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TMI Blog1995 (5) TMI 212X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 their servants, agents and assigns from giving any effect or further effect to or acting or further acting in furtherance of the purported resolution dated 5-10-1994 of the defendant No. 1, being annexures 'M' and 'N' respectively hereto in any manner whatsoever; ( e )Perpetual injunction restraining the defendant Nos. 1 to 5, their servants, agents and assigns from asserting in any manner whatso ever that the plaintiff has ceased to be the Chairman and/or removed from the chairmanship of the Board of Directors of the defendant No. 1; ( f )The alleged minutes of the alleged Board meeting of the defendant No. 1 held on 5-10-1994 and the purported letter dated 6-10-1994 being annexures 'M' and 'N' respectively hereto be delivered and cancelled; ( g )Temporary injunction; ( h )Receiver; ( i )Attachment; ( j )Costs; ( k )Further and/or other reliefs. 2. In the plaint it has been alleged inter alia as follows : The defendant No. 1 was originally incorporated under the provisions of the Indian Companies Act, 1913, under the name 'Indian Cable Co. Ltd.' and is now an existing company within the meaning of the provisions of the Companies Act, 1956 ('the Act'). In o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y any director of the consulting engineers' company or by any other officer of that company to whom its Directors may have delegated their powers in that behalf." 6. A copy of the extract of the relevant articles of association of the defendant No. 1 has been annexed to the plaint. 7. By an agreement dated 28-1-1947, between the defendant No. 1 and the defendant No. 7, the defendant No. 7 was appointed as a Consulting Engineer of the defendant No. 1, a xerox copy whereof has been annexed to the plaint. 8. Some of the relevant clauses of the aforesaid agreement dated 28-1- 1947 are reproduced below : "( i )So long as the consulting engineers remain consulting engineers to the Indian company and so long as they hold not less than 10,000 shares of any class, in the Indian company of nominal value Rupees ten or their equivalent the consulting engineers shall be at liberty at all times and from time to time to appoint two directors of the Indian company to cancel their appointments or the appointment of either of them and upon such cancellation or the retirement or resignation of them or either of them to appoint other directors or another director so long as not more than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch persons holding or representing by proxy or power of attorney not less than three-fourths of the issued share capital of the Indian company for the time being and having voting rights shall be present and shall vote for such resolution." 9. The consulting engineers shall be entitled to determine this agreement by giving twelve months' notice in writing to the Indian company expiring at any time and upon the expiry of such notice this agreement shall cease and determine but without prejudice to the performance and satisfac- tion of all obligations, duties, rights and claims which shall have become binding on either party thereto or shall have accrued prior to the expiration of such notice. 10. Subsequent thereto a supplemental agreement was executed on 30-10-1951 between the defendant No. 1 and the defendant No. 7. A xerox copy of the said supplemental agreement has been annexed to the plaint. 11. In terms of the agreement between the defendant No. 1 and the defendant No. 7 and in tune with article 90 of the articles of association of the defendant No. 1 the defendant No. 7 nominates two directors on the Board of the defendant No. 1 since 1947 one of whom was also the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be held on 10-9-1994. A xerox copy of the said notice has been annexed and forms part of the plaint without the enclosures. 18. It has been alleged that the said Board meeting scheduled to be held on 10-9-1994, though was held, but after some discussions remained inconclusive and was adjourned till 21-9-1994. 19. It has been alleged that the agenda of the Board meeting scheduled to be held on 10-9-1994 had no item regarding removal or resignation or cessation of the plaintiiff as Chairman of the Board of Directors of the defendant No. 1 for discussion by the Board. No leave was sought for from the plaintiff, nor any permission was given by the plaintiff to discuss any matter regarding resignation of the plaintiff as Chairman from the Board of Directors of the defendant No. 1. The defendant No. 2 as a Director of the defendant No. 1 wanted to be informed about the Consulting Engineers agreement vis-a-vis information about the ap-pointment of the plaintiff as Director and Chairman of the plaintiff. 20. On or about 15-9-1994, by a letter addressed to the defendant No. 1, the defendant No. 2 as Assistant General Manager of ICICI sought for certain information and docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efendant No. 1 was under discussion at the Board level since 31-3-1994. It has also been contended on behalf of the plaintiff that the question of discontinuation of the plaintiff as Chairman of the board of Directors of the defendant No. 1 did not and could not arise. At the Board Meeting of the defendant No. 1 held on 31-3-1994 an issue cropped up as to whether the plaintiff would be bringing in fresh funds as a booster to the revival package of the defendant No. 1. The plaintiff also at the said meeting and also at the meeting held on 21-9-1994 assured full co-operation with the Board for the purpose of revival of the defendant No. 1. Moreover, the plaintiff out of his own resources paid a substantial sum to the statutory and other creditors of the defendant No. 1 including the provident fund to show his bona fide in the matter of assurance of such co-operation. The question of removal or resignation or cessation of the plaintiff from the chairmanship of the defendant No. 1 did not and could not arise. 27. It has been alleged that though the plaintiff attended the Board meeting of the defendant No. 1 on 5-10-1994 but as the statutory books for holding the meeting were not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly be made in terms of the said article and not otherwise and the defendant No. 7 has not taken any step for removal of the plaintiff. ( e )The defendant Nos. 2, 3 and 4 even if they had constituted a quorum for a meeting of the Board of Directors of the defendant No. 1 had no authority and/or jurisdiction under the articles of association to appoint and/or remove any person as Chairman of the defendant No. 1. ( f )The Board of Directors of the defendant No. 1 are not entitled to act contrary to the said agreement between the defendant No. 1 and the defendant No. 7 and article 90 of the articles of association of the defendant No. 1. ( g )Ability or inability to bring in fresh or further funds does not and cannot have any relation whatsoever in the matter of operation of the terms of the agreement between the defendant No. 1 and the defendant No. 7 as also in the matter of operation of the provisions of article 90 of the articles of association of the defendant No. 1. ( h )Article 2 of the articles of association expressly provides that save as reproduced in the said articles of association, the regulations contained in Table A of the First Schedule to the Act would not app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rary to the said articles, and as such, should not be allowed to be given effect to Mr. Roy has also submitted that purported resolution for removal of the plaintiff from chairmanship of defendant No. 1 company is ultra vires, the article of the company and directly affects the plaintiff, and as such the objection raised by the contesting defendants regarding locus standi of the plaintiff to maintain the application cannot be sustained. 36. It has also been submitted that the letter dated 15-11-1994 signed by L.A. Farran, Executive Director of BICC (Consulting Engineers), ex-pressly provides that the plaintiff was nominated by BICC as Chairman of Incab the said letter is not under challenge. 37. It has been contended that in the Affidavit in opposition filed on behalf of the defendant Nos. 2 to 5 a copy of a letter dated 4-10-1994 has been annexed to show as if the plaintiff is not holding the position of Chair-man/Director of Incab as BICC's nominee. 38. The learned Advocate has further contended that the said document does not merit any credence, for the following reasons :- ( i )It is not a communication to Incab. The identity of the signatory to the letter is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of such a high magnitude and it is so projected by the defendant Nos. 2 to 5 as if the very survival of Incab is dependant on that issue. It is, therefore, obvious that there should have been at least an indication of such an important issue in the agenda and more so when very minor issues, i.e., fixed deposit holders - repayment of principal, interest, recovery of intercorporate loans, Flat at M-11, Greater Kailash and date of next Board meeting have been detailed in the agenda. 43. It is the contention of Mr. Roy that some indication even if not in the shape of a formal agenda, should be given in advance of a Board meeting stands to reason, as importance of such an issue, may be the deciding factor for a Director to opt to attend the meeting or to attend to some other more important business, may be of the company itself. 44. It has also been contended that it is one case of not having an agenda at all and completely another, when there are as many as 29 items on the agenda and the very vital one and in fact the only one claimed to have been discussed at the relevant meeting dated 5-10-1994 was not included in the agenda. 45. Mr. Roy has also submitted that in any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting to remove the plaintiff from chairmanship, the defendant Nos. 2 to 5 have to arrogate to themselves and exercise a power which they do not have in view of the concerned articles as aforestated. In the premises such act of the said defendants is null and void and invalid since the Directors and members of a company are bound to comply and act in accordance with the memorandum and articles of a company (section 36 of the Companies Act). 51. Accordingly, Mr. Roy had submitted that the present application should be allowed and the plaintiff should be granted redress by way of passing an order in terms of the prayers in the said petition. 52. The following grounds have been mainly urged on behalf of the plaintiff in support of his case : ( a )The item regarding the removal of the plaintiff as Chairman of the Board of Directors of the company was not mentioned in the agenda of the Board meeting convened to be held on 31-3-1994. ( b )The grounds for removal being alleged inability to bring in Rs. 20 crores by Tapuriah is not correct and the minutes have not been properly written. ( c )The removal of the Chairman by the Directors is ultra vires the powers of the Direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement of the business to be transacted thereat. Under section 173 in respect of every special business in the Explanatory Statement is also required to be given relating to each item of special business. Therefore, the distinction is quite clear regarding the notices of Board meetings and General meetings." 62. Mr. Mitra has further submitted that the plaintiff has been duly nominated by the Consulting Engineers by subsequent election at the said meeting in terms of the article 90 of the company and else in terms of the agreement and his authority to act as Chairman has not been revoked by BICC. The said nomination has been duly adopted. 63. He has further submitted only because of his subsequent re-election it cannot be said that there is no question of nomination by Consulting Engineers of BICC. In fact the subsequent election is a mode of ratification of the nomination originally made and it cannot be contended that the question of nomination does not arise. 64. Mr. S.B. Mukherjee learned advocate for respondent Nos. 2 to 5 has submitted that even if there is no specific agenda under the miscella- neous items with the permission of the Chairman any other busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 31-1-1984, on which reliance has been placed by the petitioner. At this meeting consequent upon the nomination by BICC plaintiff was appointed a Chairman by the Board of Directors. Therefore, the appointing authority being the Board of Direc- tors they have also the right to remove the Chairman. No such power of appointment of Chairman or removal of Chairman is vested in the Consulting Engineers. 73. The learned Advocate referred to section 255 of the Companies Act and section 25 of the Industrial Finance Corpn. Act, 1948. He has also submitted that articles 129 to 131 referred to the agreement between the company and the consulting engineers. Plaintiff is not a party to the agreement nor is any personal right or benefit conferred on him under the said agreement. In fact, he was nowhere in the picture when the agreement was entered into in 1947 and modified in 1951. Therefore, he cannot enforce any rights or obligations under the said agreement. 74. In support of the aforesaid contention Mr. Mukherjee has relied upon the following decisions : 1. M.C. Chackos case ( supra ) 2. Krishna Lal Sadhu's case ( supra ) 3. Punjab National Bank ( supra ) 75. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided at this stage on affidavit evidence. 84. It has also been submitted that the minutes have not been recorded in the minute book does not mean that no meeting was held. Admittedly, meeting was held. The original minute book was being retained by the Secretary who is openly siding with the plaintiff. The minute books have since been produced in Court. 85. It has also been contended that apart from the fact that the plaintiff has failed to bring funds of Rs. 20 crores there is lack of confidence in plaintiff by the financial institution as shareholders, and also the workers and the Bankers. 86. The learned Advocate has also submitted that in the interest of the company, the Court should not intervene in the internal management as no illegality has been committed by removal of the plaintiff. 87. In this connection he has relied upon the following decisions : ( i ) Bentley Steven's case ( supra ) ( ii ) Life Insurance Corpn. of India's case ( supra ) 88. He has also contended that the appointment of the plaintiff was made by the Board and, as such, the removal can be also made by the Board. The plaintiff has been appointed Director by the shareholders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rote to the Chairman, The Industrial Credit Investment Corporation of India Ltd. by letter dated 19-9-1991 that he had made the commitment to bring in Rs. 20 crores, whereas in the draft minutes of the meeting held on 31-3-1994, the defendant No. 2 had changed the figure to Rs. 30 crores. The plaintiff has also admitted in the said letter that the company might require somewhere around Rs. 30 crores, as against Rs. 20 crores originally envisaged. He also recorded in the said letter that draft minutes of the meeting dated 31-3-1994 does not contain correct statement regarding his commitment to step down from the post of chairmanship of the company. 98. It has, however, been noted in the said letter that the funds required for the revival package as committed by the plaintiff are now ready. The relevant portion of the said letter is as follows : "In the meantime, I wish to inform you that the funds required for the revival package as committed by me are now ready and I would be pleased to produce before you proof of the same. May I also point out for your kind information that during the last Board meeting of the company held on 10th September, 1994, when Mr. P.K. Mukherjee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Lindley L.J. as appears at pages 796-797 of the said report is set out herein below : "This case involves one question which is of great importance to companies. The rest of the points are comparatively trifling. The great point is whether, when a directors' meeting is to be held, it is necessary to give a notice not only of the meeting, but of the business to be transacted at the meeting. I am not prepared to say as a matter of law that it is necessary. As a matter of prudence it is very often done, and it is a very wise thing to do it: but it strikes me, as it struck Lord Tenterden in Rex v. Pulsford (1), that there is an immense difference between meetings of shareholders or corporators and meetings of those whose business it is to attend to the transaction of the affairs of the company or corporation. It is not uncommon for directors conducting a company's business to meet on stated days without any previous notice being given either of the day or of what they are going to do. Being paid for their services as they generally are, and as is the case in this company it is their duty to go when there is any business to be done, and to attend to that business whatever it is; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nction restraining him from calling a meeting to consider such a resolution. A proper remedy of the Director was to apply for a winding-up order on the ground that it was 'just and equitable' for the Court to make such an order. In the case of Ebrahimi v. West Bourne Galleries Ltd. [1972] 2 All ER 492 the absolute right of the general meeting to remove the directors was recognised and it was pointed out that it would be open to the Director sought to be removed to ask the Company Court for an order for winding-up on the ground that it would be 'just and equitable' to do so. The House of Lords said : "My Lords, this is an expulsion case, and I must briefly justify the application in such case of the just and equitable clause .. The law of companies recognises the right in many ways, to remove a director from the board. Section 184 of the Companies Act, 1948 confers this right on the company in general meeting whatever the articles may say. Some articles may prescribe other methods, for example a governing director may have the power to remove (of Re Wondo-flex Textiles Pty Ltd.) [1951] VLR 758. And quite apart from removal powers, there are normally provisions for retirem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Life Insurance Corpn. of India cannot be restrained from doing so nor is it bound to disclose its reasons for moving the resolutions." (p. 1423) 112. It appears on consideration of the relevant articles of the company, namely, articles 2, 90 and 129 to 131 the petitioner cannot claim that he has right to continue on the basis of the said articles for the indefinite period. 113. It is also on record that the petitioner was also elected as a Chairman by the Board of Directors as will appear from the minutes of the Board meeting dated 31-1-1984, if the petitioner was elected by the Board, the Board may also express its no confidence and remove the petitioner as Chairman. The fact, he was nominated by the consulting engineers that does not mean that he will continue for ever. 114. In my view there cannot be an agreement in perpetuity; it is obvious that from the conduct of the parties and in particular BICC that they have treated the contract as having been abandoned and no longer in force nor enforceable. 115. It appears from the correspondence exchanged with BICC that BICC does not specifically express any view in the matter. It is also on record that the consultin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... airman for any particular meeting. 122. It is not in dispute Table 'A' does not apply in view of the article 2 of the company. 123. The relief if granted will be in the nature of specific performance which is not permissible in view of section 38(2). Under sections 14 and 15 of the Specific Relief Act no specific performance can be claimed inasmuch as monetary compensation would be an adequate relief. 124. In the instant case, it would not be proper to pass the order of injunction. In this connection the judgment and decision in the case of Plantations Trust Ltd. v. Bila (Sumatra) Rubber Lands Ltd. 144 Law Times, 676 relied upon by Mr. Mukherjee, the learned Advocate for the petitioner may be taken note of. 125. In the aforesaid decision there was an agreement to appoint nominee of the guarantee company as directors. Clause 6 of the agreement provides as follows : "The company will appoint two persons, to be nominated by the trust, to be directors of the company and by Clause 7 the Bila Company's manager was to be replaced by another manager to be approved by the Trust Company." 126. It was held that although upon the true construction of the contract ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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