Dismissal due to Lack of Authorization: Director must be Specifically Authorized by the Board

The court dismissed the petition as there was no specific authorization for Shri Arun Sharma to bring the action on behalf of the petitioner company. The lack of evidence showing his directorship or authorization led to the dismissal, emphasizing the necessity for a director to be specifically authorized by the Board of Directors to bring legal actions on behalf of the company.

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Issues Involved:
1. Whether in the absence of a specific authorisation can a Director bring an action for and on behalf of a CompanyRs.

Issue-wise Detailed Analysis:

Issue 1: Whether in the absence of a specific authorisation can a Director bring an action for and on behalf of a CompanyRs.

The primary question for determination in this case is whether a Director can bring an action on behalf of a company without specific authorisation. The petitioner company, through one Shri Arun Sharma, claimed to be its Director, sought several writs and orders against the respondents, including the refund of a sum of Rs. 75,383 with interest, quashing of an illegal demand, refund of instalments paid, and directions to not interfere with or disconnect the electric supply to the petitioner company's unit.

The petition was signed and supported by an affidavit from Shri Arun Sharma. However, there was no evidence or pleadings to show that Shri Arun Sharma was a Director of the petitioner company or that he had been authorised to bring the petition on behalf of the company.

Legal Provisions and Precedents:

1. Section 291 of the Companies Act, 1956:
- This section provides that the Board of Directors of a company is entitled to exercise all powers of the company except where express provision is made for such powers to be exercised by the company in a general meeting. Individual Directors have only such powers as are vested in them by the memorandum and articles of the company.

2. Order 29, Rule 1 of the Code of Civil Procedure:
- This rule allows the Secretary, any Director, or other Principal Officer of a corporation to sign and verify pleadings on behalf of the corporation if they can depose to the facts of the case. The petitioner's counsel argued that this provision allowed Shri Arun Sharma to sign and verify the petition without a separate resolution.

3. Case Law:
- United Bank of India v. Naresh Kumar (AIR 1997 SC 3): The Supreme Court held that pleadings signed by a duly authorised person under Order 29, Rule 1 were valid. However, this case was distinguished by the Delhi High Court in Rajghria Paper Mills Ltd. v. General Manager, Indian Security Press (AIR 2000 Delhi 239), which held that specific authorisation was required to initiate a suit on behalf of a company.
- Nibro Ltd. v. National Insurance Co. Ltd. (AIR 1991 Delhi 25): It was held that unless a power to institute a suit is specifically conferred on a Director by a resolution, he has no authority to do so. The authority to institute a suit is not a technical matter but one that affects the company's policy and finances.
- Oberoi Hotels (India) (P.) Ltd. v. Observer Publications (P.) Ltd. (Civil Suit No. 469 of 1955): The Delhi High Court held that the authority to file a suit must be found in the articles of association or a resolution of the Board of Directors.
- South India Insurance Co. Ltd. v. Globe Motors (Civil Suit No. 68 of 1969): The Delhi High Court reiterated that a company must act through a specifically authorised person to institute a suit.

Conclusion:

In the present case, there was no specific resolution of the Board of Directors authorising Shri Arun Sharma to institute the petition, nor was there any evidence that the memorandum and articles of association conferred such power on him. The petition was thus not instituted by a duly authorised person and was liable to be dismissed on this ground alone.

The court concluded that the question of authority to institute an action on behalf of a company is not a mere technicality but a significant matter affecting the company's policy and finances. Therefore, the power to institute an action must be specifically conferred by the Board of Directors through a resolution.

Judgment:

The petition was dismissed due to the lack of authorisation for Shri Arun Sharma to bring the action on behalf of the petitioner company. No orders were made as to costs.

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