SHALAGRAM JHAJHARIA Vs. NATIONAL CO LTD

JUDGEMENT

(1.) This is an appeal from an order of A. N. Ray J. refusing an application for an interlocutory injunction restraining the passing of certain resolutions of a company known as National Co. Ltd. at the proposed annual general meeting of the company. The appellant is a shareholder of the National Co. Ltd, The case of the appellant is that in the middle of 1961, the National Co. Ltd. purported to appoint in Calcutta one B.M.T. Commodity Corporation of New York State in the United States of America as its sole selling agent. After the said appointment the first general meeting of the National Co. Ltd. was held on July 17, 1961. On January 27, 1962. the board of directors of the said company by an agreement in writing appointed the said B.M.T. Commodity Corporation as its sole selling agent for the sale of jute backing cloth and ordinary burlap over the width of hundred inches manufactured by the said company for the territories of the United States of America, its possessions, Canada and Mexico with effect from February 1, 1962, inter alia, on the following terms and conditions :

(2.) There are also clauses for arbitration in case of disputes arising between the parties.

(3.) The next general meeting of the company was held on May 31, 1962, but the purported appointment of the B.M.T. Commodity Corporation as the sole selling agent was not approved either in the meeting held on July 17, 1961, or on May 31, 1962. It appears however that on August 29, 1962, an annual general meeting of the company was held in which the report of the directors dated April 9, 1962, which contained a reference to the agreement dated January 27, 1962, was passed. On December 3, 1962, the Registrar of Companies, West Bengal, Calcutta, wrote to the National Co. Ltd. intimating that upon an examination of the agreement dated January 27, 1962 (wrongly dated as January 20, 1962), and particularly its Clauses (1), (2), (3), (4), (6), (7), (12) and (18) respectively, the Central Government was of the opinion that the appointment of the B.M.T. Commodity Corporation as exclusive distributors for sale of the products of National Co. Ltd. should be regarded as that of sole selling agents for the territories specified in the agreement and so request was made to obtain the approval of the shareholders of the company at a general meeting in respect of the said appointment in pursuance of the provisions of Section 29A. of the Companies (Amendment) Act, 1960, and a copy of the resolution should be filed with the office of the Registrar of Companies in order to regularise the position and an early compliance was requested. On December 11, 1962, a director of National Co. Ltd. replied to the letter of the Registrar stating that the company had been advised by an eminent lawyer that the arrangement did not constitute B.M.T. Commodity Corporation as agent but nevertheless the arrangement was referred to by the directors in their report to the shareholders and this amounted to approval of the arrangement by the shareholders. But in view of the wishes of the Registrar as expressed in his letter, dated December 3, 1962, the company would be glad to place the matters again before the shareholders in a general meeting. The letter concluded with the following words: " Kindly confirm if the above course has your approval" and it was signed by director, R. N. Goenka. On January 22, 1963, the reply was written by the office of the Registrar of Companies stating that the office had no objection to the course of action proposed to be taken by the company at the ensuing general meeting of the shareholders for proper compliance of the provisions of Section 294 of the Companies Act in respect of the appointment of B.M.T. Commodity Corporation.