TaxTMI 
TaxTMI 
1994 (9) TMI 359
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....efendant. The Managing Director of the plaintiff is also the Managing Director of the defendant. The only other two directors of the plaintiff are also, the directors of the defendant. All the directors of the plaintiff including its chairman and managing director are the directors of the defendant. Plaintiffs four directors who are the only directors are the only, four members of the plaintiff and they hold 85% of the share holding of the defendant. The defendant has only one extra fifth share holder, who is also the fifth director of the defendant and the said fifth shareholder and director of the defendant holds 153 of the shares of the defendant. 3. The prayers in the above Admiralty Suit are as follows:-- "(a) A Declaration that the plaintiff is the absolute beneficial'owner of the Vessel M.V, Loyal Bird now lying at the Port of Haldimand is entitled to be registered as the legal owner of the same; (b) An order that the defendant to execute a bill and/or Memorandum of Sale transferring ownership of the said Vessel M.V. Loyal Bird to the plaintiff; (c) Alternatively, judgment against the said Vessel M.V. Loyal Bird and each of its tackle appare....
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....tor. Khondkar transferred all his shares in the defendant-company on 3rd May, 1988 i.e. 100 shares in favour of Al-Amin Seatrans Ltd. Akmal Yusuf transferred 90 shares in favour of Al-Amin Seatrans Ltd. on 11th April, 1988. He further transferred 10 shares in favour of Capt. Imam Anwar Hossain the managing director of the plaintiff. After the said date 40 shares were transferred by Al-Amin Seatrans Ltd. in favour of Capt. Imam Anwar Hossain. Al-Amin further transferred 50 shares in favour of Al Haj Md. Siraj-ud-dowla on 10th June, 1988. Al-Amin further transferred 50 shares in favour of Mrs. Nasim Anwar Hossain on 7th June, 1988. Al-Amin further transferred 50 shares in favour of the Mrs. Asmat Ara Begum. The present position of the plaintiff company is that there are four shareholders in all holding 50 shares each. So far as the original parties to the agreement dated 30th April, 1988 are concerned the plaintiff duly obtained transfer of all shares of the defendant. The four members of the plaintiff-company got the 200 shares of the defendant in their favour in the same proportion as per their share holdings in the plaintiff . There is no dispute that at the time of such transfer ....
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.... 12. Some of the other relevant provisions of the Articles of Association which may be relevant for consideration are as follows: "57. The business of the company shall be managed by the Managing Directing with the approval of the Board of Directors who may pay all expenses incurred in getting up and registered the company and may exercise all such power of the company as are not, by the Companies Act, 1913 or any statutory modification thereof for the time being in force or by these articles, required to be exercised or done by the company in general meeting, subject to nevertheless any regulation of these articles to the provisions of the said Act, and to such regulations or provisions, as may be prescribed by the company, in general meeting, but no regulations made by the company in general meeting shall invalidate any prior act of the directors which would have been valid if that regulation had not been made. 58. The directors may meet together for the dispatch of business adjourn or otherwise regulate their meetings and proceedings as they think fit. Questions arising at any meeting shall be decided by a majority of votes. In case of equality of votes, Chairm....
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....s, draft, bond and other documents on behalf of the company. (v) To execute and sign in the name of the company all such deeds and things as are necessary for the welfare of the company. (vi) To purchase, exchange or otherwise dispose of absolutely or conditionally any property for the purpose of the company." 13. Loyal Shipping Private Limited which is the owner of the said vessel at present has five shareholders in all. The four members of the plaintiff-company are members of he said Loyal Shipping Private Limited holding 85% of the shares in equal proportion. The Chairman of the plaintiff-company is also the Chairman of Loyal Shipping Private Limited. The Managing Director of the plaintiff-company is also the Managing Director of Loyal Shipping Private Limited. There is one more shareholder of loyal Shipping Private Limited who is common between the two companies and the name of the said share-holders is Md. Anwar Hossain who holds 15% of the share capital of the company. It is apparent that the plaintiff as per the said agreement acquired the entire control over the shareholding of Loyal Shipping Private Limited the defendant and got it transferred between ....
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....ther company of whose Chairman is the first party herein and the Managing Director is the second party herein. AND WHERE AS the well-wishers and friends of both the parties took initiative to resolve the crisis arisen in between the parties and in pursuant to solicitation of the aforesaid well-wishers the parties hereto bind themselves under the following terms and conditions. 1. Chairman, Al-Haj, Seraj-ud-Dowla takes a loan of Taka 60 lacs (sixty lacs) by cheque from the company, the first party hereby acknowledges receipt thereof. Be it noted here that Managing Director Capt. Imam Anwar Hossain, the second party herein had received loans of Taka 60 Lacs (sixty lacs) approximately on different occasions from the company. So the first party is also paid accordingly by above loan. It is further stipulated that the first party would make payment of the aforesaid amount to Mohammadi Welfare Trust and now both Mohammadi Welfare Trust and Al-Amin Seatrans would start a separate joint business by investing Taka 60 Lacs (sixty lacs) under a deed of agreement to, be arrived at by the aforesaid Mohammadi Welfare Trust and Al-Amin Seatrans, and profit and loss would be d....
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....only be exercised in consultation with the Chairman. It is nowhere alleged that any authority to institute the suit was obtained or was sought to be obtained from the Board of Directors of the company specifically or at all. Even if the power of Attorney executed by the Managing Director in favour of Mr. Mohan Sen he has not alleged that he has obtained any authority or power to institute the suit from the Board of Directors or from the general meeting. The Power of Attorney was executed on 2nd June, 1994 and the purported adjourned general meeting of the company was purported to be held on 8th June, 1994. The Power of Attorney in favour of Mr. Sen is dated 2nd June, 1994. In the Power of Attorney there is no mention as to the source of authority of the Managing Director. 20. It has been argued on behalf of the plaintiff that the Managing Director by virtue of his office and provisions of articles was authorised by his own power to institute suit or to appoint a Constituted Attorney for the company. There is no dispute that no Board Meeting had been held or even called to authorise the institution of the suit or to appoint any constituted attorney for the purpose. The learned co....
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....he same are to be exercised in consultation with the Chairman. 26. From the facts of this case it is quite apparent that there were serious disputes and differences between the two groups each of which held 50% share of the plaintiff-company and equal number of directors. The Managing Director knew that he could hot get any resolution to be passed in the meeting of the Board of Directors unless the Chairman supported the same. It was also known to the Managing Director that the Chairman was against institution of such suit. 27. My attention was drawn to various provisions of Article 65 of the Articles of Association. The very opening word of the said article shows that it was without prejudice to the: general power and the other power conferred by the articles. The said Article 65 cannot and does not make the other Articles i.e. Articles 57 and 62 as nugatory. 28. The plaintiff also relied on the fact that a notice informing a general meeting of the shareholders was issued on 15th May, 1994. The said notice reads as hereunder:-- "An ordinary General Meeting of the Shareholder of the Company will be held at 1100 Hrs. on 1st June, 1994 at Company premises i.e. Motij....
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....resolution mentioned aforesaid read with clauses 69(k) and 69(d) of the Articles of Association enabled the respondent to institute suits validly on behalf of the company. 31. In the instant case, however, the facts are quite different. No authority has been given in the Article of a Association to the directors to delegate the power as was the case in the Articles of Association in Ebrahim Sait's case (supra). Furthermore, infact, there is not resolution of the Board of Directors to give any specific rights to the Managing Director. So far as the Article 62, is concerned, the powers given to the Managing Director with regard to management were subject to control and supervision of the Board of Directors and the management by the managing Director had to be carried on in consultation with the Chairman. Article 57 also provided that the management by the Managing Director was to be done with the approval of the Board of Directors. Article 65 is also without prejudice to the other article. In my opinion, whatever powers have been conferred on the Managing Director by the Articles of Association are subject to the control and supervision of the Board of Directors and he is unde....
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....ctors. There was no specific authority granted to the Managing Director either to institute any suit or to appoint any Constituted Attorney of the plaintiff company. In my opinion, the Managing Director did not have any power or authority in the facts and circumstances of this case to institute any suit on behalf of the plaintiff or to appoint any Constituted Attorney of the Company without prior approval of the Board of Directors. 34. In my opinion, whatever powers were given under the Articles of Association to the Managing Director were subject to the control and supervision of the Board of Directors and could be exercised in consultation with the Chairman. Furthermore Art. 66 provides that even the bank account of the company was to be operated under the joint signature of the Managing Director and Chairman and in the absence of the Chairman any other Director nominated by the Board of Directors from time to time. This shows that the Managing Director would not exercise any singular control over the banking account of the company and could not even operate the same alone. Either the Chairman, or any other Director authorised by the Board of Directors had to be a joint signat....
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....Act. 44. No business shall be transacted at any general meeting if a quorum of members is not present, the meeting if called on the requisition of members shall be dissolved and in any other case it shall stand adjourned to the same day in the next week at the same time and place, and if at any such adjourned meeting a quorum of members, is not present within half an hour after the time appointed for the meeting, then any number of members, not being less than two, including the Managing Director shall be Quorum". 39. Learned counsel for the petitioner relied on the Division Bench judgment of this Court reported in AIR1966Cal512 Ramshankar Prosad v. Sindri Iron Foundry (P) Ltd. In the said judgment the Division Bench held as follows; Still more difficult it is to appreciate why the petitioners should fail to attend en bloc both at the Board meeting on January 22, 1963, March 4, 1963 and March, 1963 or the extraordinary general meeting on February 21,1963. I find myself unable to believe that if notice of the Board meeting on January 22, 1963 had been duly issued they could have failed to reach all the petitioners in time or that the later would all have deliber....
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....his extraordinary general meeting or not. It was further argued that as the Companies Act allows service of documents by putting them in the post. Production of certificate of posting was enough to prove service and that the reason why a member or a group of members failed to attend a meeting was immaterial. If the matter was tried on evidence other than affidavit evidence, no better result would have followed, for the petitioners would have had to make up its mind as to whether the petitioners had received the notices but deliberately refrained from attending the meeting. In my opinion, such an argument is worthy of no consideration at all. If the case was such that it could be suggested that the petitioners had some motive in abstaining from attending the extraordinary general meeting one might have hesitated to come to a definite conclusion that the petitioner had not been served with notice of the meeting. A man may no doubt behave strangely on a particular occasion, but it is impossible to believe that a number of hard -- boiled business people will keep themselves away from meetings where their doom may be effectually sealed in their absence and where they have only ....
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....espondents who in order to counter the effect of the said resolutions sought to get a whip hand on the company by increasing the number of members and the number of Directors to suit their own ends. According to the minute book produced by the petitioners the Directors held a meeting on January 21, 1963 at 52/1, Doctor Abani Dutt Road, Howrah at 3 p.m. which was attended by Murali Dhar Jhunjhunwala Ramshankar Prosad Champalalsarogi Radhakrishna Prosad and Mahendra Prosad. This meeting merely confirm the transactions which had taken place at the meeting held on October 25, 1962 and discussed the affairs of the company in general. According to the minute book produced by the respondents there was a board meeting on the same date at the same place at 12.20 in the afternoon and the only two persons present were Ramashankar Prosad and Radha Krishna Prosad. The minute of the last mentioned meeting go to show that the Chairman waited for half an hour to enable the other Directors to come but had to proceed in their absence ultimately. Further the minutes show that the three absent directors who were entrusted with their entire management of Dhanbad Works were committing various irregulari....
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....th Bhagat and others on 13-3-1963 but the evidence now available shows that the respondents had started their campaign sometime before that and that their plan was to dethrone the petitioners from the position held by them. If the board meeting of 21-1-1963 relied on by the respondents as also the extraordinary general meeting of 21-1-1963 was motivated by the desire to exclude the petitioners, clearly there was an oppression which would not be neutralised by the petitioner short of coming to court and praying for necessary relief. The oppression was not of long duration when the petitioners came to court but it was of such a nature that its effect would have persisted indefinitely and kept the petitioner under the complete mercy of the respondents." 40. In the instant case, taking into consideration the totality of the facts and circumstances of this case, it is quite clear that there were serious disputes as between the Managing Director and the Chairman of the plaintiff. The Managing Director knew very well that he could not gel any resolution passed either by Board of Directors or in a general meeting, where the Chairman and his wife had notice of the meeting and/or were pre....
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....the power of attorney was executed by the Managing Director on 2nd June, 1994. 43. The next ground of attack by the defendant/petitioner is that the plaintiff/respondent suppressed material facts and made deliberate false statements in the petition and obtained the interim order dated 7th July, 1994 on the basis of suppression of material facts and/or by making deliberate false statement. 44. It was, inter alis, stated in the petitions that the shares of the defendant were still held in the name of Ahmed and Chowdhury who were parties to the agreement dated 8th April, 1988. The impression was sought to be given to the Court that Ahmad and Chowdhury did not give effect to the agreement which is apparently false and there was suppression of all the events that took place after the 30th April, 1988, which I have already referred to above. It had also been suppressed that the entire control of Loyal Shipping Pvt. Ltd. pursuant to the agreement dated 30th April, 1988 had come in the hands of the plaintiff. It had also been suppressed that the time when the control of Loyal Shipping Pvt. Ltd., came in the hands of the plaintiff the said vessel was owned by the said Loyal Shipping P....
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.... 47. The said cases were relied on in support of the proposition that it is perfectly well settled that a person who makes an ex parte application to court is under an obligation to the court to make the fullest possible disclosure of all material facts within his knowledge and if he does not make that fullest possible disclosure then he cannot obtain any advantage which he may have already obtained by means of the order which was thus wrongly obtained by him. 48. In my opinion, the plaintiff was also under an obligation to disclose that serious disputes and difference had been going on as between two groups of Directors of the plaintiff company and that it was the Managing Directors group who was not allowing meetings of the board to be held. He also failed to disclose that the Managing Director and Chairman of the plaintiff were also the Managing Director and Chairman of the Loyal Shipping Pvt. Ltd. who was the owner of the ship. 49. The plaintiff also made a false and incorrect statement that by virtue of the said written agreement dated 30th April, 1988 Loyal Shipping Pvt. Ltd. was obliged to transfer the said vessel in favour of the plaintiff. The agreement referred to....
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....al jurisdiction in the matter. This is because the entire alleged cause of action, if any, of the plaintiff arose totally in Bangladesh and the municipal laws applicable are laws of Bangladesh. 53. I, therefore, hold that the suit has been instituted at the instance of the Managing Director alone without any specific power or authority in him to institute the suit and the Managing Director had no power either to institute the suit by himself or through his agent or to appoint any Constituted Attorney for the said purpose. The suit has been instituted without due and proper authority and the suit is, therefore, liable to be dismissed on that ground alone and all interim orders are liable to be vacated. I also hold that in any event the order dated 7th July, 1994 for arrest of the said vessel, namely Loyal Bird was obtained by suppression of material facts and/or by making false and incorrect allegations as to the material facts and the said order dated 7th July , 1994 is in any event liable to be vacated. The petitioner, in my opinion, is entitled to an order for release of the said vessel without security. 54. At the time when the application of the petitioner was being heard....