Case: Arjun Prasad (dead) through his legal representatives smt. Madhukabhasini Devi &amp; Others Vs. Shantilal Shankarlal Sha &amp; Others

The question arises in connection with such a meeting held of the creditors of the Gaya Sugar Mills Ltd. On November 14, 1951, an order was made by the Company Judge in the Patna High Court for winding up of the Gaya Sugar Mills Ltd. On October 6, 1953 an order was made by the learned Judge for action to be taken under S.153 of the Indian Companies Act. Mr. G. C. Banerjee, who was appointed Chairman to hold the meeting of the creditors held separate meetings of the, secured creditors and of the unsecured creditors. In his Report he stated as regards the meeting of the unsecured creditors that thirty unsecured creditors either in person or through proxy attended and took part in the meeting," and that ultimately a resolution proposed by one of the creditors, the Standard Vacuum Oil Company and seconded by another creditor Shri. K. G. Agarwal was passed by the creditors present by majority in number as well ash in value." It appears that at this meeting one Arjun Prasad claiming to represent two creditor companies, viz., Bhandani Bros., and the Hindustan Coal Company Ltd., cast his votes on behalf of these two companies, in support of the resolution. No objection was taken at the meeting to the validity of these votes by any of the creditors who opposed the resolution and the Chairman proceeded on the basis that these votes were validly cast. It is not disputed that if these votes were not validly cast the requisite majority ofs in value would not be obtained2. When the application came up for final hearing before the Court an objection was taken on behalf of creditors who opposed the scheme that the votes cast by Arjun Prasad on behalf of the two creditor companies, viz., Bhandani Brothers and the Hindustan Coal Company were not valid votes and so the requisite majority ofs in value of the creditors had not been obtained. The Company Judge was of the opinion that there was no sufficient explanation as to why the objection as to the validity of the votes was not taken earlier and so the objection raised at the late stage could not be entertained. On the merits also he held that the resolution passed by the creditor companies authorising Arjun Prasad to attend the meeting of the unsecured creditors of the Gaya Sugar Mills Ltd., and vote on behalf of the companies, were sufficient in law to make his attendance at the meeting the attendance of the companies "in person" and his voting on behalf of the companies valid voting of the companies. Accordingly, he rejected this objection3. On appeal a Division Bench of the Patna High Court has allowed the objection, being of opinion that the delay in raising the objection would not entitle the Court to ignore the legal defect of the votes and that in law the votes cast by Arjun Prasad were not valid votes of these two creditor companies, viz., Bhandani Brothers and the Hindustan Coal Company. A contention that no appeal lay to the High Court from the order of the Company Judge was rejected. Therefore, the learned Judges set,aside the order of the Company Judge as to this part of the case. They, however, gave a certificate that as regards the value and nature of the case, it fulfils the requirements of Art.133(1)(a) of the Constitution and is a fit one for appeal to this Court. On this certificate the present appeals have been filed.

Reasoning: It is true that under the General Clauses Act, 1897, a company is a "person" so that whenever the word "person" is used in any statute a company would be included thereunder. The definition in the General Clauses Act can however be of no assistance in interpreting the words "to be present in person", and the difficulty in the way of a company being present in person can be obviated only by statutory provisions or rules having the force of law9. Nor can the appellant derive any assistance from the English Case In re Kelantan Coco, Limited and Reduced (1920 Weekly Notes, Part I, p. 274) cited by the learned counsel. In that case, the Court was dealing with a petition for reduction of capital. In deciding whether the special resolution to reduce the capital of the company had been duly passed, the Court had to consider whether there was a quorum at the confirmatory meeting, at which one member of the company and one representative appointed under S.68 of the Companies (Consolidation) Act, 1908 to represent a shareholder of the company, the Eastern Development Corporation, Limited, were present. The Articles of Association provided: "two members personally present shall be a quorum." It was held that a representative appointed under S.68 should be taken into account in considering whether there was a quorum. The provisions of S.68 were similar to those of S.80 of the Indian Companies Act, 1913 and thereunder a company which is a member of another company may, by resolution of the directors authorise any of its officials or any other person to act as its representative at any meeting of that other company. The presence of such a representative was taken in the above case to amount to personal presence of a member of the company. The case does not deal with the question of a creditor Company10. In the Indian Companies Act, 1956 a provision has been introduced under which a company which is a creditor of another company may by resolution of its directors, authorise such person as it thinks fit to act as its representative at any meeting of any creditors of the company held in pursuance of the Act and a person authorised in this manner shall be entitled to exercise the same rights and powers (including the right to vote by proxy) on behalf of the company. (S.187(1)(b) and 2). No such provision however is to be found in the Indian Companies Act, 1913. It is unnecessary for us to consider whether tinder this new provision the attendance of a person authorised in this mannar at a meeting of the creditors will amount to attendance of the creditor company "in person". For, the present case is governed by the provisions of the Indian Companies Act, 1913 and not by this new provision11. When the Companies Act was amended in 1936, an addition was made in S.246 which empowers the High Court to make rules, concerning the mode of proceedings inter alia "for the holding of meetings of creditors and members in connection with proceedings under S.153 of this Act." Accordingly, a number of Rules were framed by the Patna High Court in exercise of this additional power. R.144 of the Rules states that a creditor or contributor may vote either in person or by proxy. Rules 145 to 153 deal with various questions as regards proxies. Of these R.150 lays down how a proxy is to be given where a creditor is a corporation. Admittedly, no proxy in accordance with R.150 was given by the two creditor companies, Bhandani Brothers and the Hindustan Goal Company, in the present case. There is nothing in these rules which can assist Mr. Sastris argument that a resolution by the directors of the company authorising a director or some other person to represent the company at the creditors meeting makes him a "present in person" in law for that company at the meeting12. Mr. Sastris last argument was that as the business of the company has to be managed by the directors and the directors can delegate any of their powers to any one of themselves, the attendance of Arjun Prasad at the meeting should reasonably be construed as the attendance of all the directors and so the attendance of the company "in person". As we have already indicated it does not appear to us that in the Act of 1913 there is any provision for attendance of the company in person", but apart from that we wish to point out that the resolution made by the two companies do not appear to us to delegate the powers of the directors to Arjun Prasad13. The conclusion of the High Court that the votes cast by Arjun Prasad on behalf of the two companies, viz., Bhandani Brothers and the Hindustan Coal Company, were not valid votes is, in our opinion, correct.