FIRM AL AR ARUNACHALAM CHETTIAR Vs. KALEESWARAR MILLS LTD

JUDGEMENT

(1.) THIS is a petition filed under Article 228 of the Constitution for a writ of mandamus or any other appropriate writ or order, directing the respondents to forbear from enforcing in any manner the resolution passed by respondents 2 to 9 on 7th April 1956. There was a prayer for a similar writ in regard to the convening of the annual general body meeting of 29th June 1956; but we are leaving that out of consideration, because that date is now long past, and no meeting took place on that date. The petitioners are a firm of Al AR. Arunachalam Chettiar represented by four partners whose names are set out in the petition. The first respondent is the Kaleeswarar Mills Ltd. , Colmbatore, and respondents 2 to 9 are its present directors. The first respondent-Mills was incorporated as a limited liability company in 1903 with the object of carrying on the business of spinning and weaving of cotton yarn and cloth. In consideration of the services rendered by the petitioner firm in the promotion of the company, it was then agreed, and it was also put into the memorandum of Association as Clause 6, which runs thus:

(2.) THAT continued till March 1954, when certain important changes were introduced in the management of the affairs of the company. All that is recorded in the minutes of the proceedings of the Board of Directors held on 20th March 1954. It took note of the fact that the financial position of the Mills was unsatisfactory and that the Mil's was not working for more than fortnight resulting in a huge loss to the mills, as also the attachment of the properties of the mills by the Income-tax Department, and the further-fact, that the mills could not start work without adequate finance raised for that purpose. The local agent, Kalalraja Chettiar, withdrew from his office for a period of 2 years, agreeing not to exercise during the period of his leave any of the powers, authority and duties pertaining to the office of the local agent though he was permitted to continue as the ex officio director of the company. It was further resolves that the offer of Sri P. S. S. Somasundaram Chettiar, the adopted son of the said Sathappa Chettiar, to advance or to procure the advance of 15 lakhs of rupees to the company on the simple mortgage of the assets of the mills was accepted and he was appointed as the General Manager of the company and was entrusted with the whole administration and the management of the affairs of the mills, subject, of course, to the control and directions of the Board of Directors for a period of two years or until the loan to be advanced or the advance of which is procured by him is repaid with interest. The result was that in March 1954 the petitioners' firm as well as their local acent, kalairaja Chettiar, a member of that firm, "withdrew from their managing agency and agreed to vest the entire management of the mills in the hands of somasundaram Chettiar as the general manager, because he agreed to finance the mills and put it into working order. Accordingly, Somasundaram Chettiar was in full management and control of the affairs of the mills not only for the period of two years mentioned in the resolution, but he continues to hold that office down to this date.

(3.) WHILE so, after the coming into force of the new Companies Act on 1st April 1956, and on the basis of some legal opinion which the company is said to have obtained as to the definition of "managing agent" in Section 2 (25) of that Act, the board of Directors met on 7th April 1956 and passed a resolution to this effect: resolved to record that with the coming into force of the Indian companies Act, 1956, the Secretaries and Bankers of the Company have ceased to be entitled to the office of Secretaries and Bankers of the company, and that accordingly the said office has become vacant by operation of law on and from 1st April 1956. That as a consequence, the power and authority of the local agent of the secretaries and tankers of the company have also ceased and determined and that the said office has become vacant on and from 1st April 1956 and that the ex officio director has vacated his office. " The Board of Directors have not taken any tangible action on that resolution. It is that resolution that has given rise to this writ petition. On the facts alleged in the writ petition itself, it would appear that the petitioners had withdrawn from their office as Managing Agents and surrendered the right of management to Somasundaram Chettiar as general manager in accordance with the resolutions of March 1954. Since then, the said Somasundaram Chettiar has been in actual management and control of the affairs of the company and not the managing agents. It may be that the rights as managing agents continue; but the point is that they are not in actual enjoyment of those rights. The prayer in the present petition is not for restoration to that office. It is to restrain the respondents from enforcing that resolution. But if the petitioners are not in possession of their office as Managing Agents, then, it is difficult to see how that resolution can be enforced against them. There can be no question. In pursuance of that resolution, of their being thrown out of the office hereafter. If so the object of this writ is reduced to one for a declaration that the resolution of 7th April 1956 was invalid and inoperative. No writ of mandamus can issue, the object of which is to declare the rights of the parties. If authority were needed for that proposition, it will be found in Naubat Rai v. Union of India, (A) (paragraphs 19 and 23) and in Dubar Goala v. Union of India, (B ). In the latter case, at page 498, it was observed: "further, it is inappropriate to grant a declaration in an application under article 226 that a particular contract is illegal and therefore unenforceable because it contains a provision for Begar Or forced labour. "