1986 (12) TMI 297 - HC - Companies Law

Shareholders permitted to challenge director's renomination in company suit. Upheld collective rights under Companies Act.

The court allowed shareholders other than plaintiff No. 1 to join as plaintiffs in a suit regarding the renomination of a director in a company. It held ... Meetings and proceedings - Proxies Issues: Shareholder's right to relief, Cause of action for shareholders, Joinder of plaintiffs in a suitThe judgment delivered by Mahesh Chandra, J. pertains to an application filed in a suit concerning the renomination of a director in a company. The plaintiffs sought a declaration that plaintiff No. 1 was validly renominated as a director, alleging that the minutes book of the annual general meeting was forged to show otherwise. The defendants contended that the suit was a personal grievance of plaintiff No. 1 and that other plaintiffs had no cause of action. The key issue was whether plaintiffs other than No. 1 had the right to be parties to the suit.The court analyzed the provisions of Order 1, Rule 1 of the Code of Civil Procedure, which allows all persons with a right to relief arising from the same act or transaction to be joined as plaintiffs in a suit. It was established that plaintiffs Nos. 2 to 30, being shareholders of the company, had a legitimate interest in the affairs of the company and the composition of its board of directors. Therefore, they were entitled to be parties to the suit based on their common interest and the existence of common questions of law or fact.Furthermore, the court referred to the shareholders' right to vote by proxy under section 176 of the Companies Act, 1956. It emphasized that shareholders have a joint and several right to challenge actions that affect their voting rights and choice of directors. The court held that denying shareholders the opportunity to collectively seek relief in such cases would result in unnecessary multiple suits. The physical presence of all shareholders at the annual general meeting was deemed irrelevant as long as they were represented by proxies.In conclusion, the court dismissed the application filed by the defendants, ruling that all shareholders who were denied their rights could join as plaintiffs in the suit. The court emphasized the importance of upholding shareholders' rights and ensuring their ability to challenge actions that impact their interests collectively. The application was dismissed with costs assessed at Rs. 500.