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TMI Blog1981 (12) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... es is affected and the management has come to a grinding halt. He also complained that the petitioners were avoiding early orders being passed. My illness and intervening holidays delayed the matter a little. The reasons for the order are now stated. Motion Pictures Association is a company under section 25 of the Companies Act, controlling distribution and exhibition of Hindi Films (mostly) in the Northern region. The management and the working of the company are the subject-matter of innumerable proceedings in this court and subordinate courts for the last over ten years. These litigations broadly concern the complaints of mismanagement and oppression by a group of persons which is deeply entrenched in the executive committee and the sub-committee of the company. The story of Motion Pictures Association has a touch of Hitchcock Mystery. If it lacks fitness or if there are any loose ends, that is because it is a local version of the original film (Bombay "Fillum" as is described by cine critics). The company is unique in the sense that by itself it does not carry out any commercial or business venture but indirectly control business of crores of rupees every year. Its articles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot necessarily and by itself support the inference that the law was violated with the mala fide intention or that such violation was burdensome, harsh and wrongful but a series of illegal acts falling upon one another can, in the context, lead justifiably to the conclusion that they are part of the same transaction of which the object is to cause or commit the oppression of persons against whom those acts are directed. The Supreme Court has further summarised the scope of the powers of the company court in this regard. It has been held that the power conferred on the court to grant a remedy in an appropriate case appears to envisage reasonably wide discretion vested in the court in relation to the order sought by a complaint as the appropriate equitable alternative to a winding-up order. The Supreme Court has further held that even if a company petition fails the court is not powerless to do substantial justice between the parties and place them, as nearly as it may, in the same position as they would have been. Considering the history of the litigation since 1972, and repeated complaints of mismanagement and oppression, I am convinced that at least for some time, the ruling gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the direction that the annual general meeting should not be held in June, 1979. He was elected to the executive committee on February 28, 1979, which itself was a delayed election. After the statutory period was over, that is, on August 30, 1979, the company judge passed an order that pending further orders the company would not take any steps to convene the annual general meeting. Annual general meetings for the year 1971 were held under the orders of the court. The 1972 elections for the office bearers were found to be illegal by this court and fresh elections were ordered to be held under the observations of this court. A detailed procedure for election was also laid down by this court. This is the subject-matter of the decision of this court in ( In the matter of Motion Pictures Association, Delhi ) [1974] 44 Comp. Cas. 298; [1973] ILR 2 Delhi 624. A meeting thereafter took place on October 13, 1973. No meeting was called in 1974 and, therefore, by June 30, 1974, the term of the directors/executive committee members had lapsed. Even by now the annual accounts ending 31st December, 1969, to 31st December, 1973, had remained to be adopted. In C. P. No. 106 of 1974, this court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 32/76. C. P. No. 32/76 was filed by B. R. Kundra and others under sections 155, 397 and 398 of the Companies Act. The petition was filed by Shri K. K. Mehra, Advocate on December 6, 1976. The grounds of mismanagement and appression mentioned in the petition were as follows; (1)Bye-laws were framed in direct contravention of the memorandum and articles for wholesale dismembership on flimsy grounds. (2)The power of dismembership was used to eliminate dissent and opposition. (3)The office bearers were misusing their powers to further their own ends and to take undue advantage and monetary gains at the expense of other members. For example, persons who had obtained old and repeat-run pictures were not allowed to become the members of the company. Persons close to the dominant group and particularly Joginder Singh got the benefit of registration of repeat-run pictures. (4)If a member has defaulted in payment to another member he is removed from the membership. No member can thereafter deal with such a member and his whole business comes to a standstill. This power was abused by giving low instalments of payments to defaulting members supporting the dominant group, while the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bservations made by the learned judge are pertinent for understanding the complex nature of the dispute perpetuating in the company for over a decade. Justice Anand observed: "The basic hypothesis on which the petitioner justifies relief is, by and large, undisputed. It is not in dispute that the present management of the company had over the years been in the control of the group either by themselves or through their associates......It is also undisputed that during the last many years there has been discontent among the sections of the membership of the company............It is also not in dispute that allegations of oppression of the minority and of mismanagement have not been made for the first time in the present proceedings and this court had occasion to consider such allegations even earlier when certain remedial directions were made by Rangarajan J". Anand J. has further observed : "The apprehension that the minority, which has taken cudgels against the majority, which is said to be in the control of the management, is likely to be subjected to vindictive action, cannot be altogether brushed aside either as unwarranted or unreasonable and in the situation that has emerged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dev Sharma, advocate, and elect two members outside the executive committee members to be the additional directors. The court found that with these steps there will be no need for supersession of the executive committee. (4) C. A. No. 180/77 : This application related to imposition of unreasonable penalties, non-registration of a picture where a member owes some money to other members and improprieties in relation to appointment of arbitrators for settling dispute between the parties. As regards the registration of pictures where the dues are outstanding, the company promised that no discrimination would be made. No order was, therefore, found necessary. The court further directed that no penalty would be imposed on account of delay in registration of a picture without granting to the affected person reasonable opportunity of being heard. The learned judge further directed that a person interested in the picture belonging to a particular member or is hostile to him, should not be appointed as an arbitrator in his dispute with another member. The court constituted a panel of four advocates who could work as arbitrators if the company and a member do not agree on any. Against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company, for a ruling on the proper interpretation of some new articles without which elections would not have been free and fair. On May 19, 1978, Kapur J. cancelled the scheduled elections on 27th May, 1978, along with nominations because of the above illegalities and directed that the elections should be held by the end of July, 1978. The learned judge decided to further modify the Election Rules to "enable the elections to be held in a free and impartial manner without raising complications that have arisen over the past several years regarding these elections". The learned judge also held that the postponement of the elections shall not be treated as a default under the Companies Act, but in case the Registrar of Companies has any objection, this matter may be dealt with on a formal application later, if necessary". This order was passed on May 19, 1978. The learned company judge further extended the time for holding elections and directed that they should be held before February 15, 1979, but noting that sufficient delay had already taken place in holding the elections, the learned judge brought out some changes in the election rules. This order was passed on December 11, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aggrieved parties to raise it by way of challenge to elections in the appropriate proceedings. Two appeals were filed before the Division Bench of this court-Company Appeal No. 1/79 was filed by the dominant group against the order of Kapur J. directing the elections to be held on or before February 28, 1979, and appointing Mr. A.L. Joshi, advocate, to scrutinise the nominations. Company Appeal No. 3/79 was filed by the opponents (J L. Bhasin others) against the order of the company judge, dismissing the application in regard to the irregularities in the matter of the authorisation by partnership firms. The Division Bench made certain clarifications in the orders but maintained other directions of Kapur J. Against the order of the Division Bench passed in Company Appeal No. 3 of 1979 Mr. Khan, who was one of the applicants before Kapur J., filed a special leave petition in the Supreme Court (S.L.P. (Civil) No. 1843 of 1979). The S.L.P. was disposed of by the Supreme Court on April 9, 1979. Noting the observations of Kapur J. the Supreme Court clarified : "We make it clear that if and when the validity of the election held at the meeting of 28th February, 1979, is challenge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r since 1969. (2)Shri B. R. Kundra and Shri J. S. Sood, who had moved Company Petition No. 32/76, for removal of the said dominant group from power are won over by the group and are now the parties to mismanagement and oppression. Shri Kundra, without consulting 260 members, who had filed Company Petition No. 32/76, agreed to a compromise in Company Appeal No. 26 of 1977. Shri Joginder Singh without authorisation from the company agreed to the said compromise. By practising this fraud Shri Kundra and Shri Joginder Singh avoided the enquiry in the mismanagement and oppression of the members raised in Company Petition No. 32 of 1976. They had agreed to the changes in the articles of association in their individual capacity with the said fraudulent arrangement. (3)The changes in the articles of association and the election rules regarding authorisation of representative by the partnership firms were unauthorised and were not binding on the members of the association. The changes were made with a view to enable the dominant group to further oppress the members. (4)Annexure 11 (Regarding authorisation by the partnership firms) is approved by the court on February 20, 1978, was als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egistrar of Companies was illegal. C. P. No. 30/79, filed for the same purpose collusively by Shri J. S. Sood was fraudulent. (16)The financial year was illegally changed with retrospective effect, by the executive committee on May 29, 1979, so as to continue the unauthorised rule by the dominant group. In the said petition under sections 397, 398 and section 156, the following reliefs are claimed; (1)That the erring members of the Motion Pictures Association the erring office bearers/directors of respondent No. 1, namely, Joginder Singh, Narain Das, P. N. Gupta, M. B. Mathur, Dinkar R. Desai, respon dents Nos. 2 to 6, respectively, perpetrators of mismanagement, misappropriation and oppression be disqualified, debarred and expelled for a period of at least five years from the membership and their holding any office or membership of the executive committee of respondent No. 1. (2)The respondent-company may be restrained in any manner from amending or tampering with the articles of association or to make rules, bye-laws or regulations of the association and more particularly in admitting temporary provisional members. The amendment of articles effected by Shri Joginder Singh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd inability of the company judge to decide the matters expeditiously due to pendency of work in this court. No C.P. can be disposed of within one year's time with all the company applications. The company court directs the elections to be held and provides also assistance with the hope that free and fair elections would be held and the problems would be resolved but the real question of an oppression by a group remains unresolved. Injustice mounts over another injustice and relations between the groups get further strained. Faced with this difficulty during the course of the hearing and at various turns of the arguments, the question of settlement of disputes through a compromise was mooted by me. Both the parties readily agreed. My suggestion was to refer the entire pending dispute to an arbitrator with liberty to the parties to raise other agreed issues before the arbitrator. This was acceptable to both the parties. It was agreed that each party should separately meet me in chamber without lawyers. Thereafter, the lawyers would join so as to give the formal form to the formula. I passed an order to this effect in C.A. No. 53 of 1981, on April 7, 1961. During the month of April ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Bench judgment in the said appeals. The Supreme Court order rejecting the S.L.P. (expressly keeping the question of the illegalities of the elections open) is also utilised for the same purpose. This tendency of the parties to overuse the previous judgment in C.As. was another reason why I decided not to pass any orders in the said C.As. During the course of hearing of these petitions, several times, I had made observations to that effect and the parties and their counsel always gave me an impression that they agreed that the course of action I was following was the only course open in the circumstances. I finally decided not to pronounce any order in the said C.As. but to expedite the hearing of the main C.P. On May 11, 1981, I listed the matter for framing of the issues in the main C.P. on May 20, 1981. Counsel for the petitioner filed his draft issues on May 20, 1981. Mr. Mehra appearing for the company requested for further time to file the draft issues. The matter was, therefore, adjourned twice. Thereafter, the draft issues were discussed and finalized and the matter is now set for the affidavits of the parties by way of evidence. By my decision not to pass an order in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different petitions as to whether this order has finally disposed of C.M. (M) No. 223/80 or not. However, this is not of much consequence since CM. (M) No. 223/80, is now withdrawn by the petitioners therein on August 14, 1981. The position in law, therefore, is that the executive committee members and the company are left with no complaint against the interim injunction passed by the trial court and themselves want to contest the matter finally in the suit. Mr. K. K. Mehra, their counsel, showed such an anxiousness of the hearing of the said suit on the last date of hearing that he has moved an application for the return of the suit record to the trial court immediately. My order dated February 20, 1981, can no more be a matter of controversy either to the members of the executive committee or to the company. That order was passed only to reinforce the original order of the trial court restraining the executive committee members from acting as office bearers or for changing the rules of the association. A substantive writ petition, C M. (M) No. 223/80, against the original order of the said trial court is now withdrawn. This is another reason why I have found it fruitless to pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that said Shri Devinder Singh who is the signatory to the present Company Petition No. 58 of 1979, under sections 397 and 398 of the Companies Act filed a criminal case at Ghaziabad. It is then stated that both in the civil suit and in the criminal case, said Devinder Singh managed to obtain orders from the courts at Ghaziabad. It was then averred that as he was frustrated in those attempts Suit No. 438 of 1981 was filed in Delhi by suppression of facts and he managed to obtain the interim injunction. It is then averred that the grounds taken in the said suit were exactly similar to the grounds in the main C.P. and other applications moved in the company court. Some days after the admission of the said CM. by this court an application was moved by said Navrang Theatres and the company before the trial court for compromise of the suit and for withdrawal of the injunction order. It appears that there is a pattern of compromising the matters in the court. I have referred to them earlier. The most glaring example was C.P. No. 32 of 1976. Mr. Kundra who was the petitioner along with 260 others and wherein gross allegations of gross mismanagement and oppression were made.against Shri Jog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hearing C.A. No. 94 of 1981, C.A. No. 53 of 1981 and other applications. I made efforts to have permanent solution by way of arbitration. I was quite hesitant to pass any order of supersession of the executive committee. It appears that these facts were not brought to the notice of the Division Bench and, therefore, the Division Bench admitted the appeal on 30th July, 1981. After admission of the appeal by the Division Bench the executive committee members withdrew C.M.(M) 223/80, perhaps in the hope that they will get a favourable order from the appellate court. The effect of the withdrawal of C.M.(M) 223/80 was that the executive committee members were now ready to go before the trial court, which they ought to have done eight months back but instead they kept on filing the appeals and petitions for interim orders. The interim injunction order restraining the executive committee from functioning was not of much restraint because they performed all the functions through the paid secretary. This led to the petition for contempt before me. The executive committee never showed any anxiety to call annual general meeting for the next year. The two applications were moved before me fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of the interim order passed by the trial court. The said contempt petition is heard by me and the orders are reserved. The factual averments in the petition regarding various actions taken are not denied by the said contemners. The defence is that the said action could be lawfully taken by Mr. Basu and the sub-committee of the company. The action of Mr. Basu (merely a paid secretary of the company) in collecting the cash amount not depositing it in the bank and disposing of the same cannot be justified. Shri Joginder Singh has taken a stand that neither he nor any members of the executive committee had instructed Shri Basu to take the various actions complained of by the petitioners. In the interest of the company and the large number of its members this state of affairs should not be allowed to continue. An immediate arrangement for setting right the administration of the company is, therefore, necessary. For proper and effective disposal of the main C.P. full and truthful disclosure of the material is necessary. Considering the repeated allegations that the executive committee works as an exclusive group, in a secretive manner and for personal ends there is necessity of an i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do directly. Instead, it is better that the functions of these committees are performed by an independent committee of four members as stated in the order. I have carefully gone through the efforts made by various company judges from time to time to avoid supersession of the executive committee and the sub-committees to find out a solution short of supersession and their failure. I cannot ignore their experiences and herculean efforts to reduce the dominance of a particular group, to curtail arbitrariness in the matter of removal of members, to eliminate illegalities and malpractices in the elections. I also cannot ignore the deliberate changes in the election rules, on the eve of elections so as to deprive the majority of members from exercising their voting rights. The fact that out of about 1,400 members, only about 320 members could vote in 1979 elections and only 136 members could vote in 1980 elections speak volumes for the ' democratic character ' of the elected bodies of the association. The working of the company, as disclosed before the court, has left permanent impression on the company judges that a court's intervention is urgently necessary in this company because of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in both the matters, but, ultimately, decided to postpone the orders till the main C.P. was heard. On October 1, 1981, I pronounced an order in C. A. No. 94 of 1981 and the main C.P. because both parties wanted the order to be pronounced immediately. Parties also requested that I should pass an order in this application also. The changes brought about in the relevant election rules are as follows : The original election rules published on 2nd June, 1975, made the following provision regarding persons who cannot contest the elections or nominate any one to contest elections to the executive committee. "Rule 6. Who cannot nominate or be nominated. Non-members and/ or attorneys or agents/representatives of any description whatsoever of members in their such capacities are neither eligible to nominate themselves as candidates to the office of the member of the executive committee, excepting authorised representatives of company members, who are eligible to nominate and/or be nominated". By a resolution dated May 15, 1979 (circulated to the members on May 24, 1979), the said rule was amended as follows : "Non-members and/or attorneys or agents/representatives of any de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not legally constituted, So is the case with the nine office bearers. It may be noted that the annual general meeting held in February, 1979, was for the year ending 1977. An annual general meeting held in August, 1980, would naturally be for the year ending 1978. In the annual general meeting held on 30th August, 1980, income and expenditure account for the period January 1, 1978, to March 31, 1979, and the audited balance-sheet as on March 31, 1979, were adopted. No annual general meeting for the year ending 1979 and the year ending 1980 has been held so far. In the said meeting dated August 30, 1980, M/s. Dial Co., Chartered Accountants, were retrospectively appointed as auditors for the period April 1, 1979, to March 31, 1980. The said annual general meeting was " adjourned " to September 30, 1980, for consideration and adoption of the accounts for the period April 1, 1979, to March 31, 1980. This is clear breach of section 210 of the Companies Act. The challenge to the amendment is on the grounds that they are illegal and grossly oppressive. It is alleged that the object of the amendments was to deprive about two-thirds members of the association from participating in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs should be decided in the main C. P. This was confirmed by the Supreme Court by dismissing the S. L. P. Mr. Mehra pointed out that in the additional affidavit filed by the petitioners in the Supreme Court they had referred to the said amendments to election rules. The Supreme Court decision has to be understood only in relation to the decision of the High Court and nothing more. The submission of Mr. Mehra is rejected. The articles of association of this company do not lay down any qualifications for a person to be a member of the executive committee, that is, director. It was so because it is a company under section 25 of the Act. Anybody can be a director. Articles 3, 4 and 7 of the articles of association entitle partnership firms and limited companies to become members. The articles of association are in the nature of a contract between its members and subject to the provisions of the Companies Act and memorandum of association constitute the working constitution of the company. There is no prohibition in the articles of association for the partnership firms and the limited companies from deputing their representatives to contest the elections to the executive committee or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion or proper interpretation of section 253 of the Act. The company had earlier refused to give authorisation slips to about 500 partnership firms illegally. In this background, the motive in citing Mr. Saxena's opinion is quite obvious. Section 187 of the Companies Act enables the board of directors or other governing body to authorise representatives of the limited companies to participate in the meetings of the company. The articles of association had recognised the right of the partnership firms and the limited companies to fully participate in the management of the company. Indeed, the original election rules recognised this legitimate right of the members. Mr. Mehra argued for the company that the meetings referred to in the said section are meetings of the company and not of the directors. It is difficult to agree with this interpretation. The meetings referred to are, all the meetings. The board of directors also holds meetings of a company. Other provisions are made in the Companies Act for annual general meeting and other meetings of the general body and they have a different object. The executive committee was itself aware that section 187 permits the limited companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nistrator of the company to take charge of the company. He has also held some amendments in election rules to be void and the election held on August 30, 1980, at which the appellants were elected, to be void. Section 25 of the Companies Act, 1956 (hereinafter to be called as "the Act") empowers the Central Govt. if it is satisfied that an association is about to be formed as a limited company for promoting art, charity or any other useful object it may by licence direct that the association may be registered as a company with limited liability and the association may thereupon be registered accordingly and on registration shall enjoy all the privileges and (subject to the provisions of this section) be subject to all the obligations of limited companies. Sub-section (4) of section 25 further provides that a firm may be a member of any association or company licensed under this section, but on the dissolution of the firm, its membership of the association or company shall cease. Respondent No. 2, the Motion Pictures Association (hereinafter to be called "the association"), is registered under section 25 of the Act. Amongst others, the objects for which the association has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion rules have been framed by the executive committee from time to time. Original election rules were framed and published on June 2, 1975. One annual general meeting was held at which the executive committee was elected. Subsequently some amendments were made, especially in rule 6 as circulated on May 24, 1979, and further on August 6, 1980. The last annual general meeting was held on August 30, 1980, at which the appellants were elected office bearers and members of the executive committee. It is these amendments to the rules and the election which has been invalidated by the impugned orders resulting in the present appeals. The association has not had an easy sailing for the last number of years. It is enough to mention that some time in 1976, C.P. No. 32/76 was moved in which objection was taken to the various articles of the association and ultimately Kapur J., after a great deal of looking into details and with the active assistance of the parties, framed and approved the present article of the association. Though the association had held its annual general meeting for the period ending 1976 without the same having been challenged the further holding of the general meeting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuary 22, 1981, similarly making a grievance that the election held on August 30, 1980, was held by depriving the representatives firm and the company from being elected, and that, therefore, as an interim measure the board be restrained from functioning any longer. The learned judge by his order of October 12, 1981, has found that the amendment made in rule 6 and circulated on May 24, 1979, and August 6, 1980, were illegal and, therefore, the elections held on August 30, 1980, are vitiated. He, therefore, restrained the office bearers and executive committee from functioning any further. Company Appeal No. 25/81 is directed against the said impugned order of October 12, 1981. The position indisputably is that prior to the election held on February 28, 1979, every member, if he was an individual, was entitled to vote; he could also nominate and/or be nominated for election as an office bearer or member of the executive committee. Similarly, any one partner of a firm or managing director, director, etc ., of a company authorised in writing by all the partners or by the board of directors could nominate and be nominated for the election as office bearers or as members to the commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecial leave), there would be no justification for relying on those again in order to appoint an administrator. This is because once the Division Bench and the Supreme Court had held that these did not show a prima facie reason for appointing an administrator, the same could not be again revived merely by filing fresh application. Such a course will bring uncertainty in the judicial system. That is why we think the reference to the earlier litigation and the allegations made in C.P. No. 32/1976, in C.A. No. 455/1979 or 610/1979, noticed by the learned single judge were inapposite and have no relevance for the decision of C.A. No. 94/81 or C.A. No. 53/81. The learned judge has in the impugned order commented that the annual general meeting held in January, 1979, was for the year 1977, and the one held in August, 1980, was for the year 1978, thereby suggesting that the committee deliberately did not hold in trial the meetings for these years and that there has also been lapse by not holding the meeting for 1979. It would appear that the learned judge has taken it that the committee was free to hold the meeting for these years but has deliberately abstained from so holding. Apart from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would not mean that the committee as such would suffer from any such disqualification because of any alleged action having been done by the earlier committee. We feel that the approach of the learned single judge in deciding whether to restrain the committee elected on August 30, 1980, on the alleged ground of not having earlier held annual meetings in 1978 and 1979 (which in law in any case was the duty of the earlier executive committees) was proceeding on wrong principles of law, apart from the reason that in fact this assumption is not correct. The only new plea available was about the validity of elections held on August 30, 1980, and it is to this aspect that we now propose to refer. The fact of the amendments having been made on May 24, 1979, and August 30, 1980, are not in doubt. The reason given for making the amendments by Mr. Mehra, the counsel for the appellant, is stated to be that in the earlier elections which were held on February 28, 1979, the electoral officer who was a court official and had been appointed by the court in C.P. No. 32/1976 and C.A. No. 223/1978, to supervise the elections had objected that under the Indian Companies Act a body corporate cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that these figures were not on record but we may take it that they represent correctly the facts. But what was urged by Mr. Mehra strongly was that the fact that this number of members voted in the elections was not due to either the partnership firms or the bodies corporate being deprived of the right to vote. It was not disputed by Mr. Parekh that every body corporate and every partnership firm could vote if it so chose, that is to say, that none of the 1,500 or odd members of the association were disentitled under any amendment of the rule not to exercise their vote. Of course, Mr. Parekh suggested that as large number of companies and partnership firms could not nominate their representatatives for being elected to the committee they were not interested in casting a vote. That is a different matter which has relevance to the eligibility of the bodies corporate and the partnership firms to be members of the executive committee but not to voting right. We must emphasise that admittedly so far as voting rights are concerned it is still available to all 1,500 members. In the election, no one is discriminated by not being allowed to vote. We may also add that it was also not dispute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of share qualification for a director laid down by the articles of the company. Though there is no statutory requirement, the articles can prescribe that a director will hold a specified share qualification. In such a situation if the articles provide that no person shall be "eligible" to be a director or "qualified to become" a director, unless he held so many shares, the holding of the necessary shares is a condition precedent to election, and the appointment of a person not already holding such shares will be invalid" ( Gore-Browne on Companies, 42nd edition, page 681 ). But we must repel the contention of Mr. Mehra that article 28 must be equated to the possession of share qualification. In our view, article 28 only seeks to give to a member who is not a retiring member of the executive committee a right that he shall be eligible for appointment to the office of the committee in the same manner as the right has been given to the retiring member to seek re-election, vide article 24. However, the proviso to article 28 emphasies that in the case of such a member, who is not a retiring member, the said member has to file with the Secretary for filing it with the Registrar, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting; (2)annual general meetings : (3)extraordinary general meetings; (4)separate meetings of classes of shareholders" ( Palmer's Company Law, 21st edn., p. 462). That section 187 is only talking of representation at a meeting of the company and not at that of a board of directors is also clear from section 187(2) which allows a person authorised to exercise the same powers (including the right to vote by proxy) which has obvious reference to section 176 which entitles a proxy to be appointed, but only at a meeting of the company There is no question of proxy at the meeting of the Board. The purpose of section 187 (which is equivalent to section 139 of the English Act is obvious". A corporation, because of its nature, cannot attend a meeting; it cannot per se vote; it cannot show a hand; it cannot demand a poll; it cannot address the meeting and speak its mind. It appears to me that the leading purpose of this section is that it is designed to enable a corporation owning shares in a company to be in the same situation for the purpose of meetings of that latter company and voting at such meetings as would be the corporation if it were an individual " Hillman v. Crystal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aneous considerations, still it is our view that it would be just and in the interest of the association and the members that a large number of members like the bodies corporates and the firms should not be denied the right through their duly authorised representative as per election rules to nominate or be nominated for election as office bearers or as members of the executive committee of the association. To that extent, therefore, we feel that the amendments made on May 24, 1979, and August 6, 1980, though they may not be illegal in the sense that they do not contravene the provisions of the Act or the articles of association, yet we feel that in the exercise of our equity jurisdiction and in the interest of the association the position qua the rights of body corporates and firms should be restored to what was in the election rules prior to the amendments made and circulated on May 24, 1979, and August 6, 1980, and we order accordingly. We are less diffident in so ordering because we have found no material to show that prior to May, 1979, when the old election rules permitted firms and company members to stand for elections through their duly authorised representatives, it cau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ittee. We would direct that an explanation be added to article 28 as follows: Explanation A member for the purpose of election only to the office bearers or for members of the executive committee will mean all those who by election rules can be nominated for the said elections. Elections were last held on August 30, 1980. They cannot be held to be illegal because they were held on the basis of the existing election rules. We have not found these amendments illegal, are only directing future elections on the basis of old election rules because of larger consideration and in the interest of harmony amongst members. We are doing this in the hope that election will dissolve many controversies of old. The persons who will be able to contest elections will be as mentioned above. The learned judge in appointing the administrator was also influenced by the fact that in any case the term of the present committee had come to an end on September 30, 1981, This is not correct because article 31 provides that the retiring member or members of the executive committee shall retain office till the dissolution of the meeting at which his or their successor is/are elected. Thus, until the an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uding the respondents so as to see that no unfair steps are taken against the interest of any member or the company. We must, therefore, overrule this plea of the respondents. In the result we order as follows : 1that the order of the learned single judge appointing the administrator is set aside, 2that in place of that order our order passed on October 6, 1981, as affirmed on October 21, 1980, by which we had appointed Mr. Shankar as chairman of the board of directors and the directions given therein will be substituted for the order of the learned single judge, 3that the elections to the executive committee will be held and completed by March 31, 1982; and 4that in order to carry on the above directions the executive committee is directed under the chairmanship of Mr. Shankar to take necessary and consequential steps so as to effectuate the directions given herein. In this connection we may note that under article 30( d ) the executive committee is to appoint a chairman who shall not be interested in the election either directly or indirectly. We have already directed while appointing Mr. Shankar as chairman that if any decision is taken by the executive committee an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,000 for every meeting we should substitute it by order of payment of consolidated sum. We, therefore, order that Mr. Shankar will now be paid Rs. 5,000 per mensem as honorarium with effect from January 1, 1982. However, up to December 31, 1981, the previous order of payment of Rs. 1,000 for every executive meeting which he has attended or may attend will stand. Mr. Shankar will continue as chairman till the new chairman is elected in pursuance of elections ordered by us. If for any reason the elections are not completed by March 31, 1982, the matter will be listed before the court for further directions on April 5, 1982. We may mention that Suit No. 438/80 was filed by M/s. Navrung Theatres (Pvt.) Ltd. for permanent injunction restraining the executive committee and other office bearers from functioning as such. Mainly the legality of elections held on August 30, 1980, is challenged in that suit. Originally an interim injunction was issued by the trial court on December 5, 1980, restraining the members of the executive committee from functioning. This order, however, was stayed by this court in CM(M) No. 223/80 on December 8, 1980. Subsequently, a number of orders were passed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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