9911796707
TMI Blog1949 (12) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... ents. In October, 1944, the directors of the company were Mr. Cumberbatch, Sir David Ezra, Dr. Satya Charan law and Mr. Champalal Jatia. At a general meeting of the company held on 9th March 1945, Mr. Rameshwar Prosad Bajoria, plaintiff 1 was elected a director of the company, and Sir David Ezra, who had retired by rotation and offered himself for re-election, was not elected. On 28th December 1915, Dr. Satya Charan Law, Mr. Cumborbatch and Lr. Champalal Jatia requested Mr. Bajoria in writing, in terms of article 116 (k) of the Articles of Association of the company, to resign his directorship of the company and appointed Sir David Ezra in his place. Article 116 (k) runs thus: The office of a director shall ipso facto be vacated if...... (k) (not being an ex-officio Director) he be requested in writing by all his co Directors to resign or if he be removed from office by an Extraordinary Resolution of the company. 3. The suit, which has given rise to this appeal was instituted on 14th January 1946, by Mr. Bajoria and three others, against the four directors of the company, including Sir David Ezra (who has since died), and, in this suit, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties, answered it in favour of the defendants and directed the name of the company to be struck off from the plaint. The learned Judge, however, observed that it was open to the plaintiffs to make the company a defendant. The decision of Edgley J. was subsequently reversed on appeal by a Division Bench of the High Court, which held that the suit had been properly filed and the company had been correctly made a co-plaintiff in the suit. The sole question which we have to decide is which of the views taken by the Courts below is correct. 5. For the purpose of answering this question, it is, as will appear presently, material to refer to Arts, 148 and 149 (6), Articles of Association of the Company. Article 148 provides as follows: The control of the company shall be vested in the directors and the business of the company shall be managed by the directors who in addition to the powers and authorities by these presents or otherwise, expressly conferred upon them, may exercise all such powers and do all such acts and things as may be exercised or done by the company and are not hereby or by statute law expressly directed or required to be exercised or d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6), the ultimate control vests in the majority of the ordinary shareholders and, as the plaintiff-respondents admittedly command a majority of votes of those shareholders, it is proper that the suit should proceed with the name of the company as a co-plaintiff. It may be stated here that though no meeting of the ordinary shareholders was held for the purpose of authorizing the plaintiffs to file the present suit on behalf of the company, it was conceded by counsel for the defendants before Edgley J. that it would be unnecessary that such a meeting should be held in order to ascertain the wishes of the majority of the shareholders inasmuch as the plaintiffs commanded a majority of the votes of the ordinary shareholders. The case has therefore proceeded in both the Courts below on the footing that at a meeting of the ordinary shareholders, the plaintiffs would be able by a majority to assure the passage of a resolution empowering them to continue the suit. The case has also proceeded on the footing that whatever the ultimate decision in regard to the plaintiffs' allegations might be, for the purpose of deciding the preliminary issue, it must be assumed that the acts complained of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company to file a bill to have the question decided, then if there happens to be one cantankerous member, or one member who loves litigation, everything of this kind will be litigated; whereas if the bilk must be filed la the name of the company, then, unless there is a majority who really wish for litigation, the litigation will not go on. Therefore, holding that such suits must be brought in the name of the company does certainly greatly tend to stop litigation. 9. A similar view has been taken in Pender v. Lushington, (1877) 6 Ch. D. 70 : (46 L.J. Ch. 317). In that case, an action was brought by a shareholder whose vote had been rejected on behalf of himself and all others who had voted with him, naming the company as co-plaintiff, against the directors, for an injunction to restrain them from acting on the footing of the votes being bad, and Jessel M.R., dealing with the objection that the company ought not to be plaintiff, observed as follows: It is said that the company ought not to have been made plaintiffs. The reasons given were reasons of some singularity, but there is no doubt of this, that under the articles the directors ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ock companies that the Court will not interfere with the internal management of companies acting within their powers, and in fact has no jurisdiction to do so. Again, it Is clear law that in order to redress a wrong done to the company or to recover moneys or damages alleged to be due to the company, the action should prima facie be brought by the company itself. These cardinal principles are laid down in the well-known cases of Foss v. Harbottle (1843 2 Hare 461 : 28 E.R. 189) and Mozley v. Alston, (1847-1 Ph. 790 : 16 L.J. Ch. 217) and In numerous later cases which it is unnecessary to cite. But an exception is made to the second rule, where the persona against whom the relief is sought themselves hold and control the majority of the shares in the company, and will not permit an action to be brought in the name of the company. In that case the Courts allow the shareholders complaining to bring an action in their own names. 11. These cases make it quite clear that ordinarily the company would be a proper plaintiff in a case like the present, but, as has been already stated, the appellants rely upon the articles of association governing the company in so far as they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterfere with the contract apart, of course, from any misconduct on the part of the directors ? There is no such misconduct in the present case. Is there any analogy which supports the case of the plaintiffs ? I think not. It seems to me the analogy is all the other way....Ton are dealing here, as in the case of a partnership, with parties having individual rights as to which there are mutual stipulations for their common benefit, and when you once get that, it seems to me that there is no ground for saying that the mere majority can put an end to the express stipulations contained in the bargain which they have made. Still less can that be so when you find in the contract itself provisions which show an intention that the powers conferred upon the directors can only be varied by an extra-ordinary resolution, that is to say, by a three-fourths majority at one meeting, and that the directors themselves when appointed shall only be removed by special resolution, that is to ear, by three-fourths majority at one meeting and a simple majority at a confirmatory meeting. That being so if you once get clear of the view that the directors are mere agents of the company, I cannot see anythin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds: I am therefore of opinion that the learned Judge was right in refusing to dismiss the action on the plea that it was commenced without the authority of the plaintiff company. I think the Judge was also right in refusing to give effect to the resolution of the meeting of the share-holders requiring the chairman to instruct the company's solicitors not to proceed further with the action. A company is an entity distinct alike from its shareholders and its directors. Some of its powers may, according to its articles, be exorcised by directors, certain other powers may be reserved, for the shareholders in general meeting. It powers of management are vested in the directors, they and they alone can exercise these powers. The only way in which the general body of the share-holders can control the exercise of the powers vested by the articles in the directors is by altering their articles, or, if opportunity arises under the articles, by refusing to reelect the directors of whose actions they disapprove. They cannot themselves usurp the powers which by the articles are vested in the directors any more than the directors can usurp the powers vested by the articles in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , who dismissed the motion for striking out the name of the company and observed: The company is of course the owner of Marshall's patent, and alone able to litigate for the protection of that patent. The three directors had, in what I will assume to be the exercise of their discretion, refused on behalf of the company to oppose the grant of the patent to themselves or to those from whom they acquired it, and they have refused to commence, or to allow to proceed so far as they can help it, any action for the purpose of establishing that the new patent is an infringement of the patent of the company. Now it is obvious that in the position in which they have placed themselves on this question their duty and their interests are in direct confect. On the one band it is their duty as directors to protect the interests of the original patent, which is the property of the company; on the other hand, their personal interests are clearly to maintain the validity of the patent which belongs to them, and which it is alleged is an infringement. Mr. Marshall has commenced an action in the name of the company for the purpose of restraining an alleged infringement on the part o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
