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MADRAS HIGH COURT
BALAKRISHNA AYYAR
S.Ramaswami Chettiar
Versus
Jai Hind Talkies (Paramakudi) Ltd. and others
O.P. No. 218 of 1954 (Applns. Nos. 2452 2473 and 3110 of 1955)
Decided On : 1 December, 1955
COMPANIES ACT - S. 153-C - PETITION UNDER - ADVERTISEMENT - FORM NO. 2 - NOTICE - INSUFFICIENT TIME AND PARTICULARS - CONSENT ORDER - VALIDITY - COMPROMISE - AUTHORITY OF COUNSEL - RATIFICATION.
Fact of the Case:
Jai Hind Talkies, a limited liability company, faced internal disputes among its shareholders and directors. A petition was filed under Section 153-C of the Companies Act, 1913, seeking the removal of certain directors, appointment of an administrator, amendment of the Articles of Association, and other reliefs. The notice of the petition was published in the Fort St. George Gazette and two newspapers, but the time and particulars provided in the notice were insufficient.
Finding of the Court:
The court found that the notice of the petition was defective in two respects: (1) it did not provide the requisite fourteen days' notice as required by Rule 14 of the Original Side Rules, and (2) it omitted to mention the specific reliefs sought in the petition, as required by Form No. 2 of the Original Side Rules. The court also held that the order passed by the trial judge was a consent order, as it was explicitly stated in the order that it was passed by consent after discussion with the learned counsel on both sides.
Issues: 1. Whether the notice of the petition was sufficient in terms of time and particulars? 2. Whether the order passed by the trial judge was a consent order? 3. Whether counsel had the authority to enter into a compromise on behalf of their clients? 4. Whether the compromise was ratified by the clients?
Ratio Decidendi: 1. The court held that the notice of the petition was defective as it did not provide the requisite fourteen days' notice and omitted to mention the specific reliefs sought in the petition. The court relied on Rule 14 of the Original Side Rules and Form No. 2 of the Original Side Rules to support its findings. 2. The court held that the order passed by the trial judge was a consent order, as it was explicitly stated in the order that it was passed by consent after discussion with the learned counsel on both sides. The court noted that the statement in the order was conclusive and could not be contradicted. 3. The court held that counsel did not have the authority to enter into a compromise on behalf of their clients, as the vakalat filed by them did not confer such authority. The court relied on the principles laid down in Jagapati Mudaliar v. Ekambara Mudaliar, Thenal Ammal Iv. Sokkammal, and Sarath Kumari Dasi v. Amulyadhan to support its finding. 4. The court held that there was no ratification of the compromise by the clients, as the letter relied upon by the other side did not mention that the order passed on 29-3-1955 was passed by consent.
Final Decision: The court allowed the application filed by the shareholders who were not parties to the original petition, set aside the order passed by the trial judge, and allowed them to contest the petition. The court also appointed a new administrator in place of one who had resigned and gave directions for the management of the company.
ORDER :- In September 1946, Kesavaraman Chettiar along with some others as partners was running a talkie house in Paramakudi called Jai Hind Talkies. On 11-6-1951 the business was converted into a limited liability company. The shares were each of the face value of Rs. 2,000. 152 shares were issued of which 144 were subscribed. Kesavaraman Chettiar held eight snares.
Article 13 of the Articles of Association of the company provides that the qualification of a director shall be the holding of at least five shares in the company registered in his name. Article 15 provides that Kasavaraman Chettiar shall be the managing director.
Under Article 16 the remuneration of the managing director is fixed at Rs. 200. per month with an option to the directors, subject to the approval of the general body, to pay additional remuneration to the managing director.
Art. 17 provides that the whole affairs of the company shall, subject to the control and direction of the Board of Directors, be managed by the managing director. Art. 18 provides that Kasavaraman Chettiar shall be the ex-offlcio director of the company and he shall not be subject to retirement by rotation.
2. Dissensions, however, soon broke out inside the company. In 1952 Parvathammal and some others who held shares in the company filed O.P. No. 101 of 1952 for its being wound up. They also filed another petition, O.P. No. 305 of 1952, in which they prayed for various reliefs :
(a) for an order removing Kesavaraman Chettiar and three others from the management of the company and the directorate,
(b) for the appointment of an administrator to take charge of and conduct the affairs of the company,
(c) for calling a general body meeting,
(d) for the appointment of an auditor to scrutinise the accounts of the company and prepare a balance sheet, and
(e) for an amendment of the articles of the company and deletion of Art. 18.
On 2-3-1953 Ramaswami Gounder, J. passed an order dismissing O.P. No. 101 of 1952, so far as O.P. No 305 of 1952 is concerned, he appointed a commissioner to call for a general body meeting of the shareholders of the company for two purposes : (1) for the alteration of the articles of association, if any, and (2) for elections to the board of directors. He further ordered that two of the existing directors should resign in order to ensure that only three of the old directors would continue while fresh elections would be held for the place of four directors.
Mr. Seshan, an advocate of Mathurai was appointed commissioner for the purpose. The commissioner held a meeting on 10-5-1953 and at that meeting four directors were elected, but no amendment of the Articles of Association could be passed for lack of the requisite majority.
3. On 28-7-1953 Ramaswami Gounder, J. passed an order in which he declined to remove Kasavaraman Chettiar from the office of managing director and confirmed the proceedings of the meeting held by the Commissioner on 10-5-1953. Dissensions, however, still continued. The managing director called for a meeting of the directors on 31-10-1953, but the newly elected directors did not attend on the ground that the date did not suit them.
On 2-1-1954 the newly elected directors called for a meeting of the directors on 6-1-1954, but Kesavaraman Chettiar and those who supported him did not attend the meeting on the ground apparently that a meeting of the directors could be properly called only by the managing director.
4. On 19-8-1954 the newly elected directors and twelve other shareholders, making in all sixteen, filed a petition, O.P. No. 218 of 1954, under S. 153-C, Companies Act
(a) for the removal of Kesavaraman Chettiar, Ramachandran Chettiar and Kannuswami Chettiar from the management of the company.
(b) for the appointment of an administrator to take charge of the affairs of the company,
(c) for an amendment of the Articles of Association of the company by deleting Arts. 15, 16 and 18 and by amending Art. 13 by lowering the share qualification of the d
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