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2000(4) Supreme 473
SUPREME COURT OF INDIA
(From Bombay High Court)
A.P. Misra & M.B. Shah, JJ.
Nazir Hoosein & Anr. -Appellants
versus
Darayus Bhattena & Ors. -Respondents
Civil Appeal No. 3425 of 2000
(Arising out of SLP (C) No. 3126 of 1996)
Decided on 12-5-2000
Counsel for the Parties :
For the Appellant : M.M. Sakharidande, Nikhil Sakhardande, Ms. Meenakshi, Sakhardande, S.R. Grover, Ms. S. Tandon, Advocates.
For the Respondents : Navin Parikh and Mrs. V.D. Khanna, Advocates.
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. He 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. (Para 29)
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. 1 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 8th November, 1995 evaporated, authority of respondent No. 1 to preside under it also dissolved, unless some fresh authority was given to him. Thus without any fresh authority respondent No. 1 could not preside in any Board s meeting. In fact this meeting dated 17th April, 1997, at that point of time was challenged and the court on this date injuncted the respondents to implement the resolution passed in this meeting. It is during continuation of this injunction order the said consent order was passed. Consent order was to consider 8th November, 1995 agenda de novo. In view of this then how could resolution passed in this meeting survive after passing of the consent order. In the meeting dated 4th July, 1997, no resolution was passed as to who shall henceforth preside in the meeting of the Board of Directors. The resolution dated on 4th 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 the minutes recorded by Mr. Satish Shah that before item No. 1 was taken up Mr. Bhiwandiwalla and Mr. Bhathena (respondent No. 1) stressed the need to hold an early Annual General Meeting. Another Director Mr. Swadi also suggested the same for electing a new Board which could finalise the accounts. Finally, Mr. Bhiwandiwalla suggested the following :
"(i) that the Accounts be finalised and approved as soon as possible.
(ii) that all the members of the present Board should resign and an entirely new Board should be elected : and
(iii) that in any event the Annual General Meeting should be convened as early as possible even if the Accounts were not ready.
The other members were agreeable to this and it was resolved that the Annual General Meeting should if possible be held on 16th September, 1997."
This also indicates that the Board desired holding an early Annual General Meeting and in favour of all members of this Board resigning. In this context presiding by respondent No. 1 as Chairman of the meeting held on 17th April, cannot be held to be proper. Meeting dated 17th 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 placed before the next Annual General Meeting to be 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 election of the Board of Directors in the next Annual General Meeting, it is proper in the interest of the Company that neither appellant No. 1 nor respondent No. 1 presides in any Board of Directors meeting. In view of the aforesaid findings our conclusions are :
(A) Neither appellant No. 1 nor respondent No. 1 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 8th November, 1997 and 29th March, 1997 and 17th April, 1997 stand obliterated in view of the consent order dated 30th June/2nd July, 1997.
(C) So far resolution dated 17th April, 1997 for the induction of 57 life 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 for 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. (Paras 30 to 35)
JUDGMENT
Misra, J.-Leave granted.
2. The present appeal is directed against the order dated 10th February, 1999 passed by the Bombay High Court in A.O. No. 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 aforesaid suit. In the suit following interim injunctions were sought:
"(a) Respondents 1 to 3 from acting on the resolution dated 13-11-1997,
(b) Respondents from enrolling new members,
(c) Respondents 4 to 8 from acting as directors of the suit Club and restraining Respondents 1 to 8 and life members enrolled after 7.11.95 from casting their votes at the AGM,
(d) Respondents 1 to 8 from holding Board 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."
3. The appellants are the Directors of the Indian Automotive Racing Club (hereinafter referred to as the Company ). As per the appellants, appellant No. 1 is the Chairman of the Board of Directors of the said Company. Respondent Nos. 1 to 3 are the Directors and respondent Nos. 4 to 8 are Additional Directors allegedly appointed along with 7 others under the challenged resolution dated 29th March, 1997. The appellants challenged this resolution to be illegal and void, as it stood obliterated by the agreed and consent order dated 30th June, 1997/2nd July, 1997 in A.O. No. 274 of 1997 before the High Court.
4. In order to appreciate the controversy it is necessary to shortly dwell upon certain antecedents and essential short matrix of facts. At the Annual General Meeting of the Company held on 29th December, 1993 the appellants and respondent Nos. 1 to 3 were elected as Directors and the first appellant as the Chairman of the Board of Directors. The case of the appellants is, on the 8th November, 1995 respondent Nos. 1 to 3 with under current designs, purportedly held a meeting, without serving any notice upon appellant No. 1 and other 4 Directors supporting him and passed the following resolutions:-
"(a) to shift the office of the Club to Respondent No. 1 s office;
(b) to remove appellant No. 1 as Chairman;
(c) appoint Respondent No. 1 as Chairman in his place and
(d) appoint 12 additional Directors on the Board of Directors."
5. Thereafter on the 13th November, 1995, another meeting was held by the same group, viz., respondent Nos. 1 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. 1 to 3 and 4 out of the 12 newly appointed Directors. On the 18th 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. 1 as 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. 1, the appellants filed FAO No. 274 of 1997 before the High Court. On the other hand, respondent Nos. 1 to 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.
6. 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 me
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