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TMI Blog1995 (7) TMI 315X X X X Extracts X X X X X X X X Extracts X X X X ..... rector of Kirloskar Pneumatic Company Ltd. The third defendant is K.G. Khosla Compressors Ltd. 3. The plaintiffs named above instituted a suit for declaration and injunction on 10-7-1995, and along with it was moved an application under order 39, rules 1 and 2 read with section 151, of the Code of Civil Procedure. This order has its seeds in that application. 4. It so happened that on 27-3-1995, the board of directors decided to convene an extraordinary general meeting of the shareholders of the company. The date fixed was 9-5-1995, and a notice to that effect was issued on 12-4-1995. However, on 9-5-1995, the meeting was adjourned for 19-7-1995. The plaintiffs want an interim injunction restraining the defendants from transacting in that meeting the special business para 1 which is stated as follows : "1. To consider and, if thought fit, to pass the following resolution with or without modification as a special resolution: Resolved that pursuant to section 31 and other applicable provisions, if any, of the Companies Act, 1956, the articles of association of the company, be and are hereby altered, in the following manner: ( a )the existing article No. 108 be deleted a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... naging director if he ceases to hold the office of director from any cause provided that if at any time the number of directors (including the managing directors and the nominee directors) as are not subject to retirement by rotation shall exceed one-third of the total number of directors for the time being, then the managing director or any one or more of them, shall be liable to retirement by rotation in accordance with article 85 to the intent that the number of directors not liable to retirement by rotation shall not exceed one-third of the total number of directors for the time being. 122. Subject to the provisions of the Act and in particular to the prohibitions and restrictions contained in section 292 thereof and subject to article 123 thereof, the board may from time to time entrust to and confer upon a managing director for the time being such of the powers exercisable under these present by the board as it may think fit and may confer such powers for such time and to be exercised for such objects and purposes, and upon such terms and conditions, and with restrictions as it thinks fit, and the Board may confer such powers, either collaterally with, or to the exclusion o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities (not being shares in the company) in such manner as they may think fit, and from time to time to vary or realise such investments. (8) To execute in the name of and on behalf of the company in favour of any director or other persons who may incur or be about to incur any personal liability for the benefit of the company such mortgage of the company s property (present and future) as they think fit and any such mortgage may contain a power of sale and such other powers, covenants and provisions as shall be agreed upon. (9) From time to time to make, vary and repeal bye-laws or the regulations of the business of the company, its officers and servants. (10) To enter into all such negotiations and contracts and rescind and vary all such contracts and execute and do all such acts, deeds and things in the name and on behalf of the company as they may consider expedient or in relation to any of the matters aforesaid, or otherwise for the purposes of the company. (11) To give to any person employed by the company a commission on the profit of any particular business transaction, or a share in the general profit of the company, and such commission or share of profit shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and securities (including Government and other promissory notes) contracts, transfer deeds and other instruments as shall be necessary for carrying on the business of the company." 6. Why do the plaintiffs seek this relief? Before the answer gets revealed a brief resume of the background is called for. 7. As far back as in the year 1945 plaintiff No. 1 formed a partnership in the name of K.G. Khosla and Company. In the year 1955 it was converted into K.G. Khosla Company (P.) Ltd. The year 1975 saw the amalga-mation of K.G. Khosla Company (P.) Ltd. with K.G. Khosla Compressors (P.) Ltd. and in the year 1976 it was converted into a public limited company. In the year 1991 the company started facing rough weather resulting in huge losses and as business without profit is not business any more than a pickle is a candy a revival plan of the company was evolved which culminated in an agreement with the Kalyani Group. This was some time in May, 1993. The Kalyani Group then brought in the Kirloskars. This gave birth to the tripartite agreement of 21-1-1994. As per clause 4 of the said agreement the composition of the board of directors was to be as follows: 1. Three directo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs Plc. v. Quadrex [1989] 3 All ER 492. 12. It was further contended that as the meeting was earlier scheduled for 9-5-1995, and had been adjourned for 19-7-1995, a notice of the adjourned meeting was required to be given in terms of the regulations contained in Table A in the First Schedule to the Companies Act, 1956. 13. Lastly, it was urged that the plaintiffs having worked for the company right from its very inception and having been assured of their present position in the articles of association as well as in the tripartite agreement referred to above and their equitable expectations having been accepted by the company as well as by the shareholders, the same could not be frustrated by resorting to the amendment/deletion of the articles in question. 14. Prima facie, I do tend to agree with the learned counsel for the plaintiffs that the memorandum of understanding entered into by the plaintiffs with defendant Nos. 1 and 2 on 14-2-1995, was not a concluded contract. Lord Dunedin tells us in May Butcher v. The King [1934] 2 KB 7 that to be a good contract there must be a concluded bargain and a concluded contract is one which settles everything that is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of association of the company would go to show that Table A does not apply. This much for the objection regarding notice. 16. Besides saying that I find no force in the contentions raised on behalf of the plaintiffs I feel the need to say a few more words. 17. During arguments, it was not the case of the plaintiffs that the board of directors in their meeting of 23-3-1995, could not decide to convene the extraordinary general body meeting. In fact they were a party to that decision. By that decision the board decided to resort to a wholly democratic process. The challenge to the right of the members to alter the articles was limited to the three contentions referred to above. They have left me unpersuaded. As already noticed by me above, the holdings of the plaintiffs would remain unaffected. They would continue to hold the same positions in the company as they are holding at present. What is being sought is the deletion of two articles and amendment in the other two including one relating to quorum. The defendants say that all this has been necessitated to protect the interest of the shareholders holding majority of the shares and to ensure smooth functioning of the mana ..... X X X X Extracts X X X X X X X X Extracts X X X X
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