UNION OF INDIA Vs. CHANGDEO SUGAR MILLS LTD

JUDGEMENT

(1.) The petitioners are seeking directions (i) that the directors appointed by them under s. 408(1) of the Companies Act, 1956, by order dated November 17, 1973, continue to be the directors of the respondent company until they have completed their full of three years, and (ii) the board of directors elected by the company requires confirmation of their appointment under s. 408(5) of the Companies Act, 1956.

(2.) The background of the petition and the facts leading to its filing can be narrated briefly as follows :

(3.) By order dated November 17, 1973, made by the Government of India, Ministry of Law, Justice and Company Affairs, Department of Company Affairs, passed under s. 408(1) two directors were appointed for a period of three years. The validity of the said order was challenged in a writ petition being Misc. Petition No. 1306 of 1973, filed by the company and its two directors against the Union of India and others. By an order dated January 10, 1974, the directors appointed by the Central Govt. were restrained from taking any further steps or action in furtherance or implementation of the said order on the petitioners giving an undertaking, inter alia, not to call any meeting of the board of directors without the orders of the court. The undertaking was modified by order dated March 15, 1974, but that is not material for us. The Revenue Department in order to recover its tax dues had a receiver appointed of the business of the company and this appointment came to an end on June 29, 1977. Thereafter, a notice of Motion No. 1154 of 1971, dated November 3, 1977, was taken out in the said writ petition to modify the said undertaking to enable the company, firstly, to call a meeting for appointing four new directors, secondly, to permit the board of directors to accept resignations of the old directors, and, thirdly, to empower the reconstituted board of directors to convene a meeting to carry on day-to-day business of the company and to borrow money from the Bank of Madura. The following order dated November 15, 1977, came to be passed by Mr. Justice Deshmukh (as she then was) :