Nungambakkam Dhanarakshaka Saswatha Nidhi Ltd. vs Registrar of Companies

Palaniswamy, J.—This application raises an important question under the company law, namely, whether the company court has inherent

power to extend the time within which the annual general meeting of a company should be held. The short facts are these. The petitioner is a limited

company and is carrying on the business of receiving fixed deposits, recurring deposits, savings deposits, etc. There are about 11,500 members on

roll. The financial year of the company is from 1st January to 31st December. The annual general meeting should be held on 30th June of the

succeeding year. In the month of January, 1971, there was a strike among the members of the staff with the result that the normal working of the

Nidhi was dislocated. Putting forward that ground, the company approached the Registrar of Companies by letter dated May 29, 1971, requesting

for three months'' time to hold the general body meeting from July 1, 1971. The Registrar, by letter dated June 8, 1971, declined to grant time and

informed the Nidhi that expeditious steps should be taken to hold the meeting in accordance with law. The persons in charge of the affairs of the

company appear to have met the Registrar in person and explained the position and reiterated the request for time and followed up the request by

a letter dated June 24, 1971, requesting for extension of time up to at least 10 weeks. By letter dated 3rd September, 1971, the Registrar turned

down that request also. It is in these circumstances that this application has been taken under Rules 9 and 11(b) of the Companies (Court) Rules,

1959, praying that this court may be pleased to extend the time for holding the annual general meeting up to the middle of November, 1971. This

application was presented on 18th September, 1971.

The Registrar of Companies has filed an affidavit contending that the application is not maintainable in law, that the power to extend the time

within which the annual general meeting should be held rests with the Registrar and that this court has no power to grant extension of time.

It is necessary to refer to certain provisions of the Companies Act, 1956 (hereinafter referred to as "" the Act ""), bearing on the subject. Section

165 defines what a statutory meeting is. It also sets out what a statutory report should contain. Section 166 deals with annual general meeting. It

reads :

Annual general meeting--(1) Every company shallin each year hold in addition to any other meetings a general meeting as its annual general

meeting and shall specify the meeting as such in the notices calling it ; and not more than fifteen months shall elapse between the date of one annual

general meeting of a company and that of the next :

Provided that a company may hold its first annual general meeting within a period of not more than eighteen months from the date of its

incorporation ; and if such general meeting is held within that period, it shall not be necessary for the company to hold any annual general meeting in

the year of its incorporation or in the following year :

Provided further that the Registrar may, for any special reason, extend the time within which any annual general meeting (not being the first annual

general meeting) shall be held, by a period not exceeding three months.

(2) Every annual general meeting shall be called for a time during business hours, on a day that is not a public holiday, and shall be held either at the

registered office of the company or at some other place within the city, town or village in which the registered office of the company is situate :

Provided that the Central Government may exempt any class of companies from the provisions of this sub-section subject to such conditions as it

may impose :

Provided further that-

(a) a public company or a private company which is a subsidiary of a public company, may by its articles fix the time for its annual general meetings

and may also by a resolution passed in one annual general meeting fix the time for its subsequent annual general meetings ; and

(b) a private company which is not a subsidiary of a public company, may in like manner and also by a resolution agreed to by all the members

thereof, fix the times as well as the place for its annual general meeting.

This section corresponds to Section 76 of the Companies Act, 1913, It also corresponds to Section 131 of the English Act. It will be seen that

the first annual general meeting should be held within 18 months of the company''s incorporation. No provision is made for granting extension of

time in such a case in contrast with the company''s subsequent annual general meeting. The section, as it stood, originally conferred power upon the

Registrar to extend the time for holding the meeting up to six months. But this period was reduced to three months by the Amending Act XLV of

1960. The language employed in Section 166 shows that the annual general meeting should be held whether or not the annual accounts are ready

for consideration at that meeting. In other words, a clear statutory duty is cast on the directors to call the meeting whether or not the accounts, the

consideration of which is one of the matters to be dealt with at an annual general meeting, are ready or not.

Section 167 confers certain powers on the Central Government in the matter of calling annual general meeting. It provides :

Power of Central Government to call annual general meeting.--(1) If default is made in holding an annual general meeting in accordance with

Section 166, the Central Government 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 Central

Government thinks expedient in relation to the calling, holding and conducting of the meeting.

Explanation.--The directions that may be given under this sub-section . may include a direction that one member of the company present in pe''rson

or by proxy shall be deemed to constitute a meeting.

(2) A general meeting held in pursuance of Sub-section (1) shall, subject to any directions of the Central Government, be deemed to be an annual

general meeting of the company.

This section also corresponds to Section 76 of the 1913 Act and to Section 131 of the English Act. This section provides for a remedy in case

of default in holding the annual general meeting in accordance with Section 166. Notwithstanding the provisions of the Act or the articles of

association of a company the Central Government may, on the application of any member of the company, call or direct calling of a general

meeting of the company. The Central Government are also given power to give such ancillary and consequential directions as they may think

expedient in relation to the calling, holding and conducting of the meeting. Sub-section (2) of Section 167 provides that a general meeting in

pursuance of Section 167(1) shall, subject to any directions of the Central Government, be deemed to be an annual general meeting of the

company. This is a clear statutory recognition of what should be done in case there is default in holding the general meeting within the time required

by the statute. Thus, it is clear that exclusive power is conferred upon the Central Government to permit the calling of a general meeting in case of

default to hold the general meeting notwithstanding anything contained in the Companies Act or in the articles of association of a company. The

next relevant section is Section 186. It confers certain powers on the court in the matter of calling meetings. It reads :

''186. Power of court to order meeting to be called.--(1) If for any reason it is impracticable to call a meeting of a company, other than an annual

general meeting, in any manner in which meetings of the company may be called, or to hold or conduct the meeting of the company in the manner

prescribed by this Act or the articles, the court may, either of its own motion or on the application of any director of the company, or of any

member of the company who would be entitled to vote at the meeting,--

(a) order a meeting of the company to be called, held and conducted in such manner as the court thinks fit ; and

(b) give such ancillary or consequental directions as the court thinks expedient, including directions modifying or supplementing in relation to the

calling, holding and conducting of the meeting, the operation of the provisions of this Act and of the company''s articles.

Explanation.--The directions that may be given under this subsection may include a direction that one member of the company present in person or

by proxy shall be deemed to constitute a meeting.

(2) Any meeting called, held and conducted in accordance with any such order shall, for all purposes, be deemed to be a meeting of the company

duly called, held and conducted.

This corresponds to Section 79(3) of the 1913 Act and to Section 135 of the English Act. It would be seen from the language employed in this

section that it confers power upon the court only in the case of meetings other than the annual general meeting. The obvious reason is that as

regards the annual general meeting express power is conferred on the Central Government. The question arose before this court in Selvaraj v.

Mylapore Hindu Permanent Fund, [1968] 38 Comp. Cas. 153 (Mad.) whether the company court can appoint a person to supervise and preside

over the adjourned annual general meeting called by the board. This court answered the question in the affirmative. But that principle cannot be

extended to a case of calling a meeting itself. The expression "" other than annual general meeting "" occurring in Section 186 makes it abundantly

clear that the legislature did not want the company court to exercise any power with regard to annual general meeting but restricted the power only

with regard to other meetings. In this connection, it is necessary to refer to the policy with which power has been conferred upon the Central

Government with regard to calling any general meeting in case of default to hold a meeting as required under law and with regard to conferment of

power on the court u/s 186. The Company Law Committee in its report at pages 54 and 55 observed :

We further recommend that the Registrar should have the power, in special circumstances, to extend the time during which a general meeting

should be ordinarily held. The absence of any such provision in the Act of 1913 makes for needless rigidity, and our recommendation that the

annual general meeting should in future be held, within nine months from the end of each financial year, justifies the grant of this discretionary power

to the Registrar to be exercised only in cases of proved hardship. In default of the holding of an annual general meeting by the company, u/s 76 of

the present Act, the Central Authority should have the power to call such a meeting, on the application of any shareholder, and to give such

directions for this purpose as it may think fit. This is in consonance with the provisions of Section 131 of the English Companies Act, 1948, which

confers this power not on the court but on the Board of Trade.

Section 131 of the English Companies Act, 1948, confers power on the Board of Trade in the matter of calling annual general meeting on the

application of any shareholder. That power is not conferred on the court. It is in line with the policy underlying Section 131 of the English

Companies Act, that the Company Law Committee recommended incorporation of suitable provision and it is in those circumstances that express

power has been conferred upon the Central Government u/s 167, and that u/s 186 the power of the court is expressly excluded with regard to

calling an annual general meeting of the company.

A similar view was taken by Mukharji J. in In Re: Coal Marketing Co. India Private Ltd., . In that case, an application was taken out u/s 633(2)

of the Act for an order that upon the undertaking of the applicants to hold the annual general meeting of the company (which should have been held

previously) within six months from the date of the order, they may be relieved wholly from the liabilities for not holding such annual general meeting.

The learned judge, on an examination of the provisions of the Act, came to the conclusion that the court has no power to grant the request for

holding the annual general meeting within any time prayed for, having regard to Sections 166, 167 and 186 of the Act.

The decision in S. L. Kapur v. Registrar of Companies, [1964] 1 Comp. L.J. 211 (gua) on which Mr. Srinivasan, appearing for the petitioner,

relied, is not relevant. In that case, the directors of Kalinga Tubes Ltd. took out an application u/s 633(2) of the Act praying to excuse them for the

default committed in holding the annual general meeting. They approached the court after having failed to convince the Registrar to grant extension

of time. They put forward certain reasons for not being able to hold the meeting within the time. The learned judge observed :

In the circumstances stated in the petition I am satisfied that the delay in holding the annual general meeting and placing the balance-sheet, profit

and loss account and directors'' and auditors'' report before the said meeting and forwarding copies thereof to the members was due to

unavoidable reasons and that neither the company nor any of its directors who constitute the interim board, are individually responsible for the

delay which was due to circumstances entirely beyond their control.

Having observed thus, the learned judge held that the applicants were excused for the default, as prayed for. The learned judge did not refer to

Sections 166 ; 167 and 186. Obviously, those sections did not arise for consideration. All that was asked for was a prayer to excuse the directors

for the default committed by them in not holding the general meeting within the specified time. u/s 633(2) it is competent for the company court to

grant relief in respect of any negligence, default or breach of duty, misfeasance or breach of trust by any officer of the company. The question as to

whether the court has got power to grant extension of time for holding the annual general meeting did not arise for consideration.

Mr. Srinivasan, counsel for the applicant, contended that this court, under its inherent power, can grant the relief asked for by the Nidhi. Rule 9

of the Companies (Court) Rules, 1959, on which reliance is placed in this behalf, reads :

Inherent powers of court.--Nothing in these rules shall be deemed to limit or otherwise affect the inherent powers of the court to give such

directions or pass such orders as may be necessary for the ends of justice or to prevent abuse of the process of the court.

I am unable to accept the argument that by virtue of this rule, the applicant Nidhi can be granted the relief asked for. Rule 9 is analogous to

Section 151 of the Code of Civil Procedure. It is well settled that the inherent power cannot be invoked where express provision is made for the

relief by conferring power upon other authorities. No ground is made out by the applicant as to why they did not approach the Central

Government to exercise their power u/s 167. Rule 9 of the Companies (Court) Rules cannot be applied to override the express provisions of the

Act.

In the result, I find that the application is not maintainable. It is accordingly dismissed. No costs.