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TMI Blog2007 (7) TMI 404X X X X Extracts X X X X X X X X Extracts X X X X ..... provision in the articles. Thus the discussion resulting in the decision taken on 29-6-1993, whereby the plaintiff was removed from the board of directors cannot be faulted. The issue is answered against the plaintiff. - CS (O.S.) NO. 1875 OF 1993 - - - Dated:- 12-7-2007 - SANJAY KISHAN KAUL, J. Sandeep Arya for the Plaintiff. JUDGMENT 1. The plaintiff erstwhile director of defendant No. 1, has filed the present suit for declaration and permanent injunction seeking a decree whereby the removal of the plaintiff as director of defendant No. 1/company be restrained and it be declared that the plaintiff is a director of defendant No. 1 company. 2. The plaintiff claims to be a businessman and an industrialist and states that he was a co-promoter and an original investor in the shares of defendant No. 1/company. 3. Defendant No. 1 is a public limited company within the meaning of the Companies Act, 1956 ( the said Act ) incorporated on 16-1-1991, with the primary object of setting up of project for the manufacture of white crystal sugar. The certificate of commencement of business was obtained by defendant No. 1/company on 13-5-1991. Defendant No. 2 is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments have already been admitted/denied. However, the matter was not heard as adjournments were requested from time to time. It was also found that original documents had not been filed and repeatedly time was given to file the original documents. Only one document was exhibited as exhibit P1 which is the attendance sheet of the board members present in the meeting held on 29-6-1993. At the stage when the matter was to be taken up for final hearing, the defendants suddenly realised that there are certain originals which would have to be proved and thus moved I.A. No. 4493 of 2006 to lead evidence of one witness Mr. M.P. Singh. This application was allowed by the order dated 15-5-2006, and the affidavit filed along with the application of Mr. M.P. Singh was taken on record. The order itself records that the testimony of Sh. M.P. Singh is required to prove documents including the undertaking dated 16-9-1992, executed by the plaintiff (exhibit DW1/2), minutes of the meeting of the board of directors of defendant No. 1 held on 17-8-1991, (exhibit DW1/1) whereby the plaintiff was appointed as the nominee of the co-promoters, i.e., defendant Nos. 1, 2 and 3, minutes of the meeting of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh, nominee of co-promoters be and is hereby appointed as director of the company liable to retire by rotation." 10. The board desired that necessary intimations be given to the Registrar of Companies in time. 11. It is the submission of learned counsel for the plaintiff that the aforesaid shows that though the plaintiff was a nominee of the co-promoters, the actual appointment of the plaintiff was as a director of defendant No. 1/company and was "liable to retire by rotation". Learned counsel thus submits that the removal of the plaintiff could only be in accordance with the provisions of section 284 of the said Act. The relevant provisions of the said Act are reproduced as under : "284. Removal of directors. (1) A company may, by ordinary resolution, remove a director (not being a director appointed by the Central Government in pursuance of section 408) before the expiry of his period of office : Provided that this sub-section shall not, in the case of a private company, authorise the removal of a director holding office for life on 1-4-1952, whether or not he is subject to retirement under an age limit by virtue of the articles or otherwise : Provided further tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment of learned Single Judge in Tarlok Chand Khanna v. Raj Kumar Kapoor [1983] 54 Comp. Cas. 12 (Delhi), where it has been observed in paragraph 21 that even a person appointed as a life director or a permanent director by the articles or by any agreement is, nevertheless, removeable by the company in a general meeting and has no security of tenure of office. The only exceptions are the directors appointed by the Central Government under section 408 of the said Act and life directors holding office on 1-4-1952. The only other exception is nominee directors of financial institutions with which the case was not concerned. It was held that since there was absence of notice, the director could not have been removed. This case however would have no application to the given facts of the present case where the controversy is whether the board of directors could have removed the plaintiff as a director based on the provisions of the articles of association. 15. The stand of the defendants as contained in the written statement shows that the reliance has been placed on the undertaking given by the plaintiff dated 16-9-1992 (exhibit DW1/2) relevant portion of the undertaking is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was an advance notice of fourteen days. However, the notice was for a meeting of the board of directors and not for a shareholders meeting. The question thus arises as to whether a shareholders meeting was necessary to remove the plaintiff or could the board of directors have removed the plaintiff. The scope and effect of section 284 of the said Act form part of the discussion in a Division Bench judgment of the Allahabad High Court in A.K. Home Chaudhary v. National Textile Corporation (U.P.) Ltd. [1948] 48 IFLR 101. The relevant portion is extracted as under : "Learned counsel for the petitioner then urged that the petitioner being a director of the Government company could be removed only in accordance with the procedure laid down by section 284 of the Companies Act, 1956. The board of directors had no authority to remove the petitioner who was a director of the company. Section 284 lays down that a company may, by ordinary resolution remove a director. On receipt of the notice of resolution to remove a director, the company shall forthwith send a copy thereof to the director concerned, and if he makes representation to the company, the same may be placed before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not violative of section 284 of the Companies Act." (p. 101) 18. In view of the aforesaid, it is not in doubt that though there is a mandate contained under section 284 of the said Act that is not the only methodology for removing a director. It is noted in the judgment that there may be eventualities like retirement, dismissal, removal or vacation of office voluntarily. The present case is one of removal of the plaintiff. The judgment makes it clear that where articles of association confer power on the board of directors to remove a director, such power is not affected by the provisions of section 284 of the said Act. I am in full agreement with this view. The articles of association are in the nature of an agreement between the shareholders who are the joint owners of the company. If some specific methodology is devised by consent, nothing precludes the members/shareholders from doing so. The question to be considered is whether the present articles of association do provide for such a procedure. 19. The memorandum and articles of association have been exhibited as DW1/4. The issue of the directors is discussed, from article 110 onwards. The relevant articles are the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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