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TMI Blog1975 (1) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... yet another case, but left open, Shrimati Jain v. Delhi Flour Mills Ltd. [1974] 44 Comp. Cas. 298 (Delhi), as one of difficulty but not being necessary for decision of that case. The company was formed under section 25 of the Companies Act, 1913, with no share capital and prohibiting the payment of dividend to its members. It had for its object the promotion of the interests of its members, who are engaged in the trade of exhibition, distribution and exploitation of motion pictures in the Union territories of Delhi and the State of Uttar Pradesh. Any person wanting to indulge in these (business) activities relating to motion pictures in the above areas has to become a member of this company. The company, according to its articles, is to hold its annual general meeting within six months of the closing of its accounts, which is the 31st December each year ; the last annual general meeting of the company was held on 3rd May, 1969. Article 24 of the company reads as follows : "At every annual general meeting all sitting members of the executive committee Khali retire from office. The retiring members shall be eligible for re-election in the annual general meeting in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a public company, shall ( a )be persons whose period of office is liable to determination by retirement of directors by rotation ; and ( b )save as otherwise expressly provided in this Act, be appointed by the company in general meeting, (2) The remaining directors in the case of any such company, and the directors generally in the case of a private company which is not a subsidiary of a public company, shall, in default of and subject to any regulations in the articles of the company, also be appointed by the company in general meeting." A member of the company (G. S. Mayawala) had filed a suit (476 of 1960), against the company in which there was an application for restraining it from holding the annual general meeting till the decision of the suit. The company voluntarily appeared in that suit and undertook not to hold any annual general meeting till the suit was decided. The suit ended in a compromise. Subsequent to the compromise 134 members had demanded, by a requisition which had been left at the office of the company on July 29, 1972, the holding of an extraordinary general meeting for consideration and adoption of certain resolutions as stated in that requisiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning how the meeting should take place and the elections should be conducted. Such a meeting and elections took place on October 13, 1973, when the 18 persons mentioned in this petition were elected as members of the executive committee (directors) of the company. It is now stated that in spite of the petitioner in C.P. No. 102/74 (J.S. Sood), who was admittedly one of the 18 who was so elected) pressing for regularisation of certain defaults and a further election of members of the executive committee on or before June 30, 1974 (the financial year closing on December 31 each year) no such meeting was called. In the result, it is alleged, that by June 30, 1974, all the 18 must be deemed to have vacated the office of directorship/membership of the executive committee by operation of law. In April, 1974, the petitioner had also communicated in writing to the company that their term as elected executive committee had expired on June 30, 1974, and they should not continue thereafter to act. Though the receipt of this communication was denied by the secretary of the company after an application (Cr. O. No. 84 of 1974) to punish him was filed, Mr. I. N. Shroff, learned counsel for the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the jurisdiction of this court under section 186 of the Act cannot be invoked. It is common ground that if the members of the executive committee/ directors did not retire and cease to be directors, as claimed in this petition, on or before June 30, 1974, the present petition under section 186 would not be competent, in the view that they themselves could call a meeting at which the directors/executive committee members could be elected. It, therefore, falls for consideration whether having regard to the relevant provisions of the Act and the articles of the company set out above, the 18 executive committee members/directors of the company retired and ceased to hold office on or before June 30, 1974, and for that reason it has become impracticable to call a meeting of the company. In addition to the sections of the Act noticed above, the following sections may also be noticed at this stage : "168. If default is made in holding a meeting of the company in accordance with section 166, or in complying with any directions of the Central Government under sub-section (1) of section 167, the company, and every officer of the company who is in default, shall be punishable with f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the thirty days aforesaid against the adjudication, sentence or conviction resulting in the sentence or order until the expiry of seven days from the date on which such appeal or petition is disposed of ; or ( c )where within the seven days aforesaid, any further appeal or petition is preferred in respect of the adjudication, sentence, conviction, or order, and the appeal or petition, if allowed, would result in the removal of the disqualification, until such further appeal or petition is disposed of. (2A) Subject to the provisions of sub-sections (1) and (2), if a person functions as a director when he knows that the office of a director held by him has become vacant on account of any of the disqualifications, specified in the several clauses of sub-section (1), he shall be punishable with fine which may extend to five hundred rupees for each day on which he so functions as a director. (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)." The plain language of section 166 is that not more than 15 months shall el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of directors did not mean that they could not continue after the year. No provision of the Companies Act was even discussed. The Bombay decision rightly dissented from Kailash Chandra case ( supra ) and followed in In re Consolidated Nickel Mines Ltd. [1914] 1 Ch D 883 (Ch D) and A. Ananthalakshmi Ammal (a Division Bench decision of the Madras High Court). A single judge of the Madras High Court in V. Selvaraj v. Mylapore Hindu Permanent Fund Ltd. [1968] 38 Comp. Cas. 153 (Mad.), who did not refer to the Division Bench decision in A. Ananthalakshmi Ammal observed that the directors retired at an annual general meeting but since in that case the meeting had not commenced at all owing to the confusion which prevailed the previous directors must be deemed to continue in office. This decision which seems to proceed of the view, apparently, that there was no default on the part of directors since a meeting had been called but could not be conducted owing to confusion, is even distinguishable. The Indian decisions which have held that a retiring director vacates office if he fails to hold the annual general meeting are seem to be based on the view taken by the English c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o say that this question, which proceeded on a concession, should not be taken to have been decided; greater weight has to be attached to the holding in In re Consolidated Nickel Mines Ltd. ( supra ) , which was specifically referred to before the Court of Appeal but was not questioned ; on the other hand the correctness of the same was conceded before the Court of Appeal ; the concession on a question of law was not even sought to be withdrawn when the case was argued before the House of Lords. This argument also overlooks the observations of Lords Simonds in that case, Morris v. Kanssen (vide pages 467, 468 and 471 of 1946 A.C. the ruling starts on page 458). The headnote as stated in 1946 A.C. 459 reads :" No general meeting was held in 1941..............there were thereafter no de jure directors. " Having thus noticed what the position in England is as we are able to see that as per the above-said two decisions, no other case having suggested any contrary point of view it may also be rewarding to notice what, a leading English author on company law has to say. In Penning-ton's Company Law (third edition, page 478) the above-said two cases have been noticed in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) of section 283, which describes the eventualities in clauses ( a ) to (1) of sub-section (1) of section 283 as " disqualification ". It was next contended by Mr. Shroff that section 168 of the Act provides for default in the matter of complying with sections 186 and 187 and that all that the Act intended to provide was a penalty for those directors who did not comply with those sections and no more ; in other words, that independently of the said penalty there was no other disability attaching to a director functioning after the maximum period allowed under section 255 had expired. I find this contention difficult to follow. That a penalty has been prescribed for a defaulting director is something totally distinct from the question how long a director continues to hold office in the absence of his being elected. Again In re Consolidated Nickel Mines Ltd. [1914J 1 Ch D 803 (Ch D) has been followed in India also as an authority for the position that a director cannot by his own default in not calling the annual general meeting, as he is bound to do, take advantage and still continue as director and/or collect the remuneration payable to such director. This view found favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued as de jure directors/executive committee members. The settled rule of interpretation is that a statute will have to be interpreted with reference to the object of the statute, the mischief to be remedied and the remedy provided. The object of the legislature here was clearly to see that the directors would not continue beyond the terms for which they were elected and also fixing the maximum time that can elapse between one annual general meeting and another with a further statement, as under section 255, that at least one-third of the directors would, in the absence of article provision to the contrary, retire at every annual general meeting. In this case article 24 provides for the whole set of directors retiring at the annual general meeting. The articles (article 31) provide that when an annual general meeting takes place the persons concerned would retire at the end of such meeting. This provision was to remove a possible anomaly of their having to retire either before the meeting or during the course of it. In the present case, when no annual general meeting had taken place for the maximum permissible period the executive committee members/directors did retire at the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e common law rather than against it except where or in so far as the statute is plainly intended to alter the course of the common law." (page 188). ( c )If it is clear that it was the intention of the legislature in passing a new statute to abrogate the previous common law on the subject, the common law must give way and the statute must prevail; but there is no presumption that a statute is intended to override the common law." (page 339). ( d )The courts will lean against any presumption that a consolidation Act was intended to alter the common law." (page 363). Reference to another well-established rule of common law may also be made; it is that a person should be heard before his rights are affected ; if there are any omissions in the statute in this regard " the justice of the common law principle would supply the omission ". (See above observation of Byles J. which has become classic in Cooper v. Wandsworth Board of Works [1863] 143 EE 414; 14 CB (NS) 180) . In that case the metropolitan statute empowered the district board to alter or demolish a house, where the builder has neglected to give notice of his intention to build, seven days before proceeding to lay or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court under section 186 being exercised by the Central Government after the said Act comes into force ; the said Act comes into force only from the appointed date, which is yet to be fixed. So far as the present case is concerned, therefore, a meeting can be called by this court under section 186. The scope of section 186 of the Act has been discussed by me elaborately on more than one occasion, vide Shrimati Jain v. Delhi Flour Mills Co. Ltd. ILR [1973] 2 Delhi 322 and In the matter of Companies Act, 1956, and In the matter of Motion Pictures Association [1974] 44 Comp. Cas. 298 (Delhi). I had referred, among other decisions, to that in United Breweries Ltd. v. Rustomji and Co. Ltd. [1962] 2 Comp. LJ 155. Explaining the principles to be borne in mind while dealing with an application under section 186 it was stated, inter alia , that even when there is doubt as to whether a meeting in the regular course could be called the company should not be exposed to difficulty and risk of litigation; it would be a proper case, therefore, for the exercise of the power conferred under section 186 to call a meeting of the company. It is in the light of the facts discussed abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a partner in more than one member-firm he can on being authorised by the concerned firm or firms vote for the firm or firms concerned. In such cases ( i.e. ) where the person concerned is representing more than one member firm when signing the attendance register at the meeting he will indicate therein the firm/firms which he is representing. (4)All proprietary concerns can vote only in person, subject to identity and membership being verified. (5)The nominations along with the consent of the person nominated in the case of those wishing to be elected as office bearers will reach the secretary of the company on or before 5 p.m. on 13th February, 1975. The nominations will be scrutinised by the chairman. The last date of receipt of objections to nominations will be on or before 5 p. m. on 15th February, 1975. The chairman will go into the objections, scrutinize the nomination papers and make his decision concerning them. For this purpose he will attend the aforesaid premises of the company on 17th February, 1975. The list of valid nominations will be dispatched, under certificate of posting, by the secretary of the company to all the members not later than the 19th February, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f them be paid rupees fifty. (13)As soon as the voting is over the counting of votes will commence and the result will be announced that night itself. (14)After the election is over the chairman will submit a report to this court concerning the meeting along with the requisition slips, ballot papers, the attendance register, nominations, authorisations and any other documents that may be considered relevant by the chairman, all in sealed container, within a week after the meeting. (15)Only the contesting candidates will be allowed to be present inside the premises when the polling and counting take place; no other person on his behalf to help the candidates will be allowed to be present. The chairman will not allow the staff of the company to participate in the matter of conducting the election. (16)The chairman (Shri Prithvi Raj Sachdev) will be paid a remune ration of Rs. 2,000, the alternative chairman (Shri A. L. Joshi) Rs. 1,000 and the four scrutineers (Sarvashri K. L. Budhiraja, M. L. Sachdev, Suhinder Singh and S. M. Saxena) Rs. 500 each, by the company. Sarvashri M. L. Sachdev, Suhinder Singh and S. M. Saxena, officers of this court who have been appointed scrutine ..... X X X X Extracts X X X X X X X X Extracts X X X X
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