High Court Of Himachal Pradesh
R.L.KHURANA
APPLE VALLEY RESORT - Appellant
Versus
H.P.STATE ELECTRICITY BOARD - Respondent
Civil Writ Petition No. 816 of 1996
Decided On : 09/04/2003
Director - Authority to institute action for and on behalf of the Company - Companies Act, 1956, Section 291 - Order 29, Rule 1 of the Code of Civil Procedure - The court discussed the authority of a Director to bring an action for and on behalf of a Company, referencing Companies Act, 1956, Section 291 and Order 29, Rule 1 of the Code of Civil Procedure. The court emphasized that individual Directors have only such powers as are vested in them by the Memorandum and Articles, and in the absence of specific authorization, a Director cannot bring an action on behalf of the company.
Fact of the Case:
The petitioner, a private limited company, sought writ, order, or directions for refund, quashing of illegal demand, and non-interference with electric supply. The petition was filed by an individual claiming to be a Director of the company, but there was no evidence of his authorization by the company.
Finding of the Court:
The court found that the individual filing the petition as a Director of the company was not authorized to do so, as there was no evidence of specific authorization by the company's Board of Directors.
Issues: The primary issue was whether a Director, in the absence of specific authorization, can bring an action for and on behalf of a Company.
Ratio Decidendi: The court held that individual Directors have only such powers as are vested in them by the Memorandum and Articles, and in the absence of specific authorization, a Director cannot bring an action on behalf of the company.
Final Decision: The petition was dismissed as the individual filing the petition as a Director was not authorized to do so, and there was no evidence of specific authorization by the company's Board of Directors.
R.L. Khurana, J.—Whether in the absence of a specific authorisation can a Director bring an action for and on behalf of a Company? is the primary question arising for determination in the present case.
2. The present writ petition has been directed by the petitioner Company through one Shri Arun Sharma, claiming to be its Director, seeking the issuance of the following writ, order or directions to the respondents— (i) Respondents be directed to refund a sum of Rs. 75,383 alongwith interest at the rate of 19.25% per annum with quarterly rests for value received; (ii) To quash the illegal demand raised by the respondents in its bill bearing No. 223085 dated 30.11.1995 whereby a sum of Rs. 5,27,024 in respect of SOP and Rs. 9,589 in respect of E/D have been demanded from the petitioner company with further directions to the respondents not to claim or raise any bill against the petitioner Company on account of alleged slow reading of metering equipment as per the alleged inspection conducted by the Executive Engineer (F/ S) in February, 1993; (iii) Respondents may be directed to refund the instalments already paid by the petitioner company from December, 1995 till April, 1996; and (iv) Respondents may be directed not to interfere with or disconnect in any manner the electric supply to the Unit of the petitioner company at village Mohal in District Kullu on the basis of illegal demand raised by them as detailed in para (ii) above.
3. It has been pleaded in para 1 of the writ petition as under— "That the petitioner-company is a private limited company incorporated under the Companies Act, 1955. The petitioner-company is running its business of hotelry on the National Highway in village Mohal, Tehsil and District Kullu. The Directors of the petitioner-Company are Indians. On the facts and circumstances enumerated hereinbelow, the petitioner company has been grossly wronged by the highly illegal and arbitrary acts of omission and commission of the Respondent-Electricity Board and therefore, it is entitled to file and maintain the present writ petition."
4. The petition has been signed by one Shri Arun Sharma. The affidavit in support of the petition has also been sworn in by the said Arun Sharma. Such affidavit reads— "Affidavit of Shri Arun Sharma son of Shri Madan Lal Sharma aged 33 years by occupation businessman C/o M/s. Apple valley Resorts Pvt. Ltd., Mohal Kullu, Distt. Kullu, H.R in support of Civil Writ Petition. 1, Arun Sharma, the above named deponent do hereby solemnly affirm and declare on oath that the accompanying writ petition has been drafted at my instance and under my instructions. The contents of paras 1 to 13 of the same are stated to be true and correct on the basis of official record of the Co. and contents of paras 14 to 15 of the same are stated to be true and correct on the basis of legal advice received from our counsel which in turn is relied upon. No part of the same is false and nothing relevant to the present query has been concealed therefrom, 2. I, further declare on oath that the contents of para 1 of above affidavit are true and correct to my personal knowledge. No part of the same is false and nothing relevant to the present query has been concealed therefrom. Signed and verified at Shimla on this the 21st day of May, 1996. Sd/-Deponent".
5. Be it stated at the very outset that there is nothing either in the pleadings or otherwise to show that Shri Arun Sharma is a Director of the petitioner-company and that he had been authorised and is competent to bring the present petition for and on behalf of the company.
6. Section 291 of the Companies Act, 1956, provides— "S. 291 General powers of Board—(1) Subject to the provisions of this Act, the Board of Directors of a company shall be entitled to exercise all such powers, and to do all such acts and things, as the company is authorised to exercise and do : Provided that the Board shall not exercise any power or do any act or thing which is directed o
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