TaxTMI 
TaxTMI 
1991 (9) TMI 256
X X X X Extracts X X X X
X X X X Extracts X X X X
..... A general body meeting of the company was held on April 19, 1985, and a new board of directors was elected. On February 25, 1986, another general body meeting was held wherein a resolution was passed removing one of the directors, N. Madhavan Nair, who was the managing director of the company. Madhavan Nair filed Application No. 63 of 1986 before the company court on February 25, 1986, for a declaration that the resolution removing him was invalid. He also filed another petition for stay of operation of the said resolution. The company court passed an order of interim stay on March 3, 1986. When the petitions came up for hearing, the period of appointment of the managing director and the board of directors of the company had expired. The company court did not consider the question on merits, but directed a fresh election to the board of directors and managing director. In order to enable a proper election, the company court appointed advocate, Shri V.A. Mohammed, as the chairman to convene a general body meeting of the company for the purpose of conducting the elections. The meeting held under the directions of the company court elected the board of directors and N. Madhavan N....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... In the meeting held under the directions of the company court, a board of directors and managing director were elected. The Commissioner filed a report on March 22, 1990. The present Application No. 253 of 1990 was filed challenging the election and its proceedings. Another application was filed as Application No. 254 of 1990 for an order of stay of further proceedings pursuant to the election till the disposal of the present application (Application No. 253 of 1990). The company court dismissed the application for stay. An appeal was filed as M.F.A. No. 322 of 1990, which was dismissed on June 18, 1990, with certain directions. The company court has now dismissed Application No. 253 of 1990. The applicant is aggrieved and she has filed this appeal. Counsel for the appellant raised certain points before us which he has raised in the petition and before the company court. He submitted that the notice convening the meeting by the chairman appointed by the company court is defective, since an explanation as contemplated under section 173(2) of the Companies Act was not annexed to the notice. Further, it was submitted that the notice is defective since, along with the notice, t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that matter was left open to be considered by the company court at the final stage of the main application, viz., Application No. 253 of 1990. But it has to be noted that the meeting was held as early as on March 10, 1990, and the period of appointment of the board of directors and managing director of the company has expired by efflux of time and an election to a new board of directors and managing director became necessary. Nevertheless, we feel that we are bound to consider the correctness of the judgment challenged in this appeal. The company court, in its order, has extracted in full the notice issued by the chairman appointed by the company court and we do not want to repeat it in this judgment. The purpose for which the meeting is held is clearly stated in the notice. The purpose is for conducting an election to the board of directors and managing director of the company. There is no difficulty to hold that the notice was issued following the provisions contained in the articles of association and no argument was advanced by counsel for the appellant stating that the notice is defective on account of the fact that it has not complied with the provisions contained in the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....led in the meeting and for which alone the meeting was called. The notice was found to be valid by the company court. All proceedings for the conduct of the election were supervised by the company court and the parties had opportunities before the company court to raise points against the validity of the notice. Even before the holding of the meeting, the company court has considered it and found it to be valid. It is also necessary to note that neither the notice nor the explanatory note omits to disclose material facts pertaining to the transaction to be carried out in the meeting. The decision taken in respect of that transaction would be invalid and ineffective (sic). But if a shareholder is aware of the facts, he cannot reasonably complain of insufficiency of the notice or any irregularity. If he is present at the meeting, he must point out to the chairman about the irregularity before the meeting proceeds with the agenda. There is no case for the petitioner, who is the appellant herein that she has raised any objection in the meeting itself. The provisions contained in section 173 of the Companies Act making some requirements for a valid notice is to enable the members ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... director or the intention of a member to propose such person as a candidate for that office, by serving individual notices on the members not less than seven days before the meeting : Provided that it shall not be necessary for the company to serve individual notices upon the members as aforesaid if the company advertises such candidature or intention not less than seven days before the meeting in at least two newspapers circulating in the place where the registered office of the company is located, of which one is published in the English language and the other in the regional language of that place. (2) Sub-section (1) shall not apply to a private company, unless it is a subsidiary of a public company". His Lordship Justice John Mathew considered this question very elaborately and found that sub-section (1A) of section 257 of the Companies Act has no application in regard to a private company and the company in this case is a private company. Sub-section (1A) of section 257 is really interlinked with sub-section (1) of section 257 of the Companies Act. It has to be noted that in sub-section (1) of section 257 of the Companies Act the statute provides that "a person who ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on to the office of director of a company. It is significant to note that the company shall inform its members about the candidature of a person for the office of director or the intention of a member to propose a person as a candidate. Both these are referred to only in subsection (1A) of section 257 of the Companies Act. Only in sub-section (1) the procedure is prescribed by which 14 days' notice has to be given signifying by a member his intention to stand as a candidate for the office of director or any other member who wants to propose a member as a candidate for the office of director. Sub-section (1A) can have any meaning only if we read subsection (1A) along with sub-section (1) of section 257 of the Companies Act. Otherwise, sub-section (1A) will be incomprehensible. Sub-section (1A) cannot be separated from sub-section (1) of section 257 of the Companies Act. It is on account of this intimate relationship with sub-section (1) that the provisions contained in sub-section (1A) of section 257 of the Companies Act have been termed as section (1A). Sub-section (2) of section 257 of the Companies Act makes it clear that sub-section (1) shall not apply to a private company un....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The learned judge has also found so. We cannot forget the fact that the meeting was convened overruling the objection, which was subject to an appeal and that appeal was also dismissed and now, as it is, the period of the board of directors has expired by efflux of time. Section 392 of the Companies Act empowers the court sanctioning a scheme to supervise the implementation of that scheme and to give such direction in regard to any matter or to make such modifications, compromises or arrangements as it may consider necessary for the proper working of the revival scheme. It is difficult to read any limitation in that power so as to exclude the power to call a meeting of the company for the purpose of electing the directors if the court feels that it is necessary for the proper working of the scheme to appoint a board of directors of the company. The width and scope of the power under section 392 of the Companies Act is no longer in doubt. Section 392(1) of the Companies Act confers power of the widest amplitude on the High Court to give directions and if necessary to modify the scheme and that power implies in itself all incidental powers like convening a meeting of the members ....