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mnm
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
NOTICE OF MOTION NO. 3701 OF 2009
IN
SUIT NO. 2429 OF 1997
Naina D. Kamani ...Plaintiff
Vs.
Janson Engineering & Trading Pvt. Ltd. ...Defendants
And
Mr. N. Srinivasan ...Respondent
Mr. F.E. D'vitre, Sr. Advocate a/w. Mr. M.S. Doctor
a/w. Mr. Nimay Dave i/b. Bachubhai Munim & Co., for Plaintiff
Mr. M.P.S. Rao i/b. A.A. Maniyar for Defendant No.1
Mr. Rajesh Patil i/b. Mahesh Jani & Co., for Defendant No.6
Mr. Ashok Varma i/b. Jagdish Kumar Gupta for Defendant No.7
CORAM : SMT. ROSHAN DALVI, J.
Date of reserving the Order: 29th July, 2011
Date of pronouncing the Order: 18th August, 2011
ORDER:
1. The Plaintiff is one of the permanent Directors of Defendant No.1
Company. Defendant Nos. 2 and 3 are two other permanent
Directors of Defendant No.1. The Company essentially owns one
residential building. The Plaintiff and Defendant No.2 reside in two
flats of the building. The building was purchased in an auction by
Defendant the No.1 Company when the Plaintiff and Defendant No.2
were its members and Directors. The property came to be purchased
on 19th January 1989 under the certificate of such purchase in an
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auction. One flat was thereafter purchased by Defendant No.3 and
accordingly the Plaintiff and Defendants 2 and 3 came to be the
three Directors of Defendant No.1 Company.
2. It is the case of the Plaintiff that in order to give the Plaintiff
sufficient representation in management it was specifically decided
that all the three Directors would equally partake in the Board
Meetings so that the resolutions of the Board would be unanimous.
The Articles of the Company came to be amended to make a specific
provision in that regard. Article 51(f) of the Articles of Association of
the Company dealing with (Directors and proceedings of the Board)
came to be incorporated in the Article to make a specific provision
for unanimous vote at the Board Meetings. Similarly under Article
51(e) it was specifically shown that the Plaintiff and Defendant Nos.
2 and 3 were permanent Directors of the Company and further
appointment of any Directors, other than any additional Director,
would be by the person nominated by the outgoing Director as a
permanent Director.
3. Articles 51(e) and (f) are, therefore, peculiar to Defendant No.1
Company.
4. It may be mentioned that the Company does not carry on any
business except manage the building which is the only property it
owns.
5. Consequent upon the unanimity required in Board Meetings, which
became impossible of actual performance, a deadloock came to be in
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the working of the Company. The suit which came to be filed in
1997 challenged essentially the proceedings in a Board Meeting held
on 5th August 1993 as being false, fabricated, fraudulent and not
binding on the Plaintiff. The Board Meeting of 5th August 1993 was
convened and conducted inter alia in presence of the Plaintiff.
Unanimous resolutions are shown to have been passed. The material
resolution which dealt with the asset of the Company was
authorising Defendant No.6, the father of Defendant No.2, to obtain
vacant possession of a flat on the ground floor of the Company’s
building from one Pushpa Kadambande along with one garage and
servant’s room and upon obtaining such possession to let it out to
Defendant No.6 after he carried out external repairs and renovations
to the entire building as per the offer made by him. The challenge to
that meeting is essentially in respect of the said resolution.
6. The suit is, therefore, for a declaration that Defendant Nos.6 has no
right, title and interest in the suit flat, is a trespasser therein, for
recovery of possession and for other incidental reliefs of damages,
mesne profits and injunction. The suit also claims declaration with
regard to the validity of several other Board Meetings with which
this Notice of Motion is not concerned.
7. Pending the suit the Article 51(f) and (e) of the Articles of
Association of Defendant No.1 Company, which were actually
instrumental in bringing out the deadlock between the Directors and
Members of the Company, were sought to be amended to bring them
in conformity with the usual rule of majority on the board for
resolutions to be passed at Board Meetings. A Board Meeting came
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to be held in that behalf which the Plaintiff attended. Certain
resolutions came to be passed thereon. Amongst them was the
resolution to convene an Extraordinary General Meeting (EGM) to
interalia to amend the Articles of Association for that purpose.
8. Thereafter there has been a further Board Meeting which came to be
held on 9th October 2009. The Plaintiff has prayed for the relief of
injunction in respect of steps to be taken by Defendant No.1
Company pursuant to resolutions passed at the Board Meetings held
on 5th August 1993, 6th August 2009 and 9th October 2009 and the
EGM held on 31st August 2009 and other consequential reliefs of
injunction restraining the Directors appointed at these meetings to
act as such.
9. The Notice of Motion came to be amended to add a further prayer
restraining Defendants 2, 3 and 6 from convening or holding any
meetings of Defendant No.1 Company or acting in pursuance of
resolutions passed at the aforesaid meetings.
10.In short the Plaintiff, who is a Director of Defendant No.1, seeks to
stop all businesses of Defendant No.1. Defendant No.1, therefore,
cannot be a company which can transact any business as a going
concern. If the prayers of the Plaintiff must be granted, there would
be a complete deadlock in business, if any, of Defendant No.1.
11.Upon the premise that the Plaintiff would be entitled as a Director
and member of the Company having a 33% stake in the Company to
such reliefs, the Plaintiff’s case making out the reasons why such
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extreme relief should be granted is required to be seen.
12.The injunction in respect of the Board Meeting held on 5th August
1993 cannot be claimed in a Notice of Motion taken out in 2009.
The suit itself has been filed in 1997 to challenge the proceedings at
the meeting held on 5th August 1993 which the Plaintiff had
attended.
13.The Plaintiff has pressed the reliefs in respect of the meetings held in
2009. The Board Meeting held on 6th August 2009 has sought to
transact a number of businesses. The Plaintiff admittedly attended
the meeting along with Defendant No.3 and Defendant No.12 who
was the alternate Director to Defendant No.2. The Plaintiff
admittedly left the meeting soon thereafter and before the
resolutions of the Board could be passed. She submitted an
objection letter and refused to sign the attendance register. It is her
case that she was ridiculed and jeered on in the meeting which
constrained her to leave the meeting before the business was
transacted.
14.The Minutes of the Meeting show that due to the non-cooperative
attitude of the Plaintiff and her regular objections for all activities at
every Board Meeting the Company could not comply with statutory
requirements of filing the statutory documents with the Registrar of
Companies (ROC) or holding AGMs. Surprisingly the Plaintiff herself
has taken exception to the Board passing resolutions for filing the
statutory documents required to be filed by the Company, but
remaining unfiled for as many as 9 years – a circumstance which
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would itself result in winding up the company under Section 433(g)
of the Companies Act. The Board, in fact sought to make amends
and bring the stalemate to an end in that behalf. Several businesses
came to be transacted at that meeting including the approval of the
notice in the EGM which was to be convened on 31st August 2009 at
5 p.m at the registered office of the Company interalia for alteration
of the Articles of Association of the Company.
15.Defendant No.6 came to be appointed as Director nominated by
Defendant No.2 who sought to resign under the specific provision of
Article 51(e) of the Articles of Association of the Company. The
Respondent No.1 to the Notice of Motion came to be appointed as an
alternate Director to Defendant No.3 and Respondent No.2 came to
be appointed as an alternate Director to Defendant No.6 who was
appointed Director in the same Board Meeting.
16.The Plaintiff has challenged the proceedings at the Board Meeting
on two specific grounds. The Plaintiff has contended that there was
no quorum upon she having left the Board Meeting and hence no
business could be transacted. She has also challenged the attendance
of Defendant No.12 as the alternate Director to Defendant No.2 in
that meeting on the ground that the Defendant No.2 who had
appointed Defendant No.12 as his alternate whilst he was abroad
had returned to the State of Maharashtra after the appointment of
Defendant No.12 and consequently on and from such date
Defendant No.12 could no longer be a Director of Defendant No.1
and his attendance as a Director was bad in law.
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17.These two contentions of the Plaintiff have to be separately
considered.
18.Defendant No.2 appointed Defendant No.12 as his alternate Director
under the provisions of Section 313 of the Companies Act, 1956. The
validity of the attendance of the Defendant No.12 shall be
considered presently.
19.The quorum at the Board Meeting would be the three permanent
Directors under Article 51(f) of the Articles of Association of the
Company since the powers exercised by the Board of Directors were
to be by an unanimous vote. Three Directors admittedly attended
the Board Meeting dated 6th August 2009. It is only because the
Plaintiff left the meeting after attending the meeting setting out her
grievances in an objection letter dated 4th August 2009 that the
Plaintiff claims that there was no quorum at that Board Meeting.
20.Quorum is the minimum number of Directors required to transact
the business at any Board Meeting. It would have to be seen when
the quorum is required to be present. Sections 285 to 290 of the
Companies Act, 1956 which deal with meetings of Board do not
make any provisions in that regard. Section 287(2) only requires
1/3 of the total strength of the Board or two Directors whichever is
higher to be the quorum. However the provisions of the Companies
Act, 1956 being subject to the Articles of Association of the Company
and in the case of Defendant No.1 Company there having been the
aforesaid peculiar Article requiring the full strength of the Board to
pass resolutions would necessitate the full strength to be the
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quorum.
21.Section 174 of the Companies Act, 1956 sets out the quorum for
General Meetings which are members’ meetings. Under Section
174(4) a meeting would stand adjourned for want of quorum to the
next week at the same time and place or as the Board may determine
when if the quorum was not present within ½ an hour the members
present would constitute the quorum. Such a provision is absent for
Board Meetings. Board meetings being meetings of Directors who
act on behalf of the Company as their Agents are required to take
place essentially every quarter for transacting various businesses.
Hence understandably the provisions applying to the General
Meetings for want of quorum would not apply to Board Meetings.
The quorum at the Board Meetings were Directors of the Company
would meet to transact the business would, therefore, require the
minimum number of Directors required by the Company to be
present to transact those businesses. Essentially, therefore, at the
time of transacting the various businesses on the agenda of such
Board Meeting the quorum would require to be present.
22.Consequently, it is argued on behalf of the Plaintiff that unlike in a
General Meeting of members where the quorum is required to be
seen at the beginning of the meeting only, in the case of Board
Meetings the quorum must be present when every resolution is
passed. This would indeed be for the benefit of all the Directors to
take part in the proceedings of the meeting and to transact business
on the agenda.
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23.This is a case where the Plaintiff has challenged the proceedings at
various meetings of the Board. In fact these are enumerated in
prayer (i) to the plaint. The Plaintiff attended the Board Meeting on
6th August 2009, stated that she had sent her objection letter dated
4th August 2009, refused to sign the attendance register and left the
meeting. This would disable the other Directors present for
transacting any business. The main aim of the Plaintiff was,
therefore, only to disable her Co-Directors from transacting any
business. Upon such a case the Plaintiff has claimed the relief of
injunction restraining the Directors from taking steps in furtherance
of the decision taken at that Board Meeting by way of the resolution
passed therein. Therefore, a party who has herself derailed the
proceedings has come to Court to obtain its stamp of approval upon
her act. The excuse of the Plaintiff is that she was ridiculed and
jeered at. From the conduct of the Plaintiff in challenging almost
everything which the Company does, as is evidenced in prayer (i)
itself it could be seen that the Plaintiff has brought about a total and
complete deadlock in the Company. It would otherwise be a case for
winding up of the 1st Defendant Company as it would be just and
equitable to wind it up under Section 433(f) of the Companies Act.
However, the Plaintiff did attend the Board Meeting on 6th August,
2009. Having attended the Board Meeting, it was the Plaintiff’s
bounden duty as a Director and consequently an agent of the
Company to go through the businesses which were sought to be
transacted thereat. The Plaintiff would have then been entitled to
vote against the resolution sought to be passed and the resolution
could not have been passed by a unanimous vote as required by the
Articles of Association of the Company. The Plaintiff has called
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upon the Court to do what she could have done but failed to do.
The Plaintiff has seen that despite her attendance there would be no
quorum.
24.In the case of In re Hartley Baird Ld. 1955 Ch.D. 143 a similar
case was considered. The argument that such a conduct would bring
about an absurd situation, because that would enable a person to
wreck a meeting where a quorum was present at the beginning of
the meeting by leaving before the business of the meeting was
transacted and thereby reducing the meeting to a number below a
quorum required was considered and accepted in that case. The
article relating to the transaction of business in a general meeting
with regard to quorum was considered. A member who was
opposed to the resolution left the meeting before the vote was taken.
It was held that Article 52 was complied and the resolution passed
was a valid class resolution and the earlier Scottish case of
Henderson Vs. James Louttit & Co. Ltd., was not followed as the
dictum therein was considered obiter. It was observed by Wynn-
Parry J. that the expression “quorum is to be present when the
meeting is to proceed business” would cover cases where the
meeting proceeded to vote because, on the face of it, the condition of
the Article is fulfilled if the quorum was present when a meeting
proceeded to consider business for which it was convened. If there
was no such quorum there would be an automatic adjournment for
one week, then the members present would form a quorum.
Consequently, it was observed that such an article was designed to
save a meeting which was properly convened, but which could not
proceed to business because no quorum was ever present, but it did
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not apply in a case of a meeting at which a quorum is present at the
beginning when the meeting proceeds to business and has ceased to
be present when it proceeds to vote on any resolution before it.
Upon observing such a mandate in the Articles of Association of the
Company and in the Scottish case the learned Judge nevertheless
concluded upon the facts of the case before him that when the
member opposing the resolution left the meeting before the vote was
taken, the meeting in fact passed a valid class resolution because at
the beginning of the meeting when it proceeded to business the
quorum was present.
25.It is impossible to conclude that in this case the Plaintiff could be
given protection by the Court for an act unbecoming of a Director
and which was inconsistent with the duties of a Director. The
quorum was therefore present and the business transacted cannot be
challenged.
26.It is contended on behalf of the Plaintiff that Defendant No.12 who
was the other Director present at the meeting could not have
remained present as Director. He was an alternate to the Defendant
No.2. He was appointed when Defendant No.2 was to leave India.
Defendant No.2 is stated to be carrying on business in Singapore.
After his appointment Defendant No.2 returned to India, but had not
attended any Board Meetings thereafter.
27.The Plaintiff has shown on a separate single sheet of paper dated
12th April 1999 the signatures of Defendant No.2 with herself
obtained by her with regard to certain repairs to the building of the
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Company. It is the Plaintiff’s case that that was a Board Meeting.
The three signatures of the three Directors required to transact the
business unanimously are not shown. A separate sheet of paper
cannot be termed as minutes of the meeting of the board which are
required to be kept as per the specific mandate contained under
Section 193 of the Companies Act, 1956. Mr. D’vitre on behalf of the
Plaintiff concedes that aspect. However he contended that the
signature of Defendant No.2 would show his presence in the State of
Maharashtra and merely by such presence, Defendant No.12 would
ipso facto cease to be the alternate director of Defendant No.2.
28.It has been argued by Mr. Rao on behalf of the Defendant that the
interpretation of Section 313 must be made such that the
requirement for the alternate Director to cease to be the Director
would be not when the Director appointing him merely returns to
the State, but when the Director actually attends the Board Meeting
held in that State.
29.A reading of Section 313 shows that that specific requirement is not
made. For the alternate Director to cease to be a Director, the actual
attendance at Board Meeting of the Director appointing him is not
contemplated under the Section. Consequently, the return to the
State would suffice though the Director does not commence
attending Board Meetings held after his return.
30.However what would be the extent and quality of such return has to
be seen.
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31.Section 313 of the Companies Act, 1956 enables the alternate
Director to hold office for the period that the Director appointed him
would have held such office and to vacate that office when the
Director appointing him returns to the State. The alternate Director
is essentially appointed during the absence of the Director
appointing him from the State in which the meetings of the Board
are ordinarily held. Defendant No.2 returned to India for a short
period. During that period the Plaintiff and Defendant No.2 are
stated to have met when the signature of Defendant No.2 came to be
obtained on a separate paper showing his agreement thereon.
Defendant No.2 has thereafter left India for Singapore. The
provision in Section 313 of the Companies Act, 1956 with regard to
the absence of the Director from the State in which the meetings of
the Board are ordinarily held until the Director returns to the State
in which the meetings of the Board are ordinarily held as set out in
Sub Sections 1 & 2 thereof respectively would show not only a
temporary return, but an intention to stay in that State so as to able
him to transact the business of the Company in the State where
board meetings are ordinarily held. If a Director such as Defendant
No.2 merely comes to the State and leaves India again he would not
be able to transact business. Hence the alternate Director would
require to continue until the Director appointing him would have
continued. In this case it would be permanently or until Defendant
No.2 resigns or is removed is as Director or otherwise vacates office
under Section 283 of the Companies Act.
32.What precisely the Section contemplates by the term “the original
Director returns to the State”, must be read as contemplating only
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such return which would have some amount of permanence. The
Director must return to carry on the business. He must return for a
length of time. The intent of the Director must be not to make his
visit merely temporary when he does not partake in the management
of the Company and when he intends to go abroad again. It should
therefore, be the intention to return to India and the State in which
the Board Meetings are ordinarily held (i.e where the registered
office is generally situate) not for a temporary period e.g. on a
holiday or on vacation. It will imply the intention akin to the
intention required to be domiciled in the State. Therefore, when the
original Director returned to India and the State in which the board
meetings were held to carry on his business in India that the
alternate Director would vacate his office under Section 313 (2) of
the Companies Act, 1956.
33.Consequently, the interpretation sought to be put by Mr. D’vitre that
even if Defendant No.2 came to India for a week on his holiday or to
visit his family, the Defendant No.12 would ipso facto vacate his
office is wholly unacceptable. Similarly the interpretation put by Mr.
Rao that only when Defendant No.2 actually attended the Board
Meetings of Defendant No.1 that Defendant No.12 would vacate his
office as alternate Director cannot be accepted. It would be when
Defendant No.2 ceased to have the global business that he is stated
to have in Singapore and would commence his business in India, in
the State of Maharashtra so that he would be available for attending
Board Meetings of Defendant No.1 Company held in Mumbai on an
almost regular basis as required under Section 285 of the Companies
Act, 1956 that Defendant No.12 would vacate his office under
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Section 313(2) of the Act.
34.That has not happened. The Defendant No.12 would, therefore,
continue to act as a permanent Director of the Company which was
the position held by Defendant No.2 prior to he going abroad and
appointing Defendant No.12 as his alternate. Defendant No.12 has,
therefore, validly attended the board meeting held on 6th August
2009. This was with the Plaintiff and Defendant No.3. The
resolution could be passed unanimously, but for the wholly wrongful
act of the Plaintiff.
35.Consequently, it is seen that the Plaintiff cannot take exception to
the presence of Defendant No.12 at the Board Meeting.
36.Consequently as in the case of Perrott & Perrott, Ltd. Vs.
Stephenson 1933 All E.R. Ch.D 549 relating to the true
construction of such an article giving powers to the governing
directors to be exercised unanimously which was held to be correctly
exercised, the act of the directors in properly convening and
commencing the meeting cannot be whittled down by the improper
discontinuation of the meeting and the improper dis-allowance to
continue the meeting by the Plaintiff.
37.Protection of the Court which would be a premium on the default of
the Plaintiff cannot be granted. This has been similarly held when a
tenant who had defaulted in making payments of rent under Section
13(4) of the Bombay Rent Act 1947, but whose defence was not
applied to be struck off by the landlord was held not entitled to take
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advantage of the inaction on the part of the landlord (See in the case
of Prakash Chand & Ors Vs. Firm Pohap Singh Kishan Sahai &
Ors. RLW 2006(4) Raj 2763, 2006(4) WLC 248) Similarly the
defaulting parties to an arbitration who sought to adopt their own
procedure was not permitted to insist later that the Arbitrator should
have been appointed as per procedure indicated in the arbitration
clause on the same principal (See in the case of HBHL-VKS (J.V.) Vs.
Union of India (UOI) & Ors. 2007(1) ARBLR 252 (Delhi). Also
when parties settled their dispute in a suit upon a mortgage
requiring a preliminary decree to be passed, but which procedure
was circumvented by their settlement, were held not entitled to
contend that the provisions of Order 34 of the C.P.C relating to a
mortgage decree did not apply to a compromise decree as that
would be taking advantage of one’s own wrong and putting a
premium on the defaulter under the decree. (See in the case of
Rabindra Narain Lall Vs. Smt. Nirmala Sinha & Ors. AIR 1978
Patna 162).
38.Consequently, reliance by Mr. D’vitre on behalf of the Plaintiff upon
the judgment in the case of Ranjit Sinh V. Patil Vs. Collector,
Kolhapur 2004(3) Mh.L.J. 642 at page 646 that for a meeting to
be valid it must begun with the minimum number of persons fixed
by provisions of law, rules or Bye-laws constituting the quorum and
to continue the same to business and to validly transact its business
would not apply in the case of an ulterior action meant to frustrate
the board meeting. Of course, in the normal case a board meeting
cannot be held such as to have the quorum only at the time of its
commencement and later to continue the meeting of the board by
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passing resolutions in the absence of the minimum number of
Directors required to constitute the quorum. Consequently, in a given
case if it does so happen that if some of the Directors have left the
venue of the meeting upon understanding that the proceedings at
the meeting have come to an end and after some of those Directors,
unknown to the other Directors who have left, mala fide or
otherwise pass further resolutions in their absence, generally such
resolutions would be rendered as invalid for want of quorum. In fact
such resolution would not be valid even if there was quorum and
some of the Directors on the board were not notified of the later
resolutions. It is in that light that it has been held in paragraph 11
of the judgment in the case of Ranjit Sinh (supra) that the quorum is
required to constitute a meeting or to continue the same to business
or to validly transact its business. It is indeed, as observed in the
case of Punjab University, Chandigarh Vs. Vijay Singh Lamba
(1976) 3 SCC 344 referred to in the said paragraph, “to enable that
body to transact its business validly so that its act may be lawful”. It
must, therefore, be concluded that in this case the quorum which
was present at the beginning enabled that body to transact its
business to pass resolutions lawfully after the Plaintiff who had
notice of the meeting attended, but failed to perform her functions
as the Director attending that meeting.
39.Because of the continuous and persistent objections of the Plaintiff
for holding any of the meetings and transacting any business there
has been a complete deadlock in the Company. If the Plaintiff’s
contents were to be countenanced even for considering whether she
has been oppressed, her singular act has resulted in and would result
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in a complete deadlock. In the case of Krishan Lal Ahuja Vs.
Suresh Kumar Ahuja [1983] 53 Comp. Cases (Del.) 60 one such
company started by four brothers as a family partnership and
continued by their heirs who had irretrievably fallen from each other
it was observed that collaboration in management of the company
was out of question. Consequent upon the deadlock the brothers
were directed to buy out the heirs upon a fair price being ensured.
40.In the case of Sishu Ranjan Dutta Vs. Bhola Nath Paper House
Ltd. [1983] 53 Comp. Cases 883, at page 891(Cal) there was a
complete deadlock and two groups in the family could go together.
It was observed that though the business was flourishing the Court
had the power to wind up the company (as it would just and
equitable to wind it up under Section 433(f) of the Companies Act)
as it could not be managed in the “present situation” and therefore,
it followed that there was mismanagement of the company
amounting to oppression of one group by the other “whichever way
it may be looked at”. It was observed that the grounds were made
out for the intervention of the court by exercising its extraordinary
power under Sections 397-398 of the Companies Act, 1956 to put an
end to the matter complained of, so that “no further prejudice could
be caused to any of them”.
41.The case of Yashovardhan Saboo Vs. Groz-Beckert Saboo Ltd.
1995 Company Cases 371 also had two rival groups having unequal
shareholding, but equal participation under the articles. The
requirement of unanimous resolution resulted in an impasse on
issues resulting in consequent deadlock in management. The reliefs
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under Sections 397 and 398 of the Companies Act were held
grantable.
42.In fact in this case also the Court suggested a fair settlement
between the parties by paying off/selling off between the Plaintiff
and the Defendants. However, the Court cannot allow the parties
who do not call it a day despite the deadlock created by at least one
of them and seek relief to perpetuate the deadlock. If the company
were to be a going concern it must run as a going concern. To
frustrate such running of the company would be putting a premium
on such default and aiding the party creating the deadlock.
43.Once it is seen that the board meeting held on 6th August 2009 was
validly convened and properly continued, the resolutions passed
thereat and the business transacted thereat are seen to be validly
transacted and have to be effectuated. One of such businesses was
the resolution issuing the notice for holding the EGM of the
Company on 31st August 2009 inter alia for altering the Articles of
Association to delete Article 51(e) enjoining resolutions as at board
meetings by a unanimous vote.
44.The notice of the EGM has been posted on 21st August 2009 and
received by the post office of the addressee on 25th August 2009. It
is, therefore, sent by the company by post more than 7 days before
holding of the EGM as required by Article 48(2)(i) of the Articles of
Association of the Defendant No.1 Company. The Plaintiff claims
that that was not received by her more than 7 days before the EGM
was held and hence contends that the resolutions passed at the EGM
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held on 31st August 2009 are not valid and has applied for injunction
restraining the Defendants from acting thereupon. This argument is
wholly erroneous. What the Articles of the Company as well as the
Section 171 of the Companies Act relating to notices for general
meetings contemplate is the giving of the notice of the requisite
period. If a notice is given of not less than 7 days in writing and is
put in post it matters not that the addressee receives it much later or
less than 7 days before the meeting or even thereafter. What
matters is whether the Company has sent the notice more than 7
days in advance.
45.Under Section 53 of the Companies Act any document served upon
any member of the Company by the Company sent by post shall be
deemed to be properly effectuated by properly addressing, pre-
paying and posting a letter containing the document in post. Under
Section 53(2)(b) the service will be deemed to have been effected 48
hours after the same is posted in case of a notice of a meeting. The
notice of the EGM is sent by the Company to the Plaintiff is deemed
to have been received by the Plaintiff on 23rd August 2009, more
than 7 clear days prior to 31st August 2009, the date of EGM.
46.In the case of Shailesh Harilal Shah Vs. Matushree Textiles Ltd.,
AIR 1994 Bombay 20 relied upon by Mr. Rao, the prejudice caused
by a shorter notice came to be considered. In that case instead of
the notice of 21 days the notice was sent 20 days prior to the
meeting. Since no prejudice was shown to have been caused to the
Plaintiff no relief was granted. It was held that the requirement of
the service was directory and not mandatory.
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47.Consequently, none of the meetings have been invalidly convened or
held and no resolution passed at any of the meeting can be injuncted
by the Court.
48.The Plaintiff has also sought an injunction against Defendant No.6
being restrained from acting as the Director of the Company.
Defendant No. 6 has been appointed Director of Defendant No.1
Company also under the resolution passed at the board meeting held
on 6th August 2009. His appointment also does not come up for
challenge.
49.In fact strangely the Plaintiff has sought to restrain the convening
and holding of all forthcoming meetings of Defendant No.1
Company also. It need hardly be said that that would tantamount to
bringing about and complete deadlock without the company being
wound up, without any proceedings having been taken before the
competent forum upon proof of any other oppression or
mismanagement and merely upon the whim of the Plaintiff. No such
relief can be granted.
50.The Notice of Motion is, therefore, dismissed with costs of Rs.
25000/-.
51.Ad-interim order, if any, in force shall continue for 2 weeks.
(SMT. ROSHAN DALVI, J.)
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