Indian Kanoon - Search engine for Indian Law

18. The resulting position is that, while the petitioners' group has sufficient voting strength to control the company, the respondents are continuing in office by taking advantage of the mistake noticed above. Does it, however, mean that the affairs of the company are being conducted in a manner prejudicial to the interests of the company or prejudicial to public interest, in order to attract Section 398 ? The section is comparatively new, and there is little case-law around it. But if there is any one principle which is well entrenched in the company law of England and India, it is the one recognised in Foss v. Harbottle [1843] 2 Hare 461, that the affairs of a company should ordinarily be allowed to be carried on in accordance with the wishes of the majority of its members. The members in general meeting are said to be the " supreme governing body " of a company and courts have been reluctant to interfere with their decisions, because the interests of the company are ordinarily best known to them. The legitimate manner of conducting the affairs of a company, including a private company whose articles conceive of a poll at general meetings, is to allow the supreme body to have its say and if a drafting or printing mistake stands in the way of this being done, that is something prejudicial to the interests of the company. A structural defect, placing the majority of investors at the mercy of a minority, and that too only by reason of an inadvertent mistake cannot be in the interests of any joint venture. The directors of a company owe some fiduciary duties to the company ; and the most effective method of enforcing these duties is to make them subordinate to the wishes of the majority at general meetings. The company has a legal personality of its own, and if any injury is done to it by the directors, the company alone can normally maintain an action. The recognised exceptions to the rule in Foss v. Harbottle [1843] 2 Hare 461, are only attempts to get over this difficulty by allowing members to initiate derivative actions, supposedly on behalf of the company itself. Dealing with intra-corporate duties, Gower's Principles of Modern Company Law, fourth edition, p. 641, says :