of association of the company excluded the application of Table A in the first schedule to the Indian Companies Act; but the regulations framed we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty demanded a further poll which is styled under the articles, as a "poll of the whole company" ' but this was rejected. The result, therefore, of the poll at this meeting was that the A.L.A.R. group was successful and the plaintiffs-party lost. The two plaintiffs in the present suit, who were the sitting directors, were unseated and in their place, defendants 6 and 7 were elected and the co-option of the 4th and 5th defendants was approved. Two of the shareholders thereafter filed on the 7th October, 1948, a representative suit on behalf of themselves and on behalf of the shareholders of Kaleeswarar Mills Ltd. (O.S. No. 325 of 1948, Sub Court, Coimbatore) to declare that the resolutions passed at the general body meeting were illegal and void and that the newly elected and co-opted directors were not entitled to act. There were various objections to the resolutions passed at that meeting which were considered by the learned Subordinate Judge who tried the suit. He dismissed the suit overruling the contentions of the plaintiffs in that action. There was an appeal to this court against that decision in A.S. No. 29 of 1949 and in that appeal, the plaintiffs confined their objection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defendant should direct and that he should vacate the chair when a resolution relating to his co-option is to be taken up for consideration. The decree of the High Court (Ex. A-4) directed, after setting aside the decree of the trial court dismissing the suit: (1)that before the decisions on the various resolutions in which the second poll was demanded can be considered final, a fresh poll shall be held at the registered office of the company at such time as the fourth defendant (the present fifth defendant) shall direct; (2)that the fourth defendant (the present fifth defendant) should not preside when the question of his co-option is in question; (3)that at the poll to be held in pursuance of clause (1) supra, each member will be entitled to vote, the number of votes being calculated according to the provisions of Article 88 of the articles of association. The plaintiffs' party were anxious to know the addresses of some of the shareholders comprised in the newly added 450 members with a view to canvass their support for the second poll. Their complaint was that particulars regarding the shareholders so added were not given in the register as required by Sections 31 and 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly referring to Ex. A-11, in which advice was given to him as to how he should give his rulings. He requested the members to choose a chairman to take the poll. The names of two directors were suggested, Messrs. Alagappa Chettiar, the third defendant and K. Srinivasa Ayyar. The former belongs to the A.L.A.R. group and the latter to the plaintiffs' group. The plaintiffs did not then object that the chairman had no right to decline to preside at the poll. On the contrary, they accepted the position that the chairman was entitled to decline to preside and to put up a candidate of their own for the chairmanship. The plaintiffs' candidate Srinivasa Ayyar was defeated by a large majority and Alagappa Chettiar was elected chairman by the shareholders. Then the proceedings continued and Arunachala Ayyar and Narayanan Ghettiar were appointed scrutineers. The revocations received that day were rejected as unacceptable. The first plaintiff objected that the revocations filed before 30th September, 1948, numbering 49 should not be accepted as they were not stamped; but his objection was overruled. At about 10 p.m. one of the scrutineers who belonged to the defendants' group filed a memo before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the conclusion of the learned Subordinate Judge that the fifth defendant cannot be compelled to continue to act as chairman notwithstanding the fact that his bona fides were questioned earlier by the plaintiffs and this court directed, at any rate, that so far as one of the subjects was concerned, he should not preside at the poll. The argument before us on behalf of the plaintiffs by the learned advocate was that the decision of the High Court precluded the chairman from declining to preside at the poll. No doubt, the judgment of the High Court and the decree proceeded on the assumption that the chairman of the board of directors would continue to preside even at the poll as the poll was nothing but a continuation of the meeting of the 30th September, 1948. The decree directed that he should fix the time for the second poll. This was done by him and there is no other indication in the judgment preventing him from having the right recognised by Article 78. That article provides that the chairman of the board of directors should preside only if he is willing. There is nothing in law to compel a man to do that which he is not willing to do. Express power is recognised in the arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he actual process of holding the poll is not a 'meeting' at all. It differs in several of its features from any meeting of shareholders." These observations of the learned Judge have to be taken in relation to the facts of that case. In that case, the chairman of the meeting directed, when a poll was demanded on a resolution, that it should be taken on a subsequent day between 4 and 6 p. m. and appointed the company manager, one Mr. Church, as returning officer for the purpose of taking it. The poll, however, was not taken on the 20th as for some reason Mr. Church was unable to attend to the poll. The question that had to be' considered was whether the process of holding the poll was a detached portion of the general meeting or was, at any rate, a meeting within the meaning of the articles of association. This point became material as it was contended that when the Commissioner, Mr. Church, was absent to take the poll, it was open to the shareholders assembled to have elected a new chairman for the meeting and as they did not do so, the meeting was at an end. In answer to these objections, it was pointed out that the original meeting continued in law until the chairman had carrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be that "when persons agreed," as pointed out by Bowen, L.J., in Harben v. Phillips, "to act together in the conduct of a business, the way in which that business is to be carried on must depend on each case on the contract, express or implied, which exists between them as to the way of carrying it on." The decision on every question relating to the business of an incorporated company should essentially be that of the shareholders, having regard to their interest in the company. Unless, therefore, there was a contract between the company and the shareholders, they could not delegate this power of expressing their opinion at a meeting of the company to another. These propositions are so well established as not to require citation of a number of authorities in support of them. It is summarised in Palmer's Company Law, 19th Edition, at page 153. A proxy is defined by Lord Hanworth, M.R., in Cousins v. International Brick Co. as "a person representative of the shareholder who may be described as his agent to carry out a course which the shareholder himself has decided upon" and the Lord Justice in the same case defined a proxy as an agent of the shareholder who, as between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... why the principal should be denied-his right to revoke a contract which brought about the relationship of principal and agent. The articles might make the proxy irrevocable or impose restrictions or circumscribe the limitations within which the power of revocation should be exercised. But all these are matters within the region of contract between the parties and in the absence of anything to the contrary, there is no reason to exclude the right of revocation which is recognised under section 203 of the Contract Act. There are other limitations imposed by the Contract Act on the exercise of the power of revocation, e.g., if the revocation is made after the authority had been partly exercised, section 204 of the Act preserves the validity of such acts and obligations and makes the revocation effective only in respect of future acts. If the agency is limited to a period of time and without sufficient cause it is revoked before the expiry of the period, under section 205 the agent is entitled to compensation. The principal is bound to give reasonable notice of revocation as otherwise he would be liable to pay damages to the agent which result from such act of his. As regards third ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection of a director the scrutineers discovered that a proxy was revoked by the principal before the poll. The votes recorded on the strength of that proxy were excluded from the poll. If such votes were allowed the plaintiff in the action would have been successful in the election as a director and the respondent would have been defeated. The question that had to be decided was whether the exclusion of the votes from the poll by the chairman was justified. The article clearly provided that the notice of revocation should be received at the office before the meeting, i.e., before the commencement of the meeting. The revocation in that case that had been recived was communicated to the office only before the poll and not before the meeting. The communication therefore was ineffective to make the revocation operative. It was therefore held by Russell, J., that the votes were improperly rejected. In the course of the judgment, the learned Judge stated the law in these terms: "The matter really turned upon article 88, which he had been told was also in common form, but, if so, in his view it was a somewhat unfortunate common form. Omitting for the moment the proviso, it seemed qui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from the fact that the right to vote by proxy is founded on contract. For this reason, it was held in Harben v. Phillips that were the articles requird that the proxy papers should be attested in a particular manner and if this condition is not satisfied, they should be rejected. McLaren v. Thomson also illustrates the same principle. The article in that case required that the instrument appointing a proxy should be deposited at the registered office of the company not less than two clear days before the day of the meeting. The proxies were lodged between the dates of the original meeting and its adjournment. It was held that the adjourned meeting when held was really a continuation of the meeting at which the adjournment took place and as the proxies were not deposited before the date for holding the meeting as required by the article they were invalid and were therefore rejected. Astbury, J., says at page 46: "There is no inherent or equitable right in any shareholder to vote by proxy; such right, if it exists, must be found in the contract binding the shareholders generally, that is in the company's regulations or constitution, and it then exists only in the form and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion whether the revocation was effective. On the second question, it was held that the person by giving a proxy was not thereby deprived of exercising the vote personally before the proxy had exercised the vote. Lord Hanworth, M.R., pointed out in the course of his judgment that it is open to provide by articles to exclude the right to vote personally when a proxy was given; but if this is not done and there are no clear words taking away the shareholder's personal right to vote after he has put in force the proxy system the personal right remains and the shareholder is entitled to attend and give his vote according to his choice. The proxy is not entitled to prevent him from exercising the vote. Lawrence, L.J.. and Romer, L.J., put it also on the ground that, "every proxy is subject to an implied condition that it should only be used if the shareholder is unable or finds it inconvenient to attend the meeting. The proxy is merely the agent of the shareholder, and as between himself and his principal is not entitled to act contrary to the instructions of the latter." "A proxy is always subject to an understanding that the shareholder giving it does not elect to give his vote in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess mention of the thing implies the exclusion of anoter) which has been applied in the construction of written instruments. In the first place the article does not expressly confer a power of revocation. On the contrary it assumes that the power was existing and therefore lays down that the instrument appointing a permanent proxy will hold good untill the same is revoked. The maxium therefore, has no application at all. Further the subject matter of Article 96 is a permanent proxy and not a specific proxy. If power of revocation of a limited nature is recognised in respect of a specific proxy by any article then it would be possible to contend that by reason of the express mention of the limited power any other power is excluded. The argument proceeds on a misconstruction of Article 96 and on a wrong appreciation of the scope of the maxim. It is next contended that a proxy can be revoked only before its use and as in the present case, the proxies were used to exercise the vote at the first poll of the same meeting, it is too late to revoke the proxies. In other words, a proxy cannot be revoked between one poll and another and these two polls at the same meeting should be treated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Indian Companies Act, 1882, and the articles of association were modelled on the articles contained in Table A of that Act. The Indian Act of 1882 was framed on the lines of the English Companies Act, 1862 (25 and 26 Vict. Ch. 89). In Ex. A-2, the articles of association of the defendant company, the form of the proxy is provided by Article 97. This form word for word is the same as the form in Article 51 in Table A of the Indian Act of 1882, and Article 51 of Table A of the English Act of 1862, though there are a few alterations particularly at the end where the words "or, generally as the case may be, in the same manner as I myself could vote if personally present provided he be then a member of the company and be entitled or admitted to vote" are found. The addition of the expression "generally as the case may be" at the end of the sentence (or at any meeting of the company that may be held within the period of .from the date hereof, or generally as the case may be) is an innovation. The form also states that the stamp payable is one anna which was the stamp duty payable at the time as it was only in 1923 by an Amending Act that a duty of two annas was made payable in Articl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esolutions that a declaration given by a chairman at meeting that a resolution has been carried thereat is conclusive. But there is no provision in the articles giving finality to the rulings of the chairman at a meeting. There is no reason, however, to hold that the ruling of a chairman given at one stage of a meeting is not final and binding on the chairman or his successor at a later stage. If such a finality is not recognised, the proceedings of the meeting cannot be conducted in an orderly manner and will very often end in confusion and disorder. The chairman is expected to act impartially uninfluenced by party politics. He has to hold the scales even between the majority and the minority parties and his decision on all the questions must be unbiassed and impartial. It is not suggested that the ruling of the fifth defendant on the 30th September, 1948, was vitiated by fraud or misconduct and there is no reason to hold it as not being final. What would have happened if the objection on the ground of insufficiency of stamp was raised in a court of law and the court decided at one stage of the suit that the. disputed instrument was properly stamped? Under section 36 of the Stamp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... questions relating to stamp duty is the. Collector, (See section 31), who however has the right in case of doubt to refer the matter for the opinion of the chief controlling revenue authority and the chief controlling revenue authority in his turn has the right under section 57 to refer the matter to the High Court for opinion. All these provisions clearly indicate that the instrument could always be validated by paying the deficit stamp duty at a later stage together with penalty and the sole authority vested with the power of finally deciding the question of stamp duty is the Collector acting under section 31 of the Act. If a person votes or attempts to vote under any proxy not duly stamped he is liable for punishment with a fine which may extend to Rs. 500 under section 62(1)( c ) of the Act. But as indicated in the proviso to section 43, the intention must be one of evading payment of the proper duty. In the present case, it is difficult if not impossible, to hold that there was an intention on the part of persons holding the proxies to evade the stamp duty as they had acted bona fide and followed the articles of association and paid two annas stamp on each proxy. The fifth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the face of the document was far less than what it really was. The directors thereupon refused to register the transfer. An action was brought to recover damages for wrongful refusal of the registration of the transfer. It was decided by the Court of Appeal that it was the bounden duty of the plaintiff in the. action who claimed the right to register the transfer to tender a transfer which was right in all respects and which would be available to the directors of the company in a court of law if it became necessary to enforce the rights under the document against the transferee or if they were called upon to defend themselves against a hostile attack levelled against the transfer on the faith of which they acted. Similarly, if a vendor offers to the purchaser a sale deed not duly stamped, it is argued that he was not bound to accept it. This position regarding the right of a person whould be entitled to claim rights under an instrument cannot be questioned as he is entitled to get from the other party a deed valid in all respects and enforceable in a court of law. But does that apply to a proxy under which a person is entitled to vote? The company, and much less the chairman of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Indian Stamp Act enacts that no instrument chargeable with duty shall be admitted in evidence for any purpose. Mr. Rewcastle as part of his argument, for the respondent adopted the note on the words 'for any purpose' in section 35 contained in the 4th edition of Sir Dinshaw Mullah's book on the Indian Stamp Act, 1899. He pointed out that the words 'for any purpose' first appeared in India in the Stamp Act of 1879, and in England in the Stamp Act of 1891, and that under the earlier Acts there were decisions in both countries that an unstamped document might be admitted in evidence for a collateral purpose, that is, to prove some matter other than the transaction recorded in the instrument, and he submitted that these cases applied even under the later Acts. Their Lordships do not take this view. A document admitted in proof of some collateral matter is admitted in evidence for that purpose, and the statute enacts that is shall not be admitted in evidence for any purpose. Their Lordships see no reason why the words 'for any purpose' in the Indian Act of 1879 should not be given their natural meaning and effect. Such words may well have been inserted by the Legislature in orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eting of the company, that may be held within the period of from the date hereof, or generally as the case may be) in the same manner as I myself could vote if personally present provided he be then a member of the company and be entitled or admitted to vote. As witness my hand this day of "signed by the said in the presence of " It consists of two parts: "do hereby appoint as my attorney or substitute to vote for me and on my behalf at the (Ordinary or Extraordinary, as the case may be) General Meeting of the company to be held on the 30th September, 1948, and at any adjournment thereof." The second part is "(or at any meeting of the company, that may be held within the period of one year from the date hereof, or generally as the case may be)". It is not disputed that so far as the first part is concerned, notwithstanding the words, "Ordinary or Extraordinary" within brackets, it authorises the person only to vote at the meeting of the 30th September, 1948, or at any adjournment thereof. The words "as the case may be" clearly indicate that the word "or" in the expression, "Ordinary or Extraordinary" is disjunctive and if the instrument had stopped with this clause, it is not dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of appointing a proxy to vote at a meeting, and every voting paper, hereby respectively charged with the duty of one penny, is to specify the day upon which the meeting at which it is intended to be used is to be held, and is to be available only at the meeting so specified, and any adjournment thereof and the first schedule to that Act referring to letter or power of attorney and commission, factory, mandate or other instrument in the nature thereof for the sole purpose of appointing or authorising a proxy to vote at any one meeting at which votes may be given by proxy, whether the number of persons named in such instrument be one or more, the duty payable is one penny. In other cases, it is ten shillings. The Act both in the section and in the schedule requires that it should be for the sole purpose of voting at any one meeting and the day upon which the meeting is to be held is also to be specified. The language of Article 52 of the Indian Act is ''proxy empowering any person to vote at any one election of the members of a district or local board, or of a body of municipal commissioners, or at any one meeting of ( a ) members of an incorporated company or other b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it means that if there are more than ten persons authorised to act jointly or severally in more than one transaction or generally, then stamp duty payable is according to the number of persons and it is one rupee to each person authorised. Clause ( d ) applies when the authority is given to not more than five persons and relates to more then one transaction or generally. In Referred Case No. 75 of 1905 cited in the Stamp Manual, this court decided that a document of the present description would fall under clause ( g ). We do not see any reason to differ from that view as otherwise a power of attorney in favour of one person in respect of more than one transaction would escape stamp duty altogether. Lastly, Mr. Gopalaratnam, learned counsel for the appellants argued that in any event the direction of the lower court that the plaintiffs should pay separate sets of costs to the first defendant, second defendant, third defendant, fifth defendant and defendants 4 and 7 is not justifiable. The learned Judge did not give any reasons in his judgment for allowing separate sets of costs to each of the defendants. They had no separate interest in the suit and the questions that were c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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