R. Rangachari v. S. Suppiah & Ors.

UNTWALIA, J. The question which falls for our determinatlon in this appeal by special leave is as to what is the meaning and scope of s .. 186 of the Companies Act, 1956 hereinafter called the Act. For the determination of the said question it will suffice to ,;tatc only a few facts from the judgments of the Madras High Court. There were two . Managing Directors of Century Flour Mills Lrd.-respondent no. 3. Their names are S/Shri P. Govindaswamy and S. P. Sithambaram. Both of them had been duly appointed as such in the year 1972. They subsequently fell out. In August, 197 4 certain shareho~ders of the compan;y including respondents 1 and 2 lodged a requisition under section 169 of the Act for the calling of an extraordinany general meet­ /ing of the company for removal of Govindaswamy. Certain other share­ holders lodged a similar requisition for remov~I of $ilhambaram from the post of Managing Director. Both the requisitions were considered by the Board of Directors in their meeting held on 19-8-1974. As per the requisitions, they called an extraordinary general meeting of the company to be held on 14-9-1974. The meeting was directed to be held at the residence of one of the shareholders of the company instead of its registered office. The shareholders were divided into two fac­ tions belonging to the two groups of the Managing Directors. Appre­ hending very many difficnlties and troubles ip the holding and the con­ duct of the meeting on 14-9-1974, respondents 1 and 2 filed an appli­ cation under section 186 of the Act, Company Petition No. 85/1974, in the Madras High Court. They prayed to the ·Court to appoint an Advocate-Commissioner as Chairman of the meeting to be held on 14·9-1974 so that the proceedings may be conducted in a regular manner. The only respondent impleaded in the said petition was the company which filed a counter-affidavit to resist the prayer of respon- · dents 1 and 2. A learned single Judge of the High Court took the view that power under section 186 of the Act could be exercised even where a meeting had already been called, but it was impracticable to ho!d or conduct the meeting. In other words, the learned Judga was of the opinion that the Court even without ordering a· meeting of the company to be called could apooint a person to be the Chairman or the meeting. But on appreciation .of the facts of the case in the light of certain decisions of the High Courts, he came to the conclusion that it was not impracticable to hold or conduct the meeting and hence dis­ missed the application filed by respondents 1 and 2. 0. S. Appeal No. 64/1974 was filed in the High Court under clause 15 of the Letters Patent.against the order dated 11-9-1974 of the learn­ ed single Judge. By an order made on September 12, 1974 a Bench of the High Court stayed the convening of the meeting called to be held on 14-9-1974. It appears that in spite of the service of the order 3-L127SCI/75 dated 12-9-1974 on September 13, the meeting was held on 14-9·1974. CMP No. 10935/1974 was taken ouf in the form of a Judges' summons under Rule 9 of the Company Code Rule, 1959 to declare the meeting held on 14-9-1974 as void and the resolutions passed therein as illegal and inoperative. The said appeal and the CMP alongwith other CMPs which are not necessary to be referred to in this judgment were heard by a Bench of the IDgh Court presi~ over by the learned Chief Justice. The Bench allowed CMP 10935/1974, put back the parties in the same position as they stood immediately prior to the service of the order dated 12-9-1974 and declared that the meeting held on Sep· tember 14, 1974 and the resolutions passed thereunder would have no e!Iect whatsoever. By a separate judgment, Appeal No. 64/1974 was also allowed by the Division Bench. It agreed with the single Judge as regards the meanin!J and scope o( section 186 of the Act but differed from him on the merits of the case. They appointed an Advocate of the Court as the Advocate-Chairman to hold and conduct the meeting and directed that the meeting would take place at the premises of the registered office of the Company. , The sole appellant in this appeal is a shareholder of the company. Feeling aggrieved by the orders of the Division Bench of the High Court in CMP No. 10935/74 and in OS Appeal No. 64/1974 he filed special leave applications in this Court seeking leave to file appeals in both the matters. By order dated 29-8-1975 a Bench of this Court dismissed as withdrawn SLP No. 1156/1975 arising from the judgment and order dated 11-3-1975 of the High Court in CMP No. 10935/ 1974. Special leave was granted from the judgment and order dated 17·3-1975 of the High Court passed in OS Appeal No. 64/1974. Mi. S. V. Gupte, learned counsel for the appellant urged the follow­ ing three points in support of the appeal: ( 1) That power under section 186 of the Act could not be exercised until it was found that it was impracticable to call a meeting of the Company other than an annual general meeting and to hold and conduct the meeting in the manner prescribed by the Act or the Articles of the company. The Court had no jurisdiction mere- (2) . ly to· appoint a Chairman of. the meeting without an· order for the calling of the meeting. That the High Court was wrong in holding that it was impracticable to hold or conduct the meeting of the company which had already been called. (3) That during the pendency of the appeal in the High Court, Company Law Amendment Act of 1974 came into force on 1-2-1975. The oowers and jurisdiction of court under section 186 stood transferred to Com­ pany Law Board by the said amendment. The court, therefore, had no power to make an order under sec­ tion 186 on 17-3-1975. ., 8 R. RANGACH;ARI v. s. SUPP!AH (Untwalia, J,) 801 Since in our opinion the first point urged on behalf of the appellant is well founded and has to be accepted as correct, neither of the other two p@ints need any determination or answer and we express no opinion in respect of them. · Section 186 of the Act as it stood at the relevant time reads as follows: "Power of Court to order meeting to be called.-( 1) If for any reason it is impracticable to call a meeting of a com­ pany, other than an annual general meeting in any manner in which meetings of the companlY may be called, or to hold or conduct the meeting of the company in the manner pres- cribed by this Act or the articles, the Court may, either of its own motion or on the application of any director of the company, or of any member of the company who would be entitled to vote at the meeting,- ( a) order a meeting of the company to be called, held and conducted in such manner as the Court ·thinks fit; and (b) give such ancillary or .consequential directions as the Court thinks expedient, including directions modify­ ing or supplementing in relation to the calling, hold­ ing and conducting of the meeting the operation of the provisions of this Act and of the company's articles. Explanation-The directions that may be given under this sub-section. may include a direction that one member of the company present in person or by proxy shall be d_eemed to constitute a meeting. (2) Alli)' meeting called, held and conducted in accord­ ance with any such order shall, for all purposes, be deemed to be a meeting of the company duly called, held and con­ ducted." It corresponds with slight variation to section 79(3) of the Companies Act, 1913 and section 135 of the English Companies Act, 1948. The plain meaning of section 186 is that the court may order a meeting of the company to be called, held and conducted in such manner as the court thinks fit in any or more of the following contingencies. (i) If for any reason it is impracticable to call a meeting of the company other than an annual general meet­ ing. (ii) If for any reason it is impracticable to hold the meet­ ing of the company in the manner prescribed by the Act or the Articles. (iii) If for any reason it is impracticable to conduct the H 1beeting of the company in the same manner: On the occurring of any or more of the said contingencies the court has to order the calling of a meeting of the company and its holding and conducting in such manner as the court thinks fit. The use of the word 'and' between the words 'held' and 'conduct' in clause (a) of sub-section ( 1) clearly shows that the court has no power to make any order regarding the holding and conducting of any meeting which has already been called without ordering a meeting of the company to be called in place of the meeting already called. If an order under clause (a) has been made such ancillary or consequential directions as the court thinks expedient could be given under clause (b), including a direction within the meaning of the explanation appended thereto. The language of sub-section (2) further fortifies the above interpretation of sub-section ( 1) and makes any meeting called, held and conducted in accordance with an order under sub-section ( 1) to. be a meeting of the company duly called, held and conducted. The use of the word ·or' in the first part of sub-section ( 1) may be disjunctive or con­ juctive in the manner we have interpreted above. But undoubted'v the order under clause (a) has got to be for all the three purposes and not merely for holding or conducting of the meeting. In Company Petition No. 85/ 1974 no prayer was made to the Court for an order for the calling of a meeting of the Company nor has an.y such order been made by the High Court in appeal. In our opinion, therefore, the application as presented in the Court under section 186 of the Act was not maintainable. No prayer was ever made to the Court for an order that a meeting of the company be called. A fresh application, it goes without saying, if necessary, can be made under section 186 of the Act. But then it will have to be made to the authority mentioned in the amended section. For the reasons stated above, we allow this appeal, set aside the judgment and order of the High Court passed in OS Appeal No. 64/1974 and dismiss Company Petition No. 85/1974 as being not maintainable. We shall direct the · parties to bear their own costs throughout. P.B.R. Appeal allowed. • + 'fl y I