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TMI Blog1991 (7) TMI 286X X X X Extracts X X X X X X X X Extracts X X X X ..... tated that the defendants' group is the majority group and the plaintiffs' group is the minority group. On June 24, 1991, the plaintiffs filed this suit seeking to obtain several reliefs against defendants Nos. 2 to 7. By prayer ( a ) of the plaint, the plaintiffs have prayed that defendants Nos. 2 to 7 be decreed to pay a sum of Rs. 511 lakhs to the first defendant company along with further interest on the sum of Rs. 470 lakhs at 18% per annum from the date of the suit till judgment and, thereafter, till payment and realisation. The plaintiffs have described the action as a derivative action. By prayer ( b ) of the plaint, the plaintiffs have sought a declaration in the following terms : "That this court be pleased to declare that defendants Nos. 2 to 7 are not entitled to chair/act as chairman at general meetings of the first defendant company." These are the only substantive prayers in the suit, the rest of the prayers being for interim reliefs. By this notice of motion, the plaintiffs have sought a direction from this court to appoint a retired High Court judge or some other fit and proper person to be the chairman of the extraordinary general meeting of the first defend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eliefs in terms thereof or in a situation when prayer ( a ) of the plaint is in the nature of a money claim and prayer ( b ) thereof is totally unmaintainable in law. The facts and circumstances leading to the filing of this suit as explained by counsel on both sides are too many. However, I propose to refer only to such of the facts and such of the documents as, in my opinion, are really germane to the disposal of this application. The material facts are as under : ( a )Till about June, 1990, Mr. Y. G. Patel group was in management of the first defendant company. Sometime in the year 1963, Mr. Y.G. Patel was appointed as the chairman and managing director of the first defendant company. Sometime in or about the year 1976, Mr. Kishore Patel, son of Mr. Y.G. Patel, was appointed as the chief executive of the first defendant company. Mr. Kishore Patel also held power of attorney from the first defendant company. ( b )During January, 1989, to April, 1989, various persons belonging to Pravin Patel group purchased 29,842 shares of the first defendant company. On May 3, 1989, the board of directors of the first defendant company communicated its decision to the applicants concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... By an order dated May 4, 1990, the Supreme Court dismissed the special leave petition filed by Y.G. Patel group. The order of Variava J. has acquired finality. On June 5, 1990, the annual general meeting of the first defendant company was held. At this meeting also, the directors nominated by the plaintiffs' group could not be elected. The power of attorney granted by defendant No. 1 in favour of Mr. Kishore Patel was revoked. It is not disputed that since about June, 1989, Pravin Patel group is in management of the affairs of the first defendant company. It is not necessary to refer to the large number of litigations which are pending between the parties or which were initiated by the parties against each other or one another in different courts. What I have said above is enough for the purpose of stating the background facts leading to the filing of the present suit. I shall now state the facts concerning the extraordinary general meeting scheduled to be held on July 9, 1991, in respect whereof the plaintiffs are seeking judicial intervention by this notice of motion. ( a )On April 9, 1991, certain shareholders belonging to Y.G. Patel group served a requisition on the first d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appoint a retired judge of the High Court or some other fit and proper person to preside as the chairman of the extraordinary general meeting of the first defendant company to be held on May 24, 1991, including any adjourned date thereof. It was also prayed in the said suit that defendants Nos. 2 to 5, who are four of the directors sought to be removed by the said requisition or any director from that group, be restrained from acting as chairman at that meeting. The said suit is pending. An application for interim relief taken out by way of notice of motion in the said suit- is also pending. In the abovementioned writ petition filed on the appellate side of this court (appellate side Writ Petition No. 2150 of 1991, impugning the decision of the Company Law Board directing the company to transfer the shares in question) a Division Bench of this court consisting of Vaidya J. and myself, passed an order to the effect that the meeting scheduled to be held on May 24, 1991, be held only for the purpose of adjourning the same to July 9, 1991, in order to enable the court to consider the said petition on reopening. The said petition is pending. On May 21, 1991, parties to the suit in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eholders present shall choose one of their own members to be the chairman of the meeting. The Companies Act, 1956, provides for holding of statutory meetings, annual general meetings and extraordinary general meetings. Wherever the Legislature thought it fit to empower an independent authority to convene a company meeting, the Legislature has expressly made provisions in that behalf under the Companies Act, 1956. Ii" default is made in holding of an annual general meeting in accordance with section 166, the authority named in section 167 of the Act can convene an annual general meeting of the company. Similarly, if for any reason it is impracticable to call a meeting of the company other than an annual general meeting in any manner in which meetings of the company may be called or to hold or conduct a meeting of the company in the manner prescribed by the Act or the articles, the Company Law Board is empowered to convene a meeting of the company in accordance with the parameters laid down under section 186 of the Companies Act, 1956. Prior to 1974, section 186 of the said Act, conferred powers on the courts to direct the convening of a meeting other than an annual general meeting a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in. It appears to me that section 643(1)( b )( v ) of the Act alone is relevant for our purpose. Section 643(1)( b )( v ) of the Act reads as under : "Section 643. (1)( b )( v ) generally for all applications to be made to the court under the provisions of this Act." While considering applications made to the company court under the substantive provisions of the Companies Act, 1956, the company court is entitled to mould the relief and exercise its inherent jurisdiction whenever found necessary to prevent injustice. The court is thus required to address itself to the question as to under which substantive provision of the Companies Act, 1956, the application is made by the applicant. If the application made is found maintainable under some specific substantive provision of the Act, then alone rule 9 of the rules can be pressed into service and not otherwise. In our case, the application made by the plaintiffs is not maintainable under any of the provisions of the Companies Act, 1956. In my judgment, rule 9 of the Companies (Court) Rules cannot therefore be invoked. I shall now refer to the authorities cited by learned counsel on both sides. Learned counsel for the plaint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m chairing the meeting or getting an independent chairman appointed. The abovereferred judgment of the High Court of Madras was well distinguished by the High Court of Calcutta in Bengal and Assam Investors Ltd. v. J . K. Eastern Industries P. Ltd., AIR 1956 Cal 658 ; [1957] 27 Comp Cas 86 . In this case, the shareholders had issued a requisition to call an extraordinary general meeting to consider a proposed resolution for removal of certain persons as directors. In this case, an application was made for an order that the meeting be called in accordance with the directions of the court and the same be conducted in a manner the court deemed fit. In support of the application, learned counsel for the applicant in the above referred Calcutta case relied upon the ratio of the judgment of the Madras High Court in Nagappa's case, AIR 1951 Mad 831. P. B. Mukharji J. of the High Court of Calcutta held that the abovereferred Madras case was clearly distinguishable, as in the case before him the decision would be taken by the shareholders and not by the chairman himself. It was for the shareholders to decide as to whether a particular director should be removed from directorship or n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the High Court of Madras in V. Selvaraj v. M.H.P. Fund Ltd. [1968] 38 Comp Cas 153. In this case, following an unreported judgment of Ramamurthy J. quoted in paragraph 8 of the judgment, it was held that the court has inherent power to give directions in the matter where there was confusion and pandemonium and it was in the interests of justice to assist the company to perform its statutory duty to hold the annual general meeting which it was not able to hold because of the trouble which it was facing. This judgment is expressly, or at any rate by necessary implication, overruled by a later judgment of the same High Court in T. M. Menon v. Universal Film (India) Pvt. Ltd. [1982] 52 Comp Cas 371. This judgment also takes note of the judgment of the Supreme Court in R. Rangachari's case [1975] 45 Comp Cas 641. I shall now discuss the ratio of the judgment of the High Court of Madras in T.M. Menon v. Universal Film ( India ) Pvt. Ltd. [1982] 52 Comp Cas 371 . The facts of this case appear to be almost identical to the facts of the present case. In this case, an extraordinary general meeting of the shareholders of the company was scheduled to be held on November 26, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Comp Cas 371 , the High Court of Madras held that the application made to the court for appointment of an independent chairman or in the alternative an "advocate-observer" was not maintainable and the court has no inherent power to do so under rule 9. It is axiomatic and well settled that in case the meeting is conducted illegally and illegal resolutions are passed or procedure followed at the meeting is opposed to law, the decisions taken at the meeting can be impugned in appropriate proceedings which may be filed later on. At this stage it shall be appropriate to refer to the judgment of the High Court of Kerala in Dr. A.M. Zacharia v. Majestic Kuries and Loans ( P. ) Ltd. [1987] 62 Comp Cas 865 . It was held by the High Court of Kerala that the civil court had no inherent power to direct the convening or conducting of a company meeting. In this case, the question before the High Court of Kerala was as to whether the civil court was authorised by law to direct the convening of an annual general meeting of a company. It was held by the High Court of Kerala, after referring to the judgment of the Supreme Court in R. Rangachari's case [1975] 45 Comp Cas 641, and various o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through its nominee. If that were the law, in every case the court could be called upon to appoint a chairman of the company meeting as existence of rival groups in a company is almost a common feature. In my judgment, the court is required by law to restrict itself to the statutory provisions under the Act. According to me, the judgment of the High Court of Madras in V. Selvaraj's case [1968] 38 Comp Cas 153 , stands overruled by the later judgment of the same court in T. M. Menon's case [1982] 52 Comp Cas 371 . The judgment of the High Court of Madras in Ananthalakshmi's case [1951] 21 Comp Cas 294 (Mad), also does not hold the field. It was argued by Mr. Aspi Chinai, learned counsel for the plaintiffs, who supplemented the arguments of Mr. J. I. Mehta at the stage of rejoinder, that prayers ( c )( i ), ( c )( ii ) and ( c )( iii ) of the plaint must be considered as ancillary to prayers ( a ) and ( b ) only. Learned counsel submitted that the civil court always has inherent power to grant appropriate interim relief in a civil suit. In my judgment, prayer ( b ) of the plaint is totally misconceived and is liable to be treated as not maintainable in law. No one can seek ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vil court at Bombay as well as in this court. If the meeting dated July 9, 1991, is conducted in contravention of law, the party aggrieved can always pursue its legal remedy. It was stated that several proxies have been forged at the instance of Pravin Patel group. This allegation has been denied. Mr. B. Srinivasan has filed an affidavit, a copy whereof is annexed as exhibit 'L' to the plaint. The plaintiffs have given a schedule of the alleged forged proxies in exhibit 'M' to the plaint. Along with the affidavit in rejoinder, the plaintiffs have filed several affidavits of the members of the Bajaj family. All these allegations are bare allegations. The allegations are strongly made on behalf of the plaintiffs and the same are strongly denied on behalf of the Contesting defendants. It is explained on behalf of the contesting defendants that all these persons had earlier given proxies referred to in exhibit 'M' to the plaint in favour of Pravin Patel group but later on these proxies have been given in favour of Y.G. Patel group. It was submitted on behalf of the contesting defendants that in this view of the situation, the plaintiffs are unnecessarily trying to malign the contesti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of all the books of account, papers, etc., of the first defendant company. Some of the relevant facts emerging from the record are as under : ( a )The first defendant company is engaged in execution of construction projects in India and abroad. ( b )Sometime in the year 1981, a contract was awarded to the first defendant company in respect of a project described by the parties as Doha project.. Soon after completion of the project, the first defendant company made a claim against the concerned Government in the sum of Rs. 34.6 million Qatar Riyals. Some time in the month of July, 1988, the Ministry of Public Works made a recommendation to the effect that the said claim be settled for the amount of Qatar Riyals 9918520.74. At that time, the plaintiffs' group was in management of the first defendant company. Nothing further happened in pursuance of the said report for about two years. According to the contesting defendants, a copy of the said report was not in file. According to the contesting defendants, the plaintiffs are answerable to explain as to what steps were taken by them as a follow up to the report, exhibit 'A', to the plaint. The contesting defendants have submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat when the evidence is led the plaintiffs may be able to establish some more facts. Today, I have nothing before me except the unproved allegations, some of which, at any rate, do not inspire any confidence whatsoever. It is a matter of business strategy as to whether and for what amount a claim against a foreign Government should be settled or whether some concession or commission should be given to an agent in between. I cannot infer dishonesty, misfeasanee or lack of probity at this stage. The burden of proving the allegations made would be on the plaintiffs and for the moment I must presume good faith until the contrary is proved. Thus prayer ( c ) of the plaint for interim relief has no merit whether viewed in conjunction with prayer ( b ) alone or prayers ( a ) and ( b ) both or independently of the said prayers. I cannot direct appointment of a court receiver of all the records of the first defendant company. Learned counsel for the plaintiffs has submitted a list of documents pertaining to the Doha project, a copy whereof has been submitted to learned counsel for the contesting defendants, which they would like to be preserved in view of the matter being sub-judice. I hav ..... X X X X Extracts X X X X X X X X Extracts X X X X
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