M K SRINIVASAN Vs. WATRAP SSUBRAMANIA AIYAR

JUDGEMENT

(1.) The suit out of which this appeal arises relates to a Company known as the United India Life Assurance Co., Ltd. and the circumstances which gave rise to the dispute are briefly these. The Directorate of the Company is composed of two Policyholders Directors elected by the policyholders and of a certain number of Shareholders Directors. The ordinary general meeting for the election of Shareholders Directors was fixed for the 13 October, 1930. The Articles of Association had contained a provision that the number of Shareholders Directors should be six, and that two should retire in rotation, their places being filled by election at the meeting. But this number had been by amendment of the articles reduced to five, and it was provided, as a special case, that at the General Meeting of 1930 the six Directors should vacate office and that not more than five should be elected in place of them. At the meeting the 3 defendant, who was at the time the Chairman of Directors, took the chair, and, it being decided to fill all five vacancies, a vote was taken by show of hands, and five persons were declared elected. A poll was then demanded, and the Chairman directed that it should be held at the Company's Office on Monday, the 20 October, between the hours of 4 and 6 p.m. and appointed the Company's Manager, Mr. Church, Returning Officer, for the purpose of taking it. In thus allowing a week to elapse before the poll was taken, the Chairman incurred the disapproval of the 1 plaintiff, one of the shareholders, who addressed to him on the 15 a letter protesting against his action, and pointing out that, since all the Shareholders Directors had retired on the 13th, the shareholders must during the interval remain wholly unrepresented, and the operations of the Company come to standstill, because the two Policyholders Directors were be-low the minimum number authorised to transact business. This letter was certainly most provocative in tone, and perhaps explains, though it may not julstify, what happened next. On the 16 the two Policyholders Directors appointed two other persons--the Chairman himself and the 4th defendant--thus bringing the number of Directors up to four, the minimum number required by Art. 88 to act in the name of the Company. It will be for consideration whether this action was within their powers. It evoked from the 1st plaintiff another letter, written the day before the date fixed for the poll, condemning this procedure and expressing the apprehension that advantage was intended to be taken of it to hold a poll only in respect of the three remaining vacancies. What happened--whether by accident or design we are not now concerned to inquire--more than justified his misgivings. On the 20th, at the appointed time, a number of shareholders assembled at the. Office of the Company, but neither did the Returning Officer appear nor were any other arrangements made for holding the poll. They waited there and eventually dispersed. The explanation given is that Mr. Church was unable to attend through sudden illness, and that a message which he sent to the Chair-man in the course of the afternoon was not delivered as the Chairman had shortly before left Madras on a visit to a sick relative. No further attempt was made to take a poll, and indeed, whether rightly or wrongly, the four persons at that time claiming to be Directors, defendants 1 to 4, two days later took the line best calculated to demonstrate their refusal to adopt the course by "co-opting" three more Directors, defendants 5 to 7, thereby bringing their number up to the maximum. The four plaintiffs, as shareholders, filed their suit on the 24 October, praying inter alia that these appointments might be declared illegal and invalid, and that the Court should direct ,a poll to be taken to elect five Shareholders Directors to the existing vacancies.

(2.) The learned Judge who tried the suit, Waller, J., has dismissed it upon a preliminary issue. He finds indeed that the co-optation, in two stages, of the five Shareholders Directors was ultra vires, but that, assuming it to have been so, the Company, and not individual shareholders, should have been the plaintiffs. Further, he considers that the Articles of Association provided the shareholders with an alternative remedy, and that at least until that had proved infructuous the Court should not intervene. All the plaintiffs appeal against this decision, which is supported in varying ways by the several defendants, whose points of view may be gathered from the contents of their written statements. The 1 and 2nd defendants, the two Policyholders Directors, endeavour to justify their action in co- opting the 3 and 4 defendants, and then, with these defendants, co-opting the defendants 5 to 7. The Chairman (3 defendant) contends that even if this procedure was not legal, those of the new Directors who were previously in office-- all except the 4 defendant--may be deemed to have continued by virtue of the terms of Art. 68 (g). The 4 defendant, the sole new-comer to the office has-- perhaps to give scope to this alternative--since resigned. The 5 and 6th defendants denounce the act of co-opting them as unlawful, but claim to be still in office under Art. 68 (g).

(3.) It has become clear to me that the crucial questions of law upon the answer to which a correct decision depends in this case, are firstly, what determines the duration of an ordinary general meeting for the election of Directors, and, secondly, what is the nature of the process known as taking a poll. The rules governing these matters are not, I think, in any respect peculiar to this Company. Art. 37 gives the Directors power to fix the annual ordinary general meeting, and Art. 42 provides for the election of Directors at it. Such election is to be, in the first instance, by show of hands. If at least three members demand a poll, the Chairman shall grant it. Art. 49 empowers the Chairman to take it, and runs as follows: If a poll is demanded as aforesaid it shall be taken in such manner and at such time and place as the Chairman of the meeting directs, and either at once or after an interval or adjournment, or otherwise, and the result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded. The demand for a poll may be withdrawn.