Company articles and internal management powers cannot be overridden by directions beyond the limited scope of governmental authority.

A company licensed under section 25 of the Companies Act, 1956 had articles vesting its executive committee with control over staff, appointment of officers and employees, and service conditions. Article 101(1) empowered the Central Government to issue directions only on the exercise and performance of the council's functions in matters of national public interest; it did not extend to internal staff control or restructuring of management. Any such change had to be made by amendment of the articles under the Companies Act. The Madras HC held that the impugned directions constituted unauthorized interference with the executive committee's powers, were arbitrary, and were without jurisdiction and invalid.

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Issues: Whether the Central Government had jurisdiction under article 101(1) of the articles of association to issue directions controlling the staff and service matters of the council.

Analysis: The council was a company licensed under section 25 of the Companies Act, 1956 and its articles vested the executive committee with the power to administer the general affairs of the council, control its staff, appoint officers and employees, and regulate service conditions and discipline. Article 101(1) empowered the Central Government to issue directions only as to the exercise and performance of the council's functions in matters involving national public interest. That power could not be extended to taking over staff control or altering the internal management structure of the council. If such a change was intended, the proper course was amendment of the articles under the Companies Act and not issuance of directions under article 101(1). The impugned directions therefore amounted to an unauthorized interference with the executive committee's powers and were arbitrary.

Conclusion: The directions were without jurisdiction and invalid, and the challenge succeeded.

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