Case Law Companies Act R Rangachari Vs S Suppiah and Ors

Case Law Companies Act

R Rangachari Vs S Suppiah and Ors

 

DATE OF JUDGMENT15/09/1975

 

BENCH: UNTWALIA, N.L.

BENCH: UNTWALIA, N.L. ALAGIRISWAMI, A. GOSWAMI, P.K.

CITATION: 1976 AIR   73  1976 SCR  (2) 210 1975 SCC  (2) 605

 

ACT: Indian Companies Act, 1956, s. 186-Scope of

HEADNOTE: Under s.  186(1)(a) of  the Companies  Act, if  for any reason it is impracticable to call a meeting of the company, other than an annual general meeting, or to hold, or conduct it in  then manner  prescribed by the Act or the articles of the company,  the Court  may order the meeting to be called, held and  conducted in  such manner as the Court thinks fit; and s.  186(2) provides that such a meeting should be deemed to be  a meeting  of  the  company  duly  called,  held  and conducted.

 

The  Board  of  Directors   of  a  company  called  an extraordinary general meeting of the company for the purpose of considering petitions filed by shareholders regarding the managing directors.  Apprehending trouble in the holding and conducting of the meeting two share-holders filed a petition in the  High Court under s. 186 of the Companies Act praying for the  appointment of an advocate Commissioner as Chairman of the meeting, which was called. The High Court, in letters Patent appeal, granted the prayer. In appeal to this  Court it  was contended, inter alia that the  power under  s.  186  of  the  Act  could  not  be exercised until  it was  found that  it was impracticable to call the  meeting and  to hold  and conduct it in the manner prescribed by  the Act  or articles of association, and that the High  Court had  not jurisdiction   merely  to appoint a Chairman of the meeting already called. Allowing the appeal to this Court,

HELD: Under s. 186 the Court may order a meeting of the Company to be called, held and conducted, in such manner, as the  Court   thinks  fit   in  any   one  or   more  of  the contingencies, namely, if for any reason it is impracticable (1) to  call a  meeting of  the company other than an annual general meeting.  (ii) to  hold the  meeting in  the  manner prescribed by  the Act  or the  Articles of Association; and (iii) to  conduct the  meeting of  the company  in the  same manner. The use of the word ‘or’ in the first part of sub-s. (1) (a),  may, therefore,  be disjunctive  or conjunctive as interpreted above  but the  use of  the word and between the words ‘held and conducted’ in the same clause shows that the order under  cl. (a)  has got  to be  made for all the three purposes of  calling, holding  and conducting and not merely for holding  or conducting the meeting. Therefore, the Court has no  power to  make any  order regarding  the holding and conducting of  any meeting  which has  already been  called, without ordering  a meeting  of the company to be called, in place of  the meeting already called. The language of sub-s. (2) also fortifies the above interpretation. Since there  was no  prayer for  an order       of calling a meeting the  application to  the Court  under s. 186 was not maintainable. [802A-D]

JUDGMENT: CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 1136 of 1975. Appeal by       Special Leave  from the  Judgment and  order dated the  11th day of March, 1975 of the Madras High (court in C.S.A. No. 64 of 1974. S. V. Gupte, Mrs. S. Bhandare for the appellant. 799 S. Govinda       Swaminath. Raghavan,  R. Chandrasekhar  and Jayaram for respondent Nos. 1 to 2. M. C. Bhandare, A. T. M. Sampath and M. M. L. Srivastva for respondent No. 3. The Judgment of the Court was delivered by UNTWALIA,  J.   The  question   which  falls   for  our determination in  this appeal by special leave is as to what is the  meaning and  scope of  s. 186  of the Companies Act, 1956 hereinafter  called the  Act. For  the determination of the said  question it will suffice to state only a few facts from the  judgments of the Madras High Court. There were two Managing Directors  of Century  Flour Mills  Ltd. respondent no. 3.  Their names  are S/Shri  P. Govindaswamy  and S.  P. Sithambaram. Both of them had been duly appointed as such in the year  1972 They  subsequently fell  out. In August, 1974 certain shareholders  of the company including respondents I and 2  lodged a requisition under section 169 of the Act for the calling  of an  extraordinary In  general meeting of the company for  removal of  Govindaswamy. Certain  other  share holders  lodged   a  similar   requisition  for  removal  of Sithambaram form  the post  of Managing  Director. Both  the requisitions were  considered by,  the Board of Directors in their meeting  held on  19-8-1974.

As  per the requisitions, they called  an extraordinary general meeting of the company to be held on 14-9-1974. The meeting was directed to be held at the  residence of  one of the shareholders of the company instead of  its registered  office.  The  shareholders  were divided into two factions belonging to the two groups of the Managing Directors.  Apprehending very many difficulties and troubles in  the holding  and the  conduct of the meeting on 14-9-1974, respondents  1 and  2 filed  an application under section 186  of the Act, Company Petition No. 85/1974 in the Madras High  Court. They  prayed to  the Court to appoint an Advocate-Commissioner as  Chairman of the meeting to be held on   149-1974 so  that the proceedings may be conducted in a regular manner.  The only  respondent impleaded  in the said petition was  the company which filed a counter-affidavit to resist the  prayer of  respondents 1 and 2. A learned single Judge of  the High  Court took  the   view that  power under section 186  of the  Act could  be  exercise  even  where  a meeting had already been called, but it was impracticable to hold or  conduct the  meeting. In  other words,  the learned Judge was  of  the  opinion  that  the  Court  even  without ordering a meeting of the company to be called could appoint a  person  to  be  the  Chairman  of  the  meeting.  But  on appreciation of  the facts  of the  case  in  the  light  of certain decisions  of  the  High  Courts,  he  came  to  the conclusion that  it was not impracticable to hold or conduct the meeting  and hence  dismissed the  application filed  by respondents 1 and 2. O. S.

Appeal No. 64/1974 was  filed in the High Court under clause  15 of  the Letters  Patent against  the  order dated 11-9-1974  of the  learned single  Judge. By  an order made on  September 12 1974 a Bench the High Court stayed the convening of  the meeting called to be held on 14-9-1974. It appears that in spite of the service of me order 3-L127SCI/75 800 dated 129-1974  on September 13, the meeting was held on 14- 9-1974 CMP  No. 10935/1974  was taken  out in  the form of a Judges’ summons  under Rule g of the Company Code Rule, 1959 to declare  the meeting  held on  149-1974 as  void and  the resolutions passed  therein as  illegal and inoperative. The said appeal  and the  CMP alongwith other CMPs which are not necessary to be referred to in this judgment were heard by a Bench of  the High  Court presided over by the learned Chief Justice. The  Bench allowed  CMP 10935/1974,  put  back  the parties in the same position as they stood immediately prior to the  service of  the order  dated 12-9-1974  and declared that  the  meeting  held  on  September  14,  1974  and  the resolutions  passed   thereunder  would   have   no   effect whatsoever. By  a separate  judgment, Appeal No. 64/1974 was also allowed  by the  Division Bench.

It  agreed  with  the single Judge as regards the meaning and scope of section 186 of the  Act but differed from him on the merits of the case. They appointed  an Advocate  of the  Court as  the Advocate- Chairman to  hold and  conduct the meeting and directed that the  meeting  would  take  place  at  the  premises  of  the registered office of the Company. The sole  appellant in  this appeal is a shareholder of the company. Feeling aggrieved by the orders of the Division Bench of the High Court in CMP No. 10935/74 and in OS Appeal No. 64/1974  he filed  special leave  applications  in  this Court seeking  leave to file appeals in both the matters. By order dated  29-8-1975 a  Bench of  this Court  dismissed as withdrawn SLP  No. 1156/1975  arising from  the judgment and order dated  11-3-1975 of  the High  Court in CMP No. 10935/ 1974. Special  leave was granted from the judgment and order dated 17-3-1975  of the  High Court  passed in OS Appeal No. 64/1974. Mr. S.  V. Gupte,       learned counsel  for  the  appellant urged the following three points in support of the appeal. (1)  That power under section 186 of the Act could not be  exercised until it was found that it was impracticable  to call  a meeting  of the Company other  than an annual general meeting and to  hold and         conduct the  meeting in the manner prescribed  by the Act or the Articles of the company. The Court had no jurisdiction merely to  appoint a  Chairman of the meeting without an  order  for  the  calling  of  the meeting.

(2)  That the High Court was wrong in holding that it was  impracticable to  hold or conduct the meeting of the company which had already been called. (3)  That during the pendency of the appeal in the High Court, Company Law Amendment Act of 1974 came into  force on  1-2-1975. The powers and jurisdiction of court under section 186 stood transferred to  Company Law Board by the said amendment. The court, therefore, had no power to make an order  under section 186 on 17-3- 1975. 801 Since in our opinion the first point urged on behalf of the appellant  is well  founded and  has to  be accepted  as correct,  neither   of  the   other  two   points  need  any determination or answer and we express no opinion in respect of them. Section 186 of the Act as it stood at the relevant time reads as follows: “Power of  Court to order meeting to be called.(1) If for any reason it is impracticable to call a meeting of a  company, other  than an annual general meeting in any manner       in which  meetings of  the company  may  be called, or       to hold  or  conduct  the  meeting  of  the company in       the manner  prescribed by  this Act  or the articles, the Court may, either of its own motion or on the application  of any  director of the company, or of any member of the company who would be entitled to vote at the meeting,-

(a)  order a  meeting of the company to be called, held and conducted in  such  manner  as  the Court thinks fit; and (b)  give   such    ancillary     or   consequential directions as  the  Court  thinks  expedient, including     directions   modifying     or supplementing in  relation  to  the  calling, holding and  conducting of  the meeting  the operation of  the provisions  of this Act and of the company’s articles. Explanation-The directions that may be given under this sub-section  may  include  a  direction  that  one member of       the company  present in  person or  by proxy shall be deemed to constitute a meeting. (2) Any  meeting called,  held  and  conducted  in accordance with any such order shall, for all purposes, be deemed       to be  a meeting of the company duly called” held and conducted.” It corresponds with slight variation to section 79(3) of the Companies Act, 1913 and section 135 of the English Companies Act, 1948.  The plain  meaning of  section 186  is that  the court may  order a meeting of the company to be called, held and conducted  in such manner as the court thinks fit in any or more of the following contingencies. (1)  If for any reason it is impracticable to call a meeting of the company other than an annual general meeting. (ii) If for any reason it is impracticable to hold the meeting  of the  company  in the  manner prescribed by the Act or the Articles.

(iii)If for  any reason  it  is  impracticable  to conduct the   meeting  of the  company in the same manner. on the  occurring of  any or  more of the said contingencies the court  has to  order the  calling of  a meeting  of  the company and its holding 802 and conducting  in such  manner as the court thinks fit. The use of the word ‘and’ between the words ‘held’ and ‘conduct’ in clause  (a) of  sub-section (1)  clearly shows  that  the court has  no power  to make any order regarding the holding and conducting  of any meeting which has already been called without ordering  a meeting  of the  company to be called in place of  the meeting  already called.  If  an  order  under clause (a)  has been  made such  ancillary or  consequential directions as  the   court thinks  expedient could  be given under clause (b) including a direction within the meaning of the explanation  appended  thereto.  The  language  of  sub- section (2)  further fortifies  the above  interpretation of sub-section (1)  and makes  any  meeting  called,  held  and conducted in  accordance with an order under sub-section (1) to be  a meeting  of  the  company  duly  called,  held  and conducted. The  use of the word or in the first part of sub- section (1)  may be  disjunctive or conductive in the manner we have  interpreted above.  But undoubtedly the order under clause (a)  has got to be for all the three purposes and not merely for holding or conducting of the meeting. In Company       Petition No.  85/1874 no prayer was made to the Court  for an  order for the calling of a meeting of the Company nor  has any  such order been made by the High Court in appeal.  In our  opinion, therefore,  the application  as presented in  the Court under section 186 of the Act was not maintainable. No  prayer was  ever made  to the Court for an order that  a meeting  of the  company be  called.  A  fresh application, it  goes without  saying, if necessary, can  be made under  section 186 of the Act. But then it will have to be made to the authority mentioned in the amended section. For the  reasons stated above, we allow this appeal set aside the  judgment and order of the High Court passed in OS Appeal No  64/1974 and  dismiss Company Petition No. 85/1974 as being  not maintainable.  We shall  direct the parties to bear their own costs throughout. P.B.R.

Appeal allowed. 803

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