Karnataka High Court
Sri A S Neelakanta S/O Late A S Bhatta vs M/S Guages Industries Pvt Ltd on 12 November, 2021
Author: H.P.Sandesh
Bench: H.P. Sandesh
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 12TH DAY OF NOVEMBER, 2021
BEFORE
THE HON'BLE MR. JUSTICE H.P. SANDESH
R.F.A.NO.1248/2005 (MON)
C/W.
R.F.A.NO.1249/2005 (MON)
IN R.F.A.NO.1248/2005:
BETWEEN:
SRI A.S.NEELAKANTA
S/O LATE A.S.BHATTA
AGED ABOUT 62 YEARS
RESIDING AT NO.39/2
5TH MAIN, 7TH CROSS
MALLESWARAM
BENGALURU-560 003. ... APPELLANT
[BY SRI VISHWANATH R.HEGDE, ADVOCATE (THROUGH VC)]
AND:
M/s. GUAGES INDUSTRIES PVT. LTD.,
A PRIVATE LIMITED COMPANY
INCORPORATED UNDER
THE COMPANIES ACT, 1956
HAVING ITS REGISTERED OFFICE AT:
RUPANA AGRAHARA (SMLA COMPOUND)
MADIVALA, BENGALURU-560 068
REPRESENTED BY ITS DIRECTOR
Shri. K.N.DORESWAMY ... RESPONDENT
[BY SRI M.B.CHANDRA CHOODA, ADVOCATE]
2
THIS R.F.A. IS FILED UNDER SECTION 96 OF CPC
AGAINST THE JUDGMENT AND DECREE DATED 25.02.2005
PASSED IN O.S.NO.3648/1985 ON THE FILE OF I ADDITIONAL
CITY CIVIL AND SESSIONS JUDGE, BENGALURU CITY (CCH
NO.2), DISMISSING THE SUIT FOR RECOVERY OF MONEY.
IN R.F.A.NO.1249/2005:
BETWEEN:
SRI A.S.NEELAKANTA
S/O LATE A.S.BHATTA
AGED ABOUT 62 YEARS
RESIDING AT NO.39/2
5TH MAIN, 7TH CROSS
MALLESWARAM
BENGALURU-560 003. ... APPELLANT
[BY SRI VISHWANATH R.HEGDE, ADVOCATE (THROUGH VC)]
AND:
1. M/s. GUAGES INDUSTRIES PVT. LTD.,
A PRIVATE LIMITED COMPANY
INCORPORATED UNDER
THE COMPANIES ACT, 1956
HAVING ITS REGISTERED OFFICE AT:
RUPANA AGRAHARA (SMLA COMPOUND)
MADIVALA, BENGALURU-560 068
REPRESENTED BY ITS DIRECTOR
Shri K.N.DORESWAMY
2. SRI K.A.DEVAGIRI
S/O LATE A.N.DEVAGIRI
AGE: MAJOR
RESIDING AT NO.181
26TH CROSS, VI BLOCK
JAYANAGAR
BENGALURU-560 011
3
3. SRI R. GAJENDRA NAIDU
S/O LATE S.RAJAGOPALA NAIDU
AGE: MAJOR, RESIDING AT NO.256
2ND CROSS, CAMBRIDGE ROAD
BENGALURU-560 008.
4. SRI D.NAGARAJ S/O LINGAYYA
AGE: MAJOR, RESIDING AT NO.7/1
6TH CROSS, AZAD NAGAR
BENGALURU-560 018.
5. SRI P.C.APPUMANI
S/O LATE P.V.KUTTAN
AGE: MAJOR
RESIDING AT G.B.28
HAL COLONY, VIMANAPURA POST
BENGALURU-560 017
6. SRI CHANDRASHEKAR KHANAPURE
S/O MALLAPPA KHANAPURE
AGE: MAJOR
RESIDING AT NO.239/6
BULL TEMPLE ROAD
CHAMARAJPET
BENGALURU-560 018. ... RESPONDENTS
[BY SRI M.B.CHANDRA CHOODA, ADVOCATE FOR R1;
SERVICE OF NOTICE IS DISPENSED WITH VIDE ORDER DATED
20.02.2009 IN RESPECT OF R2, R3, R5 & R6
R4 IS SERVED]
THIS R.F.A. IS FILED UNDER SECTION 96 OF CPC
AGAINST THE JUDGMENT AND DECREE DATED 25.02.2005
PASSED IN O.S.NO.4879/1986 ON THE FILE OF THE I
ADDITIONAL CITY CIVIL AND SESSIONS JUDGE, BENGALURU
CITY (CCH NO.2), DISMISSING SUIT FOR DECLARATION.
THESE APPEALS HAVING BEEN HEARD AND RESERVED
FOR JUDGMENT ON 08.10.2021 THIS DAY, THE COURT
PRONOUNCED THE FOLLOWING:
4
JUDGMENT
These two appeals are filed challenging the judgment and decree of dismissal of suits dated 25.02.2005 passed in O.S.Nos.3648/1985 and 4879/1986, respectively, on the file of the I Additional City Civil & Sessions Judge, Bengaluru City (CCH.No.2).
2. The parties are referred to as per their original rankings before the Trial Court to avoid the confusion and for the convenience of the Court.
3. The factual matrix of the case is that in both the suits the plaintiff is common and M/s. Guages Industries Private Limited is the only defendant in O.S.No.3648/1985 and M/s. Guages Industries Private Limited and five others are arrayed as defendant Nos.1 to 6 in O.S.No.4879/1986.
4. The factual matrix of the case in O.S.No.3648/1985 is that the plaintiff has filed a suit for recovery of Rs.10,254.80 paise along with interest at the rate of 21% per annum from the date of suit till realisation and for costs and other reliefs. The plaintiff was a Director in the defendant - Company (for short 5 'the Company') and he was appointed by the Company on 05.08.1982 along with other Directors. It is also his case that he was appointed as a life time Director. Earlier to his appointment, the plaintiff was an employee in NGEF as a skilled worker, drawing a salary of Rs.1,500/- per month and the said employment was permanent in nature, having the scope for escalation in the wages. But, only on the assurance of the Company, the plaintiff joined the same as a Director and also on the assurance of the bright future. The Company was formed on 05.05.1981 by converting its earlier proprietorship concern, in which K.A.Devagiri was the proprietor. The plaintiff was induced to part with a sum of Rs.17,000/- on the assurance that the said amount will be credited to the plaintiff account towards 170 shares to be allotted to him by the Company. But the said A.K. Devagiri and Shri G. Gajendra Naidu with an intention to cheat the plaintiff and to have wrongful gain, failed to adhere to the assurance made in inducing the plaintiff to join the Company. A criminal case is instituted against the said persons for the illegal act. Because the business affairs of the Company were not managed properly in respect of plaintiff's perpetual complaint about the manner in which the business of the defendant was 6 being conducted. The interest of the Company was deteriorated and it's prejudicial to the interest of the share holders of the Company. Because of the squabbling between the directors of the company and as the other directors constituted a majority strategy, the plaintiff was deemed to have been removed on 10.12.1983 mischievously. The Director K.A. Devagiri was receiving a monthly remuneration of Rs.1,400/- and the plaintiff's remuneration was at Rs.700/- per month. One more director was appointed on 05.08.1982 was not being paid any remuneration since he had not resigned from his job in MICO. The aforesaid remuneration was payable monthly and from August, 1982. But the plaintiff did not receive the same. In view of the repeated reminders made by the plaintiff on various occasions, a solitary payment was made by the defendant to the plaintiff for the month of November 1982. Therefore, the plaintiff was entitled to receive the remuneration during his tenure of appointment as a director in the Company i.e., for the total period of 15 months at the rate of Rs.700/- per month, which amounts to Rs.10,500/-. Deducting the solitary payment made for the month of August, 1982, the plaintiff is entitled to Rs.9,800/-. The plaintiff demanded the same by notice dated 7 12.10.1985 and the said notice was received by the defendant on 15.10.1985, but the defendant neither replied nor complied the same. Hence, the plaintiff filed a suit in O.S.No.3648/1985.
5. The defendant has resisted the suit by filing written statement on the ground that the money transaction referred in the plaint is purely a personal in nature between plaintiff and Shri K.A.Devagiri and Shri Gajendra Naidu and it is nothing to do with the Company. The defendant admits the removal of the plaintiff from his Directorship of the company by resolution dated 10.12.1983 and w.e.f. that date the plaintiff ceased to be the director of the Company. It is contended that no such remuneration was fixed to the plaintiff and request made by the plaintiff to fix the remuneration was considered and fixed a lumpsum payment of Rs.700/- to the plaintiff for miscellaneous service rendered by him and it was also resolved that no further direct remuneration had paid to the plaintiff. The said amount of Rs.700/- was paid to the plaintiff through a cheque and he is not entitled for any further payment. Hence, the very claim made by the plaintiff for recovery of the amount is not based on any 8 right. Hence, it is contended that the plaintiff is not entitled for any relief.
6. Based on these pleadings, the Trial Court has framed the following issues in O.S.No.3648/1985:
1. Whether the plaintiff proves that he was appointed as a Director in the defendant's company on 05.08.1982?
2. Whether the plaintiff proves that the board of directors have fixed his monthly remuneration at Rs.700/-?
3. Whether the plaintiff proves that he has accepted the solitary payment of Rs.700/- as salary for the month of August 1982 and not in full discharge of his dues?
4. Is the plaintiff entitled for interest on arrears of salary if any? and if so at what rate?
5. Does the Plaintiff proves that the defendants are due Rs.10,254.80 paise in all towards the balance arrears of salary, interest and notice charges?
6. To what relief the plaintiff is entitled?
7. The plaintiff in order to substantiate his case, he examined himself as P.W.1 and got marked the documents as Exs.P1 to P5. On the other hand, the defendant also examined one witness as D.W.1 and relied upon the documents as Exs.D1 to D6. The Trial Court after considering both oral and 9 documentary evidence placed on record answered issue No.1 as in the affirmative in coming to the conclusion that he was appointed as Director in the defendant - Company on 05.08.1982, but answered other issues as in the negative in coming to the conclusion that the plaintiff is not entitled for any relief as he has not proved the remuneration of Rs.700/-. Being aggrieved by the judgment and decree of dismissal of the suit, the plaintiff has filed R.F.A.No.1248/2005 before this Court.
8. The main contention raised in this appeal is that the plaintiff left the job in which he was drawing the salary of Rs.1,500/- per month. Only on the assurance of the defendant -
Company he resigned and joined his Company as Director on 05.08.1982. The Trial Court wholly erred in believing the Minute Book-Ex.P5, produced by the respondent after a lapse of 1 year 3 months from the date of the order passed by the Trial Court and the delay in production of additional document enabled the defendant to manipulate the Minutes Book to suit the convenience of the defendant. The Trial Court wholly erred in not noticing the respondent had failed to examine the material witness Mr.L.Nagaraj, who admittedly received Rs.17,500/- from 10 the appellant. The Trial Court ought to have taken the admitted fact regarding the payment of the aforesaid sum by the appellant which admitted fact was not at all required to be proved. The appellant was entitled even admitting that he was removed from Directorship on 10.12.1983 for remuneration at least for the said period. The Trial Court erred in not noticing that admittedly the appellant was paid a sum of Rs.700/- by way of cheque. Hence, committed an error in dismissing the suit. Hence, it requires an interference of this Court.
9. The appellant in R.F.A.No.1249/2005 is the plaintiff in O.S.No.4879/1986. The contention of the plaintiff in the said suit is that he was appointed as Director and also the Life Director. Defendant No.1 is a Private Limited Company, engaged in the manufacture of standards special limited gauges and gauging fixtures. The defendant Nos.2 and 3 are the Directors of the first defendant - Company and the sixth defendant was also a Director till he resigns from his Directorship on 15.12.1982. The plaintiff in the said suit also reiterated that he was drawing a salary of Rs.1,500/- per month when he was working in NGEF and the plaintiff had a good fortune in his 11 earlier employment. But on the assurance of the Director, he joined as a Director of the defendant - Company. On such assurance, the plaintiff parted with Rs.17,000/- on two occasions. After appointing the plaintiff as a Director, the plaintiff was never consulted on any matters relating to the business affairs of the first respondent - company. Inspite of repeated reminders and request by the plaintiff from time to time upon the other directors, various suggestions put forth by the plaintiff was not heeded to. The majority of the directors were exploiting the situation to suit their whims and fancies. The Board meetings were to be held abruptly and the notice sent in the minute without sufficient notice to the plaintiff, it is nothing but an eyewash. The first defendant has not issued Share Certificates to the plaintiff although the shares were allotted to others to the exclusion of the plaintiff. The sixth defendant had continued to be a Director of the first defendant - Company without resigning from his employment at MICO. The first defendant - Company never maintained proper books of accounts and when the plaintiff had raised the voice with regard to the mal administration, defendant Nos.2 to 6, who constituted a majority did not heed to the plaintiff's suggestions and instead of he had 12 received a notice on 30.11.1983, which was signed by the second defendant for and on behalf of Board of Directors of first defendant. The plaintiff also complained to the Registrar of Companies and with a police protection, the plaintiff attended the meeting on 10.12.1983 and later he received a letter dated 12.12.1983 from the first defendant - Company intimating that he is ceased to be the Director of the first defendant. The plaintiff had been illegally removed from the directorship. The plaintiff received another notice dated 28.03.1984 from the Assistant Registrar of Companies in Karnataka, which is also replied by the plaintiff on 03.04.1984. The plaintiff has been treated as an absentee with malafide intention in spite of plaintiff attending the meetings. He was removed from the Directorship invoking the provisions of Section 283(g) of the Companies Act, 1956, which is illegal and not in accordance with the principles of natural justice. Hence, filed a suit challenging the removal of the plaintiff from the Directorship.
10. In pursuance of the suit summons, defendant Nos.1 to 4 admit that the plaintiff was appointed as Director of the defendant - Company on 05.08.1982, but they denied 13 categorically that he was appointed as life time Director on 03.09.1982. They plead ignorance as to the letter dated 01.10.1992 to the Central Bank of India. They admit the conversion of proprietorship concern namely., Gauges Industries into a private limited company. It is contended that the notices were issued to the plaintiff to attend the Board meeting on all occasions to discuss the affairs and business of the Company. But he has not attended. The other allegations made in the plaint that he attended the meeting also denied and contend that the first defendant has not received any suggestion from the plaintiff as contended. The plaintiff himself has not taken any interest in the business of the company and has abstained from attending the Board meeting. All the business transactions were carried out in the name and style of first defendant - company. It is contended that without any other option when the plaintiff did not attend the meeting was forced to take a decision of removing him from the Company after passing the resolution in the board meetings. It is contended that the notices were given on 30.11.1983 and thereafter meeting was held on 10.12.1983 and order of removal was communicated to him on 12.12.1983. The removal is in accordance with the provisions of Section 14 283(g) of the Companies Act, 1956. Hence, the plaintiff cannot find fault with the decision of removal him from the Directorship.
11. Defendant Nos.3 and 5 were placed ex-parte as per order sheet dated 07.02.1990. The second defendant also placed ex-parte as per order sheet dated 19.03.1990. The defendant No.6 has not filed written statement as per order sheet dated 22.03.1991.
12. Based on these pleadings, the Trial Court has framed the following issues in O.S.No.4879/1986:
1. Whether the plaintiff proves that he had made investments for the first defendant company before its corporation?
2. Whether the plaintiff proves that the he was appointed as a Life Director in the first defendant company on 3.9.82?
3. Whether the defendants prove that the plaintiff had not attended any of the Board Meetings of the first defendant company after becoming a Director in the first dependant company?
4. Whether the defendants prove that this Hon'ble Court has no jurisdiction to adjudicate the above suit?
5. Whether the defendants prove that the plaintiff had incurred the statutory disqualification to continue as a Director as per Sec.283(1)(g) of the Companies Act, 1956?15
6. Whether the plaintiff proves that the decision of the first defendant company communicated to the plaintiff by its letter, dated 12.12.1983 is illegal, null and void?
7. Whether the plaintiff proves cause of action for the suit?
8. Whether the plaintiff proves that he is entitled to the reliefs claimed?
9. To what reliefs, the parties are entitled?
13. The plaintiff in order to substantiate his case, he examined himself as P.W.1 and got marked the documents as Exs.P1 to P54. On the other hand, the defendants also examined one witness as D.W.1 and got marked the documents as Exs.D1 to D5. The Trial Court after considering both oral and documentary evidence placed on record answered issue Nos.1 and 2 and 4 to 6 as in the negative in coming to the conclusion that the plaintiff has not proved that he had made investment for the first defendant - company and that he was appointed as Life Director. However, comes to the conclusion that the plaintiff had not attended any of the board meetings of the first defendant - company after becoming a Director in the first defendant - Company. The Trial Court answered the other 16 issues as in the negative in coming to the conclusion that the Court has jurisdiction to adjudicate the above suit and the decision of the first defendant - Company communicated to the plaintiff by its letter dated 12.12.1983 and the same is not illegal, null and void. However, comes to the conclusion that the cause of action is proved by the plaintiff but he is not entitled for the relief as claimed in the plaint.
14. Being aggrieved by the Judgment and Decree of the Trial Court, the present appeal R.F.A.No.1249/2005 is filed before this Court, wherein, it is contended that the Trial Court failed to appreciate the admission of defendant No.4 in his deposition in S.C.No.3518/1984 to the effect that the appellant had lent a sum of Rs.17,500/- towards loan (Ex.P54). The Trial Court also committed an error in coming to the conclusion that the appellant had failed to establish that he was appointed as a Life Director in the first respondent - Company, in spite of there was an admission of DW.1 recorded in O.S.No.3648/1985 on 17.01.1991 that he was a Life Director. The Trial Court failed to appreciate that the appellant would not have joined the respondent as a Director without the inducement of the other 17 Directors. It is also contended that the Trial Court wholly erred in believing the Minute Book-Ex.P5 produced by the respondent. The Trial Court failed to take into account the various discrepancies in the Minute Book as pointed out by the appellant before the Trial Court. The Trial Court failed to notice that the disability under Section 283(1)(g) of the Companies Act, 1956 did not amount a removal but it is automatic on the absence of a Director from 3 consecutive meetings. The Trial Court failed to appreciate the said fact. It is also contended that the Trial Court failed to appreciate that when another Director Shri. K. Chandrashekar had also absented himself from all the meetings, similar action ought to have been taken against the said Director also. But no such action was taken. Hence, the decision of removal of the plaintiff alone was discriminatory and illegal. The Trial Court failed to notice that the minutes of the meeting dated 04.10.1982 mentioned that the appellant was most irregular and attended only few matters and the same has not been considered and it is clearly discloses that it was manipulated the document - Ex.P5. The Trial Court failed to notice that DW.1 was not a material witness and the material witness would be 18 one Shri L.Nagaraj, who was a Director since inception. Hence, the Trial Court committed an error in dismissing the suit.
15. Learned counsel appearing for the plaintiff/appellant in both the suits reiterated the grounds urged in the appeals. Learned counsel would vehemently contend that it is not in dispute that he was an employee of NGEF and thereafter he had joined the first defendant - Company and he was admitted as Director on 05.08.1982. Learned counsel would vehemently contend that though they dispute that he was a life member but in the pleading they have admitted that he was a life member. Learned counsel would vehemently contend that the document - Ex.P5, Minute Book was produced after almost one and a half year of order passed by the Court. Hence, they created Minute Books and the same is disputed. Exs.P5 to P24 are marked and Exs.P5 to P17 relate to plaintiff was appointed as Director. He was removed vide resolution dated 10.12.1983 and communicated on 12.12.1983 on the ground that he was not attended continuously for three meetings. Learned counsel would vehemently contend that Ex.P32-Notice which was given, no agenda with regard to removal of him from the Directorship. 19 No material is placed for removal. Learned counsel would vehemently contend that the order was directed to produce the Minute Book on 17.04.1989 but produced on 20.07.1990. Ex.P5 is a fabricated document. In terms of Ex.P32 no agenda for removal of him from the Directorship. The Trial Court failed to appreciate all these aspects into consideration.
16. Learned counsel would also vehemently contend that even though the remuneration was fixed and paid to the tune of Rs.700/-, the Trial Court has committed an error in dismissing the suit.
17. DW.1, who has been examined before the Court is not the Director. Shri L. Nagaraj was the Director of the Company as on the date of the suit and he also signed the written statement, but he has not been examined. The material witness is suppressed before the Trial Court. No doubt, the plaintiff filed a suit against one Shri L. Nagaraj in S.C.No.3516/1994, wherein, in terms of Ex.P3, he admits that for having lending an amount of Rs.17,500/-, the Trial Court committed an error that the same is not proved. The complaint is also filed against the defendant - Company and the case has 20 been registered. The plaintiff has given the notice, but no reply was given. Hence, he filed a suit for recovery of remuneration. The learned counsel reiterates the grounds of earlier acknowledgement of NGEF and colourful assurance given by the defendants. The Trial Court committed an error in dismissing both the suits. Notice not issued before removal and DW.1 admitted as they have issued the notice. But, in terms of Ex.P32, no such agenda for removal and it is nothing but a pre-planned action. Immediately after removal of him from the Directorship, caveat was filed in terms of Ex.P38. Hence, it is clear that the removal is pre-planned and stage managed. Hence, it requires an interference of this Court.
18. Per contra, learned counsel appearing for the defendant - Company would vehemently contend that Exs.P5 to 25 are produced by the plaintiff himself and when the originals produced started disputing the document - Ex.P5 and the plaintiff cannot approbate and reprobate. Ex.P15 is the original of Ex.P5. The plaintiff himself made DW.1 as party to the suit. Hence, he has been examined as DW.1. Hence, the contention of the plaintiff that he is not a material witness cannot be 21 accepted. The suit is filed between the plaintiff and the defendants for recovery and no document for having invested the money of Rs.17,000/- into the Company and no such pleading. When he was removed on 10.12.1983, no need to make any payment. The learned counsel would vehemently contend that the NGEF was in the verge of closing and voluntarily he came and obtained the Directorship in the Company. No remuneration is fixed, only Ex.P15 discloses that it is general Miscellaneous amount as Rs.700/-. The Trial Court in detail discussed the evidence of PW.1 and DW.1 and also the relevant documents. Hence, the appellant/plaintiff cannot find fault with the findings of the Trial Court.
19. Learned counsel would vehemently contend that Ex.P5 cannot be discarded. The Trial Court answered issue Nos.4 and 5 by operation of law. Learned counsel would vehemently contend that new amendment was made to the Companies Act and now present Section in respect of Old Section 283(1)(g) of the Companies Act, wherein, 3 months provided. In view of the new Section 169, it is made as 12 months. The word used is 'vacation' and not 'removal'. It is elicited in the cross- 22 examination that the payment was made in the year 1978 but the Company was incorporated in the year 1981. Learned counsel would vehemently contend that no such concept in Company Law making as life member. The contention that the police help was sought to attend the Board meeting also cannot be accepted. Ex.P17 discloses that he was appointed as Additional Director for a period of one year. Exs.P16 to 25 discloses that he was not attending the meeting and the notice issued in terms of Ex.P32. No doubt, the complaint was given on 08.12.1983 in terms of Ex.P34.
20. PW.1 admitted that Nagaraj as not Director, but payment was not made in favour of the Company and the same has been discussed in detail by the Trial Court. No doubt, Ex.P10 discloses with regard to payment of Rs.700/- and the same is not the remuneration and it is only a general miscellaneous service charges. The plaintiff not proved the remuneration, which has been fixed. Hence, the judgment of the Trial Court both in respect of recovery of money and questioning of removal of him from the Directorship, is just and proper and there are no reasons to interfere with the findings of the Trial Court. 23
21. In reply to the arguments of the learned counsel for the respondent's counsel, learned counsel for the appellant's counsel would vehemently contend that in paragraph No.4 of the plaint, it was stated that he was appointed as Director and in paragraph No.2 of the written statement of O.S.No.3648/1985 admitted that he was a life member. But in the written statement in O.S.No.4879/1986 disputed that he is not a life director and in both the written statement contrary defense was taken.
22. DW.1 admitted as Life Director vide resolution dated 06.08.1982. When such being the case, the Trial Court has given the erroneous findings. The resolution dated 03.09.1982 not forthcoming. Ex.P5 is fabricated and the same is produced after one and a half year. The Trial Court ought to have disbelieved Ex.P5. Hence, prayed this Court to allow the suits.
23. Having heard the arguments of learned counsel appearing for the appellant/plaintiff and learned counsel appearing for the first respondent/defendant, the points that would arise for consideration of this Court are: 24
(1) Whether the Trial Court has committed an error in dismissing the suit in O.S.No.3648/1985 in coming to the conclusion that no remuneration was fixed at the rate of Rs.700/- and the plaintiff is not entitled for the relief of recovery of money of Rs.10,254.80 paise?
(2) Whether the Trial Court has committed an error in coming to the conclusion that he was not a life director in the first defendant -
Company?
(3) Whether the Trial Court has committed an error in dismissing the suit that the plaintiff had not attended the board meeting continuously and he is not entitled for any relief in O.S.No.4879/1986?
(4) What order?
Point No.(1):
24. Having considered the pleadings of both the plaintiff and defendant in O.S.No.3648/1985, the Court has to examine the material available on record i.e., whether the finding of the Trial Court is against the material on record. The plaintiff was examined as PW.1 before the Trial Court and he claims that he 25 was working as an employee in NGEF earlier and on the assurance of the defendants he had joined as Director in the Company. He reiterated the averments of the plaint stating that the remuneration was fixed at Rs.700/- per month and other directors were getting Rs.1,400/- per month and also received an amount of Rs.700/- as a sole payment. After deducting the same, the defendant - Company has to pay an amount of Rs.9,800/- along with interest. He was subjected to cross - examination.
25. In the cross-examination, it is elicited that he does not remember the date on which he attended the first board meeting after the company was incorporated, but he says it was on 05.08.1984 but again he says that it might have been in the year 1982. But he admits that he did attend the board meeting held on 05.08.1982 but he was taken as Director on the same day. He had signed the Minute Book on that day and the resolution was shown to him is at Ex.P5(a). It is also elicited in the cross-examination that he does not know when his salary was fixed but it might be in the month of September 1982. He admits that he did not attend the board meeting when the salary 26 was fixed. It is suggested that no such meeting was held and the salary was fixed, the same was denied. He admits that he had not written any letter to the Board of Directors asking them for fixing his salary. Again he says that he gave such letter in the meeting itself but he does not remember the month in which he gave the letter asking them to fix his salary. He also admits that he has not received any communication from the defendant regarding the fixation of his remuneration as a Director. He admits that he has not produced any documents to show that he had made the payment of Rs.17,000/- to become a Director of the defendant - Company. One of the conditions imposed by KSFC., was that he should produce proof of his resignation from NGEF. But he claims that he attended 10-12 Board Meetings after he became the Director. He admits that the payments were made by him before the incorporation of the defendant - Company i.e., in favour of one Devagiri. An amount of Rs.5,000/- was paid to G. Leela. He admits that he had filed a suit against one Nagaraj for recovery of Rs.2,000/-. The said suit has been decreed.
27
26. On the other hand, defendant examined one witness, who is the Director of the Company and he reiterated the averments of the written statement in his evidence. In his examination-in-chief, he admitted that the plaintiff was made as a Life-Director with effect from 06.08.1982. No remuneration was fixed for the Directorship of the plaintiff. He was subjected to cross-examination.
27. In the cross-examination, he admits that he is deposing on the basis of the records of the defendant - Company. He does not know whether the plaintiff had made representation to fix his remuneration on par with other Directors. He had no personal knowledge about the absence of plaintiff in the board meetings of the defendant - Company. He cannot give the description of miscellaneous expenses which are to be paid by the defendant - Company to the plaintiff. Directors' remuneration is debited to the remuneration account of the defendant - Company. The plaintiff had sent a legal notice to the defendant - Company before filing the suit. He admits that the plaintiff joined as a Director of the defendant - Company after leaving NGEF. He does not know whether the 28 plaintiff was removed from the defendant - Company as the plaintiff demanded the remuneration amount.
28. Having considered both oral and documentary evidence available on record, it is not in dispute that he was appointed as a Director of the defendant - Company on 05.08.1982 and though it is disputed by the defendant that he was not a life member. But DW.1 in his cross-examination categorically admitted that he was made as a Life Director w.e.f. 06.08.1982. The learned counsel appearing for the appellant/plaintiff brought to the notice of this Court the admission given by DW.1. The plaintiff also relied upon certain documents in support of his contentions i.e., he has passed the resolution, wherein, he has specifically mentioned that the remuneration was fixed at Rs.700/- per month. Apart from that, resignation letter was also produced. Ex.P3 i.e., communicating him that he was removed from the Directorship. Ex.P1(a) is the postal acknowledgement received by the defendant - Company and no reply was given.
29. On the other hand, the defendant - Company also relied upon the documents for having made the payment of 29 Rs.700/-. But the main contention of the defendant - Company i.e., not remuneration. But DW.1 categorically admitted in the chief examination itself that the remuneration of Rs.700/- was paid to the plaintiff as special remuneration for the services rendered by the plaintiff for the defendant - Company. A resolution was passed to that effect and the same is entered in the Minute Book dated 04.10.1982 as per Ex.P5(a).
30. On perusal of the document, no doubt, it is mentioned as miscellaneous expenses. But DW.1 categorically admits that he cannot give the description of miscellaneous expenses, which have to be paid by the defendant - Company to the plaintiff. He also admits that Directors' remuneration is debited to the remuneration account of the defendant - Company. It is elicited that the said amount of Rs.700/- is also debited to the remuneration account of the defendant - Company. When such being the facts and circumstances of the case, the very contention of the defendant - Company that the same is not towards the remuneration and it is miscellaneous expenses, cannot be accepted. When DW.1 had not given any description of miscellaneous expenses which have to be paid, it 30 is clear that he was appointed as Director and also they admit that he was appointed as Life Director though it is disputed DW.1 categorically admits the same. When an amount of Rs.700/- is paid, the Trial Court ought not to have discarded the evidence of DW.1 , where an admission was given with regard to payment of Rs.700/- though the Trial Court answered issue No.1 as in the affirmative that he was appointed as Director but comes to the conclusion that the Board of Directors have not fixed his monthly remuneration of Rs.700/-.
31. I have already pointed out that the Trial Court has committed an error in not accepting the payment of Rs.700/- given to the Director/plaintiff and not disputed for having made the payment of Rs.700/-. When such payment was made when DW.1 was not given description regarding miscellaneous amount, the Trial Court ought to have granted the decree for recovery of amount of Rs.9,800/- after deducting an amount of Rs.700/-. Hence, in view of the admission and for having made the payment of Rs.700/-, no doubt, in document-Ex.P16, it is mentioned as miscellaneous expenses, but no explanation was given regarding what is the miscellaneous expenses by DW.1. 31 Under the circumstances, the plaintiff is entitled for the relief of recovery of amount of Rs.9,800/- with interest at the rate of 6% per annum. Hence, I answered point No.1 as in the affirmative that the Trial Court has committed an error in dismissing the suit.
Point Nos.(2) and (3):
32. Having heard the respective counsel and also on perusal of pleadings in O.S.No.4879/1986, the prayer is made to declare that the resolution dated 10.12.1983 passed by the Board of Directors of the first defendant - Company is illegal and the same is null and void and also declare that the plaintiff is entitled for all the consequential reliefs as the Director of the first defendant - Company.
33. The main contention urged in the plaint is that he was appointed as Director on 05.08.1982 and he was appointed as Life-Director on 03.09.1982 and the plaintiff was never consulted on his appointment as a Director and the defendant - Company did not receive such a suggestion. The majority of the directors were exploiting the situation to suit their whims and fancies and he was illegally removed from the Directorship. 32 Hence, the removal from the Directorship has to be set aside. The defendants in the written statement contended that he was appointed as Director on 05.08.1982 and not disputed the same. But in the written statement disputed that he was not the life director of the Company and he did not attend the meeting continuously for a period of one year. Hence, notice was given and thereafter he was removed from the Directorship and the removal is in accordance with law as prescribed under Section 283(g) of the Companies Act, 1956.
34. The plaintiff in order to substantiate his contention that with an ill motive, he has been removed from the Directorship examined himself as PW.1 and he reiterated the averments in the plaint in his chief-evidence and also having paid the amount to the second and third defendant. However, he admitted that the meeting notice was received on 30.11.1983 but he attended the said board meeting. In total he got marked 54 documents as Exs.P1 to P54. He was subjected to cross- examination.
35. In the cross-examination, he admits that he does not have any written document to show that he was invited by the 33 second defendant to be a Director in the first defendant - Company. But he contended that the second defendant has invited him as Director on the reason that his joining will be good prospects for him in his earnings with the first defendant. But he admits that there was no agreement between himself and the second defendant at the time of his joining as Director. There were also no terms settled at that time between them. It is elicited that he does not remember that when he joined as Director of the first defendant - Company. He admits that he himself and the sixth defendant received communication from the KSFC., that they can resign from their jobs within six months. Accordingly, he has resigned from his job in terms of Ex.P2. The other directors along with him in the Thread Gear Company are Nagaraj, Appumani, Mrs. Chandrashekhar Khanapure, Doraiswamy, Suresh and Babu. The said persons are not the Directors of the Company. He admits that he gave the cheque of Rs.2,000/- to the second defendant on 16.11.1978 and he gave the cheque of Rs.5,000/- to Mrs. Leela Naidu on 09.11.1978. He admits that he had no records to show that issue of those two cheques was for the purpose of formation of the first defendant's Company and also admits that the wife of 34 Gajendra Naidu was not the partner of the first defendant - Company at the time of issuing a cheque for a sum of Rs.5,000/-. He also admits that at that time to his knowledge Guages Industries was a proprietorship concern and the same was run by the second defendant. He also admits that an amount of Rs.2,000/- was paid to the second defendant. He claims that he paid the above amount towards the shares of the first defendant - Company. But defendant - Company has not given any written communication in respect of the said amount towards the shares and also admits that the first defendant - Company was not formulated when he made the payment in the year 1978-79. But he admits that he paid the amount of Rs.17,500/- on the belief. At that time the first defendant - Company did not invite any shares from the public. It is elicited that when the amount of Rs.17,500/- was paid to the first defendant - Company, Nagaraja was not the Director. It is suggested that he did not attend the meeting and the complaint was given at 4:30 p.m. The said suggestion was denied.
36. On the other hand, the defendants in order to substantiate their contention examined one witness as DW.1 and 35 DW.1 reiterated the averments of the written statement in his chief evidence. DW.1 was subjected to cross-examination.
37. In the cross-examination, he admits that he know the plaintiff personally and further admits that he himself as well as the plaintiff were the employees of NGEF. He admits that immediately on joining to the defendant - Company he was taken as Director. The last salary drawn by him in NGEF., was Rs.1,800/- and odd. It is elicited that he is not aware under what circumstances for the reason that lead for removal of the plaintiff from Directorship. It is elicited that there is a practice to issue notice to the Board of Directors to attend the meeting. He says the reason for removal of the plaintiff from Directorship from the defendant - Company was for non-attendance to the board meetings. The notice of all the meetings had been issued to the plaintiff and he had produced the copy of only one notice i.e., 30.09.1983. He has given evidence only on the basis of the records. He admits that the board meetings as per rules are to be held once in three months. He cannot say whether the board meetings have held once in three months. He admits that in the earlier suit filed by the plaintiff he had produced the Minutes 36 Book, but suggestion was made that it was a fabricated Minutes Book and the same was denied.
38. Having considered both oral and documentary evidence available on record i.e., exhibits 'P' and 'D' series and also the evidence of PW.1 and DW.1, it is not in dispute that the plaintiff was appointed as a Directed on 05.08.1982. I have already pointed out that even though the defendants have disputed that he was not the life director but in the connected matter in O.S.No.3648/1985, DW.1 has categorically admitted that he was also appointed as life director on 06.08.1982. But plaintiff contended that he was appointed as life Director on 03.09.1982. The Trial Court while answering issue No.1 with regard to the investment is concerned taken note of the amount paid to the defendants in the year 1978-79 and also the Company was incorporated in the year 1981. Hence, the contention of the plaintiff was not accepted. Payment was also not in the name of the Company but in the name of other defendants. Hence, I do not find any error in the findings of the Trial Court that the plaintiff fails to prove that he had made investments for the first defendant - Company and for having 37 made the investment, no documents are placed before the Court and there is no any agreement and even for the contention of the defendants that the said amount was paid towards the shares also. There is no any such acknowledgement for having received the amount towards the shares.
39. The Trial Court comes to the conclusion that he was not appointed as life director, when the admission is available on record that he was appointed as Life-Director in other connected suit and also in the evidence of DW.1, the trial Court committed an error in coming to the conclusion that he was not a Life- Director. But the fact is that in the cross-examination though he claims that he attended all the meetings as contended by the plaintiff, no documents are placed before the Court. Though he had produced number of exhibits in 'P' series, the main contention is that Ex.P5-Minutes of Board Meeting is a fabricated document and in order to prove the said fact, no such documents are produced instead of plaintiff himself got marked the documents i.e., Exs.P5 to P25, proceedings of board meeting on different dates and none of the documents disclose that he was attended the meeting except the one meeting as elicited in 38 the cross-examination. The plaintiff was also categorically admits that he had received the notice - Ex.P32 dated 30.11.1983 but he contends that he had attended the meeting on 10.12.1983. But in order to substantiate the same, no materials are placed. However, he admits the communication of removal from the Directorship on 12.12.1983. The defendants also relied upon Minutes of the Board Meeting in terms of Ex.D1 dated 04.11.1999 and the authorisation given to DW.1 to appear before the Court and to give evidence. The other document is Ex.D3, wherein, a case is filed against the defendant - Company in S.C.No.5798/1993 and the said suit was also dismissed and the said suit is filed for recovery of money.
40. The learned counsel appearing for the appellant also not disputes the provisions of Section 283(g)(f) of the Companies Act, 1956, wherein, if the Director continuously absent for three board meetings, there is a provision for ceasing of Directorship. In order to prove the fact that he attended the meeting continuously, no documents are placed before the Court. The documents which have been produced by the plaintiff as exhibit 'P' series, particularly, document Ex.P32 is clear that 39 before removal from the Directorship he had acknowledged the notice dated 30.11.1983. No doubt, he had given the complaint and Ex.P31 is also a notice given to the plaintiff dated 30.09.1983 and the plaintiff himself has produced the document that notice was given with regard to the meeting to be held on 08.10.1983 along with agenda. When such being the facts and circumstances of the case, the very contention that the notice was not given to the defendants cannot be accepted. Ex.P26 is also another notice given to the defendants and the same was acknowledged by him on 25.07.1983. The document - Ex.P16 is the document appointing him as Director on 06.08.1982, wherein, it is specifically mentioned that the Additional Directors be appointed as life directors of the defendant - Company, which requires attention of clause No.14(b) of the Article of Association of the Company. Hence, it is clear that on 06.08.1982, he was appointed as Life Director. Though the defendants disputed their own document - Ex.P16, which clearly discloses that the plaintiff was appointed as life director and there is an admission in the connected matter also for having made the payment for miscellaneous services to the plaintiff, an amount of Rs.700/- is also approved in the resolution dated 04.10.1982 in terms of 40 Ex.P15. It is contended by the defendants that the plaintiff cannot approbate and reprobate once he relies upon the documents - Exs.P5 to P25, the copies of resolution. Despite, Ex.P5 contending that the same was fabricated. No doubt, the document of resolution dated 03.09.1982 is not found in exhibit 'P' series and the plaintiff has to explain why he is not produced those copies. These are the documents are obtained by the plaintiff and produced before the Court and in order to prove the fact that he had attended the meeting continuously after his appointment from 05.08.1982 till his removal no such material is placed before the Court. Section 283(g) of the Companies Act, 1956 says that if the Director continuously absent for three board meetings, he can be removed. No doubt, in the notice, no agenda for his removal but the fact that he had acknowledged the notice Ex.P32 is not in dispute. He himself has relied upon document Ex.P32 and so also Ex.P31. I have already pointed out that other document of notice, which is marked as Ex.P26, is clear that notice was given. In Ex.P26, notice was given with regard to consider the share application and allotment thereafter Director L. Nagaraj and Appumani and nothing on record to show that he had appeared. But his contention is that he gave certain 41 suggestions to the Company and the Company did not accept the suggestions but prove the same also, no documents are placed before the Court except the correspondence made and mainly relying upon the documents i.e., notices and letter correspondence and letter addressed to the Registrar of Companies, postal acknowledgement, Letter to Registrar of Companies and Notices of Registrar of Companies and reply, but nothing on record for having he attended the meeting. When such being the facts and circumstances of the case, I do not find any error committed by the Trial Court in answering issue No.3 as in the negative and coming to the conclusion that the plaintiff has not attended the meeting. The Trial Court while answering issue No.3 in detail discussed the material placed on record and so also taken note of the contention that Ex.P5 marked in O.S.No.3648/1985 is a manipulated document and comes to the conclusion that the same has not been established. Ex.P5 bears the signature of the Directors, who have attended the meeting and the plaintiff has not disputed the authenticity of these signatures nor it is the allegation of the defendants that such meetings are invalid for want of quorum or otherwise. The Trial Court also taken note of Ex.P5 - Minutes of Board Meeting and 42 apart from that those documents are relied upon by the plaintiff in his evidence, which are marked as Exs.P5 to P25 and he cannot disputes the same once he relies upon the documents.
41. I have already pointed out that there was no dispute regarding he was inducted as Director on 05.08.1992 and it is only the self-serving statement of PW.1 that he attended the meeting regularly and the Trial Court also taken note of the provision of Section 283(1)(g) of the Companies Act, 1956, wherein, it is clear that if the Director not attended continuously three meetings, he can be removed. The very dispute raised by the plaintiff in respect of resolution dated 10.12.1983 passed by the Board of Directors of the first defendant - Company by removal of the plaintiff from the Directorship. It is not his case that he has attended the meeting but he himself produced the documents - Exs.P31 and P32 for having received notice and also Ex.P26-notice is clear that the notice was given and he was remained absent and he incurred statutory disqualification to continue as a Director and the Trial Court also discussed the very proviso of Section 283(1)(g) of the Company's Act, 1956. No doubt, the word is used 'vacation of office by Directors-' and 43 clause (g) is very clear that absence himself from three consecutive meetings of the Board of Directors or from all meetings of the Board for continuous period of three months, whichever is longer, without obtaining of leave of absence from the Board; he ceases from the Directorship. The plaintiff had not produced any document that he obtained the leave of absence from the Board. No such materials are placed. When such being the case, I do not find any ground to set aside the judgment of the Trial Court in coming to the conclusion that the Trial Court has committed an error in not considering both oral and documentary evidence. The documents which have been relied upon by the plaintiff in order to substantiate his contention i.e., voluminous documents - Exs.P1 to P54, not helps the plaintiff to comes to a conclusion that he had attended the meeting.
42. It is his case that he attended the meeting on 10.12.1983 with police force and no doubt he had lodged a complaint, but in order to substantiate his contention that he had attended the meeting, no materials are placed. When such being the facts and circumstances of the case, I do not find any error committed by the Trial Court in dismissing the suit and 44 only the mistake committed by the Trial Court is that the plaintiff is not the life member in spite of admission.
43. I have already pointed out that the resolution dated 06.08.1982 discloses that he was appointed as life director and apart from that in the connected matter, there is an admission by DW.1 and also in the written statement specifically contended that he was a life member and in the connected matter DW.1 categorically admitted in his chief evidence itself that he was a life member. Hence, the Trial Court has committed an error in answering the issue as in the negative that he is not a life member. But the fact is that he had removed from the Directorship for not attending the meeting continuously. When the statutory provisions provide to remove the Director in case of not attending the meeting continuously for three meetings, I do not find fault with the defendant - Company from removing him from Directorship. Hence, I do not find any merit in the appeal. Hence, I answered point No.2 as in the affirmative and point No.3 as in the negative. Answering issue No.2 as affirmative will not twist the decision to allow the suit and the same is only with regard to his status.
45Point No.(4):
44. In view of the discussions made above, I pass the following:
ORDER
(i) RFA No.1248/2005 is allowed.
(ii) The suit in O.S.No.3648/1985 is decreed for recovery of an amount of Rs.9,800/- with 6% interest per annum from the date of suit till realisation.
(iii) The Registry is directed to draw the decree.
(iv) RFA No.1249/2005 is dismissed.
(v) The Registry is directed to transmit the TCRs,
forthwith.
Sd/-
JUDGE
cp*