Power to alter board size by ordinary resolution upheld; removal of managing agents requires extraordinary resolution protecting minority rights.

A company's power in general meeting to increase or reduce the number of directors was held effective and construed to permit increasing the maximum number of directors (subject to the statutory minimum), so an ordinary resolution passed at a requisitioned meeting validly increased directors and related declarations and injunctions based on its invalidity were set aside. Conversely, an express article requiring removal of managing agents by extraordinary resolution at a specially convened meeting with special notice and attendance was held mandatory; an ordinary resolution purporting to terminate the agents was invalid and protective minority rights were upheld.

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Issues: (i) Whether resolution increasing the number of directors passed at a requisitioned general meeting (resolution No.1) was valid under the articles of association; (ii) Whether resolution terminating the appointment of the managing agents passed by ordinary resolution (resolution No.2) was valid under the articles of association.

Issue (i): Whether the company could validly increase the maximum number of directors by the ordinary-resolution power conferred by the articles (Article 126) despite Article 109 fixing a maximum of four.

Analysis: Article 126 confers power on the company in general meeting to increase or reduce the number of directors and to alter qualifications and rotation; it is expressed subject to the statutory minimum of three (Section 83-A(1)). Article 109 fixes a maximum and minimum but contains no opening words excluding the operation of Article 126. Reading the articles together requires implying words either in Article 109 or Article 126 to resolve the textual conflict so as to give Article 126 effective operation. The natural meaning of the power to "increase or reduce the number of directors" includes increasing the maximum (and creating vacancies which may be filled) or reducing the minimum, subject to statutory minima; thus Article 126 must be read so as to permit an increase in the number of directors by the company in general meeting without a special resolution to amend Article 109.

Conclusion: Resolution No.1 is valid; in favour of the appellants.

Issue (ii): Whether the managing agents could be removed by an ordinary resolution contrary to the provision in Article 132 requiring removal only by an extraordinary resolution with special notice and specified attendance.

Analysis: Article 132 expressly protects the managing agents by requiring removal only by extraordinary resolution passed at a specially convened meeting with specified notice and attendance. The legislative provision cited (Section 87-B) only requires that appointment, removal or variation be approved by a resolution of the company and does not permit bypassing the articleually prescribed higher majority or procedure. Allowing removal by ordinary resolution would frustrate the protective purpose of Article 132 and unlawfully impair minority rights. The decree preventing termination in violation of Article 132 does not amount to specific enforcement of personal service contrary to Section 21(b) of the Specific Relief Act, 1877.

Conclusion: Resolution No.2 is invalid; in favour of the respondent on this issue.

Final Conclusion: The appeal is allowed in respect of resolution No.1 and dismissed in respect of resolution No.2, resulting in a partly favourable result for the appellants; the declarations and injunctions founded on the invalidity of resolution No.1 are set aside, the declarations as to the original four directors are struck out, the injunctions discharged, and the company is removed as plaintiff and added as defendant.

Ratio Decidendi: Where two provisions of a company's articles conflict, a provision granting the company in general meeting the power to increase or reduce the number of directors must be construed so as to give it effective operation (including altering maximum or minimum numbers subject to statutory minima) rather than render it redundant; conversely, an express article requiring removal of managing agents by extraordinary resolution protects minority rights and must be observed.

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