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TMI Blog1923 (3) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... ncillor shall not vote or take part in the discussion of any matter before a meeting in which he has, directly or indirectly, any share or interest in- (j) any newspaper in which any advertisement relating to the affairs of the corporation is inserted; or (k) any joint stock company which shall contract with or be employed by the Commissioner on behalf of the Corporation. 3. The only councillor to whom Clause (j) of Section 16 can possibly apply in Mr. Murzban. As to him it is alleged by the plaintiff' that he was on the material date the proprietor of the Jam-e-Jamshed and that advertisements relating to the affairs of the said Company were inserted in that newspaper. This allegation appears in para 7 of the plaintiff's affidavit dated February 22, 1923. It does not appear anywhere in the plaint. Mr. Murzban stated in his evidence that he is not now nor was he on the material date the proprietor of the newspaper, and that his father was the sole proprietor, and that he was the editor of the newspaper on a salary of ₹ 600 per month. He further stated that he had no other interest in that paper. I accept his evidence. But even if he was the proprietor of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the words participates in the profit occurring in schedule II, Rule 64, of the Act, and consequently that a share-holder in a Gas Company which had entered into a contract to supply gas to a local board was a person interested in the Company within the meaning of Section 193. 6. On the other hand, it was contended for the plaintiff that the interest need not be pecuniary, and that any interest, however small, which created a conflict, between interest and duty, was sufficient to disqualify a councillor. 7. Section 16 of the City of Bombay Municipal Act is almost in the same terms as Section 12 of the Municipal Corporations Act, 1882 (45 46 Vic. Clause 50). Both these sections deal with disqualifications for being a councillor. One of the disqualifications laid down in both the sections is where a councillor has directly or indirectly by himself or his partner, any share or interest in any contract or employment with, by, or on behalf of the council . As regards r disqualifications for voting, the language of the two Acts is dissimilar; for while Section 22, Sub-section (3), of the English Act prohibits a councillor from voting in any matter in which he has, directly or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in a contract is pecuniary, it is immaterial that the amount involved is trifling : Nell v. Longbottom [1894] 1 Q.B. 767, a case Under Section 22, Sub-section 3, of the English Act of 1882 ; Rex v. Rowlands [1906] 2 K.B. 292, a case Under Section 46 of the Local Government Act, 1894. If the interest is not pecuniary, it must at least be a 'material' interest. 10. I will now turn to the test so much emphasised at the bar, namely, the teat of conflict between interest and duty. That test was laid down for the first time in explicit terms by Lindley L. J. in Nutton v. Wilson (1889) 22 Q.B.D. 744. The question in that case was whether if a member of a local board does part of the work which a contractor has entered into a contract with the board to do on their premises, he is within the meaning of the Public Health Act, 1875 (38 39 Vic. Clause 55) in any manner concerned in the contract . It was held that he is. In the course of his judgment Lindley L.J. said: The expression 'in any manner concerned' is a somewhat lax one. Cases may be pub in which a person might perhaps be said in one sense to be concerned in a contract entered into by the board, and yet it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to vote at such meetings in a manner beneficial to the interests of the cestui que trust, for he does not owe the membership of the Corporation to the fact that he is a shareholder of that Company. He commits no breach of the trust, if he votes at meetings of the Corporation in contravention of the interests of his beneficiary. It is no part of his duty as a trustee to vote at meetings of the Corporation in matters affecting the company as the beneficiary would have him to do. If no such duty is imposed upon him by law, it cannot be a case of conflict between two duties. Nor can it be a case of conflict between interest and duty, the interest which he has in the beneficiary being no higher than what a father has in the prosperity of his son. 14. There is no difficulty as regards Mr. Meyer Nissim and Mr. Mahomedbhai Currimbhai Ebrahim owing to admissions most fairly and frankly made by Sir Thomas Strangman on behalf of the Corporation. Mr. Meyer Nissan is the mortgagor of certain shares of the said company. The shares stand in the name of his wife. It was admitted that the shares stood in his wife's name as his nominee, and that he had a beneficial interest in the equity of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to look into the books unless he was prepared to show the books at least to counsel on both sides, but he refused to do so. Such being the case I bold that the alleged gift is not proved, and the shares belonged to him on February 19, 1923, and that he was disqualified from voting at the said meeting. 18. Dr. Master presided and voted at the meeting of February 19, 1923. He voted as a councillor and he also gave his casting vote as Chairman. Dr. Master has been a councillor for the last twenty-five years. He and his wife held eighteen preference shares and ninety-five ordinary shares of the said company. They were purchased by him with his own money. On December 20, 1922, he and his wife executed instruments of transfer (Exhs. Nos. 14 and 15) of those shares to his wife and daughter. The transfers were by way of gift. The object of the transfer, as Dr. Master said, was to enable him to vote and take part in the discussion of, matters appertaining to the said company, tie said that he had no longer any interest in those shares and that they were the absolute property of his wife and daughter. He was asked in cross-examination whether he had ever made a gift before of shares to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sferred in the register of the company to the names of Mr. Jamshed and Pirqibai. It appears from the e evidence of Dr. Cursetji and Dr. Khurshed that Dr. Cursetji had, in September 1922, borrowed ₹ 400 from Dr. Khurshed. In the middle of January 1923 he borrowed a further sum of ₹ 150 from him, and it was then arranged that Dr. Khurahed should keep the said five shares in discharge of the two loans. In the beginning of March 1923 as a result of inquiries consequent on the present suit the mistake aforesaid was discovered, and steps were taken to rectify the mistake and substitute Dr. Khurehed's name in place of Jamshed. 20. Dr. Cursetji has sworn that he ceased to have all interest in the shares from January 1923. It is contended for the plaintiff that the transfer was nominal and that Dr. Cursetji was on the material date the beneficial owner of the shares. I am not prepared to accede to this contention. I am inclined to believe the evidence of Dr. Cursetji, Dr. Khurshed and Mr. Jamshed. They all seined to me to be witnesses of truth Dr. Cursetji showed no desire to suppress anything from the Court. He produced his pass book and allowed the other side free inspe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the testator for the benefit of his wife and his children still continue. The testator held thirteen old preference shares of the said Company which were converted after his death into thirty-nine. On January 26, 1923, Sir Temulji executed an instrument of transfer (Ex. No. 13) whereby the said thirty-nine shares which stood in the names of all the three trustees were transferred to the names of the other two. Sir Temulji said that lie did so for the purpose of enabling him to vote on Tramway debates. It is contended for the plaintiff that Sir Temulji being a trustee of the said shares, he had an interest in the said company, and that he was, therefore, disqualified from voting. The broad ground on which the argument is based in that a trustee is under a legal obligation to his cestui que trust to vote as he desires. I will assume for the purposes of this case that all the thirty-nine shares stood in the name of Sir Temulji as sole trustee on February 19, 1923, but even so I fail to see how it is obligatory on Sir Temulji to vote at meetings of the Corporation according to the directions of the beneficiaries. I have already set forth above the principles by which a case such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial staff managed all about the pass. On these facts the question arises whether Mr. Murzban can be said to have an interest in the Bombay Electric Supply Tramways Company within the meaning of Section 36, Clause (p). It seems to be one of the plaintiff's grievances that, Mr. Murzban got the pass renewed in the name of the 'representative' of the Jam-e-Jamshed to enable him to vote at meetings of the Corporation involving discussion on matters pertaining to the said company. But why should he not Mr. Murzban makes no secret of it. I will, however, approach the consideration of the question on the forcing that the pans was renewed in the name of the editor. The pass did not at; any time bear Mr. Murzban's name or the name of any other person as editor. It was issued to the editor of the Jam-e-Jamshed as it was to editors of other newspapers. Mr. Murzban is the editor of the Jam e-Jamshed today; he may sever his connection with the paper tomorrow. It is not suggested that the executive of the Tramway Company ascertains the names of the editors before the pass is renewed, or that it issues the pass only to those editors who happen to be councillors. Mr. Murzban was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9; contention on this issue is that the suit ought to have been instituted in the name of the Corporation, and reference was made to the provisions of Section 517 of the Bombay Municipal Act which contemplate a suit by the Corporation. This issue, which was kept in the background at earlier stages of the proceedings, was brought to the forefront after it became clear that the defendants must lose on the merits of the case. 27. Before proceeding to examine the legal arguments on issue No. 1, it is necessary to ascertain what precisely was the proposition before the meeting held on February 19, 1923,- whether it was a proposition merely for the adjournment of the meeting within the meaning of Rule 40 or an amendment involving the disposal of, a question within the meaning of Rule 46. These rules form part of rules framed Under Section 36 of the City of Bombay Municipal Act. Rules 14, 38, 39, 40 and 41 relate to adjournments of meetings; Rules 34 to 37 to amendments, and Rules 42 to 45 to voting. It is clear from these rules that a proposition for adjournment need not be seconded (Rule 38); an amendment, however, must be seconded, or it falls through (Rule 34). A proposition for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt and a Court of law alone. That is the tribunal finally to decide questions as to the validity of votes. Neither the Corporation nor the Chairman has any power to do so. The question of the validity of a vote is a question of law, and a Court of law has jurisdiction to entertain it. One of the points raised on behalf of the defendants was that the Court has no power to interfere with the internal management of a Corporation, and reliance was placed on the observations of Lord Davey in Burland v. Earle [1902] A.C. 83. On page 93 the noble and learned Lord says: It is an elementary principle of the law relating to joint stock 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. 31. But surely questions as to the validity of votes are not question relating to the internal management of a Corporation. They are questions that can be disposed of only by a Court of law. 32. It was further contended for the defendants that the Court should not grant any relief to the plaintiff, for the relief, if granted, would be rendered nugatory if the President of the Corporation convened ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectors ought or ought not to have sanctioned certain proceedings which they are about to sanction, whether one director ought or ought not to be removed, and whether another director ought or ought not to have been appointed. If there is some one managing the affairs of the company who ought not to manage them, and if they are being managed in a way in which they ought not to be managed, the company are the proper persons to complain of that....But then the plaintiff says, 'Give us leave to amend'. It is rather late to ask for leave to amend when the amendments might have been obtained from the Master of the Rolls before any costs had been incurred. But the question is, is there anything substantial in this case on which we should give leave to amend on the part of the company? I can see nothing. I do not think we ought to give leave to amend for the purpose merely of getting a declaration as to what the proper mode of dealing with the adjournment was, because that would be simply to give a declaration without any relief…I am not aware that there could be any practical result following upon a declaration obtained by the company as to the particular mode in which the me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or damages alleged to be due to the company, the action should prima Jade be brought by the company itself. These cardinal principles are laid down in the well-known cases of Foss v. Harbottle (1843) 2 Hare 451 and Mozley v. Alston (1847) 1 Ph. 790 and in numerous later cases which it is unnecessary to cite. But an exception is made to the second rule where the persons against whom 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 share-holders complaining to bring au action in their own names. This, however, is mere matter of procedure in order to give a remedy for a wrong which would otherwise escape redress, and it is obvious that in such an action the plaintiffs cannot have a larger right to relief than the company itself would have if it were plaintiff, and cannot complain of acts which are valid if done with the approval of the majority of the share-holders, or are capable of being confirmed by the majority. The cases in which the minority can maintain such an action are, therefore, confined to those in which the acts complained of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tells as that sometimes, when minorities insist on their rights, they ultimately prevail. There must, therefore, be an injunction to restrain the defendants from acting on the resolution. 38. This decision, it may be observed, was reversed on appeal on another ground in a subsequent case, but with that we are not concerned. In Arnot v. United African Lands Limited [1901] 1 Ch. 518, a suit was brought by two of the share-holders on behalf of themselves and all the other share-holders against the company and their directors to restrain them from acting upon some resolutions which purported to have been passed as special resolutions at a general meeting of the company. The resolutions provided for the voluntary winding up of the company. By the writ in the action the plaintiffs claimed a declaration that the resolutions were not in fact passed at the meeting, but that a resolution for the adjournment of the meeting was in. fact carried and injunction to restrain the defendants from in any way acting upon the resolutions as if passed. It was held by the Court of Appeal that no poll having been demanded the declaration of the Chairman that the resolutions had been duly carried was co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , there can be no doubt that every councillor whether he has the same interest in the suit as the plaintiff or not had notice of the institution of the suit. Having regard to these facts and to the frame of the suit in Young's case cited above, I do not consider it necessary to direct any amendment and I proceed to pass my orders in the suit. 41. First, there will be a declaration in terms of prayer (a) of the plaint. Next, there will be an injunction restraining the defendants from in any wise acting upon the declaration of the Chairman at the meeting, hold on February 19, 1923. If those whom I have held to be disqualified from voting had not voted tit the said meeting, the result would have been sixteen for the amendment and fifteen against it, and the Chairman would have declared the amendment carried, and this would have been recorded in the minute book of the Corporation. The result of such a declaration would have been that the same question could not have been brought up before the Corporation prior to the April meeting of the Corporation having regard to Rule 46. I, therefore, hold that the Chairman ought to have declared that the amendment was carried. As this has n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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