TaxTMI 
TaxTMI 
1984 (5) TMI 227
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....rmore, it was claimed, the elections should be held under the supervision of the court with an impartial and independent chairman. This application was decided on July 22, 1983, by the impugned order. The appellants have challenged the various directions made in the order as well as the changes made in the articles of association and election rules of the company. It must here be stated that disputes relating to the motion pictures association have been before the court almost continuously since the year 1973 and various orders of various company judges have been passed during the pendency of these petitions and other proceedings before the company court regarding the holding of the annual general meeting. The order under appeal is, however, somewhat different from orders made in the past, because in the past, either directors have been appointed to the company or an observer, has been appointed regarding the meeting. In the present case, a committee has been appointed to hold the elections and also drastic changes have been made in the election rules and also the method of elections, which have been challenged on various grounds before us on the footing that the court cannot dep....
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.... and then a separate list made of persons who have become members after that date and objections also invited to that list. Members who are in arrears of subscription are required to make up their deficiency and elections to be conducted in accordance with the election rules as amended by the court. Though these directions may appear innocuous, they are actually drastic departures from the Companies Act and it is difficult to see how this committee can hold the annual general meeting at three places under the Companies Act. The next set of directions in the judgment are the amendments to the election rules. The changes are with regard to how a representative of a company or a representative of a partnership firm can vote or stand for election. According to the first amendment, such representatives can stand for election, but this was not permitted under the existing election rules. The second amendment is that the authorisation to the representatives of firms or companies should be in the prescribed form and a copy of the resolution of the firm or company should be sent to the association. The third amendment is that annexure II to the articles of association is deleted. The fourt....
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....firm and how. The procedure prescribed by the election rules is that all the members of the firm should jointly authorise one person to vote, who can then exercise the vote. The form for this is set out as annexure "E" to the existing election rules. It is an authorisation for a specific annual general meeting and allows the authorised person to vote at the annual general meeting and also at the elections at that meeting. The amendment made by the court in Company Petition No. 32 of 1976 was that the secretary shall issue a letter of authorisation to partnerships concerned to nominate a partner and all the partners should sign that authorisation letter. There is also a date fixed, i.e., 45 days before meeting when that letter is to be issued. There seems to be some difficulty in working out this annexure. We think the company judge is right in making a departure from this annexure. In order to make this matter specific, we would point out in the course of this judgment what we think should be the amendment. The other changes made in the election rules are such that it is difficult to see how the elections can be held. For instance, rule 6 of the existing election rules provides th....
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....ion of the democratic right of every member to stand for election. In the case of companies and partnership firms, the bar is created by the fact that the firm is the member and not the partner and in the case of the companies, the company is the member and not its director or manager. To explain this, section 187 of the Companies Act, 1956, has only to be referred to. It states that a body corporate whether a company under the Act or not can authorise such persons as it thinks fit to act as its representative at the meeting and such person can exercise the power of vote as if he was an individual member. This section is limited to companies and body corpo-rates and does not apply to partnership firms. It, therefore, comes about that a partner, who is a member of a firm which is itself a member, cannot stand for election and nor can a director or an employee of a company member. Any departure from this is a drastic change in the Companies Act and cannot be directed by the company judge. It is a legislative Act. The next amendment is that one person can only vote once, i.e. , if he votes in his own right, he cannot vote for any partnership firm or any company. This amendment is unu....
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....e annual general meeting to be held under the Act has to include not only the elections of the new executive committee but also the other ingredients of an annual general meeting. Various provisions of the Companies Act, like sections 166, 167 and 168, indicate that the annual general meeting has to be held and the consequences of not holding it may be a criminal offence. Section 173 indicates that the annual general meeting has to have its normal business, the consideration of the accounts, the balance-sheet and reports of the board of directors and auditors, the declaration of dividend, the appointment of directors and the appointment of auditors. The appointment of directors has, therefore, to be done at an annual general meeting and not otherwise. The most important provision as far as the directions regarding the meeting are concerned are contained in sections 166(2) and 168 of the Act. Sub-section (2) of section 166 provides that the annual general meeting has to be called at a time or place during business hours on a day not being a public holiday and the meeting has to be held either at the registered office or at some other place within the same city, town or village wher....
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....t hold the elections in which case an order has to be sought from the Central Government under section 167, or it is the executive committee which has to hold the meeting, as they are the persons who are liable for any default under section 168. It is, therefore, essential that the executive committee should hold the elections. But, the court can make provision for the proper conduct of the elections by nominating a chairman as visualised by rule 19. We think that we should replace the direction by appointing a person to be the chairman of the actual meeting as far as the election part is concerned as visualised by rule 19 of the election rules of the company. The chairman so nominated will take over after the other business of the annual general meeting has been completed for the purpose of the elections. We will also give directions regarding assistance to the chairman by the officials of the court. Turning now to the question of settling the register of members and the voters list, we are faced with a formidable set of objections and a great practical difficulty in complying with the order passed by the company judge. The only purpose of the directions was to hold the meeting, ....
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....s no purpose in the court trying to rectify the register of members on its own initiative by a procedure which is somewhat different to that laid down in the Companies Act. This brings us to the question as to how the voters list has to be settled. There is a procedure laid down in the election rules of the company. This states in rule 18 that the register of members shall remain closed eight clear days before the holding of the annual general meeting and no person will be admitted to membership thereafter. This means that when the date of the annual general meeting is announced, more members can be enlisted or allowed to join till eight clear days before the date of the meeting. Normally, such persons would be entitled to vote at that meeting, so there is no purpose in settling the voters' list in advance. Then there is rule 17, which states that the secretary of the company shall prepare a role of members entitled to vote. These persons will be all proprietary firm members in their own right giving the name of the member who is entitled to vote ; the names of partnership firm members together with the name of the authorised partner in whose favour an authorisation has been give....
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....member duly authorised under a resolution passed by the board of directors of the company-member concerned, in terms of section 187 of the Companies Act, 1956, to cast vote on behalf of the company-member concerned (specimen copy of the resolution is attached in annexure 'F' hereto) can cast vote, provided, however, that : (i)the required certified copy of the resolution and/or letter of authority in regard to the category of members under clause Nos. (b) and (c ) above, in favour of the person authorised to cast vote, shall be filed in the office of the association at least 4 (four) clear days (excluding the due date of receipt of such resolution and/or letters of. authority and the date of the general meeting) before the date of the relevant general meeting at which the election is to take place, and if that day happens to be a holiday, on the day preceding it ; (ii)the name of the member on whose behalf the authorisation/ resolution is being filed, is on the register of members of the association on the date of filing of such authorisation/resolution and continue to be so, until the date on which the register of members is closed, prior to the general meeting at which the elec....
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....ection 187 of the Companies Act, which provides that the resolution entitles the representative to vote. The section does not contemplate a fresh resolution being filed for every meeting. There is also sub-clause (iv) which deals with partnership firms where there is one major partner and a minor partner which we think may be retained as it is. But, as this rule visualises objections before the chairman, it is noted here for this purpose. We think that this amendment in the election rules will facilitate the voting by the company members and partnership members which is one of the main points of objection. Turning now to the appointment of the chairman, we think that Mr. R. K. Kaul, Joint Registrar of this court, who has been appointed chairman of the committee can be nominated by us to be the chairman of the meeting. He will be given a fee of Rs. 2,500 and he will be assisted by Shri S. M. Saxena, superintendent, who has been associated in the past with the committee in the previous elections and such other members of the court staff as the company judge may nominate. The fees of these persons including Shri S. M. Saxena will be settled by the company judge. The payment will be m....