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TMI Blog1980 (11) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... each. In August, 1979, the company allotted further shares to the extent of Rs. 2,95,000 among the persons mentioned in para. 6 in the affidavit. The persons set out in ( c ) to ( f ) therein have not paid the balance of 65% of the share value and hence they are no longer shareholders of the company. Under article 20 of the articles of association of the company, the applicant is the managing director for life and as such he is still functioning. Reference has been made to certain debts to certain parties mentioned in para. 13. In para. 14, it is stated that the size of the board of directors of the company was enlarged by the addition of four persons but subsequently, the company has also allotted further shares to the persons mentioned therein. According to the applicant, when he was out of Madras on 19th September, 1980, and by the time he could return, certain movables belonging to the company had been removed to premises No. 300, Mowbrays Road, which resulted in the filing of certain police complaints and action is being taken against respondents Nos. 2 and 3 for what has been done. On October 28, 1980, the communication signed by the second respondent, convening an extraord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rowals and the alleged expenses incurred in respect of certain pictures, are not true and intended to syphon off the funds of the company to benefit the applicant, and after the allotment of 2,900 shares, no further allotment of shares in the capital of the company had been effected. The applicant does not hold 2,000 shares as claimed and he has only paid a sum of Rs. 5,000 for the 50 shares. As for the 950 shares allotted to him in August, 1979, he had not paid any amounts and these are matters on record found in the minutes of the board which would show that no allotment was made after August, 1979, as claimed by the applicant. Equally, Damodaran Nambudiripad had also not been allotted any shares. When once the company has chosen to convene an annual general body meeting with proper notice, pursuant to the decision of the board, taken as early as October 27, 1980, there can be no interdict to the holding of such a meeting at the instance of the applicant by invoking rule 9 of the Rules. The apprehension expressed of physical intimidation is without any substance and the applicant is not prevented from participating in the meeting. Though he claims of holding of proxies, so far no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicant had stated that he apprehends physical danger and of intimidation and of manipulation of proceedings of the meetings. Whether in the context of such an apprehension expressed, the court by exercising powers under rule 9, can direct outsiders to be observers, is the aspect on which Mr. Raghavan would contend that in a similar situation, when a Division Bench of this court directed an observer to be present, the Supreme Court had held that when a meeting has been already called for by the company, an application under section 186 of the Act was not maintainable and the relief granted by this court deserved to be set aside. It was a case in which the respondents therein lodged a requisition under section 169 of the Act calling for the extraordinary general body meeting of the company for the removal of one of the two managing directors. Certain other shareholders similarly lodged a requisition for the removal of the other managing directors also. The meeting was directed to be held at the residence of one of the shareholders of the company instead of its registered office, because the shareholders were divided into two factions belonging to the two groups of managing director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be scrapped rather than being not available for persons like the applicant. Mr. Raghavan, on this aspect, contends that if the mere surmise or an expression of apprehension in an affidavit is to be a valid ground for inducting an outsider to be present in company meetings, it would take away the right of corporate bodies to decide their affairs in the manner in which they may choose to do. If, at the instance of one of the directors or a shareholder, an outsider is to come in, may be an advocate-commissioner or an auditor or any other party as may be appointed by the court, it would prevent a free and frank discussion when the shareholders have a right to do that without any watchful eye over their affairs. When the Supreme Court has held, by reference to section 186 of the Act, that once a meeting is called by the company, there can be no question of appointment of a chairman to be present for other purpose in a meeting, it is indicative of the approach to be made when an application is filed by a party merely invoking rule 9 of the Rules. It was also a case where the meeting was held in the residence of one of the shareholders of the company and an apprehension was expresse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the manner in which the election of the directors should take place, to hold whether it would be by ballot or by show of hands and for him also to decide as to how and in what manner proxy votes should be received and rejected. This is a case where the applicant only wants an observer to be present. He cannot take any decision as to how the proceedings are to be conducted. He cannot participate in the meeting nor can he issue directions to any of the persons present in the meeting either to do a particular thing or not to do in a particular manner. He can at best be only an observer so that later on in court the advocate-observer may be examined to speak as to what has happened. Here again it was pointed out to Mr. Harikrishnan that it is not as if the evidence of the advocate-observer may be accepted in toto, and no other evidence could be received to contradict what he may say. It would put the advocate-observer in a great predicament, if what is claimed or observed by him is ultimately found to be not correct, or that himself being not very much conversant with the affairs of the company he had not properly understood the situation, etc ., it would result in the court havin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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