Annual general meeting default does not end company power to convene later meetings and comply with binding directions.

Default in holding an annual general meeting under the Companies Act, 1956 attracts penal consequences but does not extinguish the company's power to convene the meeting later. The court also accepted that, in appropriate proceedings, corporate affairs may be regulated to implement binding higher-court directions and secure statutory compliance. Delay in acting on Supreme Court directions and the status quo ante arrangement did not invalidate fresh notices for the overdue annual general meetings, since the later steps were directed to give effect to those orders. Amounts brought in by Sajal Dutta could not be shown as a disputed liability where that treatment would be inconsistent with the binding directions and proper accounting practice.

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Issues: (i) Whether the company could convene the overdue annual general meetings and whether the Company Law Board was justified in restraining those meetings. (ii) Whether the delay in acting upon the Supreme Court directions and the status quo ante order prevented the company from issuing fresh notices for the 7th to 12th annual general meetings. (iii) Whether the amounts brought in by Sajal Dutta could be shown as a disputed liability in the company accounts.

Issue (i): Whether the company could convene the overdue annual general meetings and whether the Company Law Board was justified in restraining those meetings.

Analysis: Sections 166 to 168 of the Companies Act, 1956 were read together to hold that default in holding an annual general meeting attracts penal consequences, but does not destroy the company's power to hold the meeting after the prescribed time. The Court relied on the later Division Bench view that the statute does not make the company incapable of convening an AGM after default, and that the earlier restrictive view had been substantially diluted. It also held that, in appropriate proceedings, the Court may extend time and regulate company affairs so as to enforce statutory compliance.

Conclusion: The company was entitled to convene the annual general meetings, and the blanket restraint imposed by the Company Law Board could not be sustained.

Issue (ii): Whether the delay in acting upon the Supreme Court directions and the status quo ante order prevented the company from issuing fresh notices for the 7th to 12th annual general meetings.

Analysis: The Supreme Court had restored the position ante 19 April 1995, set aside adverse resolutions, and directed a fresh board meeting and further consequential action in the interest of the company. The Court held that the company's later steps were in implementation of that mandate and that the lapse of time was not so fatal as to nullify the Supreme Court's directions. The delay was condoned in order to give effect to the binding status quo ante arrangement and to enable proper corporate functioning.

Conclusion: The delay did not invalidate the proposed meetings, and fresh notices for the annual general meetings were permitted to be issued.

Issue (iii): Whether the amounts brought in by Sajal Dutta could be shown as a disputed liability in the company accounts.

Analysis: In the light of the Supreme Court's recognition of the respondents' contribution and the need to reflect the true source and application of funds, the Court held that accounting treatment must conform to the binding orders and acceptable accounting practice. Amounts that the company was not presently entitled to receive under the Supreme Court order could not be presented as a disputed liability in a manner inconsistent with that order.

Conclusion: The amount infused by Sajal Dutta could not be shown as a disputed liability.

Final Conclusion: The appeal succeeded to the extent that the restraint imposed by the Company Law Board was set aside, the company was directed to reconstitute the board and issue fresh notices for the annual general meetings, and the accounts had to be prepared consistently with the Supreme Court's directions and proper corporate accounting principles.

Ratio Decidendi: A default in holding an annual general meeting under the Companies Act, 1956 attracts penal consequences but does not extinguish the company's power to convene the meeting later, and the court may regulate corporate affairs to implement binding higher-court directions and ensure statutory compliance.

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