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TMI Blog1995 (8) TMI 233X X X X Extracts X X X X X X X X Extracts X X X X ..... for the implementation of the decisions taken at the above meetings and for other consequential reliefs. By the above LA. they sought to restrain the appellants from taking steps on the basis of the proceedings and in pursuance of the decisions taken at the Board meetings held on 9-6-1994 and 26-6-1994, including the convening of the general body meeting of the company stated to be held on 27-8-1994. It was alleged that at the meeting of the Board of Directors held on 9-6-1994, only 4 out of 7 members attended, which did not constitute the required quorum and, therefore, the decisions taken at the meetings are invalid. In particular, it was alleged that in the notice relating to the Board meeting for 9-6-1994 no reference to the subject of allotment of shares to the close relations of the Chairman and two other Directors was made, that they had also not disclosed their interest in the matter, which was clandestinely arranged with ulterior motives and against the larger interest of the company. In the notice for the meeting held on 26-7-1994 no reference was also made to the subject of holding the annual general meeting, about which they came to know only from the advertisement tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied. 5. Assuming that in the matter of registration of the transfer of shares held by Alukka Jose, appellants 2 to 4 were in some manner or sense involved or interested which they did not disclose, could it be said that they had incurred a disqualification and must be held to have vacated its office as Directors, is the question that has now to be considered. No doubt, the office of a Director would become vacant if he has acted in contravention of section 299 under which: "299. Disclosure of interest by director. (1) Every director of a company who is in any way, whether directly or indirectly, concerned or interested in a contract or arrangement, or proposed contract or arrangement, entered into or to be entered into, by or on behalf of the company, shall disclose the nature of his concern or interest at a meeting of the Board of Directors." Under section 300 of the Act, " Interested director not to participate or vote in Board's proceedings. No director of a company shall, as a director, take any part in the discussion of, or vote on, any contract or arrangement entered into, or to be entered into, by or on behalf of the company, if he is in any way, whether direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adverse to that of the beneficiaries and that they have to account for any secret profit made by them. The provisions of section 283(1)( i ) of the Companies Act, 1956, are, therefore, mainly a re-enactment of the obligations of a trustee arising out of common law." (p. 302) In Narayandas Shreeram Somani v . Sangli Bank Ltd. AIR 1966 SC 170, it was held: "A director of a company stands in a fiduciary position towards the company and is bound to protect its interest. He must not place himself in a position in which his personal interest conflicts with his duty. He must not vote as a director or any contract or arrangement in which he is directly or indirectly interested, unless authorised by the company's articles. Standard articles give effect to this rule of equity. In case he votes in such a case, his vote would not be counted. His presence would not count towards the quorum, that is to say, the minimum number fixed for the transaction of business by a Board meeting. A quorum must be a disinterested quorum ." (p. 170) 7. There may be conflict of interests or of duties, where a director has some interest in a contract or arrangement entered into by the company or on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereof; ( d )in the case of a contract to which section 297 applies or in the case of a contract or arrangement to which sub-section (2) of section 299 applies, the date on which it was placed before the Board; ( e )the names of the directors voting for and against the contract or arrangement and the names of those remaining neutral." By sub-section (2) particulars of such contracts or arrangements to which section 297 or, as the case may be, sub-section (2) of section 299 applies, shall be entered in the relevant register. Under sub-section (3) the register aforesaid shall also specify, in relation to each director of the company, the names of the firms and bodies corporate of which notice has been given by him under sub-section (3) of section 299. Sub-section (3A) provides, that "Nothing in sub-sections (1), (2) and (3) shall apply ( a )to any contract or arrangement for the sale, purchase or supply of any goods, materials or services if the value of such goods and materials or the cost of such services does not exceed one thousand rupees in the aggregate in any year; or ( b )to any contract or arrangement (to which section 297 or, as the case may be, section 299 ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Another suit was also instituted in respect of the 9th annual general meeting, on grounds set out in the earlier suit. The contentions were considered in detail in the light of the relevant legal precedents and the learned Judges has held: "... The Director is treated as an agent or a trustee by operation of law and not because the company or shareholders have entered into contractual relationship with the person proposed to be appointed as a Director. We are in agreement with the view expressed by the learned single Judge of Madras High Court that the appointment of additional Director does not amount to a contract as contemplated by section 300(1) of the Act...." (p. 27) They agreed with Rajagopala Ayyangar, J. in Public Prosecutor v. T.P. Khaitan AIR 1957 Mad. 4, and observed: "... that the arrangement within the meaning of section must receive the interpretation that it must be of such a nature as would arise in the case of personal pecuniary nature in the context of the company is accurate and the expression 'arrangement' must bear the meaning of it as in sections 209 and 301 of the Act. Section 301 demands that every company shall keep one or more registers in w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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