Gujarat High Court
Judgename :P.N.BHAGWATI
JUVANSINHJI BALUSINHJI - Appellant
Versus
BALBHADRASINHJI INDRASINHJI - Respondent
COMPANY PETITION 3 of 1960
Decided On : 06/23/1961
Articles of Association of Company - Article 76 - English Companies Act 1948 - Sections 87 to 90 - Companies Act 1956 - Sections 397 and 398 - Voting rights of members - Facts giving rise to this application are few and for most part undisputed and may be briefly stated as Ginning Company Private Limited was incorporated as a public Company limited by shares in old State under Company Law then in force in Old State - Company had a share capital of amount divided into Ordinary Shares amount each and entire share capital was issued subscribed and fully paid up - Voting rights were prescribed by Article 76 of Articles of Association of Company and under that Article each member of Company had one vote irrespective of number of shares held by him - Voting rights of members were not proportionate to their respective shares of paid up capital of Company but were distributed equally amongst the members in the sense that each member had one vote irrespective of his share of paid up capital of Company - Extra-ordinary general meeting of Company a special resolution was passed whereby and Articles of Association were deleted and new Articles of Association were adopted – Held, nine members who formed one group were in a position to control affairs of Company if voting rights remained as provided in the old Articles of Association Their voting strength was however affected by adoption of new Articles of Association since their share in paid up capital of Company was less than share of remaining members in paid up capital of Company - These members of Company therefore filed a petition in then High Court under of Companies Act 1956 contending inter alia that the extraordinary general meeting of Company held at which new Articles of Association were adopted was not a validly convened meeting nor was it validly held and conducted and that resolutions passed at the meeting were therefore illegal and void - According to these members to whom court shall refer as petitioners for purpose of this judgment special resolutions passed at extra-ordinary general meeting of the Company held being illegal and void new Articles of Association were not adopted by Company and Company continued to be governed by old Articles of Association – Order accordingly
( 1 ) THIS application raises a short and interesting question of law regarding the right construction to be put on sections 87 to 90 of the Companies Act 1956 These sections which relate to voting rights did not and a place in the Indian Companies Act 1913 and have been introduced for the first time in the Companies Act 1956 There is no provision in the English Companies Act 1948 corresponding to these sections nor is there any authority of any High Court in this country which throws light on the interpretation of these sections. The question of construction posed by this application has therefore to be decided by me on the language of these sections unaided by any authority or dicta of any Court in this country or in England. The facts giving rise to this application are few and for the most part undisputed and may be briefly stated as follows:the Lakhtar Ginning Company Private Limited was incorporated as a public Company limited by shares in the old Lakhtar State in December 1912 under the Company Law then in force in the Old Lakhtar State. The Company had a share capital of Rs. 32000. 00 divided into 128 Ordinary Shares of Rs. 250. 00 each and the entire share capital was issued subscribed and fully paid up. The voting rights were prescribed by Article 76 of the Articles of Association of the Company and under that Article each member of the Company had one vote irrespective of the number of shares held by him. The voting rights of the members were not proportionate to their respective shares of the paid up capital of the Company but were distributed equally amongst the members in the sense that each member had one vote irrespective of his share of the paid up capital of the Company. At an extra-ordinary general meeting of the Company held on 5th August 1951 a special resolution was passed whereby the and Articles of Association were deleted and new Articles of Association were adopted. Under the new articles of Association each member of the Company was given voting rights in proportion to his share of the paid up capital of the Company in contradistinction to the voting rights given to each member by the old Articles of Association irrespective of his share of the paid up capital of the Company. As a result of the adoption of the new Articles of Association the Company was converted into a Private Limited Company and hence the addition of the word Private in the name of the Company. Originally there were seventeen members of the Company and they were divided into two groups one group consisting of nine members and the other group consisting of the remaining eight members. The nine members who formed one group were in a position to control the affairs of the Company if the voting rights remained as provided in the old Articles of Association. Their voting strength was however affected by the adoption of the new Articles of Association since their share in the paid up capital of the Company was less than the share of the remaining members in the paid up capital of the Company. These members of the Company therefore filed a petition in the then High Court of Saurashtra under sections 397 and 398 of the Companies Act 1956 contending inter alia that the extraordinary general meeting of the Company held on 5th August 1951 at which the new Articles of Association were adopted was not a validly convened meeting nor was it validly held and conducted and that the resolutions passed at the meeting were therefore illegal and void. According to these members to whom I shall refer as petitioners for the purpose of this judgment the special resolutions passed at the extra-ordinary general meeting of the Company held on 5th August 1951 being illegal and void the new Articles of Association were not adopted by the Company and the Company continued to be governed by the old Articles of Association. The necessary corollary of this argument was that the voting rights of the members of the Company remained unaffected and e
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