Appointment of sole selling agent without general meeting approval is void ab initio under Section 294 of the Companies Act.

1. This is a petition filed by Arantee Manufacturing Corporation, a partnership firm (plaintiffs) against Bright Bolts Private Limited (defendants) for an order that the arbitration agreement contained in Cl. 12 of the sole selling agency agreement, copy whereof has been annexed as Ex. F to the petition, be filed in this Court and for an order of reference referring all disputes and differences between the plaintiffs and the defendants relating to the sole selling agency agreement to the arbitration of an arbitrator or arbitrators in accordance with Clause 12 of the said agreement and for incidental reliefs.

2. The petition is filed in the following circumstances : The plaintiffs have alleged that the defendants, who are private limited company manufacturing nuts, bolts, screws and hardware, had negotiations with them for the purpose of appointing them as their sole selling agents for the goods manufactured by them throughout India, that between the beginning of October 1964 and 19th October 1964 - discussions took place between Mr. K. M. Mehta, a Director of the Defendants as representing the defendants and the two partners of the plaintiffs - firm, that during the course of the said discussions the terms and conditions on which the plaintiffs were to be appointed as sole selling agents were discussed, and that ultimately on or about 19th October 1964 the said negotiations were finalised and a concluded contract was arrived at between the parties as a result whereof the plaintiffs were appointed as sole selling agents' of the defendants for a period of 3 years commencing from 19th October 1964 for the whole of India in respect of the bolts and screws manufactured by the defendants on terms and conditions that were subsequently recorded in an agreement. The plaintiffs have further alleged that on 19th October 1964 in furtherance of the said agreement the plaintiffs deposited with the defendants a sum of Rs. 35,000/- as orally agreed upon between the parties and that the said deposit was accepted by the defendants and the defendants passed a deposit receipt in that behalf in plaintiffs' favour. The plaintiffs have further alleged that in furtherance of the said agreement and acting upon the same the defendants addressed letters to their several customers informing them that they had appointed the plaintiffs as sole selling agents for their goods and the customers were requested to make their inquiries directly with the plaintiffs to enable the plaintiffs to give the said customers their most competitive quotations. The plaintiffs have further alleged that draft advertisements were forwarded by the defendants to them, which the plaintiffs got published in newspapers such as Times of India, Bombay Samachar and Janmabhumi and that the said advertisements contained statements that the defendants had appointed them as their sole selling agents. It is further alleged by the plaintiffs that round about the Divali of 1964 they got their greetings cards printed, which contained statements to the effect that the plaintiffs were the sole selling agents of the defendants for all over India and that they also got calendars and diaries for the year 1965 printed which contained similar statements and that in spite of copies of the greeting cards and calendars and diaries having been sent to the defendants, no objection was at any time raised by the defendants to the statements contained in these greeting cards, calendars and diaries. It is further alleged that in respect of the advertisements which were got published by the plaintiffs they forwarded debit notes in respect of half if such costs to the defe