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TMI Blog1974 (8) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been described as members of the executive committee of the 1st plaintiff, and the powers and functions of this executive committee are admittedly analogous to those of the board of directors of a company under the Companies Act, 1956. Articles 69 to 92 of the articles of association of the Cricket Club provide for the executive committee and article 74 of these articles provides for the retirement from office of one-third members of the executive committee at the annual general meeting of the Cricket Club, excluding the nominated and ex-officio members who are not subject to retirement under the articles. There is provision in the said article to the effect that a member retiring at any such meeting shall be eligible for re-election and shall retain office as a member of the executive committee until the close of the meeting at which he retires. On 3rd August, 1973, the Cricket Club received from 591 of its members, including the defendants to the special case, a requisition, dated 3rd August, 1973 (hereinafter referred to as "the requisition" for the sake of brevity). By the requisition the requisitionists desired the convening of an extraordinary general meeting of the Cric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Companies Act, 1956, and any such amendment of the articles contemplated would be invalid. Further, according to the executive committee, section 169(6) only comes into operation on the deposit of a valid requisition and (lie requisition proposing for consideration a resolution which would be illegal and invalid if carried, would not be a valid requisition within the contemplation of the said subsection. According to them, therefore, the executive committee is not bound to call an extraordinary general meeting, which has been described by the plaintiffs as an "exercise in futility". The defendants, on the other hand, have contended that the said requisition is a valid requisition on several different footings. According to them, in the first place, the rule of construction by necessary implication which is a basic premise of the conclusions regarding illegality and invalidity of the proposed resolution does not apply in the present case. It is submitted that what has been suggested by the proposed amendment to article 74 does not and cannot amount to a disqualification for the office of the executive committee. Secondly, it has been urged that the language of section 274 does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessary implication or the rule of construction by necessary implication is brought into play or attracted by the wording of sub section (3). Before, however, I proceed to consider the rival stands on this sub-section, reference may be made to an allied section of the Companies Act, the concerned section being section 283 which provides for vacation of office by a director. Under sub-section (1) of section 283 we have provision of 12 situations in which the office of a director shall become vacant, and sub-section (3) of the said section provides as follows : "283. (3) A private company which is not a subsidiary of a public company may, by its articles, provide, that the office of director shall be vacated on any grounds in addition to those specified in sub-section (1)". I have supplied certain underlining to both the sub-sections, viz., section 274(3) and section 283(3), and it can be seen that the underlined portions in both the sub-sections are in identical phraseology. During the course of arguments both sides have referred me to the previous legislative history and, therefore, at the outset, reference may be made to analogous provisions under the Indian Companies Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot quite uniform and there are American decisions to the effect that the general history of a statute and the various steps leading up to an enactment including amendments or modifications of the original bill and reports of legislative committees can be looked at for ascertaining the intention of the legislature where it is in doubt; but they hold definitely that the legislative history is inadmissible when there is no obscurity in the meaning of the statute". Krishna Iyer J., speaking for the court (at page 2558), in the above report proceeds to sound a rule of caution that such extrinsic material, although admissible, should not be regarded as decisive and that resort may be had to such sources with great caution and only when incongruities and ambiguities are to be resolved. Bearing in mind these words of caution, I think reference may now be made to the extracts from the Bhabha Committee's Report and the Notes on Clauses which were brought to my attention during the course of arguments. Paragraphs 92, 93 and 94 of the Bhabha Committee's Report deal with its recommendations vis-a-vis the existing section 86-I of the Indian Companies Act, 1913, and in paragraph 93 is to be fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as distinguished from grounds of vacation of office by a director ; and the recommendation to be found in paragraph 93 of the said report was restricted to additional grounds of vacation, and its opinion was that the public companies and private companies which are subsidiaries of public companies ought not to be allowed to have articles of association containing additional grounds of vacation of office by directors. As stated earlier, the three questions posed for the consideration of the court fall into two parts ; the first dealing with the interpretation and construction of section 274 primarily, and the second with the interpretation and construction of section 169. As the latter point is, in my opinion, one which is fairly easy to answer and does not admit of detailed arguments, I propose to deal with the provisions of that section first and express my views on questions (b) and (c) of the special case, which are based on the provisions of section 169. After this is done, I propose to revert to the somewhat difficult question of construction of section 274. Under the Indian Companies Act, 1913, the provisions as regards calling of extraordinary general meetings on requisiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d "valid" used in sub-section (6) of section 169 as having reference to the provisions of the earlier five sub-sections of that section rather than indicating compliance with any other requirements or provisions of the Companies Act. In other words, to put it shortly, all that is required to be seen before the provisions of sub-section (6) of section 169 become applicable would be to consider whether the requisition deposited was in accordance with the provisions of section 169 as to its contents, the number of signatories and similar matters, and it would not be open to the board of directors of a company to refuse to act on a requisition on the ground that, although such requisition was in accordance with the requirements of section 169, it was otherwise invalid. This conclusion receives support when one peruses subsection (5) of section 169, where also the use of the word "valid" is perceived. The learned counsel for the plaintiffs emphasised the mischief that in his opinion would be caused by an otherwise invalid requisition being made which would put the company to considerable financial loss for what he called would be an exercise in futility. On the other hand, the question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision no question of repugnancy could arise. In other words, it was submitted that the terminology employed in section 9 was such as to exclude any provision in the articles being rendered invalid by what was not expressly provided in the Companies Act or in any of its provisions, but which had to be read in the same provision by necessary implication. In my opinion, this submission is not one which can be accepted. It is impossible to read the expression "provisions of this Act" in section 9 as indicative merely of the express provisions and exclude the meanings which have to be read in the provisions of the Act by the rule of necessary implication. In my view, any meaning which has to be read in any section of the Act by the rule or principle of necessary implication is as much a provision of the Act as something expressly provided. In this view of the matter any provision contained in the memorandum, articles, agreement or resolution of a company which is repugnant to any provision of the Act, whether such provision be expressly found in any section or is to be read in the said section by necessary implication, would be clearly void. I may also dispose of, since it is not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds of disqualification other than those found in sub-section (1) of section 274. It is clear that the provisions to be found in sub-section (3) of section 274 are not couched in a happy or direct language. There would not have been any occasion to resort to the doctrine of necessary implication if sub-section (3) of section 274 had been framed as containing an express prohibition to operate directly against the companies which were sought to be prohibited from having additional grounds rather than in the form of an enabling provision, which, surely, is not an example of good legislative draftsmanship. Merely by way of interest I had been referred by learned counsel to observations of this court in D. B. Godbole v. Kunwar Rajnath AIR 1956 Bom. 652 where Chagla C.J. had occasion to refer to certain other provisions of the Companies Act, 1956, which were similarly couched in unhappy and imprecise language. It is with this handicap that I must now proceed to give some meaning, if at all a meaning can be given, to the provisions of sub-section (3) of section 274. Here, it may be stated that it is not necessary for the court to give some meaning to a legislative provision although ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases : "In Stradling v. Morgan [1560] 1 Plowed 199, 206, the question was whether an action founded upon a statute could be commenced elsewhere than before the justices of Glamorgan, at their sessions, for by the laws in Wales Act, 1542, it was enacted that ' all actions founded upon any statute shall be sued by original writ, to be obtained and sealed with the said original seal returnable before the justices at their sessions, within the limits of their authorities, in manner and form before declared '. It was contended that these words had a negative meaning, that is to say, that the statute appoints the place, order and form of such suits, and that the plaintiff cannot sue in any other place or form, and, therefore, that this action, founded upon a statute, which is appointed to be returned before the justices of Glamorgan, at their sessions, cannot be sued or returned, elsewhere or before any other justices. And so it was decided by the court, and a verdict which had been found for the plaintiff was set aside. In Amy Towsend's case [1554] 1 Plowd 110, the question was whether the Statute of Uses, ss. 1, 2, which was expressed affirmatively, contained an implied negative. By ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to use as a trade mark a word used before the passing of the Act clearly negatives the conclusion that a distinctive word can be so used if the word was not so used before the passing of the Act'." I was also referred in this connection to Stroud's Judicial Dictionary (4th edition), at page 1739, where the expression "necessary implication" and "necessary intendment" are dealt with. I was also referred to several authorities cited in Stroud's Judicial Dictionary for a clearer exposition of these two expressions. It is obvious that the expression "necessary" means something stronger than "possible" and the implication must be one which is so strong and irresistible that the alternative is not one that would appeal to a rational mind. In Cork County Council and Richard Burke v. Commissioners of Public Works in Eyre, The Minister for Finance and the Attorney-General [1945] Ir R 561,573, there are observations as to the phrase " necessary implication " which may be quoted : "But what is ' necessary implication ' in the construction of a statute ? I may cite the words of Lord Eldon in Wilkinson v. Adam [1813] 1 V & B 422, 466, where, after stating that in construing a will, a partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gathered from the actual words used and not from any words not to be found in the statute, but which are required to be added to make the statute clear and to bring out the policy intention. A number of authorities were cited at the Bar in connection with these propositions. These will be referred to, if necessary, when these submissions are discussed in somewhat greater detail as I propose to do. The first two propositions submitted by learned counsel for the defendants were obviously based on the position of the previously existing law, viz., the Indian Companies Act, 1913, as this was the law in existence prior to the Companies Act, 1956. As seen earlier, under section 86-I, additional grounds (of vacation of office by directors) could be adopted by all companies, and it was submitted that if that was the state of the existing law, a change in that law ought not to be lightly inferred unless the words of the statute were clear. In Murugiah v. Jainuddin [1954] 3 WLR 682,687 (PC) the Privy Council has spoken approvingly of a passage in Maxwell's Interpretation of Statutes (10th edition), at page 81, entitled "presumption against implicit alteration of law". The said passage in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontained in statutes which they merely amend." There is a similar passage in Craies on Statute Law (7th edition) to be found on pages 112 and 121; it is, however, not necessary to set it out. In connection with these principles of interpretation certain further submissions were made. It was urged that the enabling provision in subsection (3) must not be regarded as barring by implication the companies other than the companies mentioned in the enabling provision. I was referred to the enabling provision contained in section 86-I(2) of the Indian Companies Act, 1913, and it was argued that such a provision was enacted for abundant caution and not because without it the companies would have been precluded from having an additional ground of vacation of office of directors by adopting suitable articles. In the same vein, it was urged, the enabling provision to be found in sub-section (3) has to be similarly construed, and there is no warrant for reading any prohibition or bar in the said enabling provision. In connection with the Report of the Company Law Committee (the Bhabha Committee) it was obvious that the said report only dealt with the grounds of vacation of office, and the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght not to be interpreted in a manner which would render such provisions or such rules imposing such qualifications as invalid in law. Apart from the specific articles of the Cricket Club which may require reconsideration, I found some of the instances given to be far-fetched, and the contingency submitted for the court's consideration by learned counsel for the defendants did not appeal to me as a reasonable and probable contingency which ought to affect the interpretation of the statutory provisions with which we are concerned. Similarly, arguments were based on the principle to be found enunciated in sections 29, 31 and 36 of the Companies Act, which statutory provisions would seem to indicate the rights of the members of a company to adopt such articles as they wish to adopt, subject to the general principle that the articles or changes in the existing articles should be made bona fide. It was submitted--and there is considerable force in the submission-- that such power of the members ought not to be restricted or deemed restricted unless such curtailment or restriction was provided for in express language or such language from which only one irresistible inference could be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e will now be required to be made to a judgment of this court on which great reliance was placed by learned counsel for the plaintiffs. That was not a final judgment but an order at an interlocutory stage. It did not deal with the provisions of section 274 but proceeded upon a construction of section 283 of the Companies Act, 1956. But nevertheless, in my opinion, it would have a great bearing on the matter canvassed before me. Reference may immediately be made to this judgment. The said judgment was given by Vimadalal J. on 10th October, 1968, in his order made on the plaintiffs' Notice of Motion dated 30th August, 1968, in Suit No. 552 of 1968 (Atul Drug House Ltd. v. K. M. Chandaria). The Notice of Motion taken out by the plaintiffs in that suit (hereinafter referred to as "Atul Drug House") was for an injunction restraining the 1st defendant, one Chandaria, from acting as a director and/or managing director of the 1st plaintiff-company, viz., Atul Drug House, and it was, inter alia, contended in the motion that the 1st defendant had vacated his office as a director by virtue of the provisions of article 163 of the articles of the said company. In the order the said article has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ublic company) could, however, by its articles provide that the office of director shall be vacated on any grounds in addition to those specified in sub-section (1). There can, in my opinion, be no doubt that section 283 deals with the vacating of the office of a director before the normal term of tenure of his appointment has expired, or in other words, that it provides for the earlier determination of his tenure on the happening of the events specified therein. It is the contention of Mr. Amin for the defendants that it is not open to a public company like the 1st plaintiff-company to provide, as it has sought to do by article 163 of its articles, for the earlier determination of the office of a director in any case which does not fall within section 283(1) of the Companies Act, and that it is only a private company which is not a subsidiary of a public company that can by its articles make any such provision by virtue of the express provision contained in subsection (3) of section 283. In answer to that contention of Mr. Amin, it was sought to be contended by Mr. Thakkar on behalf of the plaintiffs that section 283 is not exhaustive of all cases in which a director's office stan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 1st plaintiff-company earlier than his normal tenure, it would be void.....". We are not really concerned with the remaining observations in the order, though it is material to point out that the learned judge in the said order made it quite clear that his views as to the construction of article 163 were prima facie views, whereas no such reservation was made in so far as his views on section 283(3) were concerned. I am making this observation in view of the submission made by the learned counsel for the defendants as to the weight to be given to the observations of Vimadalal J. to be found in the relevant passage in the said order, which passage has been fully set out by me. The learned counsel for the defendants submitted that these were the views at the Notice of Motion stage and that the views or observations made at such interlocutory stage ought not to be given that binding effect as the views expressed in a final judgment. Now, even in an interlocutory proceeding, the court may be called upon or required, for the purposes of passing an appropriate interlocutory order, to construe a statutory provision or to apply the same to a given set of facts. At that stage the obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was emphasised that there was no previous legislation dealing with the disqualifications of directors as such, nor was there any recommendation in that behalf by the Bhabha Committee, so that it would not be possible to say that sub-section (3) of section 274 was enacted to prevent the type of mischief which might be presumed to be in the contemplation of the legislature when it enacted sub-section (3) of section 283. In other words, I was asked, if I regarded the observations of Vimadalal J. as having substantial persuasive authority to restrict them to sub-section (3) of section 283 and not to follow them in a case where the construction of sub-section (3) of section 274 was concerned. This approach was sought to be supported on the basis of the reasoning which had been earlier referred to and set out, part of which, as I have already expressed, cannot be considered to be devoid of substance, although there is some part which has not appealed to me. The difficulty in adopting this approach arises from the fact that the operative wordings of the two subsections are identical. As indicated earlier, in my opinion, it would be appropriate to consider these two sub-sections in juxta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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