IFCI LTD Vs. MODERN SYNTEX INDIA LTD

JUDGEMENT

(1.) NOTICE of motion is made returnable on 5th November 2001. So far as the question of grant of ad-interim order is concerned, this is a notice of motion taken out by the plaintiffs. The plaintiffs are a Company incorporated under the Companies Act and is a public financial institution so declared under section 4A of the said Act. The controversy in the suit arises out of the agreement entered into by the defendant Nos.3 to 10 with the plaintiffs dated 12th May 1999. By that agreement, certain shares of the defendant Nos.3 to 10 Companies in defendant No.1 Company have been pledged with the plaintiffs. According to clause 6 of this agreement, the plaintiff Company has been authorised to attend and vote at General Body Meetings of defendant No.1 Company and its member Companies. According to the agreement, this agreement has been registered by the defendant Nos.3 to 10 with the defendant No.1 Company and on receiving intimation from the plaintiff Company, the defendant No.1 was to permit the representative of the plaintiffs to attend and vote at the General Body Meetings of the defendant No.1 Company. Accordingly, by communication dated 26th September 2001, the plaintiffs intimated to the defendant No.1 Company that one Rakesh Agarwal would be attending the General Body Meeting of the defendant No.1-Company which was scheduled to be held on 29th September 2001. The General Body Meeting was attended by the representative of the plaintiffs. He also cast his votes in terms of the agreement dated 12th May 1999, however, his votes were not counted and instead, the votes cast by other representatives of defendant Nos.3 to 10 were counted. The case of the plaintiffs is that in terms of the agreement, it is the representative of the plaintiffs who was entitled to cast the votes and not the other representatives of defendant Nos.3 to 10. This notice of motion is opposed by the defendant Nos.1 and 2. The defendant Nos.3 to 10 are not represented.

(2.) ACCORDING to the defendant No.1, the agreement was not registered with the defendant No.1 as required by the agreement itself. It is further their case that in terms of the provisions of section 187 of the Companies Act, only a natural person can be appointed by the defendant Nos.3 to 10 as their representative and therefore, the plaintiff Company which is a body corporate, could not have been appointed as representative of the Defendant No.1 Company. It is further contended that the agreement cannot be termed as an appointment of proxy also because according to the learned counsel, only a natural person can be appointed as a proxy and not a body corporate. It is further contended that the proxy has also not been appointed as per provisions of section 176 of the Companies Act. It is further submitted on behalf of the defendants that if the agreement between the parties amounts to appointment of a proxy, because of the subsequent resolution passed by the Board of Directors of the defendant Nos.3 to 10, some other person has been appointed as representative, under section 187 the appointment of proxy stands revoked.

(3.) NOW , if in the light of these rival submissions the record of the case is perused, it becomes clear that undoubtedly there is an agreement between the plaintiffs and the defendant Nos.3 to 10 which authorises the plaintiffs to vote on behalf of defendant Nos.3 to 10 in the General Body Meetings of the defendant No.1 Company. The defendant No.2 is undoubtedly controlling the defendant No.1 and defendant Nos.3 to 10 and they are group Companies. Therefore, the stand of the defendant No.1 that the agreement was not registered strictly in accordance with the agreement, in my opinion, cannot be accepted because there is ample material available on record to show, that the agreement was within the knowledge of the defendant No.1 Company and that will amount to sufficient compliance of the requirements of the agreement. It is further to be seen that the communication appointing proxy of the plaintiffs was received on 26th September 2001 and there was no protest made by the defendant No.1 or by defendant No.2 even till the votes were counted. The conduct of the defendant Nos.1 and 2 in my opinion, does not inspire any confidence. It is clear from the provisions of sub-section (5) of section 176 that a body corporate can appoint any other body corporate as a proxy. The learned counsel appearing for the plaintiffs has invited my attention to several authorities on company law. Perusal of those authorities clearly show that a Company which is a member of another Company has option of appointing proxy under section 176 or a representative under section 187. The various authorities relied on and referred to by the learned counsel appearing for the plaintiffs also show that appointment of proxy becomes irrevocable if the appointment is for valuable consideration and therefore, it is clear from the material on record that the appointment of plaintiffs as proxy was made because of the amounts advanced by the plaintiffs to the defendants. Therefore, the appointment of proxy is made for valuable consideration and if that is so, the various authorities which are relied on by the learned counsel for the plaintiffs clearly show that the appointment of proxy would be irrevocable and therefore, passing of resolution by the defendant Nos.3 to 10 under section 187 would not amount revocation of that proxy. It is further to be seen here that at least at this stage, this notice of motion is being opposed only by the defendant Nos.1 and 2 and defendant Nos.3 to 10 are not represented despite notice to them. Therefore, it appears that the Board of Directors of the defendant No.1 Company, which is controlled by the defendant No.2, is interested in denying the rights of the plaintiffs which have been given to the plaintiffs by an agreement entered into solemnly between the parties.