Karnataka High Court
Somalingappa Shiva Putrappa Mugabasav vs Shree Renuka Sugars Ltd. on 10 December, 2001
Equivalent citations: [2002]110COMPCAS371(KAR)
Author: N. Kumar
Bench: N. Kumar
JUDGMENT N. Kumar, J.
1. The petitioner has challenged in this revision petition the order of the Appellate Court dated 19-4-2001, in M.A. No. 13 of 2001 allowing the appeal and setting aside the order of temporary injunction granted by the trial court.
2. The plaintiff has filed a suit for a declaration that the fifth annual report of the company intimating the fifth annual general body meeting on 30-12-2000, be declared as illegal, null and void and not binding upon the plaintiff and for a decree of permanent injunction restraining the defendant from conducting the fifth annual general meeting on 30-12-2000, in pursuance of the meeting notice received by the plaintiff on 19-12-2000. The plaintiff contends that he is one of the shareholders of the defendant-company. The defendant had got created the resolution of the meeting alleged to have been held on 4-9-1999, by stating that Sri S.B. Sidnal is removed from the directorship. The said resolution is illegal, arbitrary and a created one. The defendant has again called for an annual general meeting on 30-9-1999. Sri S.B. Sidnal Chairperson of the company addressed the said meeting and after his representation the members voted against the resolution alleged to have been passed on 4-9-1999 and nullified the alleged false resolution of the removal of Sri S.B. Sidnal and Shashikant Sidnal from the directorship and Sri Sidnal was requested to continue as director of the company. In view of the resolution dated 30-9-1999, Smt. Vidya Murakumbi cannot claim as Chairperson of the company; as such the meeting notice issued by the defendant calling for the fifth meeting on 30-12-2000, is illegal. Smt. Murakumbi was not accepted as the Chairperson or president of the company, therefore, the contents of the notice are all false and any proceedings under the Chairmanship of Smt. Vidya Murakumbi are all illegal.
3. It is further contended that the defendant had called for the meeting on 30-12-2000, at 9 a.m., and notice of the meeting has been received or served on the plaintiff on 19-12-2000. As per Section 165(2) of the Companies Act, 1956 ('the Act') the board of directors shall at least 21 days before the day on which the meeting is held forward a report (statutory report) to every member of the company. The statutory report has been served upon the plaintiff on 19-12-2000. The meeting is scheduled on 30-12-2000. There is no clear 21 days notice to the plaintiff and the same is the case of other shareholders also. The non-forwarding of a report at least 21 days before the date on which the meeting is held is illegal and in violation of the mandatory provisions of the Act. Moreover, no consent is accorded by the shareholders to call for the general body meeting after giving shorter notice within 21 days, therefore, the meeting called on 30-12-2000, is illegal and against the provisions of law.
4. It is further contended that the meeting is scheduled at Millennium Garden, Shukrwarpeth, Tilakwadi, Belgaum. The company has got its members from different remote villages of Saundatti, Bailhongal and Belgaum taluks. Due to non-availability of transportation all the shareholders may not attend the meeting. The defendant has purposely fixed the time of meeting at 9 a.m., in order to have thin representation so as to get passed illegal resolutions. The company ought to have called for the meeting within the business hours of the company. Normally, starting point of the business hours will be 10.30 a.m., but in the instant case by calling the meeting at 9 a.m., at Belgaum which is at about 150 kms., from some of the remote villages of Saundatti taluk and other towns, is totally inconvenient and non-accessible to reach the scheduled place of meeting and, therefore, the meeting called is illegal and against the provisions of law.
5. The plaintiff also made an application for an order of temporary injunction restraining the defendants from conducting or holding the fifth annual general meeting at Shree Renuka Sugars Ltd., Belgaum, on 30-12-2001, at Millennium Garden, Shukrawarpeth, Tilakwadi, Belgaum.
6. Notice of the said application was served on the defendant who entered appearance through his counsel. In the statement of objections filed, the defendant has denied that he has created a resolution in the meeting held on 4-9-1999, removing Sri S.B. Sidnal from the directorship of the company. The defendant has stated that the suit filed by S.B. Sidnal seeking such declaration is still pending and the Court has not granted stay of the resolutions. The defendant also denied the allegation that on 30-9-1999, the shareholders have passed resolutions and S.B. Sidnal was requested to continue as director of the company. The defendant has further stated that it is absolutely false that the Chairperson of the company Smt. Vidya N. Murkumbi was not accepted as Chairperson of the company. It was asserted that Smt. Vidya Murkumbi is the Chairperson of the defendant-company since last more than two years. It was contended that prior notice of 21 days is not required to hold a meeting and the said provision is not applicable to the annual general body meeting. The defendant denied the allegation that notice of the annual general meeting has been served upon the plaintiff on 19-12-2000. It was asserted that the plaintiff has received the notice before 21 days of the meeting. The allegation that the meeting called on 30-12-2000 is illegal and against the provisions of law, is denied. The allegation that the defendant has purposely fixed the time of meeting at 9 a.m., in order to have thin representation so as to get the resolutions passed, is denied. It is asserted that the well-settled fact is that the meeting of the annual general meeting is called within the business hours of the company and on the working day of the company. Since the registered office of the defendant-company is situated in Belgaum, the annual general meeting will have to be conducted in Belgaum as required by the provisions of the Act. It is asserted that the annual general meeting on 30-9-2000, was held in furtherance of its statutory obligation imposed under the provisions of the Act, such meeting is being held as required by law by complying with all legal requirements of sending of notice. The annual general meeting of the company is to be conducted within 15 months of time and it is mandatory. It is further asserted that the plaintiff has received a notice prior to 21 days of conduct of the meeting. In spite of the same only with instigation of some persons and in order to harass the defendant-company and cause loss to it, he has filed the present suit dated 30-12-2000, which was the last day for the conduct of the annual general meeting by the defendant-company as per the provisions of the Act. The relief sought for by the plaintiff cannot be granted. Therefore, he prayed for dismissal of the application filed by the plaintiff for an order of temporary injunction.
7. At this juncture, it is relevant to point out that the annual general meeting was fixed on 30-12-2000. The plaintiff has filed the suit on 27-12-2000, for an order of temporary injunction restraining holding of the said meeting. Therefore, for want of time after hearing both the parties, the Court passed an order on 29-12-2000, making an interim arrangement before hearing the said application on the merits. The operative portion of the said order reads as under :
"The defendant is hereby directed not to implement any resolutions that would be passed in the meeting or to implement any decisions that would be taken in the meeting till disposal of I. A. II on the merits. With this condition the defendant is permitted to hold general meeting on December 30-12-2000, at 9 a.m. as has already been fixed. Issue orders accordingly."
8. The said order was passed before the vacation court as the civil courts had been closed for winter vacation. In terms of the said order the meeting was held on 30-12-2000 and resolutions were passed with reference to the agenda in the said notice. In order to understand the scope of the aforesaid interim order, it is necessary to have a look at the notice of the meeting. The said notice is dated 4-12-2000, which reads as under :
"Notice is hereby given that the fifth annual general meeting of Shree Renuka Sugars Ltd., will be held on Saturday, 30-12-2000 at Millennium Garden, Shukrawarpeth, Tilakwadi, Belgaum-590006 at 9 a.m., to transact the following business.
Ordinary Business:
1. To receive, consider and adopt the audited balance-sheet as at 30-9-2000 and the profits and loss account for the year ended on that date and the reports of the directors and auditors thereon.
2. To appoint a director in place of Mrs. Vidya M. Murkumbi who retires by rotation and being eligible, offers herself for re-appointment.
3. To appoint a director in place of Mr. Jayant G. Herwadkar who retires by rotation and being eligible, offers himself for re-appointment.
4. To appoint auditors and fix their remuneration.
Special Business :
5. To consider and if thought fit to pass with or without modification the following resolution as a special resolution.
Resolved that, pursuant to Sections 16, 94(1)(d) and all other applicable provisions, if any, of the Companies Act, 1956, 5,00,000 (five lakhs) 12 per cent cumulative redeemable preference shares of the nominal value of Rs. 100 each be and are hereby subdivided into 50,00,000 (fifty lakhs) 2 per cent cumulative redeemable preference shares of Rs. 10 each and that the existing Sub-clause (b) of Clause V of the memorandum of association of the company be deleted and the following new Clause V(b) be substituted therefor.
(b) 50,00,000 (fifty lakhs) 2 per cent cumulative redeemable preference shares of Rs. 10 (rupees ten only) each.
6. To consider and if thought fit to pass with or without modification the following resolution as a special resolution.
Resolved that, pursuant to Section 31 and all other applicable provisions, if any, of the Companies Act, 1956, the existing Sub-article (b) of Article 5 of the articles of association be deleted and the following new Article 5(6) be substituted therefor,
(b) 50,00,000 (fifty lakhs) 2 per cent non-cumulative redeemable preference shares of Rs. 10 (rupees ten only) each.
Notes :--
1. A member entitled to attend and vote is entitled to appoint a proxy to attend and vote instead of himself and proxy need not be a member of the company. The proxy form duly completed must reach the registered office of the company not less than 48 hours before the commencement of the meeting.
2. The explanatory statement pursuant to Section 173 of the Companies Act, 1956, in respect of the business under items 5 to 8 set out is annexed hereto.
3. Members are requested to quote folio numbers in all the correspondences with the company.
4. Members/public proxy holders are requested to bring the copy at annual report to the meeting and hand over attendance slip duly signed at the entrance of the meeting venue."
9. The meeting was held on 30-12-2000 and all the resolutions have been passed. Thereafter, application was taken up for consideration by the trial court on its merits. The trial court after hearing both the parties and after considering the documents placed on record and taking note of the legal position as submitted on either side has granted an order of temporary injunction restraining the defendant from implementing any resolution passed in the meeting or to implement any decisions that were taken in the meeting till the disposal of the suit. In coming to the said conclusion, the trial court has held that Section 171(1) of the Act is mandatory and there was no clear 21 days notice after the same was served on the plaintiffs and the defendant has not produced any documents to show how many members were served notice before 21 days and notices were not served on the shareholders as per mandatory requirement. Aggrieved by the said order, the defendant preferred miscellaneous appeal before the Principal Civil Judge, Belgaum, in M.A. No. 13 of 2001. The Appellate Judge held that the trial court has basically erred in coming to the conclusion that Section 171(1) is mandatory by overlooking the principles enunciated by the High Court of Bombay in Shailesh Harilal Shah v. Matushree Textiles Ltd. [1995] 82 Comp. Cas. 5. The notice was served on the plaintiff on 19-12-2000, he approached the Court on 27-12-2000, barely three days before the meeting and in the absence of any explanation there is a delay on the part of the plaintiff in approaching the Court which disentitles the plaintiff for the relief of injunction. Section 171(1) is not mandatory and in the light of the provisions of Section 172(2) the plaintiff has not made out a prima facie case and that the order passed by the trial court is perverse and needs to be interfered with. Accordingly, he allowed the appeal. It is against the said order, the plaintiff has preferred this revision.
10. Sri Udaya Holla, the learned counsel appearing for the petitioner contended before me as under :
(a) Section 171 is mandatory. Twenty-one days clear notice is a must, the same is to be calculated from the date of service of notice on the shareholder. The Legislature has deliberately used the words 'not less than 21 days notice in writing' making it clear that the said provision is mandatory. In the instant case as 21 days clear notice was not given to the plaintiff, the meeting held on 30-12-2000 and all the resolutions passed in the said meeting are null and void and liable to be set aside.
(b) The annual general meeting is to be held during business hours of the company as per Section 156(2) of the Act. Deliberately the meeting was held at 9 a.m., thus, preventing the shareholders who are all living at remote corners of the villages reaching the venue of the meeting in time. Therefore, the annual general meeting is void.
(c) The judgments of the Allahabad, Calcutta, Punjab and Haryana and Madras High Courts cited on behalf of the plaintiff have taken a view that Section 171 is mandatory and whereas the Bombay High Court has taken the view directory, and in the absence of any decision of the Supreme Court on the point when the trial court has followed the view of the majority of the High Courts, the Appellate Court should not have interfered with the said finding only on the ground that the Bombay High Court judgment lays down the correct law.
(d) Lastly it was contended, it is well-settled that when the trial court in exercise of its discretionary jurisdiction, on appreciation of all the materials placed on record, comes to the conclusion that the plaintiff has made out a case for grant of injunction, even if the first Appellate Court can come to a different conclusion on the same set of facts, it is no ground to interfere with the order passed by the trial court.
11. Per contra, Sri Vivek Chandy, the learned counsel appearing for the respondents contended that the plaintiff has not produced any evidence to show that he was served notice less than 21 days before the meeting and moreover when admittedly he was served on 19-12-2000, with notice, he chose to move the Court two days prior to the date of the meeting, namely, December 27 and, therefore, because of delay and laches on his part in approaching the Court, he is not entitled to the discretionary relief of temporary injunction. The plaintiff does not disclose in the plaint what is the prejudice caused to him in attending the meeting and what are his objections to the proposed resolutions and what is the valuable right of his which he has been deprived of by non-service of notice 21 days before the date of the meeting. The trial court did not consider the effect of Section 172(3) where it has been clearly stated that the accidental omission to give notice or non-receipt of notice by any member or other person to whom it should be given shall not invalidate proceedings at the meeting. In the instant case, notice has been served and the plaintiff had an opportunity to attend the meeting and espouse his cause and, therefore, Section 171 cannot be held to be mandatory in view of the language employed in Section 172(3). In view of the postal strike which commenced on 5-12-2000, the company has despatched all the notices on 6-12-2000, through professional courier and except the plaintiff no other person had any grievance whatsoever regarding service of notice or want of 21 clear days of notice and, therefore, at the instance of one shareholder the company cannot be restrained from implementing the resolutions passed in the annual general meeting.
12. Both the counsels in support of their respective contentions have relied on several judgments of various High Courts including the Supreme Court.
13. Having regard to these rival contentions, the undisputed facts which emerge are as under :
The plaintiff is a shareholder of the defendant-company. The previous annual general meeting of the company was held on 30-9-1999. In view of Section 166(1) of the Act, the next general meeting had to be held on or before 30-12-2000. It is to call the said meeting, the statutory notice was prepared on 4-12-2000. In view of the all India postal strike which commenced on 5-12-2000 the notice and explanatory statement were sent by courier on 6-12-2000. The plaintiff was served on 19-12-2000. If the date of service of notice is taken into consideration it is not in dispute from 19-12-2000, the petitioner did not have 21 clear days of notice of the annual general meeting. Therefore, he filed the suit on 27-12-2000. On 29-12-2000, as an interim arrangement the Court directed the company to hold its meeting, but restrained the company from giving effect to any resolution passed in the said meeting. Accordingly, the meeting was held on 30-12-2000 and all the resolutions were passed in the said meeting. In view of the interim orders passed in the case from time to time till today none of the resolutions in the said meeting has been given effect to.
Now the only point that arises for my consideration is :
"Whether the annual general body meeting held on 30-12-2000 and the resolutions passed in the said meeting are invalidated for want of 21 days clear notice from the date of service of notice to the plaintiff ?"
14. The answer to this point depends upon the interpretation to be placed on Sections 171 and 172. Section 171 deals with the length of notice for calling the meeting. It reads as under :
"Length of notice for calling meeting.--(1) A general meeting of a company may be called by giving not less than twenty-one days notice in writing;
(2) A general meeting may be called after giving shorter notice than that specified in Sub-section (1), if consent is accorded thereto--
(i) in the case of an annual general meeting, by all the members entitled to vote thereat; and
(ii) in the case of any other meeting, by members of the company (a) holding, if the company has a share capital, not less than 95 per cent of such part of the paid-up share capital of the company as gives a right to vote at the meeting, or (b) having, if the company has no share capital, not less than 95 per cent of the total voting power exercisable at that meeting:
Provided that where any members of a company are entitled to vote only on some resolution or resolutions to be moved at a meeting and not on the others, those members shall be taken into account for the purposes of this sub-section in respect of the former resolution or resolutions and not in respect of the latter."
15. The contents and manner of service of notice and persons on whom it is to be served is dealt with under Section 172 which reads as under :
"Contents and manner of service of notice and persons on whom it is to be served.--(1) Every notice of a meeting of a company shall specify the place and the day and hour of the meeting, and shall contain a statement of the business to be transacted thereat.
(2) Notice of every meeting of the company shall be given--
(i) to every member of the company, in any manner authorised by subsections (1) to (4) of Section 53;
(ii) to the persons entitled to a share in consequence of the death or insolvency of a member, by sending it through the post in a prepaid letter addressed to them by name, or by the title of representatives of the deceased, or assignees of the insolvent, or by any like description, at the address, if any, in India supplied for the purpose by the persons claiming to be so entitled, or until such an address has been so supplied, by giving the notice in any manner in which it might have been given if the death or insolvency had not occurred; and
(iii) to the auditor or auditors for the time being of the company, in any manner authorised by Section 53 in the case of any member or members of the company:
Provided that where the notice of a meeting is given by advertising the same in a newspaper circulating in the neighbourhood of the registered office of the company under Sub-section (3) of Section 53, the statement of material facts referred to in Section 173 need not be annexed to the notice as required by that section but it shall be mentioned in the advertisement that the statement has been forwarded to the members of the company.
(3) The accidental omission to give notice to, or the non-receipt of notice by, any member or other person to whom it should be given shall not invalidate the proceedings at the meeting."
16. Service of documents on members by company is dealt with under Section 53 of the Act which reads as under :
"Service of documents on members by company.--(1) A document may be served by a company on any member thereof either personally, or by sending it by post to him to his registered address, or if he has no registered address in India, to the address, if any, within India supplied by him to the company for the giving of notices to him.
(2) Where a document is sent by post,--
(a) service thereof shall be deemed to be effected by properly addressing, prepaying and posting a letter containing the document, provided that where a member has intimated to the company in advance that documents should be sent to him under a certificate of posting or by registered post with or without acknowledgement due and has deposited with the company a sum sufficient to defray the expenses of doing so, service of the document shall not be deemed to be effected unless it is sent in the manner intimated by the member; and
(b) such service shall be deemed to have been effected--
(i) in the case of a notice of a meeting, at the expiration of forty-eight hours after the letter containing the same is posted, and
(ii) in any other case at the time at which the letter would be delivered in the ordinary course of post.
(3) A document advertised in a newspaper circulating in the neighbourhood of the registered office of the company shall be deemed to be duly served on the day on which the advertisement appears, on every member of the company who has no registered address in India and has not supplied to the company an address within India for the giving of notices to him.
(4) A document may be served by the company on the joint holders of a share by serving it on the joint holder named first in the register in respect of the share.
(5) A document may be served by the company on the persons entitled to a share in consequence of the death or insolvency of a member by sending it through the post in a prepaid letter addressed to them by name, or by the title of representatives of the deceased, or assignees of the insolvent, or by any like description, at the address, if any, in India supplied for the purpose by the persons claiming to be so entitled, or until such an address has been so supplied, by serving the document in any manner in which it might have been served if the death or insolvency had not occurred."
17. The learned counsel appearing for the parties have relied on a catena of decisions in support of their respective contentions. The said decisions can be broadly categorized under three heads. The first category of cases are those where Section 171 was held to be mandatory where no notice was issued under Section 171 and it has been held that omission to give notice invalidates the meeting and the resolutions passed in such meeting. Those decisions are :
(i) Vice Chancellor, Utkal University v. S.K. Ghosh ;
(ii) Parmeshwari Prasad Gupta v. Union of India [1974] 44 Comp. Cas. 1 (SC);
(iii) Mahabir Prasad Jalan v. Bajrang Prasad Jalan [2000] 102 Comp. Cas. 81 (Cal.);
(iv) Musselwhite v. C.H. Musselwhite & Son Ltd. [1962] 32 Comp. Cas. 804 (Ch. D).
18. The second category of cases are those cases wherein the notice issued for calling general meeting of the company 21 clear days was not stipulated between the date of notice and the date of the meeting. Under those circumstances, the Courts have held that Section 171 is mandatory. If the notice issued does not comply with this legal formality, the meeting held and the resolution passed in such meeting are void However, it has also been held that the shareholders by consent can agree for a lesser period even before the meeting is called or after the meeting is called. The same could be waived by ratification in which event neither the meeting nor the resolutions passed in the said meetings would be invalidated. Those cases are :
(i) Self Help Private Industrial Estate (P.) Ltd, In re [1974] 42 Comp. Cas. 605 (Mad.);
(ii) N.V.R. Nagappa Chettiar v. Madras Race Club [1949] 19 Comp. Cas.
175 (Mad.);
(iii) Asansol Electric Supply Co. v. Chunnilal Daw ;
(iv) Bharat Kumar Diwali v. Bharat Carbon & Ribbon Mfg. Co. Ltd. [1973] 43 Comp. Cas. 197 (Delhi);
(v) Col. Kuldip Singh Dhillon v. Paragaon Utility Financiers (P.) Ltd [1988] 64 Comp. Cas. 19 (Punj. & Har.).
19. The third category of cases are those cases where a notice was issued and the said notice gave 21 clear days and the same was served on the shareholders but there was no clear 21 days between the service of such notice and the meeting. The cases relied on under this category, where it has been held Section 171 is not mandatory but directory, are :
(i) Maharaja Exports v. Apparels Exports Promotion Council [1986] 60 Comp. Cas. 353 (Delhi);
(ii) Shailesh Harilal Shah's case (supra);
(iii) Calcutta Chemical Co. Ltd v. Dhiresh Chandra Roy [1985] 58 Comp. Cas. 275 (Cal.);
20. In the instant case, admittedly, the company has issued notice dated 4-12-2000, fixing the date of the fifth annual general meeting on 30-12-2000. There is a clear 26 days gap between the date of notice and the date of the meeting. It is also demonstrated that the said notice is sent by the secretary on 6-12-2000, i.e., there is a gap of 24 days between the date of despatch and the date of the meeting. The plaintiff unequivocally admits that he received notice on 19-12-2000. His grievance is, he did not have 21 clear days of notice of the meeting after he has been duly served with the notice of the meeting. Therefore, the cases referred to in first and second category supra are of no assistance in deciding the controversies between the parties. As such those judgments are not referred to. Therefore, I have adverted only to those cases falling under the third category which are relevant for the purpose of this case.
21. In the case of Maharaja Exports (supra), it has been held as under :
"Ordinary course of post' in a vast country like ours with many far-flung places at inaccessible distance, where the time taken for delivery of letters varied from place to place induced an element of uncertainty. In order to do away with this state of affairs and to import certainty to such an important matter as to the length of notice of general meetings of companies, legal fiction was pressed into service, by indicating in the 1950 Act, that the notice shall be deemed to have been served 48 hours after posting. The words '48 hours' are meant to make the service certain and to fix the date of service as the date on which the said 48 hours expired. Under these circumstances, as already observed earlier, the notice issued on 27-4-1984, will expire on 29-4-1984, which is well within the phrase '14 days' clear notice'.
This aspect can also be looked into from another angle. Sub-section (3) of Section 172 of the Companies Act lays down that even the accidental omission to give notice to, or the non-receipt of the notice by, any member or other person shall not invalidate the proceedings at the meeting. The 'accidental omission' means that the omission must be not only not designed but also not deliberate. This expression implies absence of intention or deliberate design. The word 'or' appearing in this Sub-clause is of great significance. The company has only to prove on record that they have sent the notice to its members on the addresses furnished by them. The non-receipt of the notice, under no circumstances, shall invalidate the holding of the meeting or the proceedings thereof. In this case, it is the admitted case of the parties that the defendant-company did send the notice and it in fact was received by the plaintiff. Even the non-receipt, as observed earlier, would not have made any difference." (p. 365)
22. In the case of Shailesh Harilal Shah (supra), a Division Bench of the Hon'ble High Court of Bombay has held as under :
"It is, therefore, necessary to examine the object, purpose and scope of Section 171 of the Act to determine whether the requirement is mandatory or directory. The recommendations of the Company Law Committee in paragraphs 75(i) and 78 of the Report indicate that the period of 21 days was provided instead of 14 days as earlier fixed, to enable the shareholders to campaign and canvass the proxies if they so desired. The shareholders required reasonable time to canvass opinion in favour or against the particular resolution proposed to be considered at the meeting of the company. The object, therefore, is obviously to give proper and reasonable opportunity to the shareholders for participating effectively in the meeting. The length of notice, the contents and the manner of service of notice have all been prescribed with this end in view. The fact that Sub-section (2) of Section 171 of the Act enables the shareholders to consent for shorter duration of notice is an indication that the Legislature never thought the length of notice as sacrosanct. Sub-section (2) of Section 171 of the Act indicates that it is for the shareholders to consider and decide whether they have got necessary opportunity of properly participating in a meeting. Sub-section (3) of Section 172 of the Act is an indicator that the Legislature never desired that the proceedings of the meeting should be invalidated merely because notice as prescribed under Sub-section (1) of Section 171 is of insufficient duration. Sub-section (3) of Section 172 of the Act provides that the accidental omission to give notice to, or the non-receipt of notice by, any member should not invalidate the proceedings and that clearly indicates the anxiety of the Legislature not to invalidate the proceedings, even though no prejudice whatsoever is caused to the interest of the shareholders. To hold that the provisions of Section 171(1) of the Act are mandatory would lead to very unusual results and making it difficult for large public companies to effectively function. A couple of shareholders cannot be permitted to defeat the interest of a large body of shareholders by raising contention that the duration of notice was not sufficient and even though such complaints do not indicate any prejudice by service of notice of shorter duration. In our judgment, looking to the object, purpose and scope of provisions of Section 171 of the Act, the conclusion is inescapable that the provision is merely directory and not mandatory." (p. 25)
23. In the case of Calcutta Chemical Co. Ltd. (supra), it has been held as under:
"The question, therefore, is whether Section 171(1) which lays down that 'A general meeting of a company may be called by giving not less than 21 days' notice in writing' is mandatory or not. A shorter notice can be given in the circumstances set out in Sub-section (2) of Section 171. Section 172(3) provides: 'The accidental omission to give notice to, or the non-receipt of notice by, any member or other person to whom it should be given shall not invalidate the proceedings at the meeting.' Section 172(3) makes it abundantly clear that it is not a condition precedent to the holding of the annual general meeting of a company that a clear 21 days' notice must be given to each and every member of the company. The accidental omission to give notice to any member or non-receipt of notice by any member shall not invalidate the proceedings at the meeting. If we have to uphold the contention of the respondent, we shall have to hold that if the notice to a shareholder is not accidentally posted at all, the proceedings at the annual general meeting of a company will be valid. But if the notices were posted accidentally less than 21 days before the meeting, the proceedings at the meeting will be void even though the shareholder received the notice in good time before the meeting was held and actually attended the meeting. If Mr. Dhiresh Chandra Roy did not receive the notice at all, the company could have invoked the protection of the provisions of Section 172(3) of the Act. In our opinion, such a construction would lead to absurdity and should be avoided. We are aware of the dictum that law is not always logic. But the court should be very slow to give a construction to a section which would lead to absurdity and will cause injustice. We are unable to accept the contention that a short notice served on a member will invalidate a meeting altogether but non-receipt of the notice by a member will not have the same effect." (p. 279)
24. It is also useful to refer to a passage from Maxwell on the Interpretation of Statutes where it has been stated as under :
"It has been said that no rule can be laid down for determining whether the command (of this statute) is to be considered as a mere direction or instruction involving no invalidating consequence in its disregard, or as imperative, with an implied nullification for disobedience, beyond the fundamental one that it depends on the scope and object of the enactment. It may, perhaps, be found generally correct to say that nullification is the natural and usual consequence of disobedience, but the question is in the main governed by considerations of convenience and justice, (R. v. Ingall [1877] 2 QBD 199 at page 208, per Lush, J.) and, when that result would involve general inconvenience or injustice to innocent persons, or advantage to those guilty of the neglect, without promoting the real aim and object of the enactment, such an intention is not to be attributed to the Legislature. The whole scope and purpose of the statute under consideration must be regarded. The general rule, is that an absolute enactment must be obeyed or fulfilled exactly, but it is sufficient if a directory enactment be obeyed or fulfilled substantially."
25. Similarly, the Supreme Court in the case of Hari Vishnu Kamath v. Ahmad Ishaque , has observed as under :
"26. It is well established that an enactment in form mandatory might in substance be directory, and that the use of the word 'shall' does not conclude the matter. The question was examined at length in Julius v. Bishop of Oxford [1880] 5 AC 214(S), and various rules were laid down for determining when a statute might be construed as mandatory and when as directory. They are well known, and there is no need to repeat them. But they are all of them only aids for ascertaining the true intention of the Legislature which is the determining factor, and that must ultimately depend on the context...." (p. 245)
26. Following the quotations from Crawford on Statutory Construction--article 261 at page 516 is pertinent--United Commercial Bank Ltd. v. CIT :
"The question as to whether a statute is mandatory or directory depends upon the intent of the Legislature and not upon the language in which the intent is clothed. The meaning and intention of the Legislature must govern, and these are to be ascertained, not only from the phraseology of the provision, but also by considering its nature, its design, and the consequences which would follow from construing it the one way or the other...."
27. The following observation of the Judicial Committee of the Privy Council in Montreal Street Railway Company v. Normandin AIR 1917 PC 142, in Raza Buland Sugar Co. Ltd. v. Municipal Board, Rampur is as under :
"The question whether provisions in a statute are directory or imperative has very frequently arisen in this country, but it has been said that no general rule can be laid down, and that in every case the object of the statute must be looked at...When the provisions of a statute relate to the performance of a public duty and the case is such that to hold null and void acts done in neglect of this duty would work serious general inconvenience, or injustice to persons who have no control over those entrusted with the duty, and at the same time would not promote the main object of the Legislature, it has been the practice to hold such provisions to be directory only, the neglect of them, though punishable, not affecting the validity of the acts done." (p. 899)
28. The Supreme Court in the case of Raza Buland Sugar Co. Ltd. (supra), has observed as under :
"7. The question whether a particular provision of a statute which on the face of it appears mandatory--inasmuch as it uses the word 'shall' as in the present case--or is merely directory cannot be resolved by laying down any general rule and depends upon the facts of each case and for that purpose the object of the statute in making the provision is the determining factor. The purpose for which the provision has been made an4 its nature, the intention of the Legislature in making the provision, the serious general inconvenience or injustice to persons resulting from whether the provision is read one way or the other, the relation of the particular provision to other provisions dealing with the same subject and other considerations which may arise on the facts of a particular case including the language of the provision, have all to be taken into account in arriving at the conclusion whether a particular provision is mandatory or directory." (p. 899)
29. In the aforesaid judgment while dealing with the question whether a particular section could be partly directory or partly mandatory, it is observed as under:
"... The crux of the problem before us is whether all the conditions are to be treated as mandatory or all of them as directory or some of them as of one kind and some of the other kind? What is the test to apply and if a distinction is to be made, on what principle ? In my opinion, the way to look at the matter is this. A tax to be valid must be imposed in accordance with the Municipalities Act. The Act lays down conditions some of which are devised for the protection of the taxpayers and some others for ministerial operations connected with the method or system of imposing the tax or for promoting despatch, efficiency and publicity, etc. All conditions of the first kind must of course, be regarded as mandatory, because they lie at the very root of the exercise of the power. Thus, preparation of assessment rolls, hearing of objections, framing of assessment rules are all mandatory. Similarly, conditions involving the passing of resolutions by the necessary majority at special meetings after proper notice to members are fundamental and cannot be overlooked. If a defect of a fundamental kind occurs it would (in the absence of curative provision) remain even if Government gave its sanction--See Scadding v. Lorant [1851] 3 HLC 418, affirming Sub Nom, Lorant v. Scadding [1849] 13 QB 706 and Joshi Kalidas v. Dakar Town Municipality ILR 7 Bom. 399. Conditions which promote despatch or provide for ministerial operations are usually directory and although compliance with them is also necessary it is sufficient if the compliance is substantial." (p. 904)
30. In the background of the aforesaid legal principles, if we look into the provisions of Sections 171 and 172, it becomes clear that a general meeting of a company may be called by giving not less than 21 days' notice in writing. However, the Legislature provides for calling of a general meeting by giving shorter notice than specified under Sub-section (1) in the manner provided under Section 171(2), thereby meaning this 21 days notice is not sacrosanct. Thus, the Legislature, by insertion of Section 171(2) made its intentions very clear that this requirement of Section 171 is not mandatory if the conditions mentioned under Section 171(2) are fulfilled. Section 172 deals with contents and manner of service of notice and the persons to whom it is to be served and it mandates that the notice shall specify the place and the date, and hour of the meeting and shall contain a statement of the business to be transacted thereat. Section 171 is silent about the consequence of not complying with the requirements of the said section either on the general meeting held or resolutions passed in such meeting. On the contrary, Sub-section (3) of Section 172 mandates that the accidental omission to give notice to or the non-receipt of notice by any member or other person to whom it should be given, shall not invalidate the proceedings at the meeting. When the Legislature has deliberately omitted to state that the non-compliance with Section 171 would invalidate the proceedings at the meeting and expressly declares that accidental omission to give notice or non-receipt of notice shall not invalidate the proceedings at the meeting, the said section cannot be interpreted to mean contrary to the express intention expressed intention expressed by the Legislature.
31. In this context, it is useful to refer to the recommendations of the Company Law Committee in paragraphs 75(i) and 78 of the report which indicates that the period of 21 days was provided instead of 14 days as earlier fixed to enable the shareholders to campaign and canvass the proxies if they so desired and also to canvass opinion in favour or against a particular resolution proposed to be considered at the meeting of the company. The object, therefore, is obviously to give proper and reasonable opportunity to the shareholders for participating effectively in the meeting though from the original period of 14 days it was enhanced to 21 days, by way of amendment this period is essentially meant to give a fair opportunity to the shareholders to prepare themselves to face the meeting- Again the Legislature has not specifically spelt out whether this 21 days notice should be computed from the date of service of notice or from the date of notice itself. Under these circumstances, it is not open to the courts to interpret the said section to mean that 21 days is to be calculated from the date of actual service of notice of the meeting. The giving of a notice, the contents of the notice as specified under Section 172, furnishing a statement of the business to be transacted at the meeting, specifying 21 days between the date of notice and the date of the meeting subject to Section 171(2) and posting of such notice are all within the reach of the company. Therefore, all these requirements are to be complied with by the company and to that extent they are mandatory.
32. Once the notice is posted through an agency, the company loses its control over such notice. The company has to necessarily depend upon that third party agency for due service of notice and if that notice is not served on the shareholders in time, the company cannot be made to suffer. It is also possible that if the addressee is not available at the time of service even that agency to whom this work has been entrusted will be helpless in serving the notice on the shareholders. If the shareholder intends disrupting the meeting and wants to invalidate the resolutions passed in the meeting, he could cleverly avoid receiving the said notice within the stipulated period and he could choose to receive the notice so as to make it appear that after service of notice, he or she had no clear 21 days notice. Under these circumstances, if it is to be held that Section 171 is mandatory and that 21 days must be calculated from the date of service of the notice on the shareholders, it would be humanly impossible to conduct any meeting of the company by complying with the said requirement. Now-a-days there is a overwhelming participation by the public by subscribing to the shares of all companies. It is now possible for anyone to acquire a share of any company. The pattern of allotting shares has been governed by the authorities and thereby the shareholders base with minimum number of shares has been expanded considerably. Therefore, the shareholders who are scattered all over the country have to be reached necessarily by post. Under these circumstances, if 21 days notice contemplated under Section 171 is to be interpreted as mandatory and further it is to be interpreted that from the date of service of notice to each shareholder the meeting is to be held 21 days thereafter, it would be impossible to conduct any general meeting of any company. Such interpretation would result in absurdity, especially when the Legislature consciously did not provide for invalidation of the meeting or resolutions passed in the meeting for want of such 21 days of notice. Therefore, in my opinion, by interpreting Section 171 as mandatory to include in its ambit 21 days' clear notice would be improper. When the notice under Section 171 which otherwise would satisfy the requirements of that section is served on the shareholder and after service if he has reasonable time before the meeting, in my opinion, it would be substantial compliance with the provisions of Section 171. That portion of the provisions regarding service of notice is directory and although compliance with them is also necessary, it is sufficient if the compliance is substantial.
33. The whole object of giving 21 days' notice is to give a reasonable opportunity to the shareholders. If it is demonstrated that such reasonable opportunity has been denied deliberately with mala fide intention and such denial of reasonable opportunity has adversely affected the interest of the shareholders either preventing him from contesting the election or from voting in the election or from campaigning and canvassing the proxies or canvassing the opinion in favour or against a particular resolution, it is always open to the Court on proof of such prejudice to invalidate the proceedings of meetings notwithstanding the fact whether Section 171 is mandatory or not. In the absence of a case of such prejudice being made out, merely on the technical ground that there was no clear notice of 21 days from the date of service of the notice and the meeting neither the meeting nor the proceedings of the meeting could be invalidated. If such a thing is permitted one shareholder can virtually blackmail the company and prevent the company from holding its meeting or passing any resolution, thus, successfully obstructing the proper functioning of the company itself. Certainly that is not the intention of the Legislature in enacting Section 171.
34. Coming to the case on hand, the company has issued a notice under Section 171. Further the said notice contains all the particulars which are mentioned in Section 172. The notice is dated 4-12-1999 and the date of the meeting is fixed on 30-12-1999, thereby giving 26 clear days between the date of the meeting and the date of the notice. The said notice was posted through courier and the plaintiff, according to him, received the said notice on 19-12-2000. Therefore, Sections 171 and 172 have been substantially complied with. His grievance is from 19-12-2000, he did not have clear 21 days notice of the meeting and, therefore, the meeting is illegal and the resolutions passed in such notice are illegal. It is not the case of the plaintiff that by such shorter notice he was in any way disabled either in campaigning or canvassing the proxies or in any manner he could not canvass the opinion in favour or against any particular resolution proposed to be considered at the meeting of the company. Absolutely no case of prejudice is either pleaded or demonstrated by the plaintiff. Therefore, it cannot be said that he has made out a prima facie case for grant of an order of temporary injunction in his favour.
35. A reading of the plaint discloses that his grievance is that one S.B. Sidnal has been removed from the directorship of the company illegally without following the procedure and, therefore, he is espousing the cause of removal of the said Sidnal and not himself. It is a proxy fight by the said S.B. Sidnal in the name of the plaintiff. The material on record discloses that the said S.B. Sidnal has filed the suit seeking a declaration that he has been illegally removed from the directorship and he is not able to get any interim order in the said suit and, therefore, the present suit is filed in the name of the petitioner. Therefore, it is clear the petitioner has not come to this Court with clean hands. He is fighting the case of S.B. Sidnal in this suit. Though the meeting notice was served on him on 19-12-2000, he did not choose to file the suit immediately. He waited till 27-12-2000. Just three days prior to the date of the meeting, in the vacation court, he moved for an interim order. Though in the normal circumstances, nine days would not amount to any delay, in the facts and circumstances of this case and in the absence of any explanation for not moving the Court immediately and in the light of the allegations in the plaint, where the plaintiff is espousing cause of S.B. Sidnal, who, in fact, failed to get any interim order in his suit, this delay of nine days in moving the Court for an equitable relief of injunction to prevent the holding of a meeting to be conducted on 30-12-2000, in my opinion, is material and disentitles him for the grant of an order of temporary injunction.
36. The contention of the learned counsel for the petitioner that the meeting was held at 9 a.m., which was not the business hour of the company, and the said time was fixed to prevent the shareholders who are living in remote villages from reaching the venue of the meeting has remained only as an assertion without any material on record to substantiate the said contention. It is not the case of the petitioner that because of the holding of the meeting at 9 a.m. he was in any way inconvenienced. Again he is pleading the case of those unknown shareholders who are inconvenienced by such fixing of time. This is yet another circumstance which demonstrates that the petitioner's case is not of a personal injury to him and he is pleading the case for and on behalf of others who are not before this Court. While the trial court granted permission to hold the meeting on 30-12-2000, no attempt was made to get this time changed. In any event that cannot have the effect of invalidating the meeting and the resolutions passed in such meeting without any proof of inconvenience or mala fides. Therefore, I do not find any substance at this stage in the said contention.
37. It was further contended that the Allahabad, Calcutta, Punjab and Haryana and Madras High Courts have held that Section 171 is mandatory and following the said view the trial judge has granted an order of injunction and the Appellate Court could not have interfered with the said discretionary order by relying on the judgment of the Bombay High Court as in the absence of the law declared by the Supreme Court or the judgment of this Court on the point the exercise of discretionary power by the trial court in granting injunction should not have been interfered with by the Appellate Court. I do not find any substance in this submission because as I have set out earlier the judgments of the Allahabad, Calcutta, Punjab and Haryana and Madras High Courts, are not on the point. They are cases where either no notice was issued or the notices issued were defective in the sense from the date of notice till the date of holding of the meeting twenty-one clear days was not given. Therefore, those judgments have no application to the facts of this case. Admittedly, in the instant case, notice is given. Twenty-one clear days is mentioned between the date of the notice and the date of the meeting, notice has been duly served on the plaintiff on 19-12-2000. Therefore, the first Appellate Court was right in setting aside the finding of the trial judge based on those aforesaid judgments and in relying on the law laid down by the Bombay High Court.
38. Lastly, it was contended that the order of injunction being discretionary when the trial court has exercised its discretion one way or the other, it should not have been interfered with lightly by the Appellate Court even if the Appellate Court could come to a different conclusion on the same set of facts. In the instant case, there is no dispute on facts. They are admitted. The dispute is with regard to application of law. The trial court had wrongly applied the law laid down by the Allahabad, Calcutta and Punjab and Haryana High Courts to the facts of this case. What is applicable to the case on hand is the law of the Bombay High Court which has been rightly applied by the Appellate Court. Therefore, the Appellate Court was duty-bound to interfere with such finding and has rightly set aside the order of the trial judge and vacated the order of injunction granted by the trial court by applying the correct law on the point. Therefore, no fault could be found with the exercise of jurisdiction by the Appellate Court.
39. For the reasons aforesaid, I do not find any merit in this CRP and, accordingly, the CRP is dismissed. The parties to bear their own costs.