Company Law Board
Cannanore Whole Body C.T. Scan And ... vs Mrs. Saibunnisa S.V. on 17 July, 1997
Equivalent citations: [1998]93COMPCAS99(CLB)
ORDER
K.K. Balu, Member
1. This is an application filed under Section 167 of the Companies Act, 1956 (hereinafter referred to as "the Act"), by Cannanore Whole Body C. T. Scan and Research Centre Private Limited (hereinafter referred to as "the company") seeking directions of this Bench against the company to convene and hold the annual general meeting for the year 1996 for consideration and adaption of the balance-sheet as on March 31, 1996.
2. According to the company, the first annual meeting was held on September 29, 1995. The company had sent notices to its members convening the second annual general meeting for the year 1996 to consider the adoption of the balance-sheet and profit and loss account on September 5, 1996, at 2 p.m. at Kannur. Though the company made the arrangements for the annual general meeting, it could not be held on September 5, 1996, on account of the unruly behaviour of some of the members of the company and proxies present at the venue of the meeting. Consequently, the company could not hold the annual general meeting for the year 1996. Hence, this application.
3. According to the respondents, the petition is not maintainable in view of the provisions of Section 167 of the Act. Section 167 of the Act stipulates that the Company Law Board may, on the application of any member of the company, direct the calling of a general meeting of the company. Accordingly, the company has no locus standi to file this application and it is liable to be dismissed.
4. While the aforesaid application was pending, Shri K, Surendran Nayar, managing director of the company has filed an application, viz., C. A.No. 90 of 1997 for impleading him as a party in the main application filed under Section 167 of the Act, i.e., C. A.No. 129/167/SRB of 1997. This application is opposed by the respondents on the plea that the infirmity cannot be rectified by impleading the managing director, being a member of the company in the main application.
5. During the hearing on June 26, 1997, Shri Arvind Pandian, counsel for the petitioner, reiterated the submissions made in the application and further submitted that this Bench in exercise of the powers under regulation 44 of the Company Law Board Regulations, 1991, has inherent power to allow the impleading application to meet the ends of justice. He further submitted that under Section 10E(5) of the Act, this Bench while exercising its powers shall be guided by the principles of natural justice and shall act in its discretion. According to Shri Pandian, the discretionary powers of a quasi-judicial authority as enunciated at page 132 of A. Ramaiya's Guide to the Companies Act, 1992, 12th edition, shall include (a) granting of adjournments ; (b) summoning and enforcing the attendance of witnesses ; (c) addition of parties ; (d) award or refusal of costs and (e) award or refusal of damages. He further emphasised that this Bench may not go by the mere technicality. In this connection, he cited the decision in Hussein Haji Harun v. Union of India [1995] 77 ELT 803 (Guj) to state that (at page 807) :
"As observed by the Supreme Court in the case of Collector, Land Acquisition v. Mst Katiji [1987] 167 ITR 471 ; [1987] 28 ELT 185, when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred. It has further been grasped that the judiciary is respected not on account of power to legalize injustice on technical grounds but because it is capable of removing injustices and is expected to do so".
6. In the above circumstances, Shri Aravind Pandian urged that both the impleading application and main application directing the company to convene the annual general meeting for the year ended March 31, 1996, be allowed.
7. Ms. Rohini Mohan, counsel for respondents Nos. 2 to 4, 6, 7, 9 to 11, 14 and 15 submitted that Section 167 clearly stipulates, that the application has to be made by a member of the company. In the present case, the application has been made by the company itself and the managing director of the company, being a member merely seeks to implead himself as a party to the proceedings. This would not amount to the application having been made by a member of the company in compliance with the requirements of Sub-section (1) of Section 167 of the Act. This defect being ab initio is bad in law and cannot be rectified by impleading subsequently a shareholder. In this regard, she had relied upon the 4th Annual Report to the Parliament for the year ended March 31, 1960, giving explanation for introduction of section ,167 which runs as follows :
"In case of default in holding an annual general meeting, as required by Section 166, the Company Law Board will exercise the power to call or direct the calling of the annual general meeting but only on the application of a member. The underlying policy is to exercise the power only where the management is bound to be unwilling to convene an annual general meeting of the company, with a view to keeping the shareholders in the dark about the affairs of the company or where the management is unable to convene the meeting on account of party factions or other like reason".
Hence, she prayed for dismissal of the application.
8. I considered the pleadings and arguments of both the counsel. Admittedly, the present application was filed by the company seeking directions of this Bench against the company itself for convening the annual general meeting of the company for the year, 1996. Section 167(1) of the Act reads as follows :
"If default is made in holding an annual general meeting in accordance with Section 166, the Company Law Board, may notwithstanding anything in this Act or in the articles of the company, on the application of any member of the company, call or direct the calling of, a general meeting of the company and give such ancillary or consequential directions as the Company Law Board thinks expedient in relation to the calling, holding and conducting of the meeting."
9. It is clear that a member and not the company is empowered to invoke the provisions of Section 167 of the Act as explained in the 4th Annual Report to Parliament for the year ended March 31, 1960. The present application does not satisfy the requirements of the provisions of Sub-section (1) of Section 167 of the Act. The defect being ab initio is bad in law. The company cannot seek directions against the company itself. It is true that by virtue of regulation 44 of the Company Law Board Regulations, 1991, this Bench has inherent powers to pass such orders as may be necessary to meet the ends of justice. It is also true that this Bench while exercising its powers under the Act, shall be guided by the principles of natural justice and shall act in its discretion as enunciated in Sub-section (5) of Section 10E of the Act. At the same time, this Bench shall necessarily act according to the rules of reason, justice and law. There cannot be any violation of the provisions of the Act. The discretion has to be regulated according to the known rules of law. There are innumerable decisions to the above effect. The application filed by the company is not in consonance with the provisions of Section 167 of the Act. The defect being ab initio is bad in law and cannot be rectified by impleading subsequently a member. This will circumvent the provisions of Section 167 of the Act. In the circumstances, this Bench has no discretion to allow the impleading application defeating the provisions of law and remove the infirmity. The decision cited by counsel for the company is not applicable in the facts and circumstances of the case.
10. Taking into consideration the facts and circumstances of the case, oral and written submissions made by counsel for the petitioner as well as the respondent and the legal position as stated hereabove I am of the view that the application failing to satisfy the requirements of Sub-section (1) of Section 167 of the Act is not maintainable. Accordingly, without going into the other contentions of the petitioner or the respondents, the main application as well as the miscellaneous application are dismissed.
No order as to costs.