NANDLAL MORE Vs. R MIRCHANDANI

JUDGEMENT

(1.) One Mirchandani filed a suit, being Suit No. 3084 of 1960, in the City Civil Court at Bombay against three defendants. The three defendants were the United Mills Ltd., Nandlal More and Kudilal Seksaria. The plaintiff filed that suit in a representative capacity for himself and for and on behalf of, and for the benefit of, all the shareholders of the first defendant company, save and except the second and the third defendants and all other shareholders of the first defendant company supporting the second defendant. The main prayers in that suit were that the second defendant be restrained by an injunction from acting as director of the first defendant company and against the first defendant company from allowing the second defendant to act as its director, and for an order against the second defendant directing him to refund to the first defendant company all amounts recovered by the second defendant as director's fees and remuneration, etc. The main ground on which the plaintiff challenged the validity of the second defendant's appointment as director was that the second defendant had been elected as a director at a general meeting of the shareholders of the first defendant company only by a bare majority, although by reason of the provisions of section 261(1) of the Companies Act, 1956, a special resolution was necessary.

(2.) The suit was defended by the defendants. Judge Vimadalal of the Bombay City Civil Court heard the suit and by his judgment and decree dated the 12th January, 1961, negatived the plaintiff's contention that a special resolution was necessary and dismissed the suit with costs. The plaintiff filed an appeal against that judgment and order or dismissal of his suit, being Appeal No. 30 or 1961 on the file of this court. That appeal was heard by Mr. Justice Patel as a single judge and disposed of by his judgment and order dated 30th January, 1961 (Ramchandiram Mirchandani v. India United Mills Ltd.(A.I.R. 1962 Bom. 92). The learned judge came to the conclusion that the second defendant could not have been appointed by an ordinary resolution, that a special resolution was necessary as required by section 261(1) and that therefore the second defendant had not been validly elected as a director. The learned judge reversed the order of the trial court and granted reliefs on the basis of his judgment in terms of prayers (a), (b) and (f) of the plaint, being the injunctions and the order for repayment. It is against that judgment and order of Mr. Justice Patel that the second defendant has filed this present Letters Patent Appeal.

(3.) Prior to September, 1943, the name of the first defendant-company was E.D. Sassoon United Mills, Ltd. Prior to September, 1943, E.D. Sassoon & Co. were the managing agents of the first defendant-company under an agreement between them and the first defendant-company dated the 24th February, 1920. Under that agreement the managing agency was to subsist their interest under that agreement. Pursuant to the said right of assignment, E.D. Sassoon & Co. assigned the agency and the benefit of that agreement to Agarwal & Co., a partnership firm, effective as from 1st December, 1943, for the residue of the term of thirty years then remaining outstanding. Agarwal & Co. was then constituted of twelve partners. By an agreement dated 10th September, 1946, arrived at between the first defendant-company and Agarwal & Co., however, the old agreement dated 24th February, 1930, was terminated and a new agreement for managing agency was entered into. That agreement is part of exhibit F in the suit. The parties to that agreement are the first defendant-company on the one hand and thirteen named individuals then carrying on business in partnership in the firm name and style of Agarwal & Co. on the other hand. Clause 1(c) of that agreement provides that the said thirteen persons constituting at that time the said firm of Agarwal & Co. and other partner or partners for the time being constituting the said firm of Agarwal & Co., whether the change be brought about by death, retirement, addition or otherwise of a partner of partners and their permitted assigns shall be the agents of the first defendant-company for a period of 20 years commencing from the 1st day of January, 1946. Clause 2 provides for payment of certain remuneration to Agarwal & Co. for doing the work of the agency of the first defendant-company to be called ex officio directors. Clauses 10 and 13 contain provisions, the effect of which is that despite agreement would continue to subsist as if the same had been entered into by the first defendant-company with the firm of Agarwal & Co., as it may from time to time be constituted.