Companies Act Case Law Nazir Hopseinand Anr Vs Darayus. Bbattcna And Ors.

PETITIONER:
NAZIR HOPSEINAND ANR.

Vs.

RESPONDENT:
DARAYUS. BBATTCNA AND ORS.

DATE OF JUDGMENT: 12/05/2000

BENCH:
A.P.Misra, M.B. Shah
JUDGMENT:

JUDEMENT

MISRA. J.

Leave granted.

The present appeal is directed against the order dated
10th Feburary, 1999 passed by the Bombay High Court in A.O.
N0.1058 of 1998 in N/M No. 6325 of 1997 in Suit No.6559 of
1997 dismissing appellants’ appeal from Bombay City Civil
Court order dated 9th September, 1998 dismissing

aforesaid appellants’ notice of motion in
the.aforeserd suit. In the suit following interim
injunctions were sought:-

“[a] Respondents 1 to 3 from acting on the resolution
dated 13.11.97, [b] Respondents from enrolling new members,
[c] Respondents 4 to 8 from acting as directors of the suit
Club and restraining Respondents I to 8 and life members
enrolled after 7.11.95 from casting their votes at the AGM,
[d] Respondents I to 8 &’om holding Board of Directors’
meeting dated 19.12.97 and [e] for an order appointing Mr.
Satish Shah. Advocate as a Chairman of the meetings of the
Club/Company”

The appellants are the Directors of the Indian
Automotive Racing Club (hereinafter referred to as “the
Cqmpany’}. As per the appellants, appellant no.l is the
Chairman of the Board of Directors of the said Company.
Respondent nos. I 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
29th March, 1997. The appellants challenged this resolution
to be illegalandvoid,asit stood obliterated by the agreed
and consent order dated’30th June, 1997/2nd July, 1997 in
A.O.No.274 of 1997 beforc ‘the High Court.

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^ December, 1993 the appellants and
respondent nos. I 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 the 8th November, 1995
respondent nos. I to 3 with under current designs,
purportedly held a meeting, without serving any notice upon
appellant no. I and other 4 Directors supporting him and
passed the following resolutions:-

“[a] to shift the office of the Club to Respondent No.
I’s office; [b] to remove appellant No. I as Chairman;
{c] appoint Respondent no. I as Chairiman in his place and
[dj appoint 12 additional Directors on the Board of
Directors.”

Thereafter on the 13th November, 1995, another meeting
was held by the same group, viz., respondent nos. I to 3,
to approve the minutes of the meeting held on 8th November,
1995. On the 16h November, 1995, the appellants and two
other Directors filed the first Suit No. 7179 of 1995,
challenging the said resolutions passed at the behest of
respondent nos. I to

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 29th December, 1993 the appellants and
respondent nos. I to 3 were elected 09 Directors and the
first appellant as the Chairman of the Board of Directors.
The case of the appellants is, on the 8th November. 1995
respondent nos. I to 3 with under current designs,
purportedly held a meeting, without serving any notice upon
appellant no. I and other 4 Directors supporting him and
passed the following resolutions:-

“[a] to shift the office of the Club to Respondent

No. I ‘s office; [b] to remove appellant No. I as
Chairman; jc] appoint Respondent no. I as Chairman in his
place and [d] appoint 12 additional Directors on the Board
of Directors.”

Thereafter on the 13th November, 1995, another meeting
was held by the same group, viz., respondent nos. I to 3,
to approve the minutes of the meeting held on 8th November,
1995. On the 16th November, 1995, the appellants and two
other Directors filed the first Suit No. 7179 of 1995,
challenging the said resolutions passed at the behest of
respondent nos. I to

3, and 4 out of the 12 newly appointed Directors. On
the l8th March. 1997 the City Civil Court by means of an
order did not interfere with the resolution, so far the
shifting of the office and removal of appellant no.I a.s a
Chairman but injuncted the 12 additional Directors which
included defendant nos. 4 to 8. from acting as Directors.
Aggrieved by one part of the order, viz., non-interference
with shifting of the office and removal of Appellant No. J,
the appellants filed FAO No. 274 of 1997 before the High
Court. On the other hand, respondent nos. 1 10 3 and 5
additional Directors being aggrieved by the other part of
the order, viz., injuncting 12 Add. Directors from
functioning filed a cross appeal.

Subsequently on 21st March, 1997 a .notice was issued
for a meeting of the Board of Directors for the 29th March,
1997 for the co-option of another set of additional 12
Directors, in place of the injuncted Directors which
included respondent nos. 4 to 8. This led to the
appellants, to file another application on the 27th March
1997, for injunction to restrain these respondents from
holding the said meeting. The court, by an order dated
27.3.1997, however, did not injunct the said meeting, but
directed that any resolution passed at the meeting shall not
be implemented for two weeks which was subsequently extended
. As scheduled the said meeting was held,

in which again 12 newly additional Directors wore
appointed, including respondents 4 to8.. till such time as
the injunction against the first set of twelve additional
Directors remained in operation. Next on I1h April, 1997
notices were issued and served upon Directors including
those covered by the aforesaid order dated 27th March, 1997,
proposing a meeting for the 17th April, 1997. This,
according to the appellants, was in breach of the .order
dated 27th March 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^
April 1997 recorded respondents’ statement that co-opted
Directors will not be permitted to participate in the said
meeting. That meeting was held on the 17th’ April 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. Hussain (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 each Life Member applicant was not physical ty
called for the interview……… Mr. Bhathena proposed
and Mr. G.L. Goenka seconded and it was resolved that all
Life members applications, as wel) as any other 3 category,
be invited and become members in their respective
categories.”

When this series of on-going resolutions was going on
at the behest of respondent no. I and the appellants were
protesting repeatedly through various applications in court,
as aforesaid, then reached some understanding between the
parties.

On the 30* June/2nd July, 1997, the appellants’ appeal
from order, as aforesaid, came up for admission in the High
Court. On this date, a consent order was passed that a
fresh meeting of the Board of Directors be held with only
those who were on. the Board of Directors on the 8th
November, 1995 under the Chairmanship of Mr. Satish Shah,
Advocate to consider the earlier agenda of the 8th November,
1995. Hence, the High Court passed the following order on
the 2nd July 1997:

“In view of this. appeal stands disposed of Civil
application also does not survive. Same also stands
disposed of. In view of

the fact that appeal has been disposed of, nothing
survives in the Suit. Parties to withdraw the suit”.

This is how proceedings in the first Suit No. 6559 of
1997 is said to have culminated.

Thereafter in pursuant to the aforesaid consent order,
a meeting of the Board of Directors was held on 4th July,
1997 under the Chairmanship of Mr. Satish Shah. Two major
decisions were taken therein. First 16th September, 1997
was fixed as the next date for holding the Annual General
Meeting, and secondly, it turned down the proposal to
appoint 12 additional Directors by the group of respondent
no. I by the majority of 4 to 2. When parties are at
variance then they try to pull other down, disputes start
cropping up from an insignificant to other magnified issues.
One of such dispute raised is of the recording of the
minutes of the meeting dated 4^ July, 1997. According to
respondent no. I, it was the prerogative of the Secretary
to write the minutes and thus the minutes recorded by him
should be accepted. This dispute is because of the
difference in the recording of the minutes between one
recorded by the Secretary of respondent no. I and the other
submitted by Mr. Satish Shah. The significant difference
is in the recording ofltemNo.6, of the agenda of the 8^
November 1995, under

which the appointment of twelve additional Directors
was c-onsidwQd. There is neither 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:-

“lo. appomt 12 additional Direetoi’s whose m^uence,
.contact would assist the club to procure attractive
sponsorships as also those who could spare time to assist in
organising and running events.

Mr. Hoosern (.Appellant No. I ) 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. Bbiwandiwalla 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)

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 second suit. On the 6 November, 1997, notice
was issued proposing a meeting for the 13 November, 1997 for
the “Afloption of the previous minutes” and for fixing a
date for holding the Annual General Meeting. On the 13*
November, 1997, a meeting was held. in which the appellants
:.r^ed objection about respondent no. I presiding the
meeting instead of Satish Shah and about the presence of
respondentnos. 4 to 8. The appellants’ demand for fixing
an early date of Annual General Meeting was overruled and
the minutes of the meeting dated 13th November, 1995. 29th
March, 1997. 17th April, 1997, and minutes of meeting dated
4th July, 1997 (held as per courts order under chair of Mr.
Satish Shah), as per the minutes prepared by the Secretary
of respondent no. I and not as prepared by Mr. Satish
Shall, were approved. Thereafter a notice was served,
proposing tor a meeting on the 19th November. 1997 to
approve and confirm the minutes of the meeting dated 13th
November, 1997. The appellants attended the meeting and
reiterated their demand, but the same was overruled.
Thereafter, on 18th December, 1997 the appellants filed the
aforesaid suit No.6559 of 1997 for the declaration that the
resolutions dated 13th November, 1997 .and 19th November.
1997 are null and void, including the ind’uction of new life

members after November 1995, as also he appoinmiont of
12 new additiona} Directors wh’ch inclucled respondent nos.
4 to 8.
The respondents contested the .said claim of the
appellants. Their reply is that the suit is misconceived,
non-maintainabie. Mr. Satish Shah’s minutes can not be
relied, because it is the prerogative of the Secretary and
it is his obligation to prepare the minutes of that meeting.
Further, all decisions and resolutions other than the
resolution dated 8th November, 1995 are valid and binding on
the appellants. When earlier suit was withdrawn all interim
orders came to an end.

The trial court dismissed the appellants’ injunction
application and also the contention that the consent order
dated 30th June, 1997 wiped off the earlier resolutions
passed by the Board of Directors. The appellants earlier
sought injunction in the earlier suit, against hoding of
this meeting dated 17th April, 1997 in which new life
members were to be taken in and the court did pass an order
not to implement any resolution passed therein. .the
appellanta being aggrieved by the dismissal of the
injunction application filed an appeal before the High Court
which was dismissed. The High Court held, there was no
effective resolution annulling, rectifying or modifying

the resolution dated 8th November, 1995. The court
rejected the appellants’ contention that order dated 30^
June; 1997. wiped of the the earlier resolutions passed.
It held, neither party agreed nor the Court set aside the
resolution dated 8th November. 1995. It ordered tor
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.

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. I was removed as the Chairman of the
Board; . . (c) The respondent no. I was appointed as the
Chairman of the Board of Directors; and (d) The
administrative office of the company was shifted.

(ii) the resolution dated 29^ March 1997 appointing
the second set of 12 additional Directors in place of the 12
aforesaid injuncted additional Directors;

(iii) the resolution dated 17th April 1997 enrolling
dccordmg to respondent no.l, 57 additional hTe members of
the company.

The submission is, on composite reading of the orders
dated 30^ June 1997 and 2th July 1997, in the background of
the aforesaid meeting dated 4^ July, 1997 of the Board of
Directors. it clinchingly proves that the impugned
resolution dated 8th November 1995 is scored of. In further
support, it is submitted that the first, respondent
unambiguously admits this position in his affidavit in reply
to the affidavit of appellant No. I in the notice of motion
in Suit No. 6’559 of 1997. There respondent No. I clearly
averred that there could be no dispute that the meeting to
be held under the Chairmanship of Mr. Satish Shah would
consider the matter de novo and except the resolution passed
in the meetmg held after: 8th November 1995 all other
resolutions are valid, implidely admit that the meeting and
the resolutions dated 8^ November 1995 were not valid.,
Thus, it proves that the clock was set back to 8th November
1995. Hence all edifices buiJt on it subsequently, through
various resolutions since looses its base and also goes. In
any case, the appointment of first respondent as the
Chairman of the Board of Directors and of the 12 additional
Directors is also knocked off. In fact withdrawal of both
the appeals before the High Court and the suit shows that
the entire dispute including removal of first appellant as
the

Chairman, appointment of 12 additional Direotora
including induction of life members stood dissolved a.nd
settled between the parties. In view of this, all
resolutions passed in a meeting at the behest of the first
respondent where he presided as Chairman, are patently
illegal and have no force of law.

Challenge to the resolution dated 29th March 1997 is
also the same. Ita base is alao the resolution dated 8th
November. 1995, which was also hold under the Chairmanship
of the first respondent and it also stands wiped off by the
consent order dated 30^ June 1997. As said before, when
this meeting was to be held, appellants applied for
injunction to restrain respondents from holding this
meeting. On this. Court ordered that any resolution passed
in this meeting shall not be implemented. -By this
resolution, as aforesaid, 2th set of 12 additional
Directors-was appointed. Next challenge is to the
resolution dated 17th April 1997. This resolution is also
challenged on the same ground, viz., it was illegally
chaired by respondent No. 1. Even for this meeting court
directed resolution passed therein shall not be implemented.
Submission is, this meeting was also held in not haste to
overreach the order of the Court. On 10th April 1997 the
aforesaid A.O. 274 of 1997 was adjourned to 21th April 1997
for

admission. Coming to know of this, on the 11th April
1997 notice was issued for a meeting on the 17th April 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.

For the respondents the aforesaid submissions were
challenged. Submission is, both meetings dated 29^ March,
1997, and 17th April, 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. I
whose appointment as the Chairman was held to be valid by a
competent court by an order dated 18th March, 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 the meeting
could elect among one o/ themselves to be the Chairman,
hence no illegality would arise even otherwise, if
respondent no. I presided the meeting. The order by
consent on 30th June, 1997 did not and could not wipe off
what was done on the.

atoresaid two dates of meetings. There is no order of
the court settina aside these resolutions.

The crux of the grievance of the appellants which
requires our consideration is three fold: (i) reftioval of
appellant no. I and the appointment of respondent no.i as
Chairman of the Board of Directors by means of resolution
dated 8^ Novem’ber, 1995; (ii) The induction of 12
additional Directors through resolution dated 29^ March,
1997; and finally (iii) the induction of 57 life mertibers
through resolution dated 17111 April, 1997, both of these
two last meetings were presided by respondent no. I.

The aforesaid tacts reveal that the proceedings of the
first suit culminated in the passing of the consent order
dated 30 Junc/2 July, 1997. It was expected that litigation
would come to an end but that was not to be. The present
second suit is filed in view of resolution dated 13 ‘
November, 1997 which in effect brings back to life the
matter which was subject matter of the earlier suit. In the
meeting dated 13^ November, 1997. the minutes of the
meeting dated 13^ November, 1995,29^ March, 1997 and 17^
April, 1997 including the minutes of the meeting dated 4th
July. 1997 as prepared by the Secretary and not by Mr.
Satish Shah, were approved. The meeting

dated 19^ November, 1997 approved and corifirmtid
the.minutes of meeting dated I ^November, 1997. The
question is, whether passing of the consent order in the
earlier suit obliterates the meetings and resolutions passed
on 29th March, 1997 and 17th April, 1997? Also what was the
resolution passed in the meeting dated 4 July, 1997 and in
this context; whether the minutes prepared by the Secretary
or what is prepared by Mr. Satish Shah should be accepted?

It is very unfortunate, though very common, in any
organisation, including companies, there is tussle for
holding dominant position to control the ftinctioning of
such organisation. It is often said, “it is not like
sportsman spirit”. Meaning, the spirit of a sportsman is
treated to be highly cooperative even in the hour of defeat.
He is always in the best of spirit. But such spirit now
even in the field of sports seems to have receded to
oblivion. The present company is also one of such
companies, working in the field of sports. But this spirit
between the parties is lacking. The battle of supremacy to
control started between respondent no.l and appellant since
8th November. 1995 leading to two separate suits and the
battle is still raging for about five years.

Now. we proceed to test the submissions for the
appellants regaming the consent order obliterating the
resolutions dated 29th March and 17th April, 1997. As we
have said, the nucleus of conflict started on the 8th
November, 1995 when in this Board’s meeting, appellant no.
I was removed and respondent no. I was appointed in his
place as the Chainnan of the Board of Directors and 12
additional Directors were also appointed. When the first
suit was filed by the appellants, they challongod 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. I by removing
appellant no. I came in full control of the Board. Next
another meeting was held on the 13th November, 1995 to
confirm-the resolution dated 8th November, 1995. It is at
this stage, appellants filed their first suit on the 16
November, 1995 along with injunction application, in which
12 additional Directors were injuncted to function.
However, undaunted another meeting was held under the
Chairmanship of respondent no. I, of the Board of Directors
on the 29h March, 1997 in which resolution was again passed
appointing another set of 12 additional Directors till
injunction against earlier 12 additional Directors remained
in operation. When this stress and strain between the
parties was going on, with various interim orders of the
court, good sense prevailed on both-the parties which led to
the passing, of
the consent order. Through the consent order, dated
30th June Cfild 2nd. July 3997, the parties agreed for
holding a fresh meeting of the Board, under the Chairmanship
of Mr. Satish Shah, to consider afresh the original agenda
oi 8 November, .1995. In this regard submission for the
appellants is. even concerned respondents including
respondent no. I understood that agenda was going to be
considered de novo. For this, reliance is on the following
affidavit filed by respondent no. .1 in reply to the notice
of motion filed before the trial court by the appellants.
Tlie relevant portion of the said statement is reproduced
below:-

“1 say that. the gravamen of the charge, inter alia.
levelled in the previous suit revolved round the allegation
that tlie Meeting of the Board of Directors of the Club held
on 8^ November 1997 was never hold and no notice therefor
was given. In view of the tact that the Club is primarily
brought into existence to promote motor sports, it was felt
that no scope would be left for any complaint and therefore
it was agreed that the items of Agenda of the said meeting
which was held on 8h November 1995 should be convened de
novo and under the said Mr: Satish Shah, Advocate.”

On tlie other hand, learned counsel for the
respondents submits that neither the .said consent order nor
the resolution .passed on the 4 ‘ July. 1997, in any way
set asides any resolutions passed prior to the said consent

.order. Thus, it would be deemed that they coitiinued
.notwihstanding holding of the said meeting dated 4th July.,
1997.

We have considered the submissions made by the parties
including the various orders passed, both in the earlier and
the present suit. In our considered opinion, the
culmination of the appeal, the suit. by its withdrawal as
per court’s order, as a con,scnsequence of the consent order
indicates one and the only inference that once the parties
agreed to hold a fresh meeting under the Chairmanship of Mr.
Satish Shall to re-consider afresh the agenda of the meeting
dated 8^ November, 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 8th November, 1995,
would survive when it is to be considered afresh? Of
course, it is open to the Board to pass tile 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 miscons
stnied the consent order that “neither parties agreed nor
did the court set aside the resolution of the Board of
Directors dated 8^ November, 1995”. The effect of
the.order.

passed by the court was to undo what was done on tho
8th^ November. 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. Tins is also
clearly spelt out from the aforesaid quoted statement of
respondent no.l himself. The meeting which was held under
tile Chairmanship of Mr. Satish Shah was not a meeting to
confirm, modify or annul the resolutions dated 8th November,
1995 but was to consider the agenda afresh. Hence all that
was passed on the 8thNovember. 1995 cannot be treated to be
alive after the consent order followed by resolution dated
4th .July, 1997. Thus, appointment of 12 additiohal
Directors on that date also goes. So far removal of
appellant no. I and appointment of respondent no. I in his
place, it was fairly agreed to that both will not preside
the meetings of the Board, instead Mr. Satish Shah will
preside. In other words, no one could be treated to be the
Chairman of the Board.

Next we proceed to scrutinize the resolution dated
4thJuly, 1.997, which was held as a consequence of the
court’s order, under the Chairmanship of Mr. Satish Shah.
But here again we find a dispute is raised, whether the
minutes prepared by the Secretary or the one by the Chairman
Mr. Satish Shah. be accepted. We find the minutes
recorded are at variance

between the two. The relevant variance ia under item
no.6. in the seoretary report there is no reference of the
conside.ra.tion by the Board for the appointment of 12
additional Directors, while in the report of Mr. Satish
Shah it records so under item no. 6, which is reproduced
below:

“Item., No 6: To appoint 12 additional Directors
whose influence, contact would assist,the.clubto procure
attraotivo sponsorships as also thoso who could spare tjme
to assist in organising and running events.

Mr. Hoosein 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 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.”

Before drawing our conclusion we may. refer to
Section 193 of the Companies Act, 1956. The relevant
portion of Section 193 is quoted below:-

“Section 193: Minutes of proccedings of general
meetings and of Board and other meetings:

(I-A.) Each page of every such book .shall be
iniialled or signed and the last page of the record of
proceedings of each books shall be dated and signed –

(Q) in the ca.se of minutes of proceedings of a
meeting of the Board or of.a committee thereof by the
Chairman of the said meeting or the Chairman of the next
succeeding meeting.

(6) If default is made in complying with the foregoing
provisions of this section inrespect of any meeting, the
company, and ever)’ officer of the company who is in
default, shall be punishable with fine which may extend to
fifty rupees.

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. ”

With reference to minutes of the proceedings as to who
shall initial or sign, the sub-section (I-A} mandates, every
page of every booJc 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.Chairaian

of the Board, to authenticate the minutes of the
meeting of the Board. Further when the court directs Mr.
Satish Shah to preside the meeting of the Board, he acts as
the Chairman m the said meeting. This apart, in the past,
because of the conflict between two groups, a via media was
found to eliminate this mistrust by appointing a third
agreeable person then even if there be conflict, the minutes
prepared by such third person is to be accepted and not
ofthe other who belong to one of such conflicting group.
Hence for all these reasons we have no hesitation to
conclude that the minutes prepared by Mr. Satish Shall are
to be accepted as authentic.

According to the minutes authenticated by Mr. Satish
Shah, under item no.6, the Board considered the question of
appointment of 12 additional Directors and after discussion
between the two contesting groups, which is also recorded
therein, the proposal of appellant no. I that this item
docs not survive as it had been agreed to hold the Annual
General Meeting was accepted and objection of respondent no.
I that they should be appointed was rejected by the majority
of 4 : 2. Thus, question of appointment of 12 additional
Directors came to an end by the passing of this resolution.
If this is the position how can resolution dated 8^
November, 1995 or resolution dated 29th’ March. 1997,
survive so tar appointment of these 12 additional

 

Directors. So if on the 4*thJuly. 1997 it was
resolved not to appoint .i additional Directors then any
.such resolution including 29thMarch. 199′ cannot be
sustained. It would be treated to have died both on account
o consent order and the resolution dated 4th July, .1997.
The resolution date( 27 March, 1997, was itself a
consequential resolution to the. resolution dated 8^
November, 1995, as it appointed 2th set of 12 additional
Directors in its place till injunction against the first set
was m operation. This 27th March, 1997 resolution itself
was temporary in nature. Hence we conclude after passing cf
the consent order and passing of the resolution dated 4
July, 1997 so far appointment of 12 additional Directors
cannot survive.

This leaves us to the last relevant resolution dated
17th November, 1997 in which 57 life members were inducted.
This is a meeting admittedly presided by respondent no. I
to which appellants had due notice. Appellant no. I also
participated, under protest and without prejudice. So far
those inducted life members, we tried to find out from the
parties, whether there is any prerequisite or minimum
qualification for their induction. Parties could not point
any such. The dispute, if any, could be that those
inducted.. were brought in by respondent no. I to muster
his majority in the Annual General Meeting.

Learned counsel tor the app’aliants referred to The
Conduct of Meetings by T.P.E. Curry and J. Richard Sykes,
Twentieth Edition, which is quoted hereunder:-

“Board Meetings: To constitute a valid board meeting
the. following conditions must be complied with:

( I ) 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 chainman is not present within five minutes after the
time appointed for .holding the same. the directors present
may choose one of their number 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.”

Learned counsel for the appellants also referred to a
decision of dark v- Workman (1920) I I.R. 107. Relevant
portion of the headnote is quoted hereunder: –

“Ail appointment of a chairman oi’ directors madein
contravention to Article,s of association is void. and is
not regularized bv mere acquiescence and consequently
resolutions carried by the castina vote of such a chairman
arc inoperative.”

It cannot be disputed that the Chairman of the Board
of Directors is the central figure in holding the meeting
and is the controlling factor in the conduct of meeting.
Fie authenticates the minutes of the meeting and performs
such other functions as empowered under the Companies Act.
A Chairman is always elected by the Board of Directors thus
he had the full support of the majority of Directors which
helps him in the control of meeting and recording
authenticated minutes.

In the present case unfortunately since .1994
no-Annual General Meeting could be held both on account of
the aforesaid dispute and also. as per the respondents, the
accounts could not be finalised. When appointment of Mr.
Satish Shah to chair Board meeting was made. both appellant
no 1 and respondent no. I fairly conceded their claim to
preside over the meeting. Thus their serious dispute got
temporary respite. Still the question remains, as to who
could have presided in the meeting dated 17th April, 1997,
which was antecedent to the consent order.. It is true by
that date consent order was

not in existence and the tussle between the two was
continuing. If the resolution dated 8h November. 1995
evaporated, authority of respondent no. I to preside under
it also dissolved, unless some fresh authority was given to
him. Thus without any fresh authority respondent no. I
could not preside in any Board’s meeting. In .fact this
meeting dated 17h April, 1997, at dial point of time was
challenged and the court on this date injuncted the
respondents to implemeht the resolution pa.ssed in this
meeting. It is during continuation of this injunction
order, the said consent orde,r was passed. Consent order
was to consider 8^ November, 1995 agenda de novo. In view
of this then how could resolution passed in this meeting
survive-after passing ot the consent order.

In the meeting dated 4h July, 1997, no resolution was
passed as to who shall henceforth preside in the meeting of
the Board of Directors. The resolution dated on 4h July.
1997 could be construed that the parties differed 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 tlie minutes
recorded by Mr. Satish Shah that before item no. I 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 ior 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 tlie 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 16h 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. I as Chairman of the meeting held on 17th
April, cannot be held to be proper. However, on the other
hand a submission is, even where there is no Chairman or in
case the Chairman not present or as in the present case it
is indispute, it is open for the Board of Directors to elect
any one to function as such in any meeting. But this is
neither the respondents’ case nor it is shown that he was
elected as such on that date.

.His authority if at all was only through the
resolution dated 8th November, 1995.- ‘Strong submission tor
the respondents was that a.ppointment of respondent no. I
as Chairman was held to be valid by a competent court of law
by order dated 18h March, 1997 in Notice of Motion No. 6337
of 1995. But this order was challenged by the appellants
through A.O. No. 274 of 1997 in the High Court. It is in
this extent that consent order was passed which obliterated
various resolutions including of 8th November, 1995. So
this submission of respondents has no force.

Lastly, we have considered the question of induction
of 57 new life members. So far in their application no
defect could be pointed out. It is true, these new life
members are not parties before us. It will be in the best
of interest .that question of their induction as life
members instead of rejecting, beplaced for consideration, in
the Annual General Meeting to be held by the Company. So we
come to the conclusion, that meeting dated 17h April, 1997
was not only not conducted ‘in the proper perspective but it
also. suffers from procedural irregularities. This was
part of the tussle between the two groups to gain the
majority over the other. However, it would not be proper to
reject the life members’ application. So in order to

keep the interest of the life members, we direct that
their cases be plac before the next Annual General Meeting
to he held for its consideration. Since the dispute, as to
who shall preside, is still not resolved, in spite of this
long drawn litigation which can only come to an end by fresh
ejection of the Board of Directors in the next Annual
General Meeting, it is proper in the interest of the Company
that neither appellant no. I nor respondent no. I presides
in any Board of Directors’ meeting.

Thus, so far the direction of the High Court to hold
Annual General Meeting under the Chairmanship of Mr. A.P.
Kothari, the Company Registrar seems to be proper, hence
needs no interference to that extent, The relevant portion
of this is quoted hereunder:

“However, it is clear that a meeting of the Board of
Directors has been held pursuant to an order passed by this
Court and it is common ground betore me that the Board of
Directors decided to hold the annual general meeting of the
company immediately, in this view of the matter, therefore,
in my opinion, it would be just and proper to direct that
the Annual General Meeting of the Company should be held tor
holding elections to the Board of Directors of the Company.
In my opinion, considering that the parties are fighting, it
would be proper to direct that the Annual General

Meeting should be held under the Chairmanship of Shri
A.P. Kolhari, the Company Registrar.”

Hence for all the aforesaid reasons we allow the
appeal of the appellants, se aside both the judgments of the
High Court dated 10th February, J999, except to the
aforesaid extent, and the trial court order dated 9h July,
1998, and further direct holding of Annual General Meeting
at the earliest under the Chairmanship of Mr. A.P.
Kothari.. Registrar Company as aforesaid. Even if any
prior meeting before Annual General Meeting is to be held of
the Board of Directors, the same shall also be presided by
die same Mr. A.P. Kothari, Registrar. In view of the
aforesaid findings our conclusions are:

(A) Neither appeyllant no. I HOP respondent no.
I’shall preside in any of the ‘ meetings of the Board of
Directors.

(B) The appointment of 12 additional Directors cannot
be sustained. . Hence resolutions dated 8h November 1997
and 29h March, 1997 and 17th April, 1997 stand obliterated
inview of the consent order dated 30th June/2nd July,1997:

(C) So fer resolution dated 17th April, 1997 for the
induction of 57 life X- members, in view.of our findings,,
they not-be deemed to .have been.

inducted on that date as member but their induction as
such would be placed tor consideration before the Annual
General Meeting to be held later.

(D)- Annual General Meeting shall be held under the
Chairmanship of Mr. A.P. Kothari, Registrar, Company who
shall expedite the holding of Annual General Meeting at a
very early date. possibly within three months of this order
being communicated to him.

Accordingly, the aforesaid appeal is allowed. Costs
on the parties.

Office shall send a copy of this order to the Mr.
A.P. Kothari, Registrar. Company.

 

 

Leave a Comment