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TMI Blog1979 (11) TMI 199X X X X Extracts X X X X X X X X Extracts X X X X ..... residents and secretaries of the various unions and delegates elected from among the permanent members. Notice for the 75th annual general meeting, to be convened on 30th December, 1978, was published on December 6, 1978. The agenda included the passing of the balance-sheet and the profit and loss account for 1977 and the election of the president, vice-president, general secretary, devaswom secretary and the directors. In this petition filed under sections 10 and 166 of the Companies Act, 1956, the petitioner, a permanent member of the yogam, seeks to challenge the validity of the meeting held on December 30, 1978, on the following broad grounds : ( i )The delegates who attended the meeting were not duly elected by the branches ; the head office accepted as valid, lists received from the branches beyond the time specified under art. 44. Discrimination was also practiced in the matter of entertaining such lists. ( ii )Against the provisions of article 15, the nomination of a branch secretary to the director board was approved at the meeting ; ( iii )About 60 delegates admitted to the meeting belonged to the SNDP Sabha which was once functioning in the Cochin-Kanayannur Taluk; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eneral meeting and election of directors, unless jurisdiction over them are expressly taken away by some other provisions of the Act and vested in other authorities. On behalf of the respondents, on the other hand, it is contended that sections 2(11) and 10 cannot be attracted at all unless power is conferred on the court to deal with the matter, by some other provisions of the Act. From the days of Foss v. Harbottle [1843] 2 Hare 461 courts have been showing a distinct disinclination to interfere in the internal management of a company at the instance of a minority of members dissatisfied with the conduct of its affairs by the majority. Different reasons are advanced for this, but they mainly rest on the need to preserve the right of the majority to decide how the company's affairs should be conducted. Management functions are best left to those in management with the support of the majority, and the court's views are not to be imposed on them. The rule has, however, been stretched further and in some cases at least courts have refused to remedy wrongs done to the company, unless the grievance is backed by a majority. The principle is that the company, with a separate legal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract, and the remedy is mostly to prevent a threatened act, and not to get undone something improperly done. Apart from corporate rights which are but rights to get remedied wrongs done to a company, a member has also personal rights to sue for wrongs done to himself in his capacity as a member. These individual rights stem partly from contract, express or implied, and partly from the general law. A contract is implied between a company and a member who joins it. And this gives him the right to have his name properly entered in the register of members with all correct particulars, to vote at meetings of members, to receive dividends and to have his capital returned to him in whole or in part, in the event of winding up ; and he can, therefore, sue for enforcing these rights. Under the general law, he has an individual right to restrain the company from doing ultra vires acts, to have a reasonable opportunity of attending and speaking at meetings, to move amendments at such meetings, to transfer his shares and not to have his financial obligations to the company increased without his consent. The Companies Act also gives him some personal rights such as rights to inspect do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt for relief. Section 107 is another instance where dissentient shareholders can complain against variation of a class of shares. And there are also provisions, like those in section 235, where members can apply to the Central Govt, for appointment of inspectors to investigate the affairs of a company. Personal rights are also recognised by provisions like those in section 155 and section 163(2). Under the former, any member "may apply to the court" for rectification of the register of members, and under sub-section (6) of section 163 the court is empowered to enforce the rights recognised by sub-section (2). But what about other rights in respect of which remedy by way of resort to the company court is not provided for? Section 10 of the Act only attempts to enumerate or specify "the court having jurisdiction under this Act" where such jurisdiction is conferred on a court by the other provisions of the Act. Powers are conferred by the Act not only on courts, but also on other authorities like the Central Govt., the Company Law Board, and the Registrar ; and where a power is vested in a court, that court has to be specified. Beyond so specifying the court competent to deal with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tered office or without due special notice, the Central Govt. can possibly interfere. But what is to be particularly noticed is that the member can complain to the Central Govt. alone, and not to the company court. The company and its officers can be fined under section 168 for breach of section 166 or of a direction under section 167; but where a meeting is called with due notice, in proper time and at the proper place, and the proceedings are still held in violation of the articles or of other legal provisions, such violations are not matters even the Central Govt. could rectify. Section 186 empowers the Company Law Board, on the application of a director or member or even suo motu, to order a meeting (other than an annual general meeting) of the company to be called, if certain conditions exist. The statutory scheme is thus to bring into the picture the Central Govt. in the case of annual general meetings and the Company Law Board in the case of others ; and even these two come in under limited circumstances and for exercising limited powers. The court defined in section 10 does not come into the picture at all. Considerable reliance was placed on behalf of the petitioner on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not binding on the company or the shareholders. That such a relief can be obtained in the civil court and that by shareholders like the plaintiffs have been held in a number of decided cases." This decision seems to be on all fours with the facts of the present case, and I am bound by it. Counsel pointed out that the above view did not find favour with the Madhya Pradesh High Court in Nava Samaj Ltd. v. Civil Judge, AIR 1966 MP 286, where Dixit C.J., after extracting sections 2(11) and 10, observed (p. 290, para. 7, col. 1): "The plain effect of the above provisions is that the power and jurisdiction to deal with such matters as are covered by the Act itself has been given to the courts specified in section 10(1) with respect to any matter relating to a company, other than an offence against the Act . . . . . The courts nominated under the Act have exclusive jurisdiction to take cognisance of the matters covered by the Companies Act. This follows from the well-settled principle that where a particular court is specified or a special tribunal is created, by or under authority of an Act of Legislature, for the purpose of determining questions as to rights which are the crea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion over all matters except to the extent such jurisdiction has been conferred by notification on District Courts. Take, for example, section 107. This section provides that dissentient shareholders "may apply to the court" to have the variation cancelled. The shareholders concerned will have to find out which court they should resort to. It may be the High Court of one State or of another, depending upon where the head office of the company is situated. It may be the District Court of one place or another, again depending upon the notifications issued under section 19(2). The purpose of section 2(11) read with section 10 is only to enable the shareholders to decide as to which court they should approach for remedy, in respect of that particular matter. It is difficult to construe the definition clause as one conferring jurisdiction, exclusive or otherwise; and even section 10 refers only to "the court having jurisdiction under this Act", i.e., where such jurisdiction is conferred by the Act, as under sections 107, 155, 163(2), 237, 397, 425, etc. In other words, the conferment of jurisdiction on "the court" is not under section 10, but by other provisions of the Act like those e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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