9911796707
TMI Blog1995 (3) TMI 495X X X X Extracts X X X X X X X X Extracts X X X X ..... have stated that on 7-1-1995 the Chairman of the bank addressed a letter to the Reserve Bank of India, which admittedly is the supervisory authority wherein inter alia he has stated that the two appellants who are directors of the bank had indulged in certain acts which were very much against the interest of the of institution and for the reasons set out by him in that letter he had contended that they should be removed from the directorship of the bank. The plaintiffs' contention is that the R.B.I. has so far not responded to that letter nor has it taken any action as asked for and that therefore the Chairman of the Bank who is not well disposed towards them because of certain conflicts that are referred to in the plaint, is alleged to have instigated certain persons to convene the general body meeting for purposes of removing the plaintiffs from the directorship of the bank. According to them, the names of approximately three thousand shareholders who have signed the requisition for holding the general body meeting have not been disclosed and there is also an allegation in the correspondence exchanged that these so called signatures have been obtained . That part of the cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f their coming to a right conclusion or decision with regard to the items on the agenda. In this regard, he has sought to place reliance on a judgment of the Bombay High Court in the Firestone case reported in (1971) 41 Com Cas 377. The High Court had occasion to deal with various aspects of the law but as far as the requirements of Section 173 are concerned, the High Court reiterated the position that it is a mandatory requirement of law that all material facts as also the interests or otherwise of directors must be disclosed in the explanatory statement. The reason for this is obvious in so far as there would be a class of shareholders who on the basis of the data would like to decide on attending the meeting or not but more importantly as far as those who attend and participate are concerned, the law takes cognizance of the fact that they must be posted with enough material from which they would be able to ascertain as to what is the nature of the controversy on which their opinion or decision is sought. It is also necessary since it is a matter of importance touching the business of the company, that the shareholders be posted with enough factual data for purposes of arriving a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o it but that it is a requirement of S. 169 that all the requisitionists should lodge the requisition with the company. To my mind, there is absolutely no substance in this objection for the simple reason that the law does not require duplication of a requisition. If a requisition is drafted out by any one of the shareholders who is entitled to ask for the holding of the meeting and even countersigned by the prescribed number of shareholders the lodging of that requisition document with the company is deemed compliance of S. 169. As far as this objection is concerned therefore I do not see any reason why it should be upheld. ( 5. ) Appearing on behalf of the respondents Mr. Holla submitted that the full facts have not been placed before the Court. With regard to the objection regarding the so called disclosure of material, Mr. Holla stated that the present appellants to whom a copy of the requisition was sent and who have taken part in the board meeting wherein the decision to convene the E.G.M. was taken, had themselves sent a detailed written explanation or reply setting out their side of the case. They had also requested that this should be circulated to all the shareholders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company has more than fully complied with what it was obliged to do. ( 7. ) Mr . Holla has thereafter drawn my attention to certain other parts of the record wherein he has contended that there exists more than enough justification as far as the present case is concerned for the shareholders to convene the present meeting. According to Mr. Holla, the company is shortly to go for a large public issue and that in these circumstances any adverse statements, publicity or material that is not condusive to the reputation and good name of the company or inter se disputes would affect the working, welfare and prospects of the company. Mr. Holla has submitted, that on facts this is a fit case in which even as far as the merits go, that this court should not intervene. ( 8. ) As regards the grant of a relief of the type that has been prayed for, Mr. Holla has relied significantly enough on an earlier decision of this Court reported in 1993 (2) Kar LJ 230 wherein, this very bank had come in appeal in somewhat similar circumstances. Mr. Holla has placed reliance on one part of the judgment wherein this Court has taken the view that it would not be open to a party to apply for an injuncti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning the meeting and that regardless of the amount of damage that is alleged, that the Court should refuse to stop the meeting. On the basis of these submissions, learned advocate contended that quite apart from the merits of the matter, that even the aspect of balance of convenience lies heavily in favour of the respondents and that consequently, no relief should be granted to them. ( 10. ) In the light of the aforesaid position, the short question that requires to be considered is as to whether any breach as alleged has been committed, if so how serious is that breach, what is the effect thereof and whether, assuming such a breach has been committed, whether it is so fundamental and whether it is grave enough to warrant the stoppage of the E. G. M. tomorrow. As far as this aspect of the matter is concerned, I need to take cognizance of certain features that are special to the facts of this case. One cannot go by generalised propositions nor can an issue be decided in a vacuum. On the facts of the case before me, the sole business at the meeting is the removal of the two directros of the bank. This is an aspect of seriousness because in the first instance (sic) it would reflect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would have been in a position to acquaint himself with the aspect of what exactly the seriousness of the matter was. To my mind, this is a requirement of law and the company has failed to comply with this requirement. It is not a mere obligation. It is not optional but it is compulsory and the Courts while interpreting Section 173 have unequivocaly held so. Even in the headnote G of the Escorts case referred to supra, the Court has specified that this is a requirement of law and has amplified it to state that it is a requirement that is cast on the company. Under these circumstances it was absolutely necessary that this material should have been disclosed. I have no hesitation in holding that this particular information or these facts constitute what Section 173 refers to as material facts. In the Firestone case also referred to supra, the Court has in some detail referred to this requirement and has once again reiterated the position that it is an express requirement of the law. ( 11. ) The question arises as to what is the effect of such non-disclosure. Mr. Holla has advanced the plea that it is curable in so far as since the respondents themselves have circulated an explanato ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of money for purposes of holding of the meeting and further more that serious inconvenience will be caused to the shareholders as it is too late now to intimate them that the meeting is either postponed or cancelled. The sum total of this situation represents a certain degree of financial loss. That is a consideration of consequence but on the other hand I need to take note of the fact that the appellants are gravely exposed to a situation whereby some wrong or reckless decision could be taken at the meeting only because of the fact that the shareholders were not posted with all the material. The damage to the appellants and the consequent damage to the company and the subsequent consequences thereof to my mind completely and totally outweigh whatever financial loss the postponement or revocation of the meeting may entail. In my considered view, the balance of convenience also lies very much in favour of the present appellants. ( 13. ) The present appeal is only for the limited relief as far as the holding of the meeting on 2-3-1995 is concerned. To my mind, the appellants qualify for such a relief. The appeal is accordingly allowed. The respondents are accordingly restrained ..... X X X X Extracts X X X X X X X X Extracts X X X X
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