HIRENDRA BHADRA Vs. TITWN ENG CO P LTD

JUDGEMENT

(1.) THIS application is directed against Order 8 dated 26th of March, 1974 passed by Shri p. Jethwani, Munsif, First Court, Durgapur, in Title Suit No. 2 of 1974 rejecting the application of the defendant petitioner dated February 18, 1974 challenging the inherent jurisdiction of the said Court to try the suit. Facts of the case may briefly be stated as follows : -On January 4, 1074, the opposite party filed a Title Suit No. 2 of 1974 in the Court of the Munsif, Durgapur against the petitioner on the allegation that keeping in dark the opposite party and/or its other Directors, the petitioner though a permanent Director of the opposite party company carried on business of supply of spare parts and other materials in violation, of Section 299 of the Companies Act, 1956, and by reason thereof the petitioner became disqualified to hold the office of the Director of the opposite party company. It was alleged that on December 3. 1973 shri P. K. Basu, another Director of the opposite party company, learnt the said fact. It was further alleged that the nineteenth meeting of the Board of Directors of the company was held on December 28, 1973 at the registered office of the company at Durgapur and the petitioner came to attend the said meeting, duly accepted the fee of rs. 50/- for attending the said meeting and signed the relevant vouchers. It was further alleged that in the said meeting a resolution was passed, inter alia, resolving that the petitioner has or must be deemed to have vacated the office of the Director of the opposite party company with effect from at least January 29, 1972 under Section 283 of the Companies Act, 1956 read with clause 42 of the opposite party company's Articles of Association for contravention of the provisions of Section 299 of the Companies Act. In the suit it was prayed that a decree be passed declaring (1) that the Resolution dated December 28, 1973, passed by the Board of Directors of the plaintiff company is valid, operative and binding on the defendant; (2) that the defendant has vacated or must be deemed to have vacated the office of the Director of the plaintiff company with effect from January 29, 1972, or from such earlier date as will be found from the evidence to be the date when the defendant has contravened the provisions of section 299 of the Companies Act, 1956 and (3) that the defendant has no manner of right, title and interest to act as Director of the plaintiff company and/or to interfere and intermeddle with the affairs of the plaintiff company. Another prayer was made to the effect that a decree for perpetual injunction be passed restraining the defendant from acting or attempting to acts as Director of the plaintiff company and from interfering intermeddling with the plaintiff company's affairs. Long after the institution of the suit the petitioner came to know about the filing of such a suit against him, appeared in the suit and filed an application challenging the jurisdiction of the Court. It was submitted chat the plaintiff has based its right and/or claim the suit under the provisions of the Companies Act, 1956. The company and its Directors being creature of the said Companies Act, the plaintiff was not entitled to any relief in the suit on the basis of any common law right. The learned Munsif after hearing both the parties dismissed the application holding that he had jurisdiction to entertain the suit. Being aggrieved by the aforesaid order the defendant has come up in this Court.

(2.) MR. Tapas Chandra Ray, learned Advocate appearing on behalf of the petitioner, submits that the learned munsif acted illegally and in excess of jurisdiction by rejecting the petitioner's application. It is contended that the learned Munsif failed' to appreciate properly the true import of the suit of the opposite party and acted with material irregularity by proceeding on the basis that the plaintiff in the suit did not seek to enforce any of the special rights created by the Companies Act. Mr. Ray argues with much force that the learned Munsif failed to appreciate properly the true scope and import of the various provisions of the Companies act, 1956, and acted with material irregularity by proceeding on the basis that there is no provision in the Companies Act whereby a company whose director had acted in contravention of section 229 (1) but continues to hold himself out as a Director can seek the relief of declaration and injunction before the company court as defined in section 10 of the Act. In this connection, Mr. Ray further submits that the company is a legal entity distinct and separate from the office of a Director and the affairs of a company are carried out by the Board of Directors acting collectively and a single Director cannot act for and on behalf of the company unless specifically empowered by the Board of Directors and any un authorised act of a Director does not bind the company. In the scheme of the Act provision for declaration and permanent injunction against a Director on the ground of breach of Section 299 (i) of the Companies Act was wholly unnecessary. Mr. Ray further contends that the learned Munsif ought to have appreciated that whatever remedy and/ or steps necessary in case of breach of Section 299 (i) of the Companies Act, 1956 have been provided fully and adequately in sections 299 and 203 of the said Act.

(3.) MR. Ray first of all refers to section 290 (1) of the Act which reads as follows : -