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TMI Blog1979 (10) TMI 161X X X X Extracts X X X X X X X X Extracts X X X X ..... men, who are holding a block of shares in those companies, has constituted one group and the other is constituted by the other brothers led by Inderson Mittal, Ratan Kumar Mittal, their relatives, henchmen and stooges. In the respondent-company, the shareholdings of the petitioners and their group are set out in para 6 of the petition in which it is alleged that a block of 5,000 equity shares in the capital of the respondent-company is held by Southern Steel Ltd., another company of the Mittal group which is supporting the present petition and thereby the qualification shareholding under section 399 of the Companies Act, 1956, to make this application is acquired. In other words, if the said consent of the Southern Steel Ltd. to this application is not valid or legal the present application must be held to be not maintainable as the petitioner cannot acquire the necessary qualification share under section 399 of the Companies Act, 1956. This position is admitted by both the parties and one of the main questions argued as a preliminary issue in this application is that it is not maintainable, as the alleged secretary of Southern Steel Ltd. who has signed the letter of consent which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner No. 1, Mohan Lal Mittal, from respondent No. 4, Ratan Kumar Mittal signed on behalf of the respondent-company calling a board meeting on May 14, 1976, at Hyderabad. It is alleged that petitioner No. 1, Mohan Lal Mittal, as a director issued a notice dated May 5, 1976, to all the directors that the said meeting scheduled to be held on May 14, 1976, had been postponed due to unavoidable circumstances. It is now alleged that in spite of such postponement respondents Nos. 2-5 held the meeting on the May 14, 1976, illegally and wrongfully. It is further alleged that one Mr. K. M. Gupta, alleged to be the secretary of the respondent-company, requested respondent No. 4, Ratan Kumar Mittal, for the particulars of the proceeding of the meeting and a copy of the said minute of the meeting for keeping the same at the registered office of the company and had various correspondence dated June 2, 1976, June 3, 1976, copies of which are annexed to the petition. It is further alleged that respondent No. 4, Ratan Kumar Mittal, and/or Hyderabad office of the respondent-company did not send any copy of the minute or proceeding of the alleged meeting claimed to have been held on May 14, 1976. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay 14, 1976, was illegally held and it should be ignored. It is further alleged by the petitioner that the full facts and circumstances of the alleged wrongful and illegal acts of respondents Nos. 2-5 carried out at the meeting held on December 11, 1976, would appear from the letters dated December 13, 1976, and December 18, 1976, from respondents Nos. 6 and 7, respectively, addressed to the board of directors of the respondent-company which are annexed to the petition. It is further alleged that by a letter dated December 13, 1976, addressed to Mr. K. M. Gupta alleged to be the secretary of the company by respondent No. 4 it was alleged that the said Mr. Gupta had ceased to be the secretary of the company and called upon him to hand over all books, papers and documents of the company to one Mr. K. Gopal Rao, the alleged new secretary of the company, apart from the minutes of the board meeting which was already handed over at the meeting dated December 11, 1976. The said letter is also annexed to the petition. It is alleged that petitioner No. 1 received a letter dated December 17, 1976, from the said Mr. Gopal Rao alleged to be the secretary of the respondent-company enclosing a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illegally conducted and false and incorrect minutes have been prepared and all these constitute oppression, mismanagement and acts prejudicial to the public interests as well as to the company and its shareholders. The respondents apart from disputing and denying all the allegations took up a preliminary objection as to the maintainability of the application as the alleged consent of Southern Steel Ltd., which is another company of the Mittal group, as the secretary who is alleged to have granted the consent was not the secretary of the company and was not authorised by the board of the said Southern Steel Ltd., to grant such consent, and, therefore, the said consent was invalid and if the said consent is invalid, then the petitioner has not the requisite qualification under section 399 of the Companies Act, 1956, and the petition is not maintainable. Mr. Nag in support of his contention that the consent is valid relied on the Companies Act, 1956, particularly the position of the secretary under the Companies Act, 1956, and his authority as denned under section 234 and also powers of the director under section 292 of the Companies Act, 1956. He also relied on the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsent letter on behalf of the Southern Steel Ltd. signed by the alleged secretary is not valid, legal or of no effect. He submitted that assuming the said Mr. K. M. Gupta as the secretary at the time of signing of the alleged consent letter he had no authority without resolution of the board authorising him to do so and without any affidavit of competency. He referred to the provisions of sections 2(45), 291, 292 and 399(3) of the Companies Act, 1956, read with the Companies (Court) Rules, 1959, rules 19, 21 and 88 which make it clear that without the proper resolution and affidavit of competency a secretary has no power to sign the consent letter for making an application under sections 397-398 of the Companies Act, 1956, to be a valid consent within section 399. He also referred to Forms Nos. 3, 43 and 44 of the Companies Act, 1956, in support of his said proposition. Thereafter, Mr. Mukherjee referred to the articles of association of the company, definitions of secretary and director in clause (2) and articles 155 and 161 thereof. Mr. Mukherjee referred to a decision in Haycrajt Gold Reduction and Mining Co., In re [1900] 2 Ch 230 at p. 236 (Ch D). He submitted that giving c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inable as the consent of the Southern Steel Ltd. is not valid in fact or in law and, therefore, the requirement of section 399 of the Companies Act, 1 956, is not satisfied and the application under sections 397 and 398 of the Companies Act, 1956, is not maintainable and should be dismissed. Mr. Mukherjee next submitted that the petitioner is making a complaint qua director and, therefore, the petitioner is not entitled to any relief under sections 397 and 398 of the Companies Act, 1956. He submitted that there is no material or any allegation that he has suffered as a shareholder of the respondent-company. Further, Mr. Mukherjee submitted that the interim order passed in this application from time to time has removed all the alleged acts complained of and regularised the irregularities, if any. Therefore, he submitted that there is nothing left of the present application save and except certain academic questions which are sought to be raised from the Bar. Admittedly, since the present application was moved on December 21, 1976, various orders were made by this court from time to time appointing a special officer to supervise any board meeting to be held by the orders of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied by this order all other interim orders will continue. Special officer and all parties to act on a signed copy of the minutes on the petitioner's solicitor undertaking to complete and file this order". "The Court: The order dated January 4, 1977, is varied to this extent that the provisions for bearing the cost at the first instance by the petitioner should be deleted and it is ordered that the cost to be paid out of the funds of the company at the first instance and the said order is further modified that the special officer appointed in the other companies under the control and management of Mittal group to fix the venue of such meeting of the board at a time convenient to the directors attending the same, i.e. , the date, place and time should be so arranged as to make it convenient for them to attend at the same time during their visit at Calcutta. Save as modified aforesaid, the order dated January 4, 1977, will continue. The special officer and all parties to act on a signed copy of the minutes". It now appears that pursuant to the orders of this court there was a board meeting of the respondent-company held on February 12, 1977. The special officer was also direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mittal and also their group at Rs. 12 per share. After the sale is completed, the special officer will hand over all the documents lying with him to the person concerned, whoever buys the shares of the other. Purchase price of the shares to be sent to the respective solicitors within a fortnight. There will be no further order on this application. This order can be executable as a decree of court and should not be construed as violation of the order of court. Mr. Bose asked for stay of operation of this order for one week, which is refused. Further remuneration of 100 Cms. be paid to the special officer by the company. All parties to act on a signed copy of the minutes". The said order seems to have been modified on August 30, 1977, to the effect that the order dated on August 10, 1977, was not a consent order. The said order dated on August 30, 1977, is set out hereunder : " The Court : The order dated on August 10, 1977, passed by me was not a consent order. The only thing which was agreed to by and between the parties that the market price was Rs. 6 per share and that the court should fix the price. It is further recorded that after the judgment was delivered Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he present application, Mohan Lai Mittal authorised the alleged secretary to sign the consent letter on behalf of the Southern Steel Ltd. without whose consent the present application under sections 397 and 398 of the Companies Act, 1956, is not maintainable as the requisite qualification under section 399 of the Companies Act, 1956, could not be fulfilled which is an admitted position. Mr. Nag's main contention that by the amendment of the provisions of the Companies Act, in the definition of secretary and the various powers, the secretary is now given under the Companies Act, and also by various judicial decisions it must be taken as a proposition that a secretary can sign the consent letter for supporting an application under sections 397 and 398 of the Companies Act, 1956, without any resolution of the board or the company authorising him to do so. In my view, if that proposition is to be accepted there will be disastrous result and the conception of company management would be completely demolished and the secretary would become the company in no time. According to Mr. Nag, the definition of secretary in section 2(45) of the Companies Act, 1956, which runs as follows . " ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d functions of the secretary are concerned in the modern company are more or less the same. These two paras, are set out hereunder. "546. Nature of employment of secretary. The Secretary, being an agent only, is in the same position as any other agent of a company. If his dealings are such that his company is not bound by them, he may himself be liable, either as principal or on the ground of breach of warranty of authority. Whereas it has formerly been held that he had no authority by virtue of his position to make representations to induce persons to contract with the company, his functions being ministerial only, his status has now greatly increased. He regularly makes representations on behalf of the company and enters into contracts on its behalf which come within the day-to-day running of the company's business, he signs contracts connected with the administrative side of a company's affairs; and all these matters are now within his ostensible authority. But he is not, whilst merely performing the duties appropriate to his office, a party to the carrying on of the business of the company, so as to make him responsible without more for fraudulent trading. He has no power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irs of the same. The Supreme Court decision in Lakshmiratan Cotton Mills Co. Ltd. v. Aluminium Corporation of India Ltd., AIR 1971 SC 1482, which has been cited by both the parties before me on the question as to the authority of the secretary of a company to act on behalf of the company does not really deal with the question which has arisen before me as to whether the secretary has the power to give consent under section 399 of the Companies Act, 1956, for moving a petition under sections 397 and 398 of the Companies Act, 1956, on behalf of the company which holds shares in the capital of the company in respect of which the application under sections 397 and 398 of the Companies Act, 1956, is made by the petitioner. In the Supreme Court decision, the question arose whether a letter written by the secretary on behalf of the company can constitute an acknowledgment within the meaning of section 19 of the Limitation Act, 1908, as acknowledgment for saving the bar against limitation. In the facts of the case, it was found that the person who had written the letter in question was a secretary-cum-accountant and holder of a power-of-attorney of the Corporation, and the statement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... down that in suits by or against a Corporation, any pleading may be signed and verified on behalf of the Corporation by the secretary or by any director or other principal officer of the Corporation who is able to depose to the facts of the case. The requirement of this rule is not that the principal officer must be empowered by a specific resolution to present the suit in a court of law. The only requirement of this rule is that the principal officer must be in a position to depose to the facts of the case. In the case of Jaipur Udyog Ltd., the petition has been signed by one Sri G.P. Gogla who has in his affidavit deposed that he is the senior executive officer (quarry) of the Jaipur Udyog Ltd. and that he was fully conversant with the facts of the case and was competent to swear to the affidavit. In petition No. 11 of 1971 of M/s. Hindusthan Sugar Mills Ltd., Bombay, the affidavit has been sworn by one Shri Rangnath Kabra who has described himself as the administrative manager of the petitioner-company and has stated that he was fully conversant with the facts of the case. These averments of the aforementioned two officers clearly show that the petitions were signed and verifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been clearly laid down and it cannot be said that he can override the board of directors of the company whose powers are defined under sections 291-293 of the Companies Act, read with the articles of association of the company. Further, rule 21 of the Companies (Court) Rules, read with Form No. 3 thereof makes it clear that any petition or pleading filed on behalf of the company must make an averment that the person verifying the petition must state that he has been duly authorised by the petitioner-company to make the said affidavit on behalf of the company and that appears to be the affidavit of competency as it is known in the original side practice of this court. It is true that in the note to Form No. 3 such a statement is necessary when the petition is verified by an affidavit sworn to by any person other than a director, agent or secretary or other officer of the company. But invariably in all petitions filed by the company an affidavit of competency is required to be filed by the person verifying the said petition. Then again in rule 70 of the Companies (Court) Rules, 1959, dealing with the proxy for voting at the meeting of a company where the shareholder is the membe ..... 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