General Commerce Ltd. And Anr. vs Apparel Export Promotion Council
1989 Latest Caselaw 558 Del

JUDGMENT

Mahinder Narain, J.

(1) By this order I propose 40 deal with I.A. No. 4157 of 1989 in suit No. 1464 of 1988, being an application under Order 39 Rules I and 2 of the Code of Civil Procedure by which it is prayed that the respondents, their servants, agents be restrained from enforcing or implementing the impugned Election Rules, said to have been passed by the Executive Committee of the respondent at its meeting held on 4-8-1988, particularly rules C-6, 7 and 8 thereof.

(2) It is not disputed by the parties that the respondent Apparel Export Promotion Council is a guarantee company within the meaning of Section 25 of the Companies Act. It is also not disputed between the parties that being a guarantee company, unless the articles of its association so provide there is no right to vote by proxy. As far as the respondent is concerned, its articles do provide for voting at the annual general meeting of the society by means of proxies.

(3) Section 176 of the Companies Act deals with proxies, and it is laid down in Section 176(1)(a) that if the articles of association so provided a company not having a share capital shall not be able to have proxies as the manner of voting by its members unless its articles so provide. The respondent which is a guarantee company has provided in its articles that it shall be permissible for members to vote byproxy. In this view of the matter Section 176 of the Companies Act will apply to the respondent company. Section 176 of the' said Act reads as under :-

"176(1)-ANYmember of a company entitled to attend and vote at a meeting of the company shall be entitled to appoint another person (whether a member or not) as his proxy to attend and vote instead of himself; but a proxy so appointed shall not have any right to speak 'at the meeting : Provided that, unless the articles otherwise provide-

(A)this sub-section shall not apply in the case of a company not having a share capital ;

(B)a member of a private company shall not been titled to appoint more than one proxy to attend on the same occasion: and

(C)a proxy shall not be entitled to vote except on a poll.

(2)In every notice calling a meeting of a company which has a share capital, or the articles of which provide for voting, by proxy at the meeting, there shall appear with reasonable prominence a statement that a member entitled to attend and vote is entitled to appoint a proxy, or, where that is allowed, one or more proxies, to attend and vote instead of himself, and that a proxy need not be a member.

If default is made in complying with this sub-section as respects any meeting, every officer of the company who is in default shall be punishable with fine which may extend to five hundred rupees.

(3)Any provision contained in the articles of a public company or of a private company which is a subsidiary of a public company, which specifies or requires a longer period than forty-eight hours before a meeting of the company, for depositing with the company or any other person any instrument appointing a proxy or any document necessary to show the validity or otherwise relating to the appointment of a proxy in order that the appointment may be effective at such meeting, shall have effect as if a period of forty . eight hours had been specified in or required by such provision for such deposit.

(4)If for the purpose of any meeting of a company, invitations to appoint as proxy a person or one of a number of persons specified in the invitations are issued at the company's expense to any member entitled to have a notice of the meeting sent to him and to vote there by proxy, every officer of the company who knowingly issues the invitations as aforesaid or willfully authorises or permits their issue shall be punishable with fine which may extend to one thousand rupees : PROVIDED that an officer shall not be punishable under this sub-section by reason only of the issue to a member at his request in writing of a form of appointment naming the proxy, or of a list of persons willing to act as proxies, if the form or list is available on request in writing to every member entitled to vo'.e at the meeting by proxy.

(5)The instrument appointing a proxy shall-

(A)be in writing ; and

(B)be signed by the appointer or his attorney duly authorised in writing or, if the appointer is a body corporate, be under its seal or be signed by an officer or an attorney duly authorised by it.

(6)An instrument appointing a proxy, if in any of the forms set out in Schedule Ix, shall not be questioned on the ground that it fails to comply with any special requirements specified for such instrument by the articles.

(7),Every member entitled to vote at a meeting of the company, or on any resolution to be moved there at, shall be entitled during the period beginning twenty-four hours before the time fixed for the commencement of the meeting and ending with the conclusion of the meeting, to inspect the proxies lodged, at any time during the business hours of the company, provided not less than three days' notice in writing of the intention so "to inspect is given to the company."

(4) Mr. Goyle who appears for the petitioner, relies upon the provisions of Section 176(6) of the above Act which lays down that any Instrument proxy which is in the form set out in Schedule Ix, shall not be called in question on the ground of failure to comply with any special' requirements specified for such instrument by these articles.

(5) It is the case of the petitioner that by the aforesaid resolution passed by the respondent company on 4-8-1988, particularly Rules 6(c), 7 and 8 have gone beyond the provisions of Section 176(6) inasmuch as they require and add on something more than what the statute itself requires. The statute requires compliance with the form set forth in Schedule Ix only. The election rules which have been made on 4-8-1988 are mentioned in para 21 of the petition and Rules 3(c), 7 and 8 read as under :-

"6(C)A member or his authorised representative who is entitled to vote at every general meeting shall be entitled to appoint another person, (whether a member or not) as his proxy to attend and vote instead of himself but proxy so appointed shall not have right to speak at the meeting. Along with the notice for calling the meeting the Council shall send a printed form to each member. Any proxy appointed through any instrument other than printed instrument dispatched by the Council referred to above shall not be valid.

(7)In case the proxy so dispatched by the Council is not received, lost, misplaced and not available or mutilated, a duplicate proxy may be issued from the office of the Council by the secretary of the Council, of said situation. An application to this effect shall be made by the member concerned to the Secretary of the Council supported with an affidavit setting out the facts and other such evidence, as may be available with the member. On being satisfied the Secretary shall direct issuing of another proxy in lieu of the earlier one and only such proxy as subsequently issued in the manner as referred shall be valid. Earlier proxy will be invalid.

(8)In case a member intends to revoke the proxy which has been utilised by the said member, he can do so. In such a situation he can have a duplicate printed proxy from the office of the Secretary of the Council. For this purpose, he will be required to make an application on his letter head duly signed saying therein that the earlier proxy stands revoked. Secretary will issue a fresh proxy and the revoked proxy shall be invalid and cannot be used for any purpose."

Rule 6(c), therefore, requires that the proxy appointed through an instrument other than the printed instrument duly dispatched by the Council a hall not be valid. Rule 7 deals with lost proxy, by issuance of another proxy in case the proxy issued by the Council is lost. Rule 8 deals with the revocation of proxy.

(6) A number of contentions have been advanced before me but I think it will be sufficient to dispose of this application on the basis of the principle which has been enunciated in Nazir Ahmed v. King Emperor, Air 1936 Privy Council 253(2).

(7) The Privy Council has laid down that, "where a power is given by a statute to do a certain thing in a certain way, the thing must be done in that way or not at all. Other methods of performance are necessarily forbidden."

(8) It is clear from a reading of Section 176(6) of the Companies Act that the only proxy which is required for the purposes of enabling a person to cast his vote which is provided is in the form set out in Schedule IX. That proxy cannot be added on to or subtracted from. No special proxy form issued by any body of persons which adds to requirement of proxy, by imposing any condition, or requiring it to be on specific proxy paper can be sustained in law. Rules 6(c), 7 and 8 purport to do exactly the thing which the statute does not require or permit. The respondents seek to do what the statute necessarily forbids.

(9) Inasmuch as the respondent is bound by the provisions of the Companies Act, it cannot have any rules which by necessary intendment or implication make a variation between what the statute permits and what the respondent would like to do. There may be reasons as far as the company is concerned for attempting to vary the requirement of the proxy, but in the face of the prescribed statutory form such special proxies are of no avail.

(10) Section 9 of the Companies Act has been referred to by both the parties before me. Section 9 in my view is nothing but reiteration of the principle which has been laid down in the aforesaid judgment of the Privy Council. It makes clear specifically with reference to the Companies Act what is clear even otherwise, that no action which is contrary to the terms of the statute can be sustained in law. Fine distinctions, if any, with respect to the meaning of "repugnancy" need not be considered in the matter which is so clear as this one.

(11) In my view the members of the respondent company are entitled to make use of all proxies which are in accordance with the form prescribed in Schedule Ix at any of the general meetings of the Company,

(12) I only need to note that the principle of ultra vires would also come into play when any action of the respondent, contrary to the terms of the statute is attempted. Such action of the respondent whether relates to a provision in the articles, or any provisions in the rules, or any resolution or any provision in the memorandum, if it is contrary to or inconsistent with the statutory provisions will have no effect or force. It is the statute in the instant case. Companies Act, that will prevail.

(13) In this view of the matter, as what is proposed by the impugned Rules, the respondent goes beyond what is required by the statute, the same is of no effect, and in view of the principles set out by Lord Denning in 1967(3) All E.R 434, it is the law (Companies Act, 1956) which must prevail, and the members of the respondent company are entitled to vote by proxies which are in accordance with the form prescribed by Schedule Ix of the Companies Act, 1956, and the petitioner is entitled to injunction sought, restraining the respondents from giving effect to Rules 6(c), 7 and 8 of the Election Rules which have been framed by the respondent on 48-1988

(14) At request of the counsel for the respondent, Mr. G L. Rawal, it is clarified that for exercising right of revocation, it is not necessary to use the printed form supplied by the company.

(15) 1.A. No. 4157 of 1989 stands disposed of. Suit be listed before t.he Deputy Registrar on 22-1-1990.