LALJIBHAI C KAPADIA Vs. LALJI B DESAI

JUDGEMENT

(1.) THIS is an appeal by defendants 2 and 3 and is directed against the judgment and decree passed in the suit filed by Respondents 1 and 2 against the appellants and Respondent No. 3. the suit was for a permanent injunction restraining Respondent No. 3 and its directors, servants and agents from allowing the appellants to act as directors of the Respondent No. 3 company. A similar injunction was also claimed against the appellants restraining them from acting in any manner as the directors of the respondent No. 3 company.

(2.) RESPONDENT No. 3 is a public limited company registered under the Indian Companies Act and carries on business, inter alia, as manufacturer of rayon yarn and has its registered office at Bombay. It is the plaintiffs' case that on 9-4-1969 the Board of Directors appointed the appellants as additional directors of Respondent 3 company. The Board of Directors consisted at that time of 8 members excluding these additional appointed directors. The plaintiffs have referred to the 8 directors as functioning directors and that may be to distinguish them from the appellants who are appointed additional directors. Thereafter notices dated 10th April 1969 were received by Respondent No. 3 company proposing the appellants as directors at the next Annual General Meeting. On 11-6-1969 the 22nd Annual General Meeting of the Respondent 3 company was convened. At the General Meeting two directors Kasturbhai Lalbhai and Naval H. Tata retired by rotation and were again elected as directors. At the same meeting by two separate resolutions the appellants were appointed directors. The two resolutions are referred to in the Plaint as Resolutions Nos. 5 and 6.

(3.) THE plaintiffs by the suit challenged the legality of the appointment of the appellants on certain grounds. According to the plaintiffs the number of directors on the Board can be increased by the company under Section 258 of the Indian Companies Act by passing a resolution. No such resolution was ever duly notified, proposed and passed. In the absence of any such resolution, Respondent No. 3 company had not the power to appoint the appellants as directors. The plaintiffs submit that Resolutions Nos. 5 and 6 are, therefore, invalid, void and of no effect.