\u00a0Corporate Case Law ROC Vs Rajshree Sugar Chemicals Ltd<\/p>\n
PETITIONER:<\/p>\n
NAZIR HOPSEINAND ANR.<\/p>\n
Vs.<\/p>\n
RESPONDENT:
\nDARAYUS. BBATTCNA AND ORS.<\/p>\n
DATE OF JUDGMENT: 12\/05\/2000<\/p>\n
BENCH:
\nA.P.Misra, M.B. Shah
\nJUDGMENT:<\/p>\n
JUDEMENT<\/p>\n
MISRA. J.<\/p>\n
Leave granted.<\/p>\n
The present appeal is directed against the order dated
\n10th Feburary, 1999 passed by the Bombay High Court in A.O.
\nN0.1058 of 1998 in N\/M No. 6325 of 1997 in Suit No.6559 of
\n1997 dismissing appellants’ appeal from Bombay City Civil
\nCourt order dated 9th September, 1998 dismissing<\/p>\n
aforesaid appellants’ notice of motion in
\nthe.aforeserd suit. In the suit following interim
\ninjunctions were sought:-<\/p>\n
“[a] Respondents 1 to 3 from acting on the resolution
\ndated 13.11.97, [b] Respondents from enrolling new members,
\n[c] Respondents 4 to 8 from acting as directors of the suit
\nClub and restraining Respondents I to 8 and life members
\nenrolled after 7.11.95 from casting their votes at the AGM,
\n[d] Respondents I to 8 &’om holding Board of Directors’
\nmeeting dated 19.12.97 and [e] for an order appointing Mr.
\nSatish Shah. Advocate as a Chairman of the meetings of the
\nClub\/Company”<\/p>\n
The appellants are the Directors of the Indian
\nAutomotive Racing Club (hereinafter referred to as “the
\nCqmpany’}. As per the appellants, appellant no.l is the
\nChairman of the Board of Directors of the said Company.
\nRespondent nos. I to 3 are the Directors and respondent
\nnos. 4 to 8 are Additional Directors allegedly appointed
\nalong with 7 others under the challenged resolution dated
\n29th March, 1997. The appellants challenged this resolution
\nto be illegalandvoid,asit stood obliterated by the agreed
\nand consent order dated’30th June, 1997\/2nd July, 1997 in
\nA.O.No.274 of 1997 beforc ‘the High Court.<\/p>\n
In order to appreciate the controversy it is necessary
\nto shortly dwell upon certain antecedents and essential
\nshort matrix (of facts. At the .annual General Meeting of
\nthe Company held on 29^ December, 1993 the appellants and
\nrespondent nos. I to 3 were elected as Directors and the
\nfirst appellant as the Chairman of the Board of Directors.
\nThe case of the appellants is, on the 8th November, 1995
\nrespondent nos. I to 3 with under current designs,
\npurportedly held a meeting, without serving any notice upon
\nappellant no. I and other 4 Directors supporting him and
\npassed the following resolutions:-<\/p>\n
“[a] to shift the office of the Club to Respondent No.
\nI’s office; [b] to remove appellant No. I as Chairman;
\n{c] appoint Respondent no. I as Chairiman in his place and
\n[dj appoint 12 additional Directors on the Board of
\nDirectors.”<\/p>\n
Thereafter on the 13th November, 1995, another meeting
\nwas held by the same group, viz., respondent nos. I to 3,
\nto approve the minutes of the meeting held on 8th November,
\n1995. On the 16h November, 1995, the appellants and two
\nother Directors filed the first Suit No. 7179 of 1995,
\nchallenging the said resolutions passed at the behest of
\nrespondent nos. I to<\/p>\n
In order to appreciate the controversy it is necessary
\nto shortly dwell upon certain antecedents and essential
\nshort matrix of facts. At the Annual General Meeting of the
\nCompany held on 29th December, 1993 the appellants and
\nrespondent nos. I to 3 were elected 09 Directors and the
\nfirst appellant as the Chairman of the Board of Directors.
\nThe case of the appellants is, on the 8th November. 1995
\nrespondent nos. I to 3 with under current designs,
\npurportedly held a meeting, without serving any notice upon
\nappellant no. I and other 4 Directors supporting him and
\npassed the following resolutions:-<\/p>\n
“[a] to shift the office of the Club to Respondent<\/p>\n
No. I ‘s office; [b] to remove appellant No. I as
\nChairman; jc] appoint Respondent no. I as Chairman in his
\nplace and [d] appoint 12 additional Directors on the Board
\nof Directors.”<\/p>\n
Thereafter on the 13th November, 1995, another meeting
\nwas held by the same group, viz., respondent nos. I to 3,
\nto approve the minutes of the meeting held on 8th November,
\n1995. On the 16th November, 1995, the appellants and two
\nother Directors filed the first Suit No. 7179 of 1995,
\nchallenging the said resolutions passed at the behest of
\nrespondent nos. I to<\/p>\n
3, and 4 out of the 12 newly appointed Directors. On
\nthe l8th March. 1997 the City Civil Court by means of an
\norder did not interfere with the resolution, so far the
\nshifting of the office and removal of appellant no.I a.s a
\nChairman but injuncted the 12 additional Directors which
\nincluded defendant nos. 4 to 8. from acting as Directors.
\nAggrieved by one part of the order, viz., non-interference
\nwith shifting of the office and removal of Appellant No. J,
\nthe appellants filed FAO No. 274 of 1997 before the High
\nCourt. On the other hand, respondent nos. 1 10 3 and 5
\nadditional Directors being aggrieved by the other part of
\nthe order, viz., injuncting 12 Add. Directors from
\nfunctioning filed a cross appeal.<\/p>\n
Subsequently on 21st March, 1997 a .notice was issued
\nfor a meeting of the Board of Directors for the 29th March,
\n1997 for the co-option of another set of additional 12
\nDirectors, in place of the injuncted Directors which
\nincluded respondent nos. 4 to 8. This led to the
\nappellants, to file another application on the 27th March
\n1997, for injunction to restrain these respondents from
\nholding the said meeting. The court, by an order dated
\n27.3.1997, however, did not injunct the said meeting, but
\ndirected that any resolution passed at the meeting shall not
\nbe implemented for two weeks which was subsequently extended
\n. As scheduled the said meeting was held,<\/p>\n
in which again 12 newly additional Directors wore
\nappointed, including respondents 4 to8.. till such time as
\nthe injunction against the first set of twelve additional
\nDirectors remained in operation. Next on I1h April, 1997
\nnotices were issued and served upon Directors including
\nthose covered by the aforesaid order dated 27th March, 1997,
\nproposing a meeting for the 17th April, 1997. This,
\naccording to the appellants, was in breach of the .order
\ndated 27th March 1997, not to implement the resolution
\nappointing them as Directors. On an application thereafter
\nmade by the appellants, the court by an order dated 17^
\nApril 1997 recorded respondents’ statement that co-opted
\nDirectors will not be permitted to participate in the said
\nmeeting. That meeting was held on the 17th’ April 1997,
\nunder the Chairmanship of respondent no. 1. The appellants
\nthough attended the meeting but did so under protest and
\nwithout prejudice, which was recorded in the minutes of the
\nmeeting. It is relevant to record, in this meeting,
\nquestion of the induction of more new life members came up
\nfor consideration. Relevant portion of the discussion as
\nrecorded in the minutes is quoted hereunder:<\/p>\n
“Mr. Hussain (Appellant No. 1) raised the topic of
\nnew applicant and whether the old practice would be adopted
\nin deciding membership of new applicant.<\/p>\n
Regarding the interview the life member category
\napplicant Mr. Bhathena (Respondent No. 1) pointed out that
\nin the past each Life Member applicant was not physical ty
\ncalled for the interview……… Mr. Bhathena proposed
\nand Mr. G.L. Goenka seconded and it was resolved that all
\nLife members applications, as wel) as any other 3 category,
\nbe invited and become members in their respective
\ncategories.”<\/p>\n
When this series of on-going resolutions was going on
\nat the behest of respondent no. I and the appellants were
\nprotesting repeatedly through various applications in court,
\nas aforesaid, then reached some understanding between the
\nparties.<\/p>\n
On the 30* June\/2nd July, 1997, the appellants’ appeal
\nfrom order, as aforesaid, came up for admission in the High
\nCourt. On this date, a consent order was passed that a
\nfresh meeting of the Board of Directors be held with only
\nthose who were on. the Board of Directors on the 8th
\nNovember, 1995 under the Chairmanship of Mr. Satish Shah,
\nAdvocate to consider the earlier agenda of the 8th November,
\n1995. Hence, the High Court passed the following order on
\nthe 2nd July 1997:<\/p>\n
“In view of this. appeal stands disposed of Civil
\napplication also does not survive. Same also stands
\ndisposed of. In view of<\/p>\n
the fact that appeal has been disposed of, nothing
\nsurvives in the Suit. Parties to withdraw the suit”.<\/p>\n
This is how proceedings in the first Suit No. 6559 of
\n1997 is said to have culminated.<\/p>\n
Thereafter in pursuant to the aforesaid consent order,
\na meeting of the Board of Directors was held on 4th July,
\n1997 under the Chairmanship of Mr. Satish Shah. Two major
\ndecisions were taken therein. First 16th September, 1997
\nwas fixed as the next date for holding the Annual General
\nMeeting, and secondly, it turned down the proposal to
\nappoint 12 additional Directors by the group of respondent
\nno. I by the majority of 4 to 2. When parties are at
\nvariance then they try to pull other down, disputes start
\ncropping up from an insignificant to other magnified issues.
\nOne of such dispute raised is of the recording of the
\nminutes of the meeting dated 4^ July, 1997. According to
\nrespondent no. I, it was the prerogative of the Secretary
\nto write the minutes and thus the minutes recorded by him
\nshould be accepted. This dispute is because of the
\ndifference in the recording of the minutes between one
\nrecorded by the Secretary of respondent no. I and the other
\nsubmitted by Mr. Satish Shah. The significant difference
\nis in the recording ofltemNo.6, of the agenda of the 8^
\nNovember 1995, under<\/p>\n
which the appointment of twelve additional Directors
\nwas c-onsidwQd. There is neither recording nor any
\nreference about this consideration in the minutes prepared
\nby the Secretary, while in the recording by Mr. Satish
\nShah, it clearly records this. The relevant part of his
\nreport under item no. 6 is quoted hereunder:-<\/p>\n
“lo. appomt 12 additional Direetoi’s whose m^uence,
\n.contact would assist the club to procure attractive
\nsponsorships as also those who could spare time to assist in
\norganising and running events.<\/p>\n
Mr. Hoosern (.Appellant No. I ) said that this item
\ndid not survive because it had been agreed in principle to
\nhold the Annual General Meeting. Mr- Swadi, Mr. Futehally
\nand Mr. Bbiwandiwalla concurred.<\/p>\n
Mr. Bhathena {‘ respondent No. 1) and Mr.<\/p>\n
Goenka opposed.Mr. Bhathena said that “he was
\ndisagreeing because in his view fresh blood was required on
\nthe Board. Mr. Rao abstained. The view of Mr. Hoosein
\nwas adopted by a majority of 4 to 2:’<\/p>\n
{Emphasis supplied)<\/p>\n
It was thought, the aforesaid meeting will resolve the
\nconflict and parties shall restrain themselves from
\nprecipitating any other issue till the Annual General
\nMeeting. But it was so done. Now the succeeding facts and<\/p>\n
resolutions gave rise to the cause for the filing of
\nthe present second suit. On the 6 November, 1997, notice
\nwas issued proposing a meeting for the 13 November, 1997 for
\nthe “Afloption of the previous minutes” and for fixing a
\ndate for holding the Annual General Meeting. On the 13*
\nNovember, 1997, a meeting was held. in which the appellants
\n:.r^ed objection about respondent no. I presiding the
\nmeeting instead of Satish Shah and about the presence of
\nrespondentnos. 4 to 8. The appellants’ demand for fixing
\nan early date of Annual General Meeting was overruled and
\nthe minutes of the meeting dated 13th November, 1995. 29th
\nMarch, 1997. 17th April, 1997, and minutes of meeting dated
\n4th July, 1997 (held as per courts order under chair of Mr.
\nSatish Shah), as per the minutes prepared by the Secretary
\nof respondent no. I and not as prepared by Mr. Satish
\nShall, were approved. Thereafter a notice was served,
\nproposing tor a meeting on the 19th November. 1997 to
\napprove and confirm the minutes of the meeting dated 13th
\nNovember, 1997. The appellants attended the meeting and
\nreiterated their demand, but the same was overruled.
\nThereafter, on 18th December, 1997 the appellants filed the
\naforesaid suit No.6559 of 1997 for the declaration that the
\nresolutions dated 13th November, 1997 .and 19th November.
\n1997 are null and void, including the ind’uction of new life<\/p>\n
members after November 1995, as also he appoinmiont of
\n12 new additiona} Directors wh’ch inclucled respondent nos.
\n4 to 8.
\nThe respondents contested the .said claim of the
\nappellants. Their reply is that the suit is misconceived,
\nnon-maintainabie. Mr. Satish Shah’s minutes can not be
\nrelied, because it is the prerogative of the Secretary and
\nit is his obligation to prepare the minutes of that meeting.
\nFurther, all decisions and resolutions other than the
\nresolution dated 8th November, 1995 are valid and binding on
\nthe appellants. When earlier suit was withdrawn all interim
\norders came to an end.<\/p>\n
The trial court dismissed the appellants’ injunction
\napplication and also the contention that the consent order
\ndated 30th June, 1997 wiped off the earlier resolutions
\npassed by the Board of Directors. The appellants earlier
\nsought injunction in the earlier suit, against hoding of
\nthis meeting dated 17th April, 1997 in which new life
\nmembers were to be taken in and the court did pass an order
\nnot to implement any resolution passed therein. .the
\nappellanta being aggrieved by the dismissal of the
\ninjunction application filed an appeal before the High Court
\nwhich was dismissed. The High Court held, there was no
\neffective resolution annulling, rectifying or modifying<\/p>\n
the resolution dated 8th November, 1995. The court
\nrejected the appellants’ contention that order dated 30^
\nJune; 1997. wiped of the the earlier resolutions passed.
\nIt held, neither party agreed nor the Court set aside the
\nresolution dated 8th November. 1995. It ordered tor
\nholding. the Annual General Meeting under the Chairmanship
\nof Shri A.P. Kothari, the Company Registrar, to hold the
\nelection afresh of the Board of Directors. Aggrieved by
\nthis the appellants have filed the present appeal.<\/p>\n
The main thrust of submission on behalf of the
\nappellants is, “whether the consent order dated 30th June
\n1997 wipes off:<\/p>\n
(i) the resolution dated 8th November 1995, in which:<\/p>\n
(a) 12 additional Directors were appointed; . . .
\n(b) Appellant no. I was removed as the Chairman of the
\nBoard; . . (c) The respondent no. I was appointed as the
\nChairman of the Board of Directors; and (d) The
\nadministrative office of the company was shifted.<\/p>\n
(ii) the resolution dated 29^ March 1997 appointing
\nthe second set of 12 additional Directors in place of the 12
\naforesaid injuncted additional Directors;<\/p>\n
(iii) the resolution dated 17th April 1997 enrolling
\ndccordmg to respondent no.l, 57 additional hTe members of
\nthe company.<\/p>\n
The submission is, on composite reading of the orders
\ndated 30^ June 1997 and 2th July 1997, in the background of
\nthe aforesaid meeting dated 4^ July, 1997 of the Board of
\nDirectors. it clinchingly proves that the impugned
\nresolution dated 8th November 1995 is scored of. In further
\nsupport, it is submitted that the first, respondent
\nunambiguously admits this position in his affidavit in reply
\nto the affidavit of appellant No. I in the notice of motion
\nin Suit No. 6’559 of 1997. There respondent No. I clearly
\naverred that there could be no dispute that the meeting to
\nbe held under the Chairmanship of Mr. Satish Shah would
\nconsider the matter de novo and except the resolution passed
\nin the meetmg held after: 8th November 1995 all other
\nresolutions are valid, implidely admit that the meeting and
\nthe resolutions dated 8^ November 1995 were not valid.,
\nThus, it proves that the clock was set back to 8th November
\n1995. Hence all edifices buiJt on it subsequently, through
\nvarious resolutions since looses its base and also goes. In
\nany case, the appointment of first respondent as the
\nChairman of the Board of Directors and of the 12 additional
\nDirectors is also knocked off. In fact withdrawal of both
\nthe appeals before the High Court and the suit shows that
\nthe entire dispute including removal of first appellant as
\nthe<\/p>\n
Chairman, appointment of 12 additional Direotora
\nincluding induction of life members stood dissolved a.nd
\nsettled between the parties. In view of this, all
\nresolutions passed in a meeting at the behest of the first
\nrespondent where he presided as Chairman, are patently
\nillegal and have no force of law.<\/p>\n
Challenge to the resolution dated 29th March 1997 is
\nalso the same. Ita base is alao the resolution dated 8th
\nNovember. 1995, which was also hold under the Chairmanship
\nof the first respondent and it also stands wiped off by the
\nconsent order dated 30^ June 1997. As said before, when
\nthis meeting was to be held, appellants applied for
\ninjunction to restrain respondents from holding this
\nmeeting. On this. Court ordered that any resolution passed
\nin this meeting shall not be implemented. -By this
\nresolution, as aforesaid, 2th set of 12 additional
\nDirectors-was appointed. Next challenge is to the
\nresolution dated 17th April 1997. This resolution is also
\nchallenged on the same ground, viz., it was illegally
\nchaired by respondent No. 1. Even for this meeting court
\ndirected resolution passed therein shall not be implemented.
\nSubmission is, this meeting was also held in not haste to
\noverreach the order of the Court. On 10th April 1997 the
\naforesaid A.O. 274 of 1997 was adjourned to 21th April 1997
\nfor<\/p>\n
admission. Coming to know of this, on the 11th April
\n1997 notice was issued for a meeting on the 17th April 1997.
\nThis clearly exhibits, the unholy motive of the respondents
\nto overreach the order of the Court. At this meeting it is
\nsaid 57 new life members were enrolled. This was opposed by
\nthe appellants in the meeting which was turned down by the
\nrespondent No. 1.<\/p>\n
For the respondents the aforesaid submissions were
\nchallenged. Submission is, both meetings dated 29^ March,
\n1997, and 17th April, 1997, were validly held. Even the
\ncourt did not grant any stay against holding of these
\nmeetings. These meetings were attended by duly qualified
\nDirectors. The meetings were chaired by respondent no. I
\nwhose appointment as the Chairman was held to be valid by a
\ncompetent court by an order dated 18th March, 1997 in the
\nNotice of Motion No. 6337 of 1995 in the earlier suit No.
\n7179 of 1995. Reference is also made to Section 175 of the
\nCompanies Act, 1956 – i.e. members present at the meeting
\ncould elect among one o\/ themselves to be the Chairman,
\nhence no illegality would arise even otherwise, if
\nrespondent no. I presided the meeting. The order by
\nconsent on 30th June, 1997 did not and could not wipe off
\nwhat was done on the.<\/p>\n
atoresaid two dates of meetings. There is no order of
\nthe court settina aside these resolutions.<\/p>\n
The crux of the grievance of the appellants which
\nrequires our consideration is three fold: (i) reftioval of
\nappellant no. I and the appointment of respondent no.i as
\nChairman of the Board of Directors by means of resolution
\ndated 8^ Novem’ber, 1995; (ii) The induction of 12
\nadditional Directors through resolution dated 29^ March,
\n1997; and finally (iii) the induction of 57 life mertibers
\nthrough resolution dated 17111 April, 1997, both of these
\ntwo last meetings were presided by respondent no. I.<\/p>\n
The aforesaid tacts reveal that the proceedings of the
\nfirst suit culminated in the passing of the consent order
\ndated 30 Junc\/2 July, 1997. It was expected that litigation
\nwould come to an end but that was not to be. The present
\nsecond suit is filed in view of resolution dated 13 ‘
\nNovember, 1997 which in effect brings back to life the
\nmatter which was subject matter of the earlier suit. In the
\nmeeting dated 13^ November, 1997. the minutes of the
\nmeeting dated 13^ November, 1995,29^ March, 1997 and 17^
\nApril, 1997 including the minutes of the meeting dated 4th
\nJuly. 1997 as prepared by the Secretary and not by Mr.
\nSatish Shah, were approved. The meeting<\/p>\n
dated 19^ November, 1997 approved and corifirmtid
\nthe.minutes of meeting dated I ^November, 1997. The
\nquestion is, whether passing of the consent order in the
\nearlier suit obliterates the meetings and resolutions passed
\non 29th March, 1997 and 17th April, 1997? Also what was the
\nresolution passed in the meeting dated 4 July, 1997 and in
\nthis context; whether the minutes prepared by the Secretary
\nor what is prepared by Mr. Satish Shah should be accepted?<\/p>\n
It is very unfortunate, though very common, in any
\norganisation, including companies, there is tussle for
\nholding dominant position to control the ftinctioning of
\nsuch organisation. It is often said, “it is not like
\nsportsman spirit”. Meaning, the spirit of a sportsman is
\ntreated to be highly cooperative even in the hour of defeat.
\nHe is always in the best of spirit. But such spirit now
\neven in the field of sports seems to have receded to
\noblivion. The present company is also one of such
\ncompanies, working in the field of sports. But this spirit
\nbetween the parties is lacking. The battle of supremacy to
\ncontrol started between respondent no.l and appellant since
\n8th November. 1995 leading to two separate suits and the
\nbattle is still raging for about five years.<\/p>\n
Now. we proceed to test the submissions for the
\nappellants regaming the consent order obliterating the
\nresolutions dated 29th March and 17th April, 1997. As we
\nhave said, the nucleus of conflict started on the 8th
\nNovember, 1995 when in this Board’s meeting, appellant no.
\nI was removed and respondent no. I was appointed in his
\nplace as the Chainnan of the Board of Directors and 12
\nadditional Directors were also appointed. When the first
\nsuit was filed by the appellants, they challongod this
\nmeeting as it was held without any notice to them. The very
\ntexture of this resolution shows two clear distinctive
\ngroups, and the group of respondent no. I by removing
\nappellant no. I came in full control of the Board. Next
\nanother meeting was held on the 13th November, 1995 to
\nconfirm-the resolution dated 8th November, 1995. It is at
\nthis stage, appellants filed their first suit on the 16
\nNovember, 1995 along with injunction application, in which
\n12 additional Directors were injuncted to function.
\nHowever, undaunted another meeting was held under the
\nChairmanship of respondent no. I, of the Board of Directors
\non the 29h March, 1997 in which resolution was again passed
\nappointing another set of 12 additional Directors till
\ninjunction against earlier 12 additional Directors remained
\nin operation. When this stress and strain between the
\nparties was going on, with various interim orders of the
\ncourt, good sense prevailed on both-the parties which led to
\nthe passing, of
\nthe consent order. Through the consent order, dated
\n30th June Cfild 2nd. July 3997, the parties agreed for
\nholding a fresh meeting of the Board, under the Chairmanship
\nof Mr. Satish Shah, to consider afresh the original agenda
\noi 8 November, .1995. In this regard submission for the
\nappellants is. even concerned respondents including
\nrespondent no. I understood that agenda was going to be
\nconsidered de novo. For this, reliance is on the following
\naffidavit filed by respondent no. .1 in reply to the notice
\nof motion filed before the trial court by the appellants.
\nTlie relevant portion of the said statement is reproduced
\nbelow:-<\/p>\n
“1 say that. the gravamen of the charge, inter alia.
\nlevelled in the previous suit revolved round the allegation
\nthat tlie Meeting of the Board of Directors of the Club held
\non 8^ November 1997 was never hold and no notice therefor
\nwas given. In view of the tact that the Club is primarily
\nbrought into existence to promote motor sports, it was felt
\nthat no scope would be left for any complaint and therefore
\nit was agreed that the items of Agenda of the said meeting
\nwhich was held on 8h November 1995 should be convened de
\nnovo and under the said Mr: Satish Shah, Advocate.”<\/p>\n
On tlie other hand, learned counsel for the
\nrespondents submits that neither the .said consent order nor
\nthe resolution .passed on the 4 ‘ July. 1997, in any way
\nset asides any resolutions passed prior to the said consent<\/p>\n
.order. Thus, it would be deemed that they coitiinued
\n.notwihstanding holding of the said meeting dated 4th July.,
\n1997.<\/p>\n
We have considered the submissions made by the parties
\nincluding the various orders passed, both in the earlier and
\nthe present suit. In our considered opinion, the
\nculmination of the appeal, the suit. by its withdrawal as
\nper court’s order, as a con,scnsequence of the consent order
\nindicates one and the only inference that once the parties
\nagreed to hold a fresh meeting under the Chairmanship of Mr.
\nSatish Shall to re-consider afresh the agenda of the meeting
\ndated 8^ November, 1995, then it implicitly voices, what was
\nresolved in the said meeting earlier is wiped off and has
\nbecome non-est. The very re-consideration of the earlier
\nagenda clinchingly reveals that what was done then is wiped
\noff. How can earlier resolution dated 8th November, 1995,
\nwould survive when it is to be considered afresh? Of
\ncourse, it is open to the Board to pass tile same. modify
\nor pass entirely different resolution. Thus. company would
\nbe bound by the resolution passed in this later meeting.
\nThe High Court committed error of law by concluding to the
\ncontrary. The High Court misdirected itself and miscons
\nstnied the consent order that “neither parties agreed nor
\ndid the court set aside the resolution of the Board of
\nDirectors dated 8^ November, 1995”. The effect of
\nthe.order.<\/p>\n
passed by the court was to undo what was done on tho
\n8th^ November. 1995 and consider the matter afresh. This
\nwas done in the background of the appellants’ case that it
\nwas held without notice to the appellants. Tins is also
\nclearly spelt out from the aforesaid quoted statement of
\nrespondent no.l himself. The meeting which was held under
\ntile Chairmanship of Mr. Satish Shah was not a meeting to
\nconfirm, modify or annul the resolutions dated 8th November,
\n1995 but was to consider the agenda afresh. Hence all that
\nwas passed on the 8thNovember. 1995 cannot be treated to be
\nalive after the consent order followed by resolution dated
\n4th .July, 1997. Thus, appointment of 12 additiohal
\nDirectors on that date also goes. So far removal of
\nappellant no. I and appointment of respondent no. I in his
\nplace, it was fairly agreed to that both will not preside
\nthe meetings of the Board, instead Mr. Satish Shah will
\npreside. In other words, no one could be treated to be the
\nChairman of the Board.<\/p>\n
Next we proceed to scrutinize the resolution dated
\n4thJuly, 1.997, which was held as a consequence of the
\ncourt’s order, under the Chairmanship of Mr. Satish Shah.
\nBut here again we find a dispute is raised, whether the
\nminutes prepared by the Secretary or the one by the Chairman
\nMr. Satish Shah. be accepted. We find the minutes
\nrecorded are at variance<\/p>\n
between the two. The relevant variance ia under item
\nno.6. in the seoretary report there is no reference of the
\nconside.ra.tion by the Board for the appointment of 12
\nadditional Directors, while in the report of Mr. Satish
\nShah it records so under item no. 6, which is reproduced
\nbelow:<\/p>\n
“Item., No 6: To appoint 12 additional Directors
\nwhose influence, contact would assist,the.clubto procure
\nattraotivo sponsorships as also thoso who could spare tjme
\nto assist in organising and running events.<\/p>\n
Mr. Hoosein said that this item did not survive
\nbecause it had been agreed in principle to hold the Annual
\nGeneral Meeting. Mr. Swadi, Mr.Futehally and Mr.
\nBhiwandiwalla concurred.<\/p>\n
Mr. Bhathena and Mr. Goenka opposed. Mr- “Bhathena
\nsaid that he was disagreeing because in his view fresh blood
\nwas required on the Board. Mr. Rao abstained. The view of
\nMr. Hoosein was adopted by a majority of 4 to 2.”<\/p>\n
Before drawing our conclusion we may. refer to
\nSection 193 of the Companies Act, 1956. The relevant
\nportion of Section 193 is quoted below:-<\/p>\n
“Section 193: Minutes of proccedings of general
\nmeetings and of Board and other meetings:<\/p>\n
(I-A.) Each page of every such book .shall be
\niniialled or signed and the last page of the record of
\nproceedings of each books shall be dated and signed –<\/p>\n
(Q) in the ca.se of minutes of proceedings of a
\nmeeting of the Board or of.a committee thereof by the
\nChairman of the said meeting or the Chairman of the next
\nsucceeding meeting.<\/p>\n
(6) If default is made in complying with the foregoing
\nprovisions of this section inrespect of any meeting, the
\ncompany, and ever)’ officer of the company who is in
\ndefault, shall be punishable with fine which may extend to
\nfifty rupees.<\/p>\n
Explanation: The chairman shall exercise an absolute
\ndiscretion in regard to the inclusion Or non-inclusion of
\nany matter in the minutes on the grounds specified in this
\nsub-section. ”<\/p>\n
With reference to minutes of the proceedings as to who
\nshall initial or sign, the sub-section (I-A} mandates, every
\npage of every booJc shall be initialled or signed including
\nthe last page of the record of proceedings by the Chairman
\nof the Board. Under Explanation to sub-section (6) of the
\naforesaid Section. Chairman is empowered to exercise an
\nabsolute discretion in regard to the inclusion or
\nnon-inclusion of any matter in the minutes. Sub- section 6
\nmakes defaulters for not complying the foregoing provisions
\npunishable with fine. Thus, this section casts an
\nobligation on the.Chairaian<\/p>\n
of the Board, to authenticate the minutes of the
\nmeeting of the Board. Further when the court directs Mr.
\nSatish Shah to preside the meeting of the Board, he acts as
\nthe Chairman m the said meeting. This apart, in the past,
\nbecause of the conflict between two groups, a via media was
\nfound to eliminate this mistrust by appointing a third
\nagreeable person then even if there be conflict, the minutes
\nprepared by such third person is to be accepted and not
\nofthe other who belong to one of such conflicting group.
\nHence for all these reasons we have no hesitation to
\nconclude that the minutes prepared by Mr. Satish Shall are
\nto be accepted as authentic.<\/p>\n
According to the minutes authenticated by Mr. Satish
\nShah, under item no.6, the Board considered the question of
\nappointment of 12 additional Directors and after discussion
\nbetween the two contesting groups, which is also recorded
\ntherein, the proposal of appellant no. I that this item
\ndocs not survive as it had been agreed to hold the Annual
\nGeneral Meeting was accepted and objection of respondent no.
\nI that they should be appointed was rejected by the majority
\nof 4 : 2. Thus, question of appointment of 12 additional
\nDirectors came to an end by the passing of this resolution.
\nIf this is the position how can resolution dated 8^
\nNovember, 1995 or resolution dated 29th’ March. 1997,
\nsurvive so tar appointment of these 12 additional<\/p>\n
Directors. So if on the 4*thJuly. 1997 it was
\nresolved not to appoint .i additional Directors then any
\n.such resolution including 29thMarch. 199′ cannot be
\nsustained. It would be treated to have died both on account
\no consent order and the resolution dated 4th July, .1997.
\nThe resolution date( 27 March, 1997, was itself a
\nconsequential resolution to the. resolution dated 8^
\nNovember, 1995, as it appointed 2th set of 12 additional
\nDirectors in its place till injunction against the first set
\nwas m operation. This 27th March, 1997 resolution itself
\nwas temporary in nature. Hence we conclude after passing cf
\nthe consent order and passing of the resolution dated 4
\nJuly, 1997 so far appointment of 12 additional Directors
\ncannot survive.<\/p>\n
This leaves us to the last relevant resolution dated
\n17th November, 1997 in which 57 life members were inducted.
\nThis is a meeting admittedly presided by respondent no. I
\nto which appellants had due notice. Appellant no. I also
\nparticipated, under protest and without prejudice. So far
\nthose inducted life members, we tried to find out from the
\nparties, whether there is any prerequisite or minimum
\nqualification for their induction. Parties could not point
\nany such. The dispute, if any, could be that those
\ninducted.. were brought in by respondent no. I to muster
\nhis majority in the Annual General Meeting.<\/p>\n
Learned counsel tor the app’aliants referred to The
\nConduct of Meetings by T.P.E. Curry and J. Richard Sykes,
\nTwentieth Edition, which is quoted hereunder:-<\/p>\n
“Board Meetings: To constitute a valid board meeting
\nthe. following conditions must be complied with:<\/p>\n
( I ) The proper person must be in the chair His
\nappointment is generally governed by the articles.
\nRegulation 101 of Table A, for example, provides that the
\ndirectors may elect a chairman of their meetings and
\ndetermine the period for which he is to hold office, and
\nthat if no such chairman is elected, or if at any meeting
\nthe chainman is not present within five minutes after the
\ntime appointed for .holding the same. the directors present
\nmay choose one of their number to be chairman of the
\nmeeting.<\/p>\n
An appointment of a chairman of directors made in
\ncontravention of the articles is void and is not regularised
\nby mere acquiescence, and consequently resolutions carried
\nby the casting vote of such a chairman are inoperative.”<\/p>\n
Learned counsel for the appellants also referred to a
\ndecision of dark v- Workman (1920) I I.R. 107. Relevant
\nportion of the headnote is quoted hereunder: –<\/p>\n
“Ail appointment of a chairman oi’ directors madein
\ncontravention to Article,s of association is void. and is
\nnot regularized bv mere acquiescence and consequently
\nresolutions carried by the castina vote of such a chairman
\narc inoperative.”<\/p>\n
It cannot be disputed that the Chairman of the Board
\nof Directors is the central figure in holding the meeting
\nand is the controlling factor in the conduct of meeting.
\nFie authenticates the minutes of the meeting and performs
\nsuch other functions as empowered under the Companies Act.
\nA Chairman is always elected by the Board of Directors thus
\nhe had the full support of the majority of Directors which
\nhelps him in the control of meeting and recording
\nauthenticated minutes.<\/p>\n
In the present case unfortunately since .1994
\nno-Annual General Meeting could be held both on account of
\nthe aforesaid dispute and also. as per the respondents, the
\naccounts could not be finalised. When appointment of Mr.
\nSatish Shah to chair Board meeting was made. both appellant
\nno 1 and respondent no. I fairly conceded their claim to
\npreside over the meeting. Thus their serious dispute got
\ntemporary respite. Still the question remains, as to who
\ncould have presided in the meeting dated 17th April, 1997,
\nwhich was antecedent to the consent order.. It is true by
\nthat date consent order was<\/p>\n
not in existence and the tussle between the two was
\ncontinuing. If the resolution dated 8h November. 1995
\nevaporated, authority of respondent no. I to preside under
\nit also dissolved, unless some fresh authority was given to
\nhim. Thus without any fresh authority respondent no. I
\ncould not preside in any Board’s meeting. In .fact this
\nmeeting dated 17h April, 1997, at dial point of time was
\nchallenged and the court on this date injuncted the
\nrespondents to implemeht the resolution pa.ssed in this
\nmeeting. It is during continuation of this injunction
\norder, the said consent orde,r was passed. Consent order
\nwas to consider 8^ November, 1995 agenda de novo. In view
\nof this then how could resolution passed in this meeting
\nsurvive-after passing ot the consent order.<\/p>\n
In the meeting dated 4h July, 1997, no resolution was
\npassed as to who shall henceforth preside in the meeting of
\nthe Board of Directors. The resolution dated on 4h July.
\n1997 could be construed that the parties differed the
\nquestion as to who shall preside the meeting till holding of
\nfresh election of the Board of Directors in the Annual
\n(general Meeting. It is significant in tlie minutes
\nrecorded by Mr. Satish Shah that before item no. I was
\ntaken up Mr. Bhiwandiwalla and Mr. Bhathena (respondent
\nno. 1) stressed the need to hold an early Annual General
\nMeeting. Another Director Mr. Swadi also<\/p>\n
-suggested the same ior electing a new Board which
\ncould finalise the accounts. Finally, Mr. Bhiwandiwalla.
\nsuggested the following:-<\/p>\n
“(i) that the Accounts be finalised and approved as
\nsoon as possible.<\/p>\n
(ii) that all the members of the present Board should
\nresign and an entirely new Board should be elected: and<\/p>\n
(iii) that in any event tlie Annual General Meeting
\nshould be convened as early as possible even if the Accounts
\nwere not ready.<\/p>\n
The other members were agreeable to this and it was
\nresolved that the Annual General Meeting should if possible
\nbe held on 16h September, 1997.”<\/p>\n
This also indicates that the Board desired holding an
\nearly Annual General Meeting and in favour of all members of
\nthis Board resigning. In this context presiding by
\nrespondent no. I as Chairman of the meeting held on 17th
\nApril, cannot be held to be proper. However, on the other
\nhand a submission is, even where there is no Chairman or in
\ncase the Chairman not present or as in the present case it
\nis indispute, it is open for the Board of Directors to elect
\nany one to function as such in any meeting. But this is
\nneither the respondents’ case nor it is shown that he was
\nelected as such on that date.<\/p>\n
.His authority if at all was only through the
\nresolution dated 8th November, 1995.- ‘Strong submission tor
\nthe respondents was that a.ppointment of respondent no. I
\nas Chairman was held to be valid by a competent court of law
\nby order dated 18h March, 1997 in Notice of Motion No. 6337
\nof 1995. But this order was challenged by the appellants
\nthrough A.O. No. 274 of 1997 in the High Court. It is in
\nthis extent that consent order was passed which obliterated
\nvarious resolutions including of 8th November, 1995. So
\nthis submission of respondents has no force.<\/p>\n
Lastly, we have considered the question of induction
\nof 57 new life members. So far in their application no
\ndefect could be pointed out. It is true, these new life
\nmembers are not parties before us. It will be in the best
\nof interest .that question of their induction as life
\nmembers instead of rejecting, beplaced for consideration, in
\nthe Annual General Meeting to be held by the Company. So we
\ncome to the conclusion, that meeting dated 17h April, 1997
\nwas not only not conducted ‘in the proper perspective but it
\nalso. suffers from procedural irregularities. This was
\npart of the tussle between the two groups to gain the
\nmajority over the other. However, it would not be proper to
\nreject the life members’ application. So in order to<\/p>\n
keep the interest of the life members, we direct that
\ntheir cases be plac before the next Annual General Meeting
\nto he held for its consideration. Since the dispute, as to
\nwho shall preside, is still not resolved, in spite of this
\nlong drawn litigation which can only come to an end by fresh
\nejection of the Board of Directors in the next Annual
\nGeneral Meeting, it is proper in the interest of the Company
\nthat neither appellant no. I nor respondent no. I presides
\nin any Board of Directors’ meeting.<\/p>\n
Thus, so far the direction of the High Court to hold
\nAnnual General Meeting under the Chairmanship of Mr. A.P.
\nKothari, the Company Registrar seems to be proper, hence
\nneeds no interference to that extent, The relevant portion
\nof this is quoted hereunder:<\/p>\n
“However, it is clear that a meeting of the Board of
\nDirectors has been held pursuant to an order passed by this
\nCourt and it is common ground betore me that the Board of
\nDirectors decided to hold the annual general meeting of the
\ncompany immediately, in this view of the matter, therefore,
\nin my opinion, it would be just and proper to direct that
\nthe Annual General Meeting of the Company should be held tor
\nholding elections to the Board of Directors of the Company.
\nIn my opinion, considering that the parties are fighting, it
\nwould be proper to direct that the Annual General<\/p>\n
Meeting should be held under the Chairmanship of Shri
\nA.P. Kolhari, the Company Registrar.”<\/p>\n
Hence for all the aforesaid reasons we allow the
\nappeal of the appellants, se aside both the judgments of the
\nHigh Court dated 10th February, J999, except to the
\naforesaid extent, and the trial court order dated 9h July,
\n1998, and further direct holding of Annual General Meeting
\nat the earliest under the Chairmanship of Mr. A.P.
\nKothari.. Registrar Company as aforesaid. Even if any
\nprior meeting before Annual General Meeting is to be held of
\nthe Board of Directors, the same shall also be presided by
\ndie same Mr. A.P. Kothari, Registrar. In view of the
\naforesaid findings our conclusions are:<\/p>\n
(A) Neither appeyllant no. I HOP respondent no.
\nI’shall preside in any of the ‘ meetings of the Board of
\nDirectors.<\/p>\n
(B) The appointment of 12 additional Directors cannot
\nbe sustained. . Hence resolutions dated 8h November 1997
\nand 29h March, 1997 and 17th April, 1997 stand obliterated
\ninview of the consent order dated 30th June\/2nd July,1997:<\/p>\n
(C) So fer resolution dated 17th April, 1997 for the
\ninduction of 57 life X- members, in view.of our findings,,
\nthey not-be deemed to .have been.<\/p>\n
inducted on that date as member but their induction as
\nsuch would be placed tor consideration before the Annual
\nGeneral Meeting to be held later.<\/p>\n
(D)- Annual General Meeting shall be held under the
\nChairmanship of Mr. A.P. Kothari, Registrar, Company who
\nshall expedite the holding of Annual General Meeting at a
\nvery early date. possibly within three months of this order
\nbeing communicated to him.<\/p>\n
Accordingly, the aforesaid appeal is allowed. Costs
\non the parties.<\/p>\n
Office shall send a copy of this order to the Mr.
\nA.P. Kothari, Registrar. Company.<\/p>\n","protected":false},"excerpt":{"rendered":"
\u00a0Corporate Case Law ROC Vs Rajshree Sugar Chemicals Ltd 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 … Read more<\/a><\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":""},"categories":[4928],"tags":[],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/posts\/30177"}],"collection":[{"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/comments?post=30177"}],"version-history":[{"count":2,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/posts\/30177\/revisions"}],"predecessor-version":[{"id":115838,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/posts\/30177\/revisions\/115838"}],"wp:attachment":[{"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/media?parent=30177"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/categories?post=30177"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/tags?post=30177"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}