9911796707
TMI Blog1952 (10) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. No. 118 of 1950. By the order which was passed in the said appeal on January 11, 1951, an advocate, Mr. Sanjeevi Naidu, was appointed as chairman of the meeting with power to scrutinise the proxies. The company then took out an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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, therefore, overruled. A more substantial objection to the validity of the election of the defendants is that the power of the general body is limited to electing a director in the place of one who retires at the annual meeting under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the express power contained in article 93 excludes the possibility of implying a concurrent power under article 82 and in my opinion the company has by its constitution delegated to those of its members who for the moment constitute the board the sol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticle 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 disputed in an action by the shareholders. Articles 109, 111 and 128 of the company were in substance similar to articles 82 and 93 which were considered in the Blair case. There was also an additional article 126 corresponding to article 83 in Table A which had been adopted by the company in Worceste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that even if the power to appoint additional directors is exclusively vested in the board of directors under Regulation 58 the resolution of the general body appointing defendants 2 to 7 as directors should be upheld because there was at the time of the meeting no board of directors which could validity function under the article and the general body had inherent power, which it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erences 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. This contention was overruled and it was held that as there was a dead-lock in the administration resulting from the fact that the directors were unwilling to exercise their powers the company had the inherent power to take necessary steps to ensure the working of the company and to appoint additional directors for that purpose. Warringtgn J. observed: "The argument against the validity of the appointment i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 general and inherent power to appoint directors. He observed: "I am far from saying that a general meeting might not have filled up the casual vacancy, although, as I have pointed out the 80th clause only requires the general meeting to fill up the vacancies created by the retirement in rotation but nevertheless the general power of a general meeting are so large that I certainly do not mean to determine that if they had been s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 there were only two directors; both of them had been elected at the annual meeting held on August 27, 1947, and one of them had to retire at that meeting. Veeramani retired at that meeting and was re-elected. Thereafter there was no annual meeting. The plaintiffs contended that on December 30, 1949, one Dekshinamurthy was co-opted as a director, Exhibit P-9, that he resigned on June 18, 1950, Exhibit P-10, and that on August 12, 1950, one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese 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 whose place he was co-opted and as four directors who retired in 1946 and 1947 had all been elected at the annual meeting held on June 24, 1946, their term of office would have expired under article 53 during the year 1949 and Dakshinamurthy whose co-option must have been in their place could not hold office beyond 1949. At any rate as he resigned on June 18, 1950, his rights do not merit any further consideration. It would follow from this that the co-op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying 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 are illegal. In Application No. 139 of 1951 as part of the order adjourning the meeting originally fixed for January 28, 1951, to February 18, 1952, Krishnaswamy Nayudu J. gave the following directions:- "But I consider that if it is made clear that the register as on November 28, 1950, will be the register that will be taken into consideration for the purpose of finding out the members who are entitled to vote or to be reckoned in a quorum, the apprehension on beha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 to whom the wrong is done, maintain an action for that wrong." That is precisely what the plaintiffs seek to do in this action. They are not themselves wronged and they seek to sue on behalf of themselves and others. It may also be mentioned that even if the votes of Srinivasam Pillai and Narasimham are counted in favour of the plaintiff's group and against defendants 2 to 7 the result of the election would not be affected and on this ground also this objection must be overr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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 recognition that proxies are only a form of power of attorney. He also relies on the observations of Lindley J. in English Scottish and Australian Chartered Bank In re that a "proxy there means some agent properly appointed" and the decision of Satyanarayana Rao and Chandra Reddi JJ. in Narayanan Chettiar v. Kaleswarar Mills where it was held that the relationship between a shareholder and a proxy is that of a principal and an agent. That undoubtedly is so but the question is what do the words " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, paragraph 588, (2nd Edn.) the law is thus stated:-"Except where empowered by the regulations of the company, the chairman cannot adjourn the meeting nor dissolve it while any of the business for which it was called remains untransacted." In this case article 35 provides that the chairman may with the consent of the meeting adjourn it from time to time. It is not now disputed that Mr. Sanjeevi Naidu obtained the consent of the meeting to adjourn it. It is suggested that the order appointing him does ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
