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TMI Blog1991 (4) TMI 316X X X X Extracts X X X X X X X X Extracts X X X X ..... nd restraining the defendant from obstructing the plaintiff from discharging his duties and exercising his powers and privileges as a director of the defendant-company. I have heard arguments for deciding this application, I. A. No. 1558 of 1991. It is averred in the plaint that the defendant-company was incorporated on July 23, 1985, and that the same was promoted by the plaintiff and his son, Vijay Bhushan, who formed one group and Harish Chander Bhasin and his associates who formed the other group and that the plaintiff, along with his associates as well as Harish Chander Bhasin, hold not less than 10% of the paid-up equity capital of the defendant-company. It is mentioned that, at the time of incorporation of the company, it was agreed between the two groups that the management and control of the company would be exercised by the two groups jointly and that the two groups will have an equal share in the management of the company and that the name of the company was also taken from the first alphabets of the names of the plaintiff and Harish Chander Bhasin. It is then pleaded that rule 104B of the memorandum and articles of association of the defendant-company stipulated nomin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d articles of association of the defendant-company. So, it is pleaded that the defendant-company had illegally declared that the plaintiff and his son had vacated the offices of directors inasmuch as no notice, at any time, of any meetings, had been received by the plaintiff for the alleged board meetings which the plaintiff, in the absence of receipt, of any notice or knowledge, could not attend. In the alternative, it is pleaded that the plaintiff has exercised his right under article 104B by nominating himself and others as directors, vide letter dated February 18, 1991, and thus, he has become a director of the defendant-company and is entitled to have the injunction on that score in any event. The suit as well as the application are hotly contested by the defendant-company. It is pleaded that the plaintiff is guilty of suppression of material facts inasmuch as the plaintiff has not disclosed some important facts and thus, he is not entitled to have the equitable relief of injunction. On merits, it is pleaded that the plaintiff and his son, Vijay Bhushan, had intentionally and deliberately absented themselves from three consecutive meetings of the board and thus had incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e share capital of the company. So, it is pleaded that, only in case the plaintiff and his associates fulfilled the prerequisite qualification of holding such share capital, the plaintiff could exercise the right to nominate any directors. It is pleaded that the plaintiff is having his own business which is competitive with the business of the defendant and, due to his own volition or on account of lack of interest or on account of his own business considerations and/or for reasons best known to the plaintiff, he did not attend the board meetings on March 28, June 29, and August 29, 1990, consecutively, despite notices having been served on him in the same manner as notices were being served earlier of the dates of holding the meetings. It is pleaded that, for about 16 months, the plaintiff remained silent and it is only on the eve of the public issue and with a view to damage or hurt the said issue that the plaintiff has instituted the present action in a mala fide manner. It is also averred that the plaintiff has got published misinformation in the newspapers to harm the public issue of the defendant-company and such news appeared in the newspapers Business and Political Obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Companies Act. In the alternative, he has contended that, before the plaintiff could be deemed to have vacated the office, he ought to have been served a show-cause notice by the board of directors to explain his absence from three consecutive board meetings and as the rules of natural justice have been violated by not serving any such show-cause notice, the defendant could not treat the office of director as having been vacated by the plaintiff. He has placed reliance on Turnbull v. West Riding Athletic Club Leeds Limited [1894] 70 Law Times 92 and Richardson v. Methley School Board [1893] 3 Ch 510. So, he urged that prima facie the case being in favour of the plaintiff, the balance of convenience is also in favour of the plaintiff and, in case an interim injunction is not granted, the plaintiff is bound to suffer irreparable loss and so, he has urged that the interim injunction should be granted. He has argued that although the plaintiff had a minimal shareholding, yet the plaintiff is the director of the company and was associated with the company from the very beginning and he ought not to have been kept away from the affairs of the company by showing that he had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the office of a director shall become vacant if he absents himself from three consecutive meetings of the board of directors, or from all meetings of the board for a continuous period of three months, whichever is longer, without obtaining leave of absence from the board. This particular provision does not contemplate the passing of any board resolution for showing that the office of the director has been vacated by a particular director. It appears that the vacation of the office of director is automatic as soon as a director is found to have incurred the disability as contemplated by clause ( g ). Section 284 of the Companies Act, however, contemplates removal of a director by the passing of a board resolution. That provision, in fact, is not applicable where the director vacates office by virtue of incurring the disqualifications laid down in section 283. The case of Turnbull [1894] 70 Law Times 92, examined the provisions of article 70 of the articles of association of a company which provided that the office of any director should be vacated on any of the five grounds enumerated therein, one of them being that a director had absented himself from board meetings for a period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 Ch 570 (Ch D), rule 14 in Schedule II, Part I, to the Elementary Education Act, 1870, contemplated that a member of a school board ceases to be a member "if he absents himself during six successive months from all meetings of the board, except from temporary illness or other cause to be approved by the board". The question which arose for consideration before the Chancery Division was whether a particular member had incurred the said disqualification or not. The plea taken by the member was that he was ill and thus he justified his absence. It was held that without, however, giving a chance to that member of defending himself, he could not have been declared in default and thus, the action of the board was termed to be illegal. The question whether a particular person has absented himself from meetings of the board due to any serious illness could be a disputed question of fact and may be in such a situation the rules of natural justice have to be observed before declaring that such a person had incurred the disqualification. Section 283 merely makes the disqualification on a director for not attending three consecutive meetings without obtaining leave of absence from the board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company. The said clause reads as follows: "So long as Mr. Harish Chander Bhasin and/or Mr. Bharat Bhushan and associates hold or continue to hold not less than 10% (ten per cent.) of the paid-up equity capital of the company from time to time, Mr. Harish Chander Bhasin and/or Mr. Bharat Bhushan shall have the right to nominate up to a maximum of 4 (four) persons as director or directors on to the board of the company". The plaintiff had sent a letter to the defendant-company mentioning that he and Harish Chander Bhasin and their associates holding 10% of the paid-up equity capital had proceeded to nominate the directors including the plaintiff. It is now admitted before me that Harish Chander Bhasin has not joined Bharat Bhushan-plaintiff in writing the said letter. So, the question to be decided is whether the plaintiff alone had such authority when admittedly the plaintiff and his associates do not hold 10% of the paid-up equity capital. Counsel for the plaintiff would like me to interpret the aforesaid clause to mean that, as long as Harish Chander Bhasin along with the plaintiff and associates hold 10% of the paid-up equity capital, the plaintiff can exercise the ri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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