9911796707
TMI Blog1960 (12) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... these provisions. The shareholders of the company were Dadoba, his brother, the respondent Bhaskar, and his two sons, the appellant Govind and the respondent Harish, of whom the first three were the directors, Dddoba being the managing director. This constitution of the company continued till Dadoba's death on January 14, 1957. Dadoba had died leaving a will whereby he purported to appoint the appellant, Govind, the managing director of the company in his place from the date of his death. Shortly after Dadoba's death, disputes arose between the appellant, Govind, and the respondent, Bhaskar. The appellant, Govind, was contending that the respondent, Bhaskar, had ceased to be a director on account of his failure to attend the directors' meetings. He also purported to co-opt the appellant, Bhalchandra, as a director. The respondent, Bhaskar, contended that he had not ceased to be a director and challenged the legality of the appointment of the appellant, Bhalchandra, as a director. He further contended that the appointment of the appellant, Govind, as the managing director of the company by the will of Dadoba was void. On November 22, 1957, the respondent, Bhaskar, filed a suit in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act came into force on April 1, 1956, and Dadoba had both made his will and died after that date. The appointment of the appellant, Govind, as managing director was, therefore, made after the commencement of the Act. Now, section 312 makes the assignment of his office by a director void. It does not on the face of it say that an appointment by a director of another person as the director in his place would be void. The High Court, however, took the view that the word "assignment" in the section included "appointment ", and so such an appointment would also be void under the section. What we have to decide is whether the High Court was right in this view. Before we proceed to examine this question, we have to point out one thing. It appears that the High Court thought that the appellants had conceded that an appointment by a director of another in his place by act inter vivos would be an assignment of the office of a director within section 312, and had only contended that such an appointment by will, which is what had been done by Dadoba, would not be an assignment and would not, therefore, be rendered void by the section. The learned Attorney-General, appearing for the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have the meaning of "appointment", then it would have to be given both the meanings of "transfer" and "appointment" in the section. This is what the High Court did. That would produce a curious result. Transfer and appointment are clearly entirely different things. Even apart from considerations arising from the law of conveyance, which the High Court was unable to entertain in connection with the transfer of an office, a transfer from its very nature inevitably imports the passing of a thing from one to another; a transfer without the passing of the thing transferred, even when that thing is an office, cannot be conceived. An "appointment", on the other hand, has nothing to do with anything passing from one to another ; it connotes the putting in of someone in a vacancy. The acts constituting a transfer and an appointment are, therefore, wholly dissimilar. It would be an unusual statute which by the use of a single word intended to prohibit at the same time, two wholly different acts. We do not think that a construction leading to such a result is permissible. Secondly, section 255 of the Act permits one-third of the total number of directors of a public company and all the dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by making it possible for a director to choose his successor, the management of the company would be permitted to remain all along in one hand and this the Act wanted to prevent. It does not seem to us that the Act wanted to prevent this. The Act by enacting section 255 shows that it does not disapprove of a person having power to appoint a succession of directors and in the case of a private company, a succession even of all the directors. Such a person would have what has been described as "perpetual management". It would follow that the Act did not consider this as an evil which required prevention. If perpetua management by an outsider is not an evil, nor would such management by one who is a director of the company be so. This aspect is very clearly illustrated by the case in hand. Dadoba had this "perpetual management". But the whole of the company's undertaking was really a largess from him. In fact he held nearly 43% of the shares of the company. It is inconceivable that perpetual management by him would have worked to the detriment of the company. We are, therefore, unable to agree that it was the object of the Act or of s. 312 to prevent a director from appointing his s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade does not result in an evasion of section 312 for, as we have earlier said, the section could not have intended to prevent what another section in the same Act made legal. An appointment made outside the powers legally conferred by the articles is wholly ineffective, and, therefore, is not an appointment at all and hence again does not result in an evasion of section 312. We have now to consider an argument based on the first proviso to section 86B of the Companies Act of 1913. The main part of section 86B contained a provision analogous to that of section 312 of the new Act. It made an assignment of his office by a director to another person, under an agreement with the company, void, unless such assignment was approved by a special resolution of the company. Under the new Act the assignment has been made altogether void and would not become valid even if approved by a special resolution of the company. Now, the proviso laid down that the exercise by a director of a power to appoint an alternate director to act for him during an absence of not less than three months from the district in which meetings of the directors are ordinarily held, if done with the approval of the boar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in these words : " It is a well established principle of construction that when one finds a proviso to a section, the presumption is that but for the proviso the enacting part of the section would have included the subject matter of the proviso." This rule would enable the court to hold in regard to section 86B at the most that an appointment of an alternate director by a director intending to absent himself would have been an assignment of his office but for the proviso. It would be an unwarranted extension of this principle to hold that all appointments of their successors by directors would be assignments within the main part of the section. In any case, in our view, as in section 312 of the new Act, so under the main part of section 86B of the old Act, an appointment of a successor to his office by a director was not an assignment of his office by him for the old Act contained in section 83B provisions substantially similar to those contained in section 255 of the new Act, and the reasons which have inclined us to the view that in section 312 the word "assignment" does not include "appointment" would equally lead to the same conclusion in regard to section 86B. If the enactin ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
