V SELVARAJ Vs. MYLAPORE HINDU PERMANENT FUND LTD

JUDGEMENT

(1.) THE above two applications were taken up together for hearing, as common questions are involved. Company Applications No. 124 of 1967 is by a shareholder of the Mylapore Hindu Permanent Fund Limited, which is governed by the provisions of the Indian Companies Act, 1956, for a direction restraining respondents 2 to 5 from exercising the functions of directors of the above fund which is a public limited company, and for certain incidental orders. The 1st respondent in the said application, is the Fund itself. The applicant alleges that respondents 2 to 5 have to retire on the holding of the 94th annual general body meeting of the Fund, their term of office having expired by efflux of time and they being obliged to retire by rotation. The 94th annual general body meeting was called by the Board of Directors who were in charge of the affairs of the Fund and who were statutorily obliged to call for such a meeting. Such annual general body meeting was proposed to be convened at 2 p. m. on 22-4-1967 at the Gokhale hall, No. 9, Armenian Street, Madras-1. The contention of the applicant is that after calling for the said meeting, the Board of Directors, including respondents 2 to 5 left the hall abruptly along with the Secy. of the Fund after distributing the agenda and the printed balance sheet for the financial year ending with 31-101966. As the Board of Directors and the Secretary left without sufficient cause, the meeting hall, the shareholders who were present there continued the meeting and considered the agenda after electing Mr. S. T. Shanmugesan as the Chairman thereto. Several resolutions were passed in the said meeting, including the election of Directors in the place of respondents were passed in the said meeting, including the election of Directors in the place of respondents 2 to 5 who ought to have retired normally if the meeting was held. The applicant, therefore, states that respondents 2 to 5 can no longer hold their office and, in fact, they have ceased to hold such office and, in fact, they have ceased to hold such office on 22-4-1967 after the annual meeting was held by those who were left over at the hall after the board of Directors and the Secretary left the same. He, therefore prays that suitable directions restraining respondents 2 to 5 from continuing as Directors of the Fund may be given. The first respondent has filed a counter-affidavit through its Secretary. According to the first respondent, this application is not maintainable in law and the facts stated in the affidavit in support of the application to not represent the correct state of affairs. The Secretary of the Fund states that in spite of the best arrangements made by the Board of Directors by providing separate entrances for the entry of members and non-members proxy-holders, yet the persons who congregated at the Hall, including strangers, gained entrance into the Hall improperly and insisted upon their demands being conceded, and refused to vacate the Hall. Even the police help which was sought to maintain peace and order was of no avail. By that time it was 2 p. m. and members and non-members who gathered outside the Hall gained entry by pushing the main door and there was thus confusion and pandemonium and shouts and counter-shouts. As it became impossible for the Board of Directors to commence and conduct the annual general meeting called, for, the President of the Fund recorded in the minutes-book that the annual general meeting could not be held and an announcement to that effect was also made in the mike at about 3 p. m. It is also alleged that the minutes-book and the record were never taken away before the commencement of the meeting and all such records were there in the Hall till about 5 p. m. By reason of the fact that the meeting could not be commenced and thereafter held, the Fund requested the Registrar of Companies for extension of time for holding the 94th annual general body meeting of the Fund. The Fund also refers to certain civil proceedings taken by the petitioner and others, which it is unnecessary for this Court to set forth in detail. The Fund alleges that no annual meeting of the Fund could have been held validly after the Board of Directors announced that due to pandemonium and confusion, no meeting can be held and that therefore respondents 2 to 5 are still functioning as Directors of the Fund and this application for injunction is without any merits.

(2.) THE applicant, in his reply, reiterates what was said in the opening affidavit and affirms that the meeting should be deemed to have commenced by the distribution of the agenda and the balance sheet and by the congregation of the members in response to a call to hold the meeting. The petitioner's main contention is that the Board has no power to adjourn the meeting specifically convened for electing Directors, except under the provisions of Section 256 of the companies Act. He denies what all has been said by the Secretary in his counter-affidavit and alleges that the Registrar of Companies rejected the request of the petitioner for extension of time for holding the 94th annual general body meeting. he, therefore, presses that respondents 2 to 5 who are deemed to have ceased to hold the office of directorship, should be restrained from acting as Directors of the fund.

(3.) THE Company Application No. 131 of 1967 is by the Fund and the only material prayer asked for is for the appointment of an independent Chairman for holding and conducting the 94th annual general body meeting of the Fund, as it could not be held earlier though called for by the Board of Directors. This application is also supported by an affidavit sworn to by the Secretary. Here again, the Secretary refers to the disorder which prevailed on 22-4-1967 and as to how the members and non-members gained forcible entry into the Hall by pushing the gates and that rival parties created galata and confusion with a view to see that the meeting was not held and conducted. he reiterates that the Board of Directors recorded the fact of such disorder in the minutes-book and made an announcement to that effect in the mike. One other contention raised in this application is whether the claim of some of the shareholders to have the election of Directors by ballot was the only process which should be restored to for the election of Directors to the Fund and whether it is not feasible to adopt the practice in vogue for electing the Directors by show of hand. The Fund also refers to the fact that the election of Directors in the past was in accordance with the provisions of the Companies Act and there has been no departure from such accepted rules. The Fund refers to certain proceedings in the City Civil Court and, as I said already, it is unnecessary to refer to them in the view that I intend taking in the matter. The Fund, therefore, prays that to ensure a peaceful holding of the 94th annual general body meeting of the fund, it is necessary that an independent Chairman be appointed for holding and conducting the same and for holding the election of Directors as per provisions of the Companies Act and for consideration of other subjects to be tabled in the agenda. Notice of this application was directed to be published by me in the newspapers, so that every one of the shareholders may have the same benefit of the same. on such publication of the notice, several shareholders have filed common counter-affidavits and one such counter-affidavit is filed by Mr. S. T. Shanmugesan who happened to be the Chairman of the alleged annual general meeting conducted by the alleged shareholders of the Fund after the Board of directors expressed their inability to hold and conduct it at the Gokhale Hall on 224-1967. In this counter-affidavit, the allegations already traversed in Company application No. 124 of 1967 are reiterated and the allegations made in the affidavit of the Secretary of the Fund in support of this application are expressly denied. The deponent of this affidavit states that the Registrar has recognised and approved the minutes of the alleged annual general meeting held by the shareholders after the Board expressed its inability to hold it and that several matters in this application are subjudice in the City Civil Court and that this Court has no jurisdiction under Section 186 of the Companies Act to call for an annual general meeting of the Fund and that what the alleged shareholders did on 22-41967 is valid and cannot be disturbed and that therefore there is no need for the holding of a second annual meeting for the same purpose. It is significant to note that the applicant in Company Application No. 124 of 1967 also has filed a counter-affidavit almost on similar lines with that filed by Mr. Shanmugesan and others.