S.K.Mukherjea, J. - (1.) This is an application in a representative action by a shareholder for an injunction restraining the respondent company, Swadeshi Cotton Mills Co. Ltd., and its directors from holding any meeting pursuant to a notice dated September 14, 1970, or from passing any of the resolutions set out in the said notice or from giving effect to the resolutions, if passed.
(2.) The history of the litigation may be briefly indicated. On January 29, 1970, a notice was given by the secretary of the respondent-company intimating that a general meeting of the company would be held on February 27, 1970, to consider and if thought fit to pass the following resolution among others. "Resolution No. 1.--Resolved that subject to the necessary approval of the Central Government being obtained pursuant to the provision of Section 372 and all other applicable provisions, if any, of the Companies Act, 1956, the company hereby sanctions investment by it in the shares of the Swadeshi Polytex Ltd., Kanpur, to the extent of the aggregate face value of Rs. 1 crore by way of subscribing and/or purchasing to the extent of 10,00,000 equity shares of the value of Rs. 10 each at par on such terms and conditions as the board of directors think fit notwithstanding the fact that the investment in the shares of the said Swadeshi Polytex Ltd. exceeds 10 per cent. of the subscribed capital of the said Swadeshi Polytex Ltd. and shall exceed 30 per cent. of the subscribed capital of this company and the board of directors of the company be and are hereby authorised to do and/ or cause to be done all such acts, deeds or things as they may think expedient for the purpose. The explanatory statement annexed to the said notice stated :" "The company had received a letter of intent from the Government of India for establishment of a new undertaking for the manufacture of polyester fibre. As a considerable amount of capital will have to be raised it was considered expedient to promote a new company.........Accordingly a company under the name and style of Swadeshi Polytex Company Ltd. is being incorporated. Considering the future prospects and the profitability of the company, Swadeshi Polytex Ltd., it is considered desirable that this company should invest liberally in the shares of the aforesaid company. It is proposed to acquire equity shares to the extent of the aggregate value of Rs. 1 crore in the new company aforesaid."
(3.) The petitioner instituted a suit against the respondent-company and its directors for a permanent injunction restraining the respondents from holding any meeting pursuant to the said notice and from passing the resolutions mentioned in the said notice on the ground that the notice did not disclose material facts. On February 26, 1970, on an application moved ex parte, Mr. Justice, S.C. Ghose, passed an order of injunction restraining the respondents from giving effect to any resolution that might be passed pursuant to the said notice. The resolutions in question were passed at a meeting held on February 27, 1970. The application was finally disposed of by Ghose J. by an order dated September 7, 1970, By the said order, the directors of the respondent-company were restrained from acting on the resolution No. 1 until the same was confirmed or approved at a meeting properly notified. The said order of injunction was issued by the learned judge on the ground that the explanatory statement did not disclose a material fact, viz., that the offer contained in the letter of intent had lapsed on January 24, 1970, and was no longer in force when the notice was issued.;