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TMI Blog1952 (10) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... hus raised to six. At the first annual meeting which was held on June 24, 1946, all the directors retired as provided in article 53 and were re-elected. Before the next general body meeting which was held on August 27, 1947, three of the directors had resigned and a fourth resigned at that meeting with the result that the strength of the directorate became reduced to two. The next general body meeting was held on December 30, 1948, and thereafter no annual meeting was called. It was in this state of affairs that one of the shareholders, Mrs. Ananthalakshmi Ammal, filed Appln. No. 3898 of 1950 under section 79(3) of the Indian Companies Act for a direction that a general body meeting might be convened by a commissioner and that an independent chairman might be appointed to preside over the meeting. On November 27, 1950, Krishnaswami Nayudu J. passed an order that the annual general body meeting be held on January 28, 1951, in accordance with the articles of association of the company, Exhibit P. 1. He, however, refused the prayer for the appointment of an independent chairman to preside over the meeting and against this portion of the order Mrs. Ananthalakshmi Ammal preferred O.S.A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etired at the meeting held on February 26, 1951, and that therefore the election of six directors was beyond the competence of the meeting; that there was no proper notice that six directors were to be elected at the meeting and that there was not even a resolution to that effect. Hence, it is urged, the election of defendants 2 to 7 is void. The complaint that there was not clear notice to the members that six directors were going to be elected is without substance. Exhibit P. 6 is the notice of the meeting to be held on February 18, 1951, and item 2 therein is as follows: "To elect directors. Mr. A.S. Padmanabhan retires at the meeting." It was argued that read as a whole Exhibit P. 6 would mean that a director is to be appointed in place of A.S. Padmanabhan who was to retire and that it would not convey the meaning that six directors were to be elected. We are unable to agree with this contention. The retirement of A.S. Padmanabhan is stated as a fact and the notice does not state as is usual "to elect a director in place of Padmanabhan who retires." The business to be transacted under item No. 2 is generally to elect directors and not to elect a director. This objection is, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Reigart. In that case, at an extraordinary meeting of the company, resolutions were passed increasing the number of directors and electing two additional directors. The company filed a suit for a declaration that under the articles of association the general body had no power to appoint the two additional directors, and that the election of the defendants was, therefore, illegal. Article 82 of the company's articles provided that the number of directors shall not be less than two or more than seven. Article 85 provided that at the ordinary meeting every year one director shall retire and the meeting at which any director shall retire shall fill up his place. Article 93 provided "Any casual vacancy in the office of director may at all times be filled up by the board by the appointment of a director. The directors may from time to time appoint additional directors but so that the total number of directors shall not exceed the prescribed maximum." On a construction of these articles it was held that the company had delegated its power of appointment of directors to the board and that it could not itself exercise it. The ground for the decision is thus stated by Eve J.: "I think ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reigart, that the general body had no power to appoint the additional directors. On appeal this decision was reversed on the ground that in Blair Open Hearth Furnace Company Ltd. v. Reigart, there was nothing in the articles corresponding to article 83 in Table A and that that article conferred on the general a general power to elect additional directors. In this view it became necessary to pronounce on the correctness of the decision in Blair Open Hearth Furnace Company Ltd. v. Reigart. But Lord Hanworth M.R, remarked: "I am bound to say that I find some little difficulty in seeing that the power must be either in the one or in the other; but be that as it may, we have to interpret the articles of association as we find them." Lawrence L.J. observed: "This court is not concerned upon the present occasion to say whether the construction put upon the articles in the Blair case by Eve J. was right or not; we have here to see what is the true meaning of the articles of the plaintiff company." In Ram Kissendas v. Satya Charan the general body passed a resolution appointing seven new directors in addition to the existing four. The validity of this resolution was disput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian Companies Act of 1913 shall apply to this company except in so far as otherwise provided for hereunder." Regulation 83 in Table A of Schedule I runs as follows: "Subject to the provisions of sections 83-A and 83-B of the Indian Companies Act, 1913, the company may from time to time in general meeting increase or reduce the number of directors and may also determine in what rotation the increased or reduced number is to go out of office." This regulation, must, therefore, be read as part of the articles of the company. In Worcester Corsetry v. Witting it was the existence of this article which was held to distinguish it from the decision in Blair Open Hearth Furnace Company Ltd. v. Reigart where there was no such article. In Ram Kissendas v. Satya Charan also there was an article 126 corresponding to regulation 83 and the power of the general body to elect additional directors was confirmed. The decisions in Worcester Corsetry v. Witting and Ram Kissendas v. Satya Charan rather than the decision in Blair Open Hearth Furnace Company Ltd. v. Reigart will apply to the present case. It was further argued by Mr. Vasantha Pai on behalf of the respondents t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors think proper to exercise their powers. That does not in my judgment deprive the general meeting of the power to elect directors, where there are no directors or where the directors do not think fit to exercise their powers." In Barron v. Potter, Potter v. Berry, the facts were that the board, of directors of a company consisted of two persons, Mr. Potter and, Mr. Barron. Owing to their differences no meeting of the board could be held and nothing transacted. Then at an extraordinary meeting of the shareholders two additional directors were appointed. The question was whether this was valid. The articles of the company provided that the number of directors should be not less than two and not more than ten and that the directors should have the power to appoint additional directors but there was no article corresponding to article 83 conferring on the company a power to increase or decrease the number of directors. In this respect the articles of this company were similar to those in Blair Open Hearth Furnace Company Ltd. v. Reigart. It was, accordingly contended on the strength of that decision that the general body had no authority to appoint additional directors. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ging director was one with which the general meeting of the company could deal and that having regard to the circumstances recourse must be had to the general meeting and the appointment by the general body must accordingly be upheld. In Munster v. Cammell Company certain vacancies which had occurred in the directorate before the annual general meeting were filled by the directors after that meeting and this appointment was attacked as illegal on the ground that the power of the board to fill vacancies could be exercised only before the next annual meeting and if not so exercised it lapsed and became incapable of exercise thereafter. Article 80 of the company corresponding to article 53 in the present case provided that the general meeting should have the power to fill vacancies arising by reason of the annual retirement of directors and article 84 conferred on the board power to fill vacancies. On a construction of these articles it was held that the appointment of directors by the general body was valid. The decision by itself, therefore, has no bearing on this point. But the following observations of Fry J. are relied on in support of the position that the company has a gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst directors of the company were five persons named in article 49 which number was raised to six by the co-option of Veeramani under that article, that all of them retired at the annual meeting held on June 24, 1946, and were re-elected. Under article 53 a third of the directors had to retire at every annual meeting. Before the next annual meeting which was held on August 27, 1947, three of them had resigned. Of the remaining three, two directors Padmanabhan and Veeramani retired at the meeting and were re-elected. The third director resigned at that meeting and thus the strength of the directorate became reduced to two. Section 83-A of the Companies Act is as follows: "Every company shall have at least three directors." Article 47 provides that the number of directors inclusive of the director (ex-officio) shall not be less than three and that was also the number prescribed as quorum for a meeting of the directors. Thus after August 27, 1947, there was no board which could act except for the purpose of filling up vacancies under article 62. Admittedly no directors were co-opted in 1948 and the position on December 30, 1948, when the last annual meeting was held was that ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a director. The respondents contend on the other hand that the directors could not take advantage of their own default and continue in office beyond the period when they would have retired, if they had done their duty and called for a meeting in accordance with article 29. This contention is supported by the decisions in In re Consolidated Nickel Mines Ltd.; Srinivasan v. Watrap Subramania Iyer; Kanssen v. Rialto and Morris v. Kanssen. These decisions were followed by this court in O.S.A. Nos. 120 of 1951 and 15 of 1952: Ananthalakshmi Animal v. The Indian Trades and Investments. It must accordingly be held that Padmanabhan ceased to be a director at the end of 1949. On the same reasoning it must also be held that Veeramani ceased to be a director by the end of 1950. This conclusion furnishes also the answer to a contention of the appellants that at least Veeramani was in office as director on February 26, 1951, and there could have been an election at the most of only five directors. Then there is the case of Murugappa Chettiar who is put forward as the third director. It is stated that Dakshinamurthy was co-opted on December 30, 1949, but it does not appear in w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date there was no election the vacating directors must be deemed to have been re-elected; therefore on February 25, 1951, Murugappa Chettiar became re-elected as director. We do not agree with this contention. Article 43 will apply only when there is a meeting held and as none was held before February 26, 1951, it has no application. Moreover in the view we have taken that there was no director who was in office on the date of the meeting there is no scope for applying article 43. It was also urged that regulation 50 in Table A of Schedule I of the Companies Act provides that the election of directors other than those who retire, that is under article 53, must be by a special resolution, there was none such in this case and that, therefore, the election is illegal. But under article 33 of the articles of the company, which prevails over Regulation 50 no special resolution is required for election of directors. In the result we hold that the election of defendants 2 to 7 as directors is valid and not open to any objection. It is next contended that members who were entitled to vote at the meeting had been excluded from exercising their right and that, therefore, the proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir complaint is that two members Srinivasam Pillai and Narasimharn whose names had been placed on the register after November 28, 1960, had sent their proxies on January 25, 1951, and that those proxies had been wrongly rejected. Assuming that Srinivasam Pillai and Narasimham had validly been admitted as members, a point on which Balakrishna Iyer J. had held against them, it is obvious that when their proxies were rejected they were the persons who were wronged and that, therefore, they are the only persons who can make a complaint of it and not other shareholders. In Pulbrook v. Richmond Consolidated Mining Company the plaintiff who had been elected as a director complained that he had been excluded by the company from taking part in the management and sued for an injunction. The company contended that the action was not maintainable except in the name of the company. Overruling this contention Jessel M.R. held that when the wrong complained against is individual to the shareholder he was the person who was entitled to maintain the action and observed: "But in a case of an individual wrong, another shareholder cannot on behalf of himself and others, not being the individuals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his matter? Article 38 is as follows: "On a demand of poll every member present in person or by proxy or by attorney shall have one vote." Under section 79(2)( g ) of the Companies Act "a proxy must be a member of the company," and article 44 in Table A provides "No person shall be appointed a proxy who is not a shareholder," and these provisions are applicable to the present case there being nothing in the articles of the company inconsistent therewith. Therefore, there is no doubt that a proxy can validly be given only to a member. But the respondents argue that article 38 clearly recognises that a member can be present in person or by proxy or by attorney and that, therefore, the attorneys form a class distinct from proxies and as to them there is no limitation that they should be members. Mr. K. Rajah Ayyar contends on behalf of the appellants that in law the status of a proxy is only that of an agent, that no distinction can be made between a proxy and an attorney and that they are synonymous words. He refers to item 48 in Schedule I to the Stamp Act which deals with the power of attorney not being a proxy and item 52 which deals with proxy and argues that this is a recogniti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting was originally fixed for January 28, 1951, it was not actually held on that date by reason of the order dated January 16, 1951, Exhibit P-3; that there was no notice even given of that meeting and that the meeting which was held on February 18, 1951, can in no sense be said to be an adjourned meeting. The contention that there had been no valid nomination of the defendants 2 to 7 as directors because it was not made seven days before the meeting is again based on the assumption that there was a meeting on January 28, 1951, and that the meeting held on February 18, 1951, is the continuance thereof. There was no meeting on January 28, 1951, and therefore there can be no question of an adjourned meeting on February 18, 1951. It is conceded that the nominations are in time if the date of the meeting is February 18, 1951, and not January 28, 1951. It is finally contended that Sanjeevi Naidu the commissioner who was appointed to preside over the meeting which was fixed for February 18, 1951, had no authority to adjourn it to February 26, 1951,and that, therefore, the proceedings of the meeting held on February 26, 1951, are void. In Halsbury's Laws of England, Vol. V, page 359 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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