TaxTMI 
TaxTMI 
1985 (2) TMI 227
X X X X Extracts X X X X
X X X X Extracts X X X X
....mmittee have retired by rotation and are not entitled to continue in office as members of the executive committee; (d)declaring that the 9 members of the executive council whose names are mentioned in the impugned notice have automatically ceased to be the members of the executive committee and are not entitled to function as such after May 14/15, 1984 ; (e)declaring that all the proxy forms lodged with the council regarding the fourth annual general meeting to be invalid and illegal particularly those on the forms other than the official forms ; (f)declaring the fourth annual general meeting purportedly held on May 14/16, 1984, in so far as it relates to election of 9 executive committee members who have retired by rotation to be illegal and invalid. In order to understand the true scope of the plaintiff's suit, it will be relevant to keep in mind the salient features as given in the plaint. The plaintiff is carrying on business as manufacturers and exporters of ready-made garments of which Ms. Sushma Gulati is the sole proprietor; that M/s. Apparel Exports Promotion Council (hereinafter referred to as "the council") is a public limited company registered under the pro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e plaintiff received a notice regarding the fourth annual general meeting of the defendant to be held on Monday May 14, 1984, at 11 a.m. at FICCI auditorium, New Delhi, to transact the business incorporated in the notice ; that though the notice is purportedly dated April 4, 1984, the same is understood and reasonably believed by the plaintiff to have been posted only on April 26, 1984 by the defendant to the various members; that this notice is totally illegal, invalid and mala fide for the grounds mentioned in the plaint; that in view of these grounds, it is apparent that the fourth annual general meeting convened through the impugned notice is illegal, invalid and the defendant cannot be permitted to hold the same. Hence, the present suit. Along with this suit the plaintiff also filed an application (I.A. No. 2448 of 1984) under Order 39, rules 1 and 2, CPC, praying for the issuance of an ad interim restraint order against the defendant from giving effect to the notice dated April 4, 1984, which is illegal and void and from holding the annual general meeting in pursuance thereof. After the suit was registered and after hearing the learned counsel for the plaintiff on the i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....efendant approached the Division Bench in appeal (F.A.O. (OS) Nos. 59 and 60 of 1984) for the vacation of the order restraining the defendants from declaring the result of the election of the members of the executive committee. This appeal was disposed of by the Division Bench on May 25, 1984, vide the following order: "After hearing counsel for the parties, we are of the opinion that the old arrangement should continue, but the result of the election shall be declared. The members declared to have been elected as directors shall not act till the decision is given by the learned single judge. The learned single judge will hear and decide the matter on the date fixed by him. We are not expressing any opinion at this stage since he has not given any decision on the merits of the controversy. The F. A. Os. are disposed of." Before the defendant could file the reply, the plaintiff was allowed to amend the plaint. In the written statement, the defendant took up a number of preliminary objections, inter alia, alleging that the present suit of the plaintiff is false, frivolous and vexatious and otherwise the same is a misuse of the process of law; that the alleged disputes fal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ys being second Saturday and Sunday. Even after ex parte injunction, the plaintiff intentionally did not serve the notice on the defendant or on any of its officers either on May 11, 12 or 13, 1984, even though the office of the defendant was open for making the arrangements for the holding of the annual general meeting on May 14, 1984. The plaintiff got the service of the notice effected only at about 10.45 a.m. on May 14, 1984, when all the arrangements for the holding of the meeting were complete. Under these circumstances, the plaintiff has not come to the court with clean hands and is not entitled to the discretionary relief on this account also. It was prayed that the suit which is a mala fide one and has been filed with the only motive of stalling the elections deserves dismissal with special costs. In the replication, the plaintiff controverted the pleas raised by the defendant in the written statement and reiterated the facts as stated in the plaint. On the pleadings of the parties, the following issues were framed: 1.Whether the defendant was enjoined in law to frame fresh rules for holding elections of the defendant council after they were struck down by a judgm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ant council after the previous rules were struck down by the judgment dated May 19, 1983, of this court in Suit No. 873 of 1981 titled as Pramod Chopra v. Apparels Exports Promotion Council. This issue is, therefore, decided against the plaintiff. Issue No. 2 : The objection of the defendants is that as the disputes raised in the suit fall within the purview of the company court jurisdiction, the present suit for declaration is not maintainable. This objection appears to have been raised only for the sake of raising an objection. Section 10 of the Companies Act defines the jurisdiction of the court to entertain suits in such like matters. The definition of "court" in clause (11) of section 2 and section 10 of the Companies Act, 1956, dealing with jurisdiction of courts read together enables the shareholders to decide as to which court they should approach for remedy in respect of a particular matter. This provision does not purport to invest the company court with the jurisdiction over every matter arising under the Act. In view of the eloborate provisions contained in the 1956 Act in regard to management and conduct of a company's affairs, including even important internal m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly and squarely applies to the facts of the present case and there is no reason to oust the jurisdiction of this court to entertain the present suit. Under these circumstances, this issue is decided in favour of the plaintiff and against the defendants. Issue No. 3 : This is the most material issue, the decision of which will decide the fate of the parties. Before the relevant facts are taken into consideration as to whether the plaintiff was duly served with a clear 14 days' notice of the proposed fourth annual general meeting of the defendant council, the relevant provisions of the Companies Act have to be kept in view. Section 171(1) of the 1956 Act reads as follows : "A general meeting of the company may be called by giving not less than 21 days' notice in writing..." Admittedly, the defendant council falls within the categories specified in clause (6) of section 25 of the Companies Act. In exercise of powers conferred by this provision, the Central Government notified that under section, 171(1) the general body meeting may be called by giving a notice in writing of not less than 14 days instead of 21 days. The next relevant provision is section 53(2); It reads a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he business relating to (i) the consideration of accounts, the balance-sheets (which in this case was for a period of two years) and the reports of the board of directors and auditors ; (ii) the declaration of dividend ; (iii) the appointment of directors in the place of those retiring, and (iv) the appointment of and the fixation of the remuneration of the auditors. This requirement has admittedly been complied with by the defendant company. According to the plaintiff, the impugned notice even though dated April 4, 1984, was posted to the plaintiff and many other members on April 27, 1984. It was received by the plaintiff on April 30, 1984, as is clear from the postal stamp affixed on the envelope, exhibit P-8, which was an officially declared holiday in the area where the plaintiff carried on business. It is also alleged that April 29, 1984, was a Sunday while May 1, 1984, was again a public holiday and, therefore, it came to the plaintiff's notice only on May 2, 1984. This notice did not allow clear 14 days' time before the annual general meeting and, as such, is bad and invalid and the annual general meeting cannot be held in pursuance thereof. It is also alleged that even i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he auditors and the executive committee of the council. (2)To appoint auditors of the council to hold the office from the conclusion of this meeting until the conclusion of the next annual general meeting and to fix their remuneration. (3)To appoint members to the (a)Executive committee in place of Shri........................who retire by rotation and is eligible for reappointment.... Admittedly, this notice complies with all the requirements of section 173 of the Companies Act. Prima facie this notice cannot be said to be illegal. On the second aspect, the facts mentioned in the plaint are to be taken at its face value. In paragraph 14 of the unamended plaint, the plaintiff alleged that the impugned notice dated April 4, 1984, was posted only on April 26, 1984, by the defendant to the various members. However, in the amended plaint, the plaintiff advanced the date of posting of the notice as on April 27, 1984, which was received by her on April 30, 1984. Even assuming that the impugned notice was issued by the defendant company on April 27, 1984, even then, in my opinion, the company has complied with the provisions of section 171 of the Companies Act. In this case....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e learned counsel for the plaintiff is mixing up the service of the notice of the holding of the meeting with the filing of the nomination for the membership of the executive committee of the defendant company. By virtue of section 257 of the Companies Act, a person who is not a retiring director shall be eligible for appointment to the office of director at any general meeting, if he or some other member intending to propose him has, not less than 14 days before the meeting, left at the office of the company a notice in writing under his hand signifying his candidature for the office of director or the intention of such member to propose him as a candidate for that office. Mere knowledge of the holding of the meeting is sufficient. The plaintiff has nowhere alleged in the plaint or in her affidavit that she was not aware of the holding of the fourth annual general meeting on May 14, 1984. It is also not alleged that the notice of the meeting was served on her on the night of April 30, 1984, or that she made efforts in securing the signature of a proposer and that she was not able to contact them. On the other hand, the defendants have placed on record the numerous advertisements w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me forward and throw the blame on the defendant company. Taking an overall view of the circumstances brought out on record and discussed earlier, there is no hesitation for this court to hold that the plaintiff was duly served with 14 days' clear notice of the holding of the fourth annual general meeting of the defendant council. This issue, therefore, is decided against the plaintiff. Issue No. 4 : In order to appreciate the scope of this issue, one has only to refer to the various dates admitted by the parties. On October 29, 1981, the third annual general meeting was held. On June 12, 1982, notice was issued to the members for the correction of addresses, etc., so that the fourth annual general meeting is held within the stipulated period. One of the members filed an application and obtained the stay of the holding of the annual general meeting and for taking steps in this direction, from this court on June 28, 1982. This ad interim stay dated August 25, 1982, was confirmed till the disposal of the suit. The plaintiff ultimately succeeded in the suit and a decree was passed by S. S. Chadha J. on May 19, 1983. The respondent company preferred to file an appeal before a Divi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uits. As per the order sheet dated May 15, 1984, during the pendency of the suit, the defendant council was directed to hold the elections of the executive committee members on May 16, 1984, at 2 p.m. but the result of the election was not to be declared. This order was modified by the Division Bench of this court, wherein the council was directed to declare the result of the election but the members declared elected were required not to act till the decision of the present suit. It comes to this that the 9 members of the executive committee have already been declared elected. It is not denied that the fifth annual general meeting has already been held except for the election of the executive committee members because of the order of the Division Bench. Learned counsel for the defendant states at the Bar that immediately after the decision of this case, they propose to hold the election of the 9 members for the fifth annual general meeting in the month of February, 1985, and they will hold the next annual general meeting and in this way all the 27 members will be declared elected. For the reasons explained above, I am not inclined to issue any directions to the defendant council fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ating the date of the meeting, requiring the members to furnish their correct addresses and to send their nominations within the statutory period. These publications continued appearing from April 5, 1984, to April 15, 1984. The defendant also started despatching the letters to individual members supplying information about the holding of the fourth annual general meeting. In compliance of the service of the individual notices as well as the publication in the various newspapers, the defendant council was able to correct the list of the members by April 20, 1984. By this time they also started receiving the nominations for the post of executive committee members the lists of which were published from time to time. While in the witness box, even the plaintiff has not led any evidence showing the mala fides/motive on the part of the defendant council to secure the re-election of the retiring members by not sending notices. Unfortunately, she also did not mention the name of any person/office-bearer or the member of the executive committee alleging mala fide intention. The plaintiff having failed to furnish the necessary particulars either in the plaint or in the form of evidence, thi....