TaxTMI 
TaxTMI 
2000 (5) TMI 965
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....sting their votes at the AGM. (d)Respondents 1 to 8 from holding Board of directors' meeting dated 19th December, 1997. (e )for an order appointing Mr. Satish Shah, advocate, as a chairman of the meetings of the club/company." 3. The appellants are the directors of the Indian Automotive Racing Club ('the company'). As per the appellants, appellant No. 1 is the chairman of the board of directors of the said company. Respondent Nos. 1 to 3 are the directors and respondent Nos. 4 to 8 are additional directors allegedly appointed along with 7 others under the challenged resolution dated 29-3-1997. The appellants challenged this resolution to be illegal and void, as it stood obliterated by the agreed and consent order dated 30-6-1997/2-7-1997 in Assessing Officer No. 274 of 1997 before the High Court. 4. In order to appreciate the controversy it is necessary to shortly dwell upon certain antecedents and essential short matrix of facts. At the annual general meeting of the company held on 29-12-1993 the appellants and respondent Nos. 1 to 3 were elected as directors and the first appellant as the chairman of the board of directors. The case of the appellants is : on 8-11-1995....
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....ding those covered by the aforesaid order dated 27-3-1997, proposing a meeting for 17-4-1997. This, according to the appellants, was in breach of the order dated 27-3-1997, not to implement the resolution appointing them as directors. On an application thereafter made by the appellants, the Court by an order dated 17-4-1997 recorded respondents' statement that co-opted directors will not be permitted to participate in the said meeting. That meeting was held on 17-4-1997, under the chairmanship of respondent No. 1. The appellants though attended the meeting but did so under protest and without prejudice, which was recorded in the minutes of the meeting. It is relevant to record, in this meeting, question of the induction of more new life members came up for consideration. Relevant portion of the discussion as recorded in the minutes is quoted hereunder : "Mr. Hoosein (appellant No. 1) raised the topic of new applicant and whether the old practice would be adopted in deciding membership of new applicant. Regarding the interview the life member category applicant Mr. Bhathena (respondent No. 1) pointed out that in the past life member applicant was not physically called for the ....
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....ther recording nor any reference about this consideration in the minutes prepared by the secretary, while in the recording by Mr. Satish Shah, it clearly records this. The relevant part of his report under item No. 6 is quoted hereunder : "To appoint 12 additional directors whose influence, contact would assist the club to procure attractive sponsorships as also those who could spare time to assist in organising and running events. Mr. Hoosein (appellant No. 1) said that this item did not survive because it had been agreed in principle to hold the annual general meeting. Mr. Swadi, Mr. Futehally and Mr. Bhiwandiwalla concurred. Mr. Bhathena (respondent No. 1) and Mr. Goenka opposed. Mr. Bhathena said that "he was disagreeing because in his view fresh blood was required on the Board". Mr. Rao abstained. The view of Mr. Hoosein was adopted by a majority of 4 to 2." [Emphasis supplied] 10. It was thought, the aforesaid meeting will resolve the conflict and parties shall restrain themselves from precipitating any other issue till the annual general meeting. But it was so done. Now the succeeding facts and resolutions gave rise to the cause for the filing of the present seco....
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.... no effective resolution annulling, rectifying or modifying the resolution dated 8-11-1995. The Court rejected the appellants' contention that order dated 30-6-1997, wiped off all the earlier resolutions passed. It held, neither party agreed nor the Court set aside the resolution dated 8-11-1995. It ordered for holding the annual general meeting under the chairmanship of Shri A.P. Kothari, the Company Registrar, to hold the election afresh of the board of directors. Aggrieved by this the appellants have filed the present appeal. 13. The main thrust of submission on behalf of the appellants is, "whether the consent order dated 30th June, 1997 wipes off- (i)the resolution dated 8th November, 1995, in which- (a)12 additional directors were appointed, (b)appellant No. 1 was removed as the chairman of the board, (c)the respondent No. 1 was appointed as the chairman of the board of directors, and (d)the administrative office of the company was shifted; (ii)the resolution dated 29th March, 1997 appointing the second set of 12 additional directors in place of the 12 aforesaid additional direc-tors; (iii)the resolution dated 17th April, 1997 enrolling, according to r....
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....is meeting court directed resolution passed therein shall not be implemented. Submission is, this meeting was also held in hot haste to overreach the order of the Court. On 10-4-1997, the aforesaid A O No. 274 of 1997 was adjourned to 21-4-1997 for admission. Coming to know of this, on 11-4-1997, notice was issued for a meeting on 17-4-1997. This clearly exhibits the unholy motive of the respondents to overreach the order of the Court. At this meeting it is said 57 new life members were enrolled. This was opposed by the appellants in the meeting which was turned down by the respondent No. 1. 17. For the respondents the aforesaid submissions were challenged. Submission is, both meetings dated 29-3-1997 and 17-4-1997, were validly held. Even the Court did not grant any stay against holding of these meetings. These meetings were attended by duly qualified directors. The meetings were chaired by respondent No. 1 whose appointment as the chairman was held to be valid by a competent court by an order dated 18-3-1997 in the Notice of Motion No. 6337 of 1995 in the earlier Suit No. 7179 of 1995. Reference is also made to section 175 of the Companies Act, 1956, i.e., members present at t....
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....ld of sports. But this spirit between the parties is lacking. The battle of supremacy to control started between respondent No. 1 and appellant since 8-11-1995 leading to two separate suits and the battle is still raging for about five years. 21. Now, we proceed to test the submissions for the appellants regarding the consent order obliterating the resolutions dated 29-3-1997 and 17-4-1997. As we have said, the nucleus of conflict started on 8-11-1995 when in this Board's meeting, appellant No. 1 was removed and respondent No. 1 was appointed in his place as the chairman of the board of directors and 12 additional directors were also appointed. When the first suit was filed by the appellants, they challenged this meeting as it was held without any notice to them. The very texture of this resolution shows two clear distinctive groups, and the group of respondent No. 1 by removing appellant No. 1 came in full control of the Board. Next, another meeting was held on 13-11-1995 to confirm the resolution dated 8-11-1995. It is at this stage appellants filed their first suit on 16-11-1995 along with injunction application, in which 12 additional directors were injuncted to function. Ho....
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..... Satish Shah to re-consider afresh the agenda of the meeting dated 8-11-1995, then it implicitly voices, what was resolved in the said meeting earlier is wiped off and has become non est. The very re-consideration of the earlier agenda clinchingly reveals that what was done then is wiped off. How can earlier resolution dated 8-11-1995, would survive when it is to be considered afresh? Of course, it is open to the Board to pass the same, modify or pass entirely different resolution. Thus, company would be bound by the resolution passed in this later meeting. The High Court committed error of law by concluding to the contrary. The High Court misdirected itself and misconstrued the consent order that "neither parties agreed nor did the Court set aside the resolution of the board of directors dated 8th November, 1995". The effect of the order passed by the Court was to undo what was done on 8-11-1995 and consider the matter afresh. This was done in the background of the appellants' case that it was held without notice to the appellants. This is also clearly spelt out from the aforesaid quoted statement of respondent No. 1 himself. The meeting which was held under the chairmanship of M....
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....he chairman of the next succeeding meeting. . . . ****** Explanation: The chairman shall exercise an absolute discretion in regard to the inclusion or non-inclusion of any matter in the minutes on the grounds specified in this sub-section." (6) If default is made in complying with the foregoing provisions of this section in respect of any meeting, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees. 26. With reference to minutes of the proceedings as to who shall initial or sign, the sub-section (1A) mandates, every page of every book shall be initialled or signed including the last page of the record of proceedings by the chairman of the Board. Under Explanation to sub-section (6) of the aforesaid section, chairman is empowered to exercise an absolute discretion in regard to the inclusion or non-inclusion of any matter in the minutes. Sub-section (6) makes defaulters for not complying the foregoing provisions punishable with fine. Thus, this section casts an obligation on the chairman of the board to authenticate the minutes of the meeting of the Board. Further when the Court directs Mr. Satish....
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....Parties could not point any such. The dispute, if any, could be that those inducted, were brought in by respondent No. 1 to muster his majority in the annual general meeting. 29. The learned counsel for the appellants referred to The Conduct of Meetings by TPE Curry and J Richard Sykes, 20th edn., which is quoted hereunder : "Board meetings : To constitute a valid Board meeting the following conditions must be complied with : (1) The proper person must be in the chair.-His appointment is generally governed by the articles. Regulation 101 of Table A, for example, provides that the directors may elect a chairman of their meetings and determine the period for which he is to hold office, and that if no such chairman is elected, or if at any meeting the chairman is not present within five minutes after the time appointed for holding the same, the directors present may choose one of their member to be chairman of the meeting. An appointment of a chairman of directors made in contravention of the articles is void and is not regularised by mere acquiescence, and consequently resolutions carried by the casting vote of such a chairman are inoperative." 30. The learned counsel ....
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....parties deferred the question as to who shall preside the meeting till holding of fresh election of the board of directors in the annual general meeting. It is significant in the minutes recorded by Mr. Satish Shah that before item No. 1 was taken up Mr. Bhiwandiwalla and Mr. Bhathena (respondent No. 1) stressed the need to hold an early annual general meeting. Another director Mr. Swadi also suggested the same for electing a new Board which could finalise the accounts. Finally, Mr. Bhiwandiwalla suggested the following : "(i )that the accounts be finalised and approved as soon as possible. (ii)that all the members of the present Board should resign and an entirely new Board should be elected; and (iii)that in any event the annual general meeting should be convened as early as possible even if the accounts were not ready. The other members were agreeable to this and it was resolved that the annual general meeting should if possible be held on 16th September, 1997." This also indicates that the Board desired holding an early annual general meeting and in favour of all members of this Board resigning. In this context presiding by respondent No. 1 as chairman of the mee....