9911796707
TMI Blog1961 (3) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... hares of Rs. 100 each fully paid up; 659 shares on which Rs. 50 per share have been paid. The amount of the paid-up capital, therefore, comes to Rs. 1,29,250. The company when floated had a large number of businesses but it has been in the main engaged in doing forward contract business in grains, in particular in rape seeds and mustard seeds. The petitioners feel aggrieved with the manner in which the affairs of the company have been conducted which, according to them, is oppressive in relation to the non-trading members. They feel that the directors of the company are behaving in a manner prejudicial to the interests of the company. At the meeting of the board of directors held on the 14th of December, 1957, it was resolved that the following notice and resolution be circulated along with the following explanatory statement as required by section 173 of the Companies Act, 1956 : "Notice is hereby given that an extraordinary general meeting of the shareholders of the company will be held on Thursday, the 9th January, 1958, at 2 p.m. at the registered office of the company to pass the following resolution with or without modification : Special resolution: Resolved that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... new shares of the company shall be allotted only to the trading members of the company. The qualifications of a trading member under article 47 are the holding of shares of the company of the face value of at least Rs. 2,000 besides payment of security deposit of Rs. 1,000, building deposit of Rs. 1,060, admission fee of Rs. 500, annual subscription of Rs. 151 etc. Under article 59, the right of entering into contracts with other persons, whether trading members or not, in commodities for which the company is recognised by the Central Government, shall belong to trading members of the company. Under article 62, the board is required to keep separate registers of shareholders and of trading members. Articles 85 to 106 deal with the holding of meetings, statutory, annual, general, ordinary and extraordinary general meetings, etc. The other matters dealt with relate to giving of notices of the meetings, quorum, adjournment of meetings, the manner of taking votes and of demanding of poll, etc. One of the grievances is that in consequence of the change.in the definition of " member", the non-trading shareholders cannot participate in the meetings. Article 107 provides that votin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of association have been necessitated in pursuance of the provisions of the forward Contracts (Regulation) Act of 1952 as amended by Act II of 1957. It is said that the Government of India by its notification dated 25th January, 1955, (R/1) applied section 15 of the Forward Contracts (Regulation) Act, 1952, to rape-seeds and mustard seeds in the whole of India except Greater Bombay with the result that the contracts in these two commodities could be contracted only through a recognised association. The Government of India by another notification of the same date applied section 17 of the Forward Contracts (Regulation) Act, 1952, to rape-seed and mustard seed oils in the whole of India, the effect of Which was to continue the ban on transferable specific delivery contracts for the purchase or sale of these oils. One of the recommendations made by the Forward Markets Commission was that the grant of recognition to the associations dealing in these commodities be conditional "on their previously carrying out such modifications in their articles of association, trading bye-laws and working procedure as may be suggested to them by the Commission". The Commission also recommended t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reholders present, out of whom twenty were non-trading. The petitioners, however, are not among those twenty non-trading shareholders. It was also said that no objection was raised by any non-trading members that the notice of the meeting was not sufficient or the modifications or the proposed amendments were not understood. It was also said that the first elections according to the amended articles of association were held in August, 1958, and the non-trading shareholders never protested that they were not allowed to vote and this right of theirs had been erroneously taken away. It was urged that the working capital of the company runs into over eight lakhs and contributed in the main by the trading members as against Rs. 67,100 contributed by the non-trading shareholders. The undeniable fact, however, is that out of the paid-up capital of Rs. 1,29,250, the non-trading shareholders have contributed Rs. 67,100 and trading shareholders have contributed Rs. 62,150. The sum of rupees eight lakhs referred to above consists of cover money deposits, margin money deposits and security deposits of trading members. The question which now calls for decision is whether on the admitted facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity attached to the resolution unanimously passed because the meeting was not adequately represented. No weight can be attached to such a contention. The only argument which merits consideration is that omission to object is immaterial in respect of matters which deprive a shareholder of certain fundamental statutory rights guaranteed by the Act. There are certain rights which no shareholder of a company can be permitted to barter away. In respect of such rights, failure to object is not fatal. Reference in this connection may be made to the following provisions of the Companies Act. Section 9( b ) of the Companies Act reads, " any provision contained in the memorandum, articles, agreement or resolution aforesaid shall, to the extent to which it is repugnant to the provisions of this Act, become or be void, as the case may be". The intention of the above provision is to make the statute law supreme so as to override the memorandum, articles, etc. Section 87 confers upon every member of a company limited by shares and holding any equity share capital therein, the right to vote in respect of such capital on every resolution placed before the company. Section 181 visualises ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o this fact, in order to emphasise the extent of oppression, as in this case, the non-trading shareholders who far outnumber the trading shareholders have no voice in the affairs of the concern. This right which is bestowed by the statute could not be bartered away by the members present at the meeting of 9th January, 1958, either for themselves or for other ' non-trading shareholders. Mr. Sikri argues that if a right is voluntarily given up with open eyes, howsoever valuable that right may be, it cannot be styled as oppression. According to him, oppression is an act proceeding from one against the other to the latter's detriment and against his consent. This argument has failed to impress me. An oppression may be an act of cruelty, severity, unlawful exaction, domination of will or excessive use of authority. The sixth chapter of the Companies Act deals with the prevention of oppression and mismanagement. Section 397 provides relief, inter alia , where the court is of the opinion that the company's affairs are being conducted in a manner oppressive to any member or members. In this case the non-voting members are being subjected to hardship or burden which may truly be called ..... X X X X Extracts X X X X X X X X Extracts X X X X
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