RAMKISSENDAS DHANUKA Vs. SATYA CHARAN LAW

JUDGEMENT

(1.) THIS is an appeal from a judgment and decree of the High Court at Fort William affirming on appeal a judgment and decree of the same Court in its original jurisdiction. The questions raised in the litigation relate to the validity of two resolutions of the respondent company Lothian Jute Mills Ltd. (hereinafter called "the company" ). By the first of these, resolutions (which were passed at a requisitoned general meeting of the company held on June 3, 1945), the appellants (other than S. P. Bose, who was one of the requisitionists), seven in number, were appointed to be directors of the company in addition to the four existing directors, one of whom was the respondent Dr. Satya Charan Law. By the second resolution it was resolved that the termination of the appointment of the managing agents of the company, Messrs. Andrew Yule and Co. Ltd. was to be recorded and in any event that they were thereby forthwith removed from their office. In the action the respondent Dr. Law on behalf of himself and all other holders of shares in the company attacked the validity of both resolutions and sought appropriate relief. The defendants were the eight; appellants and the respondent H. H. Commanding General Hiranya Shamsher Jung Bahadur Rana, another of the requisitionists, who has taken no part in the proceedings. The ground on which the validity of both resolutions was attacked was that under the articles of association of the company they could only have been passed effectively as to No.1 by a special and as to No.2 by an extraordinary resolution whereas the majority by which they purported to be passed was admittedly insufficient for those purposes : and that the rights of the minority had been illegally infringed accordingly. At the trial Mcnair J. held that both resolutions were invalid; he made declarations to that effect and granted consequential injunctions. THIS decision was affirmed on appeal by a Court consisting of Derbyshire C. J. and Gentle J.

(2.) THE question as to the validity of resolution No.1 depends upon the true construction of certain of the articles of association of the company. THEse so far as relevant are as follows : Directors. 109. THE number of the directors shall not be less than three nor more than four 111. THE directors shall have power at any time and from time to time to appoint any person, other than a person who has been removed from the office of a director of the company under Article 127, as a director as an addition to the Board but so that the total number of directors shall not at any time exceed the maximum number fixed. But any director so appointed shall hold office only until the next following ordinary general meeting of the company and shall then be eligible for re-election. 112. THE qualification of a director, other than an ex-officio director, shall be the holding of, in his own name or jointly with any person whether beneficially or as a trustee for any company or person or otherwise, ordinary shares in the company of the nominal value of Rs. 5,000. Rotation of Directors. 121. At the first ordinary meeting of the company to be held in every year, one-third of the directors for the time being or, if their number is not three or a multiple of three, then the number nearest to one-third shall retire from office. 122. THE directors to retire in every year shall be those who have been longest in office since their last election, but as between persons who became directors on the same day those to retire shall (unless they otherwise agree among themselves) be determined by lot. 123. A retiring director shall be eligible for re-election. 125. If at any meeting at which an election of directors ought to take place the places of the vacating directors are not filled up, the meeting shall stand adjourned till the same day in the next week at the same time and place, and, if at the adjourned meeting the places of the vacating directors are not filled up, the vacating directors or such of them as have not had their places filled up, shall be deemed to have been re-elected at the adjourned meeting. 126. THE company in general meeting may from time to time increase or reduce the number of directors, subject to the provisions of Sections 83 A (l) and 83 B (2);of the Act, and may alter their qualification and may also determine in what rotation such increased or reduced number is to go out of office. 127. THE company may by extraordinary resolution remove any director, whose period of office is liable to determination at any time by retirement of directors in rotation, before the expiration of his period of office and may by ordinary resolution appoint another person in his stead. . . . 128. Any casual vacancy occurring among the directors may be filled up by the directors. . . .

(3.) THE first of these to be considered is Article 126 itself. Two points in it fall to be noticed : (a) the power is expressed to be subject to Section 83a (1) of the Indian Companies Act which provides that "every company shall have at least three directors"; and (b) the power extends to altering the qualification and making a change in the order of rotation of the increased or reduced number. Now if, as the High Court has held, Article 126 only allows an ordinary resolution to operate between the limits of four and three prescribed by Article 109, the following consequences would result: (a) THE reference to Section 83a (1) would, as the articles stand, be unnecessary. THE reason of this is that if, according to the argument, the minimum of three laid down by Article 109 can only be altered by a special resolution, it could not in any event be altered by an ordinary resolution which is the kind of resolution with which Article 126 is dealing, (b) THE power to alter qualification and change the order of rotation, if, as Article 126 provides, it is to be exercised by ordinary resolution, must involve a departure from the provisions of Articles 112, 121 and 122. Those articles are not expressed to be "subject to Article 126" nor are these powers in Article 126 expressed to be given "notwithstanding anything in Articles 112, 121 and 122. " Some such words must therefore be implied in one place or the other in order to remove the inconsistency. THE omission to make such cross-references as may be required to reconcile two textually inconsistent provisions is a common defect of draftsmanship. THEre is thus no insuperable difficulty in reconciling Article 109 with Article 126 either by implying in the former some such opening words as "subject to Article 126" or implying in the latter some such opening words as "notwithstanding anything contained in Article 109. "