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HIGH COURT OF CALCUTTA
A. N. Ray
MURARKA PAINT AND VARNISH WORKS LTD. - Appellant
Versus
MOHANLAL MURARKA - Respondent
Suit 426 Of 1960
Decided On : AUGUST 01, 1960
COMPANY - SUIT - AUTHORITY OF DIRECTORS TO INSTITUTE SUIT - OBJECTION TO USE OF COMPANY'S NAME - STAY OF SUIT - GENERAL MEETING TO ASCERTAIN WISHES OF SHAREHOLDERS - ARTICLES OF ASSOCIATION - INTERPRETATION - POWERS OF DIRECTORS - CONTROL BY GENERAL MEETING - SECTION 284 OF THE COMPANIES ACT, 1956.
Fact of the Case:
The plaintiff company, Murarka Paint and Varnish Works (Private) Ltd., filed a suit against the defendants, Mohanlal Murarka and others, alleging that Mohanlal Murarka had ceased to be a director of the company and that the defendants had trespassed into the company's office and interfered with the management of its affairs. The defendants filed a written statement, contending that the suit was instituted without the authority of the Board of Directors and against the decision of the shareholders.
Finding of the Court:
The court held that the objection to the use of the company's name by the plaintiff could not be raised as a defence to the suit but should be on a motion to stay the action. The court further held that the Articles of Association conferred sufficient powers on the directors to maintain the suit and that no general meeting should be held to deprive the directors of their powers under the Articles.
Issues: 1. Whether the defendants could raise an objection to the use of the company's name by the plaintiff as a defence to the suit? 2. Whether the directors had the authority to institute the suit? 3. Whether a general meeting should be held to ascertain the wishes of the shareholders regarding the continuance of the suit?
Ratio Decidendi: 1. The court held that an objection to the use of the company's name by the plaintiff could not be raised as a defence to the suit but should be on a motion to stay the action. The court relied on the decisions in Russian Commercial and Industrial Bank v. Comptoir d' Escompte de Mulhouse and Shaw and Sons (Salford) Ltd. v. Shaw and Shaw to support this holding. 2. The court held that the Articles of Association conferred sufficient powers on the directors to maintain the suit. The court relied on Article 121 of the Articles of Association, which vested the management of the company's business in the directors, and Article 122(6), which authorized the directors to institute legal proceedings on behalf of the company. 3. The court held that no general meeting should be held to deprive the directors of their powers under the Articles. The court relied on the decisions in Isle of Wight Rly. Co. v. Tahourdin, Automatic Self-cleansing Filter Syndicate Co. v. Cunninghame, and Marshall's Valve Cear Company v. Manning Wardle and Co. to support this holding.
Final Decision: The court recalled the order it had made on June 3, 1960, which had directed that a general meeting be held to ascertain the wishes of the shareholders regarding the continuance of the suit. The court directed that the suit would appear in the list on August 25, 1960, subject to any part-heard suit. The court also awarded costs to the plaintiff.
( 1 ) THIS suit has been instituted by Murarka Paint and Varnish Works (Private) Ltd. against Mohanlal Murarka, Chunilal Murarka, Purushottamalal Murarka, Beharilal Murarka, Radheylal Murarka, Kunjlal Murarka and Hiralal Murarka. The plaintiff has its registered office at 4e, Dalhousic Square, East, Calcutta; the plaintiff uses the said office in common with 5 other limited companies. At the last annual general meeting of the plaintiff company, Sohanlal Murarka,, Kissenlal Murarka, Shankarlal Murarka and Mohanlal Murarka were appointed directors.
( 2 ) ARTICLE 111 of the Company states that every director shall vacate his office, inter alia, on his being requested in writing by all his co-directors to resign. On or about February 24, 1960 Sohanlal Murarka, Kissenlal Murarka and Shankarlal Murarka acting under Article 111 requested Mohanlal Murarka in writing to resign. The plaintiffs case is that Mohanlal Murarka immediately thereafter ceased to be director of the plaintiff. On or about February 25, 1960 the Board of Directors of the plaintiff at a meeting held by it on the same day appointed in accordance with the Articles one Mahabir Prasad Murarka in place and stead of Mohanlal Murarka. The plaintiff alleges that in the premises on and from February 25, 1960 the lawful directors of the plaintiff were and are: Sohanlal Murarka, Kissealal Murarka, Shankarlal Murarka and Mahabir Prassad Murarka.
( 3 ) ON or about February 25, 1960 the plaintiff through its solicitors, Messrs. Khaitan and Co. issued notices in various newspapers to the effect that all power and authority of the defendant Mohanlal Murarka as a director had been terminated. The defendants Chunilal Murarka, Radheylal Murarka, Beharilal Murarka, Hiralal Murarka and Kunjalal Murarka, it is alleged, are not registered shareholders of the plaintiff. The defendant Mohanlal is the joint registered owner of 6250 ordinary shares in the plaintiff company along with the defendants Purushottamlal Murarka and Shankarlal Murarka.
( 4 ) ON or about March 23, 1960 at about 2 p. m. It is alleged, the defendants Mohanlal Murarka, Chunilal Murarka, Purushottamlal Murarka and Beharilal Murarka accompanied by about 25 unknown persons and police officers forcibly entered into the office of the plaintiff and attempted wrongfully and illegally to take possession and charge of the affairs and properties of the plaintiff including its books of accounts papers, documents and monies etc. The plaintiff on March 23, 1960 lodged a complaint at Hare Street Police Station in Calcutta. On March 24 1960 an application was made before the Chief Presidency Magistrate, Calcutta praying for the issue of process against the defendants Chunilal Murarka, Mohanlal Murarka, Purushottamlal Murarka and Beharilal Murarka. A report was called for by the Chief Presidency Magistrate by April 9, 1960. After the passing of the order, it is alleged, the defendants with the help of unknown persons started dismantling almirahs, fixtures etc. situate in the office of the plaintiff. Another application was made before the Chief Presidency Magistrate for an order under Section 144 of the Criminal Procedure Code. Another report was called for by the Chief Presidency Magistrate by March 26, 1960 and it was directed that there was to be no breach of peace meanwhile.
( 5 ) THE plaintiffs solicitors received a letter dated March 23, 1960 from Radheylal Murarka whereby Radheylal Murarka purporting to act as a director of the plaintiff informed the plaintiff's solicitors that Sohanlal Murarka, Kissenlal Murarka and Shankarlal Murarka had been removed from the Board of Directors of the plaintiff.
( 6 ) IT is further alleged in the plaint that on Mareh 24, 1960 the plaintiffs law agent went to the office of the plaintiff company when it was discovered that Kunjlal Murarka was asserting that he and his father Hiralal Murarka were directors. The plaintiffs law agent further discovered almirahs to be broken and
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