B.S. Metha vs Polar Marmo Agglomerates
1990 Latest Caselaw 556 Del

JUDGMENT

Mahinder Narain, J.

(1) [ED. facts : Some shareholders (more than 10% value) requisitioned a meeting for passing a resolution for removing plaintiff from Board of Directors. Resolution was passed on 12.4.90. Pff. filed suit and applied for interim injunction. At the hearing Deft's Counsel made a statement that impugned resolution of 12.11.90 had been superceded by circular resolutions of 7/8th Dec., 90 and pff. had been duly served of these and his suit had because infructuous. Pff. averred that for new resolution fresh requisition was necersary]. After detailing above, judgment is :

(2) Apparently, what has happened, is that the deft. company has chosen to rely upon the requisitions which had been received by it earlier, its Board of Directors has now purported to pass resolution by circulation, after the statement was made in Court, and issued some notice to the plaintiff. This notice, according to the deft. was served upon the plaintiff's residence on 7.12.1990 or 8.12.1990, service being effected on a domestic servant of the plaintiff at his residence. Mr. Beg says such service is proper service. He relies upon Articles of Association of the Company, which require effecting service of notice at the residence of the directors.

(3) In my view, in as much as it was known to the persons concerned in Court, when the matter was being heard on 5th and 6th Dec., 1990 that the plaintiff had to go to Indore to attend the marriage of his son, such service would not be proper service, in the facts and circumstances of this case, as the service is effected on the plaintiff's domestic servant, during the absence of the plaintiff.

(4) As regards the entitlement of the plaintiff to notice, what needs to be seen is Sec. 284 of the Companies Act, which deals with removal of directors. [S. 284 is then reproduced].

(5) SEC. 284(2) of the Act clearly postulates "special notice" of any resolution to remove a director, and it is on receipt of this notice that the director acquires the right to be heard and becomes entitled to be heard. In any event, notice is required before a person is made to suffer any kind of resolution against him for his removal. He is required to be heard. A notice has to be a sufficient and adequate notice.

(6) In this case, I do not deem the service of notice on the servant of the plaintiff, to be sufficient notice. In the facts and circumstances of the case, this notice is not sufficient notice which would enable the plaintiff to make his case known before the extra-ordinary general body meeting, which, as stated above, has been held today.

(7) Mr. Beg refers to and relies upon S. 172(3) of the Companies Act, which reads : "The accidental omission to give notice, to, or the non-receipt of notice by, any member or other person to whom it should be given shall not invalidate the proceedings at the meeting." and says that the fact that the notice was not received by the plaintiff, it being received by his servant, would not invalidate the proceedings held on today.

(8) I do not think that such an attitude should be permitted to be adopted by the Company with respect to a serious matter, like removal of the Managing Director of the Company, who has been given a statutory right to be heard. Acceptance of this contention, would mean negation of the other provisions of the Act, namely, S. 284 of the Companies Act, which requires that before a director is removed, he shall be entitled to be heard. These two sections 284 and 172 of Companies Act, 1956, cannot be so read that one provision negates another.