C L JOSEPH Vs. JOS

JUDGEMENT

(1.) The 3rd defendant is the appellant. Defendants 3 to 5 were Directors of the 1st defendant company. Item No. 4 in the agenda of the annual general meeting of that company held on 23rd March 1961 was the election of three Directors in the place of defendants 3 to 5 who were due to retire. Defendants 3 to 5 sought reelection and it was resolved in that meeting that there should be separate elections to the three posts. The first election was to fill up the vacancy to be caused by the retirement of the 5th defendant. The plaintiff was a candidate, and he contested the election, but was defeated, and the 5th defendant was elected. Then two shareholders moved a resolution that the election of the two other Directors may be postponed. The chairman disallowed the motion. Thereafter the plaintiff was proposed as a candidate to fill up the vacancy to be caused by the retirement of the 3rd defendant. But the chairman ruled that he was not qualified to stand as a candidate as he was already defeated in the contest with the 5th defendant. In the election the 3rd defendant was declared elected. The suit was for a declaration that the proceedings of the meeting as regards the election of the Directors were null and void, and for an injunction restraining defendants 3 to 5 from functioning as directors and for directing the 1st defendant company to hold a meeting for electing the three Directors. Several allegations were made in the plaint challenging the validity of the election. The main defence was that the question raised in the suit related to the internal management of the 1st defendant company and that the suit was incompetent.

(2.) The courts below held the chairman acted illegally in disallowing the nomination of the plaintiff to the vacancy caused by the retirement of the 3rd defendant, that the question raised in the suit did not relate to purely internal management of the 1st defendant company and that the suit was competent. They also held that no direction could be given for convening a meeting of the company for electing the Directors.

(3.) The only point argued before me was that the suit was not maintainable, since the matter related to and was entirely concerned with the internal management of an incorporated company. In order to decide the question whether the ruling of the chairman that the plaintiff has no right to stand as a candidate for election to the post of a Director raised a justiciable issue, one has to look into the nature of the right which the plaintiff was asserting in the case. There are two kinds of rights for a member of the company, one the individual membership right, and the other the corporate membership right. So far as the corporate membership rights are concerned, a shareholder can assert those rights only in conformity with the decision of the majority of the shareholders. An individual membership right is a right to maintain himself in full membership with all the rights and privileges appertaining to that status. This right implies that the individual shareholder can insist on the strict observance of the legal rules, statutory provisions and provisions in the memorandum And articles which cannot be waived by a bare majority of shareholders. The distinction between individual membership rights and corporate membership rights of a shareholder is founded on the following consideration: