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4. The Company approached the Karnataka State Finance Corporation (for short 'KSFC') for grant of a term loan. The KSFC granted a loan to the extent of Rs. 12 lakhs. One of the conditions stipulated for the grant of the loan was that the Company should enter into a technical collaboration and selling arrangement with a reputed company. The subject of raising loan from the KSFC was discussed on 17-5-1979 at the very first meeting of the Board of Directors. The plaintiff had disclosed his interest in the NTL to the 2nd defendant who was the only other Director of the Company, when the 2nd defendant said that he was fully aware of the interest of the plaintiff in the NTL as he was an employee in the NTL for fairly a long time and there was no need to make a fetish of the same. This fact was also known to the 3rd defendant who was also an employee of the NTL at that time as Works Manager and resigned his job on 11-9-1980. The plaintiff pointed out to the 2nd defendant the scope of Section 299 of the Act and the 2nd defendant agreed to place on record the interest of the plaintiff in the NTL. The plaintiff had written a letter dated 10-3-1979 well before the Company was incorporated, to the KSFC expressing his willingness to help the Company in the matter of technical collaboration and selling arrangement in his capacity as the Managing Director of NTL and also kept the NTL Board of Directors fully informed about his 51% interest in the Company at the time, the NTL agreed to enter into an agreement with the Company to grant technical collaboration and to arrange the sale of the products of the Company. The 2nd defendant filed an application for term loan to KSFC in May 1979. The second defendant had also annexed a statement of the assets of the plaintiff as Managing Director of NTL to the loan application. The statement was prepared by the plaintiff and given to the 2nd defendant at the first meeting of the Board of Directors on 17-5-1979 when the plaintiff made the disclosure of his interest in the NTL. The plaintiff has not withheld his interest in the NTL at any stage and in fact positively did disclose at the very first instance when the question of entering into a contract with the NTL came up for consideration. This was done in spite of the full knowledge and the long standing awareness of the 2nd and 3rd defendants about the interest of the plaintiff in the NTL.

34. Bearing the above principles of law, I shall now proceed to consider whether the plaintiff has failed to comply with the requirement of sub-sections (l) and (2) of Section 299 and whether the office of the plaintiff as Director of the . Company fell vacant on the grounds urged by the defendants.

35. It is common ground that the plaintiff was concerned or interested in the NTL as he was the Managing Director then. It is not in dispute that there was a proposal to enter into an arrangement or contract with the NTL for technical collaboration and selling arrangement of the products of the Company through NTL. Admittedly the 1st Meeting of the Board of Directors was held on 17-5-1979. Well before the incorporation of the Company, plaintiff wrote a letter Ex, D.6 dated 10-3-1979 to the KSFC on behalf of the NTL as its Managing Director expressing willingness to give technical know how to the Company and also to enter into a selling arrangement of the products of the Company through NTL. The question is whether this proposed arrangement or contract to be entered into by the Company with the NTL came up for consideration at the Meeting of the Board of Directors on 17-5-1979 and the plaintiff failed to disclose his interest or concern in the same. Defendants 1 and 2 in their plaint in O.S. No. 10462/ 1980 have specifically alleged that the plaintiff T.K. Bose was the Managing Director and also a shareholder of the NTL, that he and his family had the controlling interest in the said Company, that he failed to disclose his interest in respect of the proposed agreement or arrangement between the Company and the NTL to the Board of Directors of the Company as required under Section 299 of the Act and his office as Director of the Company became vacant by reason of the provisions of Section 283(1X0 of the Act and consequently he ceased to be the Chairman also. In traversing these averments contained in the plaint, T. K. Bose, in his written statement has averred that he became one of the Directors and the Chairman of the Company, that an application was filed for a term loan from the KSFC on behalf of the Company in May 1979 as per the resolution passed at the meeting of the Board of Directors held on 17-5-1979 at Bangalore, that he prepared a statement of his assets as Managing Director of NTL and presented it to the 2nd defendant at that meeting, where he made the formal disclosure of his interest in the NTL, that the defendants were fully aware of his interest in the NTL even before, that the statement of assets prepared by him and presented at the time of the first meeting of the Board of Directors on 17-5-1979 when he disclosed his interest in the NTL was annexed to the loan application presented to the KSFC by the 2nd defendant on behalf of the Company, that the defendants therefore, had the full knowledge about the interest of the plaintiff in the NTL, that the plaintiff had not withheld information regarding his interest in the NTL at the first meeting when the subject of entering into a con-tract or arrangement with the NTL came up for consideration and the disclosure of the interest of the plaintiff in the NTL was made in spite of the full knowledge and awareness of the defendants about the interest of the plaintiff in the NTL.

39. The plaintiff and defendants 2 and 3 were known to each other very closely and intimately for a long time. The plaintiff was the Managing Director of NTL in which defendants 2 and 3 were employed. Defendant-2 was working as an Engineer since 1974 and he was responsible for the project, during project phase and looking after all the papers in respect of financial institutions, Banks etc., and after completion of the project phase, he was responsible for and was in charge of planning, production planning and drawing departments and also responsible for various designing and implementation of plant and machinery like crane, winding machines etc. whereas defen-dant-3 was the Works Manager. Undoubtedly, the plain-tiff was a man of experience about the functioning of a Company, he being the Managing Director of the NTL since 1974 which was incorporated in the year 1973. Such being the case, it is normal to expect that he had kept him-self informed the relevant provisions of law applicable to companies both public and private and in particular, the duties and functions of the Directors, the Managing Director and the Chairman of a Company, whereas defen-dants 2 and 3 were the freshers and new-comers in the line. Since defendants 2 and 3 were the employees in the NIL for a considerable long period, they knew the nature of the interest of the plaintiff in the NTL. This aspect has been made clear by defendants 1 and 2 in their plaint in O.S. No. 10462/1980 wherein they have stated that the plaintiff is the Managing Director and shareholder and he with his family has the controlling interest in the NTL. Besides, the 2nd defendant, in his cross-examination has stated that he knew that the plaintiff was the Managing Director and that he was holding the controlling shares in the NTL. These three individuals, viz., the plain-tiff and defendants 2 and 3 in this background, decided to start the company which was incorporated on 16-5-1979 of which the plaintiff and the 2nd defendant were the first Directors and they were respectively appointed as the Chair-man and the Managing Director. To start with, there were only three shareholders, the plaintiff and defendants 2 and 3 each owning five shares of Rs. 100/-. After the formation of the Company, the 2nd defendant was authorised to make the necessary application to the KSFC for grant of a term loan to the extent of Rs. 12 lakhs and one of the conditions prior to the grant of loan by the KSFC was that the Company should enter into a technical collaboration and selling arrangement with a reputed Company. It was decided among the shareholders that the Company should enter into a technical collaboration and selling arrangements with the NTL and in this regard well before the incorporation of the Company, the plaintiff wrote a letter Ex. D. 6 dated 10 3-1979 to the KSFC on behalf of the NTL as its Managing Director expressing willingness to give technical know-how to the Company and also to enter into a selling arrangement of the products of the company through the NTL and this proposed arrangement or contract to be entered into by the Company with the NTL came up for consideration at the 1st meeting of the Board of Directors held on 17-5-1979. Whatever may be the stand taken on behalf of the plaintiff at the time of arguments, the plaintiff in his pleadings in both the suits has taken up the stand that the proposed contract or arrangement respecting the technical collaboration and the selling arrangement of the products of the Company to be entered into by the Company with the NTL came up for consideration at the first Meeting of the Board of Directors held on 17-5-1979. Besides, the plaintiff has also' admitted in unequivocal terms in his evidence that a discussion did take place at the First Board Meeting held on 17-5-1979 about the proposed contract to be entered into between the NTL and the Company, although that subject was not on the agenda, obviously referring to the proposed contract or arrangement to be entered into in terms of the letter written by him as per Ex.D. 6 to the KSFC well before the incorporation of the Company. It is equally the case of the defendants both in their pleadings and also in the evidence of the 2nd defendant that the matter contained in the letter Ex, D. 6 came up for discussion and consideration in the first meeting of the Board of Directors held on 17-5-1979 and it was his further case that, that subject was discussed is borne out in para 7 of Ex. D. 1, the Minutes of the Board Meeting held on 17-5-J 979, Thus far, there is no controversy or dispute between the parties.

42. Admittedly the letter Ex.D.6 dated 10th March 1979 was written to the KSFC by the plaintiff in his capacity as the Managing Director of NTL offering technical collaboration and also agreeing to sell the products of the Company through NTL which was one of the conditions precedent for granting a term loan to the Company. This letter was well before the Company came to be incorporated, obviously as a preliminary step to keep inform the KSFC in advance and also to facilitate the Company to make its loan application. It is admitted by the 2nd defendant in his evidence that the matter contained in Ex. D. 6 was discussed in the first meeting of the Board of Directors held on 17-5-1979. Thus it is obvious that Ex. D. 6 was placed at the first meeting of the Board of Directors on 17-5-1979 and the contents of Ex. D. 6 came to the knowledge of the Directors in that meet-ing. Besides, Ex. D. 6 was produced by the defendants in the Trial Court. The terms and conditions of the NTL offering technical collaboration and agreeing to sell the products of the Company have been made clear in Ex.D.6. It is stipulated that the Company would pay to the NTL a technical know-how fee of 3 1/2% plus actual cost of drawings and other paper work which would be furnished at cost and also 5% on the selling cost exclusive of taxes, towards selling expenses. Besides, the letter in question also reveals the nature of the concern or interest of the plaintiff in the NTL that he was the Managing Director and consequently a shareholder and also one of the Directors of the NTL. With this document Ex. D. 6 before the Board Meeting on 17-5-1979, the evidence of P.W. 1 that he disclosed orally in the said meeting about his interest in the NTL in compliance with Section 299 of the Act and the 2nd defendant then said that he too was an employee of the NTL and knew the interest of the plaintiff in the NTL and the disclosure made by the plaintiff could be recorded at the appropriate time, appears to me true and real. This conclusion I reach gains support from the other material produced, the conduct of the parties and the the circumstances of the case to which I shall advert presently.