BISWANATH PRASAD KHAITAN Vs. NEW CENTRAL JUTE MILLS CO LTD
HIGH COURT OF CALCUTTA
BISWANATH PRASAD KHAITAN
NEW CENTRAL JUTE MILLS CO LTD
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(1.) THIS is a suit for an injunction restraining the defendants from holding the extraordinary general meeting of March 31, 1960 and also from implementing or giving effect to any resolution which may be passed at the meeting and for a further declaration that the resolutions mentioned in paragraph 12 of the plaint are illegal, void and ultra vires the Articles of Association and the Companies Act, 1956.
(2.) NEW Central Jute Mills Company Ltd. , is a company incorporated under the Indian Companies Act, 1913. The share capital of the company, according to the plaintiff, consists of subscribed 33,000, 7 p. c. cumulative preference shares of Rs. 100/- each fully called up and 1282500 ordinary shares of Rs 10/- each fully called up. The company states that the ordinary shares are 17,10,000 and not as alleged by the plaintiff. The company at its annual general meeting on January 15, 1960 wherein the balance sheet and profit and loss accounts for the year ending March 31, 1959 were passed, elected directors and a dividend of Rs. 1. 50 np. per share (that is 15 p. c.) was declared and paid for the said year. By a notice dated March 7, 1960 an extraordinary general meeting of the company was convened to be held on March 31, 1960 to declare further dividends in respect of the year ending March 31, 1959. The proposed resolution is set out in paragraph 12 of the plaint. It reads:-
"resolved that a further dividend in respect of the year ended March 31, 1959 be and is hereby declared out of the General Reserve No. 1 at the rate of Re. 1. 50 np. per share (i. e. , 15 p. c. without deduction of income-tax) on ordinary shares payable to the shareholders whose names stand registered in the books of the company on March 31, 1960. "
(3.) IN paragraph 14 of the plaint the plaintiff challenges the notice as illegal and ultra vires on several grounds. The main grounds are:- (i) The dividends can be declared only at the annual general meeting. (ii) The extraordinary general meeting has no power of sanctioning any dividend. (iii) The final dividend in respect of the year ended March 31, 1959 was declared in the meeting dated January 15, 1960, and at the said meeting the shareholders finally approved and passed the dividends recommended. (iv) The balance sheet ending March 31, 1959 was duly passed at the annual general meeting dated January 15, 1960 and that it is not competent for the company and/or its directors and/or the management to declare a fresh dividend in addition to those already declared and/or to change the figures already stated in the balance sheet. (v) The powers of the company in respect of the declaration of dividend cannot be used for speculative transactions and that the convening of the extraordinary general meeting and the attempt to declare the said dividend are in furtherance of the fraudulent objects of forcing up the market value of the shares; and (vi) The only body competent to recommend dividend for the year ended March 31, 1959 was the Board of Directors prior to the general meeting dated January 15, 1960 and the only body competent to sanction such dividend was the shareholders as on the date of the general meeting dated January 15, 1960 and finally the explanatory statement given with the notice was misleading and incorrect and not in conformity with the provisions of law and the material facts answering the proposed resolution have not been stated in the explanatory statement.;
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