S PAZHAMALAI Vs. ARUNA SUGARS LIMITED

JUDGEMENT

(1.) THE applicant in both the applications is a shareholder of the public limited company, Aruna Sugars Ltd. THE relief claimed in the former is to declare that the election of the second respondent as director of the first respondent company as void, while that in the latter is to restrain the second respondent from functioning as director pending disposal of the former. THE undisputed facts, in brief, are given below : At the annual general meeting of the company held on March 30, 1983, at Hotel Dasaprakash, Madras, the second respondent was elected as director. THE statutory notice dated February 16, 1983, issued under s. 171 of the Companies Act, 1956 (hereinafter referred to as "the Act"), did not contain any reference to the election of the second respondent as director. THE company received three notices, one from K. R. Sevugan Chetty, while the rest from S. Thiagarajan and S. Venugopalan. THE details of the first notice are not necessary for the present occasion as it has no impact on the points to be determined now. Under the second and third, Thiagarajan and Venugopalan, respectively, proposed the second respondent for appointment as a director on the board of directors. THE first respondent company, in turn, sent a notice dated March 16, 1983, informing its members of the receipt of the above notices. Before the said annual general meeting only two vacancies in the board of directors arose by the retirement of P. Maruthai Pillai and B. S. Adityan. THE said retiring directors have sought re-election. THE company, therefore, pointed out in its notice dated March 16, 1983, that if the second respondent were to be elected in the above meeting, the strength of the board of directors would rise to 9. Till then, the board consisted of eight directors. THE main contention of Mr. Rangarajan, learned counsel for the applicant, proceeded thus :

(2.) IN the absence of even an averment to the above effect, it is not open to the applicant to submit that the fixed strength of the board of directors is eight and that, therefore, unless as provided under art. 109, the strength is increased, there cannot be a valid appointment of a ninth director in the annual general meeting. On the other hand, according to art. 93, any number of directors, not exceeding 12, can be appointed by the members at the annual general meeting. Further, it is seen from the balance-sheets for the year ending September 30, 1981, and September 30, 1982, the strength of the board of directors was 9 and 10 respectively. Such constitution is consistent with art. 93.

(3.) IT is necessary to examine sections 171 and 257. Section 171 reads as follows :