IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.SASIDHARAN NAMBIAR THURSDAY, THE 14TH JULY 2011 / 23RD ASHADHA 1933 RSA.No. 418 of 2011() --------------------- AS.147/2006 of ADDITIONAL DISTRICT COURT (ADHOC), THRISSUR OS.374/2004 of I ADDL.SUB COURT, THRISSUR .................... APPELLANT/5TH RESPONDENT/5THE DEFENDANT ----------------------------------------------------------- E.A.BENNY, CHAIRMAN, THE ASSYRIAN CHARITIES KURIES LIMITED, RESIDING AT EMMATTY HOUSE, MISSION QUARTERS, THRISSUR - 680 001. BY ADV. SRI.V.CHITAMBARESH, SENIOR ADVOCATE SRI.T.C.SURESH MENON SRI.JIBU P THOMAS SRI.P.S.APPU SRI.A.R.NIMOD SRI.C.A.ANOOP SRI.MATHEWS RAJU RESPONDENT(S): RESPONDENTS 1 TO 4 & 6 TO 13/APPELLANT DEFENDANTS 1-4 & 6-13/ PLAINTIFFS : ----------------------------------------------------- 1. THE ASSYRIAN CHARITIES KURIES LIMITED, REPRESENTED BY ITS MANAGER, K.I.JOSE, RICE BAZAR, THRISSUR - 1. 2. A.R.VAREED, FORMER CHAIRMAN, THE ASSYRIAN CHARITIES KURIES LIMITED, ALLAPPADAN HOUSE, PARAVATTANI, THRISSUR - 5. 3. K.L.INASU, FORMER DIRECTOR, THE ASSYRIAN CHARITIES KURIES LIMITED, KALLIATH HOUSE, KURIACHIRA, THRISSUR - 6. 4. P.P.JOHNSON, FORMER DIRECTOR, THE ASSYRIAN CHARITIES KURIES LIMITED, MISSION QUARTERS, PADAVAN HOUSE, THRISSUR - 1. 5. K.V.PAVU, FORMER DIRECTOR, THE ASSYRIAN CHARITIES KURIES LIMITED, KIZHAKKUMPATTUKARA, KUNNATH HOUSE, THRISSUR - 5. 6. JACOB O.RAPHEAL, FORMER DIRECTOR, THE ASSYRIAN CHARITIES KURIES LIMITED, KAVALAKKAT OUNGAL HOUSE, AYYANTHOLE, THRISSUR - 3. 7. SABU JOSEPH, FORMER DIRECTOR, THE ASSYRIAN CHARITIES KURIES LIMITED, KONIKKARA HOUSE, MUKKATTUKARA, NELLANGARA, THRISSUR. 8. P.V.THIMOTHY, FORMER DIRECTOR, THE ASSYRIAN CHARITIES KURIES LIMITED, PORATHOOKKARAN HOUSE, KIZHAKKUMPATTUKARA, THRISSUR. 5 9. FRANCIS CHANDY JACOB, FORMER DIRECTOR, THE ASSYRIAN CHARITIES KURIES LIMITED, CHANDY HOUSE, SANANA MISSION ROAD, CHEMBUKKAVU, THRISSUR. 20. 10. C.R.VALSAN, CHAIRMAN, THE ASSYRIAN CHARITIES KURIES LIMITED, ST.JOHNS STREET, KURIACHIRA, THRISSUR. 6 11. JACKSON THOMAS, DIRECTOR, THE ASSYRIAN CHARITIES KURIES LIMITED, THETTAYIL HOUSE, NELLIKKUNNU, THRISSUR. 12. RAJU JOHN.M., DIRECTOR, THE ASSYRIAN CHARITIES KURIES LIMITED, SURVANA STREET, ANCHERY, THRISSUR. 13. JAMES C.JOSEPH, S/O.CHEERAMBAN JOSEPH, RESIDING AT MISSION QUARTERS, CHEMBUKKAVU VILLAGE, THRISSUR -1. ADV. SRI.V.RAMKUMAR NAMBIAR SRI.S.VINOD BHAT FOR R10-13 SRI.V.RAMKUMAR NAMBIAR FOR R10-13 SRI.R.D.SHENOY, SENIOR ADVOCATE FOR R10 TO R13 SRI.S.VINOD BHAT FOR R10 TO R13 SRI.P.B.KRISHNAN FOR R7-9 SMT.GEETHA P.MENON FOR R7-9 SRI.JIJO PAUL FOR R3 TO 5 THIS REGULAR SECOND APPEAL HAVING BEEN FINALLY HEARD ON 14/07/2011, ALONG WITH RSA NO. 538, 584 & 592 OF 2011 THE COURT ON THE SAME DAY PASSED THE FOLLOWING: M.SASIDHARAN NAMBIAR,J. -------------------------------------------------------------------- R.S.A.NOs.418, 538, 584 and 592 OF 2011 --------------------------------------------------------------------- Dated 14th July, 2011 JUDGMENT Appellant in R.S.A.418/2011 and 538/2011, is the fifth defendant and appellants in R.S.A.584/2011 and 592/2011 are defendants 1,3,4,6,8,9 and 10 in O.S.374/2004 on the file of First Additional Sub Court, Thrissur. Plaintiff is respondent No.10 in R.S.A.538/2011, respondent No.13 in R.S.A.418/2011, first respondent in R.S.A.584/2011 and respondent No.4 in R.S.A.592/2011. The suit was filed seeking a decree for declaration that the extra general meeting held on 20/3/2004 was invalid and the decision taken in that meeting is not valid and binding on the company or its share holders and also for a RSA.418,538,584 & 592/11 2 further declaration that the extra general meeting held on 2/4/2004 is valid and binding on the company and defendants 1 to 10 and for a permanent prohibitory injunction restraining defendants 1 to 10 from causing obstruction to the functioning of defendant No.11 as the Chairman and defendants 12 and 13 as the Directors of the company. Plaintiff would contend that on 10/2/2004 plaintiff sent a notice requiring the convening of extra general meeting, as provided under Section 169 of Companies Act. Though an extra general meeting was convened on 20/3/2004, notice dated 19/2/2004 was posted only on 28/2/2004 and therefore, there was no time for a 21 days as prescribed under the statute. Plaintiff met the Manager of the company and requested him to cancel the meeting convened on 20/3/2004 and to RSA.418,538,584 & 592/11 3 call for an extra general meeting with sufficient notice. Though they promised to cancel the notice and call a proper extra general meeting, the Managing Director and defendants 2 to 10, the directors made arrangement to convene the meeting on 20/3/2004 itself. It was alleged that it was to prevent the plaintiff from collecting proxy. Getting to know about the intention of the contesting defendants, plaintiff sent Ext.A4 notice on 6/3/2004 stating that if extra general meeting convened on 20/3/2004 is not cancelled and a proper meeting is not convened, plaintiff would be compelled to call an extra general meeting on 2/4/2004 as provided under Section 169(6) of the Companies Act. The defendants did not cancel the meeting convened on 20/3/2004. Though a meeting was convened on 20/3/2004, as RSA.418,538,584 & 592/11 4 there was no legal notice as provided under Section 171 of Companies Act, the meeting is bad in law and the decisions taken in that meeting are not valid and binding on the company or the shareholders. Hence plaintiff was compelled to convene an extra general meeting on 2/4/2004 in exercise of the powers under Section 169(6). It was contended that meeting convened by the defendants on 20/3/2004 is not a valid one and decisions taken in the meeting are therefore, invalid and pursuant to Ext.A4 notice, plaintiff convened extra general meeting on 2/4/2004 at Marthoma Girls High School at 11.30 p.m, by serving notice on the share holders under Ext.A8. The meeting was presided over by T.J.Thomas Master and various resolutions were passed. As per the resolutions, defendants 2 to 10 were removed RSA.418,538,584 & 592/11 5 from the Board of Directors. Defendants 11 to 13 were elected as Directors and they elected defendant No.11 as Chairman of the company. The decisions taken in that meeting was informed to the first defendant on 3/4/2004. They in turn intimated that they will not agree with the decision taken on 2/4/2004. In such circumstances, the suit was filed seeking a declaration that the extra general meeting held on 2/4/2004 is valid and binding on defendants 1 to 10 and also for a declaration that the meeting held and the decision taken on 20/3/2004 are not valid and binding on the company or the shareholders. 2. Defendants resisted the suit contending that the meeting convened on 20/3/2004 is valid and binding on the company and the shareholders. 21 days notice is not RSA.418,538,584 & 592/11 6 mandatory for convening an extra general meeting and it is only discretionary. The extra general meeting held on 20/3/2004 passed a resolution rejecting the request of the plaintiff. The plaintiff is not entitled to a declaration that the meeting convened on 20/3/2004 is not valid on the company or the share holders. Defendants have also contended that as claimed by the plaintiff, no extra general meeting was held on 2/4/2004 at Marthoma Girls High School and there was no notice to the share holders convening the said meeting and the envelopes sent by the plaintiff purporting to convene the meeting on 2/4/2004 contained only a slip and proxy format and did not contain any notice convening the meeting and hence no meeting could have been convened on 2/4/2004 and it was not convened RSA.418,538,584 & 592/11 7 also. Hence plaintiff is therefore not entitled to a declaration that the meeting held on 2/4/2004 and the decisions taken including election of defendants 11 to 13 as Directors or 11th defendant as the Chairman is valid and binding on the plaintiff. It was also contended that before extra general meeting held on 20/3/2004 defendants 10 to 13 instituted O.S.753/2004 and I.A.2611/2004 was filed therein seeking an order of temporary injunction restraining the convening of the meeting on 20/3/2004 and after hearing both sides, the petition was dismissed holding that 21 days notice is not mandatory to convene an extra general meeting under Section 169 of the Companies Act and the suit was filed, by the plaintiff at the instance of defendants 11 to 13 and he is not entitled to the decree sought RSA.418,538,584 & 592/11 8 for. 3. Learned Sub Judge on the evidence of PW1, Dws.1 to 5, Exts.A1 to A21 and B1 to B16 found that extra general meeting held on 20/3/2004 is void as the meeting was convened without prescribed notice as provided under Section 171 of the Companies Act. Learned Sub Judge found that though the notice for convening the meeting though dated 19/2/2004, were sent by certificate of posting only on 28/2/2004 and therefore, the meeting held on 20/3/2004 was without 21 days notice and hence it is void. Learned Sub Judge further found that when Additional District Judge was hearing the C.M.A filed by the plaintiff, challenging the dismissal of the application for an order of temporary injunction under Order XXXIX Rule 1 of Code of Civil Procedure, filed by him in RSA.418,538,584 & 592/11 9 the suit, it was submitted before the District Court that the envelopes sent by the plaintiff for convening the meeting on 2/4/2004, did not contain the notice. Therfore, Ext.B7 series of notices, the unopened envelopes received by the shareholders, were opened in open court . It was found that they did not contain the notice and contained only the proxy format and a slip requesting the share holders to send proxy to the plaintiff. Though plaintiff produced Exts.A15 and A16, the application submitted to the Headmistress and the receipt obtained for payment of rent, for booking the hall where the meeting was convened, the certificate did not contain seal of the school. It was also found that the Headmaster or the President of the Parent-Teacher's Association were not examined and plaintiff RSA.418,538,584 & 592/11 10 did not examine any person who attended the meeting or who presided the meeting and therefore, held that the alleged extra general meeting held on 2/4/2004 also is void. It was therefore, held that plaintiff is not entitled to the decree sought for. The suit was dismissed. 4. Plaintiff challenged the decree before Additional District court in A.S.147/2006. Though the suit was dismissed, as the finding with regard to the extra general meeting held on 20/3/2004 was against the defendants, defendants 1 to 10 filed A.S.137/2006 challenging the said finding. Learned Additional District Judge heard both the appeals together and by common judgment allowed A.S.147/2006 and dismissed A.S.137/2006. 5. Defendant No.5 filed R.S.A.418/2011 RSA.418,538,584 & 592/11 11 against the decree in A.S.147/2006. Defendants 1,3,4,6,8,9 and 10 filed R.S.A.584/2011 challenging the same decree. They also filed R.S.A.592/2011 against the decree in A.S.137/2006. Defendant No.5 filed R.S.A.538/2011 against the same decree in A.S.137/2006, which in turn was challenging only the finding of the learned Sub Judge that the meeting held on 20/3/2004 is not valid, based on their contention that 21 days notice as provided under Section 171 of Companies Act is only discretionary and not mandatory. But in view of the decision of the Apex court in M.S.Madhusoodanan v. Kerala Kaumudi Pvt. Ltd. (Judgment Today 2003 (6) SC 560) learned Senior counsel appearing for the appellant in R.S.A.538/2011 and the appellant in R.S.A.592/2011 did not press their RSA.418,538,584 & 592/11 12 challenge against the finding of the courts below on invalidity of the meeting held on 20/3/2004. In view of the decision of the Apex Court in M.S.Madhusoonanan's case (supra) appellants are not entitled to contend that 21 days time as provided under Section 171 is only discretionary and not mandatory. The requirement is mandatory. Hence the only dispute is with regard to the finding of the first appellate court that extra general meeting held on 2/4/2004 is valid and binding on the company and the defendants. 6. Appeals were admitted on the following substantial questions of law. 1) Has Lower Appellate Court erred in not finding that postal covers contained only proxy forms and not notice, as revealed from Exts.B7 series, opened as per the order in CMA RSA.418,538,584 & 592/11 13 119/2004. 2) Whether First Appellate Court was justified in granting a decree for injunction in favour of defendants 11 to 13, whose term would have ended, in view of Section 256 of the Companies Act, 1956, even if a valid meeting was convened on 2/4/2004. 7. Learned Senior Counsel appearing for the appellants, and the supporting defendants and learned Senior counsel appearing for the contesting respondent/plaintiff were heard. 8. Learned Senior counsel appearing for the appellants pointed out that though the learned Sub Judge had given specific reasons for holding that the extra general meeting held on 2/4/2004 was not valid and binding on the company or the share holders, while reversing that finding, the appellate court did RSA.418,538,584 & 592/11 14 not advert to those grounds and only on the ground that it is probable that notices for convening extra general meeting held on 2/4/2004 would have been enclosed in the envelopes, reversed the findings of the trial court and held that the extra general meeting held on 2/4/2004 is valid and binding on the company and the shareholders. Learned Senior counsel pointed out that Exts.B7 and B8 series of envelopes were produced before the trial court at the time when the application filed under Order XXXIX Rule 1 of Code of Civil Procedure was heard and Ext.B8 series were the envelopes, which when opened found that they did not contain notices convening of the meeting and Ext.B7 series unopened envelopes which were opened by District Judge in open court in the CMA and when they were opened in RSA.418,538,584 & 592/11 15 open court as seen recorded by the learned District Judge in the order in the CMA, did not contain notices convening the meeting and instead contained only the proxy format as well as the request to send the proxy formats to the plaintiff and on the evidence first appellate court was not justified in holding that it is probable that the case of the plaintiff that notices were also enclosed in the envelopes is correct. Learned counsel would point out that if a meeting was in fact convened, as claimed by the plaintiff, plaintiff could have examined any of the share holders who attended the meeting or who allegedly presided the meeting and in the absence of satisfactory evidence, first appellate court was not justified in interfering with the findings of the trial court. RSA.418,538,584 & 592/11 16 9. Learned Senior counsel appearing for the plaintiff/respondent argued that though Ext.B7 series of envelopes were opened by the District Judge while hearing the CMA, possibility of tampering with the envelopes by removing the notices before they were produced in court, cannot be ruled out and when Ext.A8 shows that notices were sent to all the shareholders, by certificate of posting and an extra general meeting was held on 2/4/2004 as stated in Ext.A6 notice, it cannot be believed that plaintiff will not enclose the notices for convening the meeting to the shareholders along with the proxy formats and no purpose will be served by withholding of the notices and in such circumstances, first appellate court was justified in finding that there was a valid meeting held on 2/4/2004. Learned Senior RSA.418,538,584 & 592/11 17 counsel also pointed out that Ext.A10 minutes book and Ext.A11 attendance register of the meeting held on 2/4/2004, establish that extra general meeting was held on 2/4/2004. Relying on Section 195 of the Companies Act, it was argued that it is to be presumed as seen in Ext.A10 that a meeting was held as recorded in Ext.A10, as it is a valid minutes book prepared in accordance with the provisions of the Act and in such circumstances, there was no necessity to examine any shareholder who attended the meeting and without examination of any share holders based on Exts.A10 and A11, it is to be found that extra general meeting was held on 2/4/2004 and 43 share holders participated in the meeting and in such circumstances, there is no reason to interfere with the finding of the first appellate court. RSA.418,538,584 & 592/11 18 Learned Senior counsel also pointed out that Ext.A12 notices which were sent to the share holders and returned back, unserved by the plaintiff were produced before the court and those envelopes were opened by the trial court at the time of recording the evidence and it was found that all those envelopes contained notices convening the meeting on 2/4/2004 and it further strengthen the finding of the first appellate court that a meeting was held on 2/4/2004. Learned Senior counsel appearing for the appellants pointed out that the presumption available under Section 195 is only if a minutes book was maintained as provided under Section 193 of Companies Act and when Ext.A10 shows that it does not contain the signature or initial on every page and also did not contain the dated signature at the end of the record RSA.418,538,584 & 592/11 19 of the meeting, Ext.A10 cannot be taken as a minutes book as provided under Section 193 and maintained by the Company and if so, the presumption provided under Section 195 is not applicable and based on Ext.A10, it cannot be found that a valid meeting was convened on 2/4/2004. 10. There is force in the argument of the learned counsel appearing for the appellants that the first appellate court did not properly consider the grounds on which the trial court found that there was no valid meeting held on 2/4/2004. Learned Sub Judge has given several reasons to support the finding that there was no meeting held on 2/4/2004. Firstly, it was found that though Exts.A15 and A16 were pressed into service by the plaintiff to prove that a hall in Marthoma RSA.418,538,584 & 592/11 20 Girls High School was booked for convening the meeting on 2/4/2004 and Ext.A15 application and A16 receipt were produced by the convener of the Parents-Teacher's Association, when the very holding of the meeting was disputed, plaintiff should have examined the Headmaster of the school or the Convener of Parents- Teacher's Association especially when the receipt did not contain the seal of the school. It was also found that plaintiff could have at least examined one witness who could depose that a meeting was convened at Marthoma Girls High School. Learned Sub Judge also found that though Ext.A11 attendance register, to show that 43 share holders had attended the meeting was produced, not a single share holder was either cited or examined. It was also found that though Ext.A10 minutes book show that RSA.418,538,584 & 592/11 21 meeting was presided over by T.J.Thomas Master, he was also not examined and only the plaintiff was examined as PW1. It is for these reasons, the learned Sub Judge found that there is no evidence for convening of the meeting on 2/4/2004. It was in addition the learned Sub Judge relied on the finding of the learned District Judge in the CMA that when Ext.B7 series of envelopes were opened in open court it was found that they did not contain the notice for convening of the meeting on 2/4/2004 and therefore, held that even if, there was a meeting, there was no notice as provided under Section 169(6) of the Companies Act. Learned District Judge while reversing the said findings of the learned Sub Judge, did not consider any of the grounds found by the learned Sub Judge, for holding that there was RSA.418,538,584 & 592/11 22 no acceptable evidence to find that a meeting was held on 2/4/2004. Instead it was solely based on the reversal of the finding of the learned Sub Judge that there was no notice convening a meeting on 2/4/2004 and that too holding that it was probable that notices were also enclosed in the envelopes, the learned Additional District Judge held that the meeting held on 2/4/2004 as claimed by the plaintiff, was valid. In fact judgment of District Judge shows that he did not consider the question whether a meeting was in fact held on 2/4/2004 or not. The decision was based only on the finding that it is probable that envelopes sent by the plaint must have contained the notice convening of the meeting. The learned Additional District Judge appears to be unaware of the powers of the first appellate court RSA.418,538,584 & 592/11 23 being the final fact finding court. First appellate court cannot set aside the finding of fact rendered by the trial court without finding that the findings of the trial court is erroneous and that too showing the reasons. The learned District Judge grossly erred in setting aside the factual finding without even considering the question whether the reasons given by the trial court are correct or not and if correct, whether they are sufficient to support the findings of the trial court. 11. When learned Sub Judge found that there is no evidence to hold that a meeting was convened on 2/4/2004 and had given several reasons, the first appellate court is bound to consider the correctness of those findings and if found correct to decide whether they are sufficient reasons to render a finding that no RSA.418,538,584 & 592/11 24 meeting was held on 2/4/2004. Then only the first appellate court is competent to reverse the findings of the trial court. But without considering any of the said reasons, and without finding that there is evidence to hold that a meeting was convened on 2/4/2004, first appellate court should not have set aside the findings of the trial court. Even if there was notice, if no meeting was held on 2/4/2004, first appellate court could not have granted the decree. The judgment of the learned Additional District Judge is therefore to that extent perverse and bad in law. 12. Before, considering the question whether there was notice to convene the meeting on 2/4/2004, it is necessary to consider whether there is any evidence to hold that, finding of the trial court that there was no RSA.418,538,584 & 592/11 25 meeting held on 2/4/2004 is erroneous. As First appellate court did not consider this aspect, this court is compelled to consider the same. 13. Though learned Senior counsel relied on Exts.A10 and A11 and relying on Section 195 of the Companies Act argued that presumption provided thereunder is attached to Ext.A10 and therefore, when Ext.A10 shows meeting was convened and it was corroborated by Ext.A11 attendance register it is to be found that meeting was held on 2/4/2004. In view of the reliance placed on Section 195 of the Companies Act, the question is whether Ext.A10 is the minutes book maintained, as provided under Section 193 of the Companies Act. 14. Section 195 of the Companies Act reads; “195. Presumptions to be drawn where minutes duly drawn RSA.418,538,584 & 592/11 26 and signed.-Where minutes of the proceedings of any general meeting of the company or of any meeting of its Board of directors or of a committee of the Board have been kept in accordance with the provisions of section 193 then, until the contrary is proved, the meeting shall be deemed to have been duly called and held, and all proceedings thereat to have duly taken place, and in particular, all appointments of directors or liquidators made at the meeting shall be deemed to be valid.” It is absolutely clear that the presumption, attached to a minutes book is only when the minutes book is duly drawn and signed as provided under Section 195. Hence the presumption is available only if it is proved RSA.418,538,584 & 592/11 27 that the minutes book was kept in accordance with the relevant provisions of Section 193. Section 193 reads; “193. Minutes of proceedings of general meetings and of Board of other meetings.- Every company shall cause minutes of all proceedings of every general meeting and of all proceedings of every meeting of its Board of directors or of every committee of the Board, to be kept by making within thirty days of the conclusion of every such meeting concerned, entries thereof in books kept for that purpose with their pages consecutively numbered. (1A) Each page of every such book shall be initialled or signed and the last page of the record of proceedings of RSA.418,538,584 & 592/11 28 each meeting in such books shall be dated and signed- (a) in the case of minutes of proceedings of a meeting of the Board or