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HIGH COURT OF CALCUTTA
Harries, Banerjee
INDIAN SPINNING MILLS LTD. - Appellant
Versus
HIS EXCELLENCY LT. GENERAL MADAN SHAMSHER JANG BAHADUR RANA - Respondent
A. F. O. O. 132 Of 1950
Decided On : JANUARY 30, 1951
COMPANIES ACT - SECTION 79 (3) - IMPRACTICABILITY OF HOLDING MEETING - INTERPRETATION - COURT'S DISCRETION TO ORDER MEETING.
Fact of the Case:
Dispute among shareholders and directors of a company made it impracticable to hold an extraordinary general meeting. The directors refused to call a meeting, and the requisitionists, holding 3/4th of the paid-up share capital, sought to convene a meeting under Section 78(3) of the Companies Act. However, the validity of the Board of Directors was challenged, raising doubts about the requisitionists' right to call a meeting.
Finding of the Court:
The court held that it was impracticable to hold a meeting due to the ongoing disputes and the potential for further litigation. The court interpreted 'impracticable' as meaning that it is not feasible from a reasonable and prudent business perspective.
Issues: 1. Whether it was impracticable to hold an extraordinary general meeting due to disputes among shareholders and directors? 2. Whether the requisitionists had the right to call a meeting under Section 78(3) of the Companies Act in the absence of a valid Board of Directors?
Ratio Decidendi: 1. The court found that the disputes between the shareholders and directors, coupled with the potential for endless litigation and further embitterment of feelings, made it impracticable to hold a meeting. 2. The court did not decide on the validity of the Board of Directors or the requisitionists' right to call a meeting under Section 78(3), as those matters were the subject of ongoing suits.
Final Decision: The court dismissed the appeal against the order directing an extraordinary general meeting under Section 79(3) of the Companies Act.
( 1 ) THIS is an appeal from an Order of Mookerjee J. dated 22-9-1950, directing that an extraordinary general meeting of the Company should be held.
( 2 ) THE application was made to Mookerjee J. under Section 79 (3), Companies Act. It was alleged that owing to disputes which had arisen between the share-holders and the directors of the company in question it was impracticable to hold an extraordinary general meeting and therefore application was made to the Court for the convening of such a meeting under the directions of the Court. The learned Judge having considered the whole of the matter came to the conclusion that it was impracticable to call a meeting of the company in any manner in which the meetings of that Company might be called in accordance with the Articles of the Companies Act.
( 3 ) THE paid up capital of this Company is Rs. 4,59,420/- of which the contesting respondents hold Rs. 3,66,000/ -.
( 4 ) THE last annual general meeting of the Company was held on 23-12-1949 and thereafter the Board of Directors consisted of Gopal Chandra Saha Monoj Mohan Ray, S. K. Mukherjee, N. N. Bose and A. C. Roy Chowdhury; the latter was the nominee of the contesting respondents who are referred to by the learned Judge as the Nepal group. This Nepal group holds roughly 3/4ths of the paid up share capital.
( 5 ) MR. Roy Chowdhury had been elected Chairman of the Board of Directors. But disputes arose and eventually the other Directors challenged his position on the Board. Mr. Roy Chowdhury originally only held one share and the qualification of a director was the holding of 250 shares. The contesting respondents arranged to transfer the necessary number of shares to Mr. Roy Chowdhury to qualify him for the post of a director. But it is said on behalf of the appellants that the transfer was bad. On 12-7-1950 the Board noted in their proceedings that the transfer of 250 shares in the name of Mr. Roy Chowdhury on the strength of which he had been acting as a director was defective. The following resolution was accordingly passed:"it is therefore resolved that in view of irregular transfer which does not confer on Mr. Roy Chowdhury title to the shares he be requested to vacate from the Board of Directors of the Company till the transfer is regularised when he will be co-opted. "
( 6 ) MR. Roy Chowdhury thereafter was excluded from the Board. Another share-holder was co-opted in his stead and a new chairman appointed.
( 7 ) THE contesting respondents contend that the whole of these proceedings of the Board of Directors were illegal and of no effect. According to them Mr. Roy Chowdhury held the necessary qualification and therefore was a director and could not be excluded by his co-directors and no one could be appointed in his stead.
( 8 ) THE position of Mr. Roy Chowdhury has now become the subject-matter of two suits. Certain members of the Nepal group and Mr. Roy Chowdhury filed on 30-8-1950 Suit No. 3559 of 1950 on the Original Side of this Court in which they claimed a declaration that Mr. Roy Chowdhury had at all material times been and was still a director of the company and was entitled to act as such. They further claimed that the resolution of the Board dated 12th July was illegal and 'ultra vires' and they asked for an injunction restraining the other directors from excluding Mr. Roy Chowdhury from the meetings of the directors. They further asked for a declaration that all the resolutions passed by the directors during the time when Mr. Roy Chowdhury was excluded were invalid and inoperative.
( 9 ) ANOTHER suit was filed by one Jatish Chandra Pal along with another share-holder and in that suit a prayer was made for a declaration that an extraordinary general meeting which had been called for 9-9-1950, was improperly convened, and further that any directors appointed at that meeting should be declared to have been invalidly appointed.
( 10 ) THE cause of this latter suit was the requisitioning of an
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