Case: R. Rangachari Vs. S.Suppiah & Ors

UNTWALIA J.1. The question which falls for our determination in this appeal by special leave is as to what is the meaning and scope of section 186 of the Companies Act, 1956, hereinafter called the Act. For the determination of the said question it will suffice to state only a few facts from the judgment of the Madras High Court. There were two managing directors of Century Flour Mills Ltd., 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, 1974, certain shareholders of the company including respondents 1 and 2 lodged a requisition under section 169 of the Act for the calling of an extraordinary general meeting of the company for removal of Govindaswamy. Certain other shareholders lodged a similar requisition for removal of Sithambaram from the post of managing director. Both the requisitions were considered by the board of directors, in their meeting held on August 19, 1974. As per the requisitions, they called an extraordinary general meeting of the company to be held on September 14, 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 factions belonging to the two groups of the managing directors. Apprehending very many difficulties and troubles in the holding and the conduct of the meeting on September 14, 1974, respondents 1 and 2 filed an application 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 September 14, 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 respondents 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 hold or conduct the meeting. In other words, the learned judge was of the opinion that the court even without ordering a meeting of the company to be called could appoint a person to be the chairman of 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 dismissed the application filed by respondents 1 and 2. O. S. Appeal No. 64/1974 was filed in the High Court under clause 15 of the Letters Patent against the order dated September 11, 1974, of the learned 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 September 14, 1974. It appears that in spite of the service of the order dated September 12, 1974, on September 13, the meeting was held on September 14, 1974. CMP No. 10935/1974 was taken out in the form of a judges summons under rule 9 of the Companies Court Rules, 1959, to declare the meeting held on September 14, 1974, as void and the resolutions passed therein as illegal and inoperative. The said appeal and the CMP along with other CMPs which are not necessary to be referred to in this judgment were heard by a Bench of the High Court presided over by the learned Chief Justice. The Bench allowed CMP No. 10935/1974, put back the parties in the same position as they stood immediately prior to the service of the order dated September 12, 1974, and declared that the meeting held on September 14, 1974, and the resolutions passed thereunder would have no effect 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 meaning and scope of 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. 10935/1974 and in O.S. Appeal No. 64/1974, he filed special leave applications in this court seeking leave to file appeals in both the matters. By order dated August 29, 1975, a Bench of this court dismissed as withdrawn SLP No. 1156/1975, arising from the judgment and order dated March 11, 1975, of the High Court in CMP No. 10935/1974. Special leave was granted from the judgment and order dated March 17, 1975, of the High Court passed in O.S. Appeal No. 64/1974.2. Mr. S. V. Gupte, learned counsel for the appellant, urged the following 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 merely to appoint a chairman of the meeting without an order for the calling of the meeting.(2) 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, the Company Law Amendment Act of 1974 came into force on Feburary 1, 1975. The powers and jurisdiction of the court under section 186 stood transferred to the Company Law Board by the said amendment. The court, therefore, had no power to make an order under section 186 on March 17, 1975.3. 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 points 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 company other than an annual general meeting, in any manner in which meetings of the company may be called, or to hold or conduct the meeting of the company in the manner prescribed 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 modifying or supplementing in relation to the calling, holding and conducting of the meeting, the operation of the provisions of this Act and of the companys 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 deemed to constitute a meeting.(2) Any meeting called, held and conducted in accordance with any such order shall, for all purposes, be deemed to be a meeting of the company duly called, held and conducted. "4. 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 one 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 meeting.(ii) If for any reason it is impracticable to hold the meeting of the company in the manner prescribed by the Act or the articles.(iii) If for any reason it is impracticable to conduct the meeting of the company in the same manner.5. On the occurring of any one 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 " conducted " 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 conjunctive in the manner we have interpreted above. But, undoubtedly, the order under clause (a) has got to be for all the three purposes and not merely for holding or conducting of the meeting.6. 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 any 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.

Decision:
1[ds]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 points need any determination or answer and we express no opinion in respect ofCompany 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 any 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.