A ANANTALAKSHMI AMMAL Vs. INDIAN TRADES AND INVESTMENTS LIMITED
LAWS(MAD)-1952-4-19
HIGH COURT OF MADRAS
Decided on April 04,1952

A.ANANTALAKSHMI AMMAL Appellant
VERSUS
INDIAN TRADES AND INVESTMENTS LIMITED Respondents

JUDGEMENT

- (1.) THE question raised in these appeals is whether the co-option of K. N. Narayana Iyer and K. C. Chandy as directors in a company called the Amalgamated Coffee Estates Ltd. is valid. This company was formed with the object of carrying on business in coffee, tea, cardamom and other commodities and was incorporated under the Indian Companies Act in 1944. THE last annual meeting of the company was held on 31st January, 1949. Article 55 of the articles of the company provides that a general meeting shall be held within 18 months from the date of its incorporation and thereafter once at least in every calendar year at such time (not being more than 15 months after the holding of the last preceding general meeting) and place as the directors may decide. In accordance with this provision the last day for holding the annual meeting would be 30th April, 1950, but no meeting was held either on or before that date. Notices were issued by the management on 21st July, 1950, for an annual meeting to be held on 6th August, 1950. But this meeting, however, was cancelled on the ground that objections were taken to its legality. On 14th August, 1950, one of the shareholders, Mrs. A. Ananthalakshmi Ammal filed an application under Section 76(3) of the Indian Companies Act. Application No. 2813 of 1950, for an order that the court should call for a general meeting, and in the affidavit filed in support of that application it was alleged that no general body meeting had been called after 31st January, 1949, that the directorate consisted of only three members, V. R. Veeramani, A. S. Padmanabhan and B. V. Raman, while Article 75 provided for a minimum of four directors, that the affairs of the company were being grossly mismanaged and that accordingly the court should direct that a general body meeting should be convened for scrutinising the balance sheets, appointing auditors and electing "new directors in the vacancies caused". THEre was also a prayer that a commissioner should be appointed to convene the meeting and act as chairman therefore. A similar application was filed by one of the debenture-holders, Application No. 2814 of 1950, and therein Application No. 2826 of 1950 was made for an injunction restraining the management from co-opting injunction was issued. On 21st August, 1950, the management applied in Application No. 2954 of 1950 for cancelling the interim injunction and all the four applications were heard together by Krishnaswami Naidu, J., who passed an order on 26th September, 1950, that the annual meeting be called on 29th October, 1950, for discussing the balance sheet and profit and loss account for "election of directors in the places vacant" and to consider the auditor's report, and that notices of the said meeting be issued in the names of the two directors, V. R. Veeramani and B. V. Raman. He also appointed an advocate, Mr. Sanjeevi Naidu as commissioner to preside over the meeting. THE injunction petition was dismissed on the ground that in view of the orders passed in Applications Nos. 2813 of 1950 and 2814 of 1950 no orders were necessary. On 7th October, 1950, notices were issued for annual meeting on 29th October, 1950, in terms of the order dated 26th September, 1950. THE notices also stated that "two directors, A. S. Padmanabhan and B. V. Raman retire. THE vacancies created by their retirements have to be filled up. Of the retiring directors Mr. B. V. Raman offers himself for re-election." *
(2.) ON 9th October, 1950, two of the directors, Veeramani and B. V. Raman passed a resolution co-opting K. N. Narayana Iyer as a director in the place of one Dakshinamurthi who had resigned on 18th June, 1950. ON 11th October, 1950, V. R. Veeramani resigned his office as an elected director and was nominated by the managing agents as a director under Article 82A, and in the vacancy thus created K. C. Chandy was co-opted as a director. Both the co-options took place after the court had passed an order on 26th September, 1950, for holding the annual meeting on 29th October, 1950, and after notices thereof had actually been issued. Thus on 29th October, 1950, the position was that V. R. Veeramani had become a nominated director two directors had to be elected in the place of Padmanabhan and B. V. Raman whose terms of office had expired and K. N. Narayana Iyer and K. C. Chandy had been co-opted as directorsAt the annual meeting held on 29th October, 1950, when the subject of "Election of directors in the places vacant" was taken up disputes arose as to the number of vacancies which are available to be filled. ON behalf of Mrs. Ananthalakshmi Ammal it was contended that the expression "places vacant" would include the maximum number of directors that could be elected under Article 75 and that should be determined by the general body that further the co-options of K. N. Narayana Iyer and K. C. Chandy were invalid. The management contended that the election should be limited to the two vacancies mentioned in the notice and that the co-options of Narayana Iyer and K. C. Chandy were invalid. The management contended that the election should be limited to the two vacancies mentioned in the notice and that the co-options of Narayana Iyer and K. C. Chandy were valid. In this conflict of opinion it was decided to adjourn the meeting and obtain from the court a clarification of the order dated 26th September, 1950. Application No. 4025 of 1950 was then filed by Mrs. Ananthalakshmi Ammal for that purpose and on that Krishnaswami Naidu, J., passed an order on 3rd November, 1950, that apart from the two vacancies mentioned in the notice there was also a vacancy as well. ON the question of the validity of the co-options he observed that it was unnecessary to go into the question in these proceedings Against this order the management filed O.S.A. No. 103 of 1950. Their contention being that as there was valid co-option in the place of Dakshinamurthi there were only two vacancies. Mrs. Ananthalakshmi Ammal filed O.S.A. No. 110 of 1950 claiming that V. R. Veeramani was the only director validly in office, that all the other places were vacant and that the shareholders had the right to fill the vacancies up to the maximum as provided under Article 75. Both these appeals were disposed of by the judgment of this court dated 9th February, 1951. Therein it was held that for the purpose of election of directors "in the places vacant" as provided in the order dated 26th September, 1950, it was necessary to determine the number of vacancies and that to decide that, it was necessary to decide whether the co-options were valid or not. The matter was accordingly remanded for decision on the validity of the co-options of K. N. Narayana Iyer and K. C. Chandy. There was also a direction that the court might order, at its discretion, addition of parties for the purpose of a satisfactory disposal of the points in disputeIn pursuance of this order of remand Applications Nos. 2813 of 1950 and 2814 of 1950 came for re-hearing before Krishnaswami Naidu, J. The two directors, the validity of whose co-option was at issue, Narayana Iyer and K. C. Chandy, were also impleaded as parties. The whole case was reheard and on 14th November, 1951, Krishnaswami Naidu, J., pronounced judgment upholding the co-option of K. N. Narayana Iyer and rejecting that of K. C. Chandy. It is against this judgment that the present appeals have been brought. In O.S.A. No. 120 of 1951 Mrs. Ananthalakshmi Ammal contends that the co-option of K. N. Narayana Iyer on 9th October, 1950, is invalid. In O.S.A. No. 15 of 1952 Mr. K. C. Chandy contends that his co-option on 11th October, 1950, is valid. These are the questions that fall to be determined in these appeals
(3.) IN O.S.A. No. 120 of 1951 Mr. Vasantha Pai, the learned advocate for the appellant contends that the co-option of Narayana Iyer on 9th October, 1950, was invalid because there was only one director who was entitled to act on that date and that the power to co-opt could not be exercised when there was no board of directors competent to act under Article 75 that in any event such a power could not be exercised after an annual meeting had been called that at any rate on the facts of the present case such a power could not be exercised as the court had ordered on 26th September, 1950, that the shareholders should elect the directors in the vacancies at an annual meeting to be 1950, did not comply with the requirements of Article 99 of the articles of the company. It was further argued that even if the power to co-opt could be validly exercised on 9th October, 1950, it was not in fact so exercised as the co-option was made not in the interests of the shareholders but of the management. The management controverts the soundness of these contentionsThe position that the power to co-opt directors comes to an end when once an annual meeting is convened, is not sought to be supported by anything in the Companies Act or in the articles of the company. Nor is any authority cited in support of it. We have no hesitation in rejecting it. Nor is there any substance in the argument that the order of the court dated 26th September, 1950, directing that the annual meeting be convened for filling up vacancies has the effect of extinguishing that power. Though interim injunction was issued against co-option in Application No. 2826 of 1950 on 18th August, 1950, that became dissolved on the dismissal of that application on 26th September, 1950. It is true that the order of dismissal was made not on the merits but in view of the orders passed in Applications nos. 2813 of 1950 and 2814 of 1950 and it must have been assumed that all the places would be filled by election, at the annual meeting, on 29th October, 1950. This circumstance, though material on the question whether the exercise of power on 9th October, 1950, and 11th October, 1950, was bona fide or not, does not operate to deprive the management of its powers under Article 81. The objection based on Article 99 that the resolution dated 9th October, 1950, was not signed by all the directors but only by two of them must also be rejected inasmuch as no contention is raised by the management that the co-option of K. N. Narayana Iyer, if not valid under Article 81 could still be upheld as one passed in circulation under Article 99;


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