Judgment :- The question raised in these appeals is whether the co-option of K. N. Narayana Iyer and K. C. Chandy as directors in a company called the Amalgamated Coffee Estates Ltd. is valid. This company was formed with the object of carrying on business in coffee, tea, cardamom and other commodities and was incorporated under the Indian Companies Act in 1944. The last annual meeting of the company was held on 31st January, 1949. Article 55 of the articles of the company provides that a general meeting shall be held within 18 months from the date of its incorporation and thereafter once at least in every calendar year at such time (not being more than 15 months after the holding of the last preceding general meeting) and place as the directors may decide. In accordance with this provision the last day for holding the annual meeting would be 30th April, 1950, but no meeting was held either on or before that date. Notices were issued by the management on 21st July, 1950, for an annual meeting to be held on 6th August, 1950. But this meeting, however, was cancelled on the ground that objections were taken to its legality. On 14th August, 1950, one of the shareholders, Mrs. A. Ananthalakshmi Ammal filed an application under Section 76(3) of the Indian Companies Act. Application No. 2813 of 1950, for an order that the court should call for a general meeting, and in the affidavit filed in support of that application it was alleged that no general body meeting had been called after 31st January, 1949, that the directorate consisted of only three members, V. R. Veeramani, A. S. Padmanabhan and B. V. Raman, while Article 75 provided for a minimum of four directors, that the affairs of the company were being grossly mismanaged and that accordingly the court should direct that a general body meeting should be convened for scrutinising the balance sheets, appointing auditors and electing "new directors in the vacancies caused". There was also a prayer that a commissioner should be appointed to convene the meeting and act as chairman therefore. A similar application was filed by one of the debenture-holders, Application No. 2814 of 1950, and therein Application No. 2826 of 1950 was made for an injunction restraining the management from co-opting injunction was issued. There was also a prayer that a commissioner should be appointed to convene the meeting and act as chairman therefore. A similar application was filed by one of the debenture-holders, Application No. 2814 of 1950, and therein Application No. 2826 of 1950 was made for an injunction restraining the management from co-opting injunction was issued. On 21st August, 1950, the management applied in Application No. 2954 of 1950 for cancelling the interim injunction and all the four applications were heard together by Krishnaswami Naidu, J., who passed an order on 26th September, 1950, that the annual meeting be called on 29th October, 1950, for discussing the balance sheet and profit and loss account for "election of directors in the places vacant" and to consider the auditor's report, and that notices of the said meeting be issued in the names of the two directors, V. R. Veeramani and B. V. Raman. He also appointed an advocate, Mr. Sanjeevi Naidu as commissioner to preside over the meeting. The injunction petition was dismissed on the ground that in view of the orders passed in Applications Nos. 2813 of 1950 and 2814 of 1950 no orders were necessary. On 7th October, 1950, notices were issued for annual meeting on 29th October, 1950, in terms of the order dated 26th September, 1950. The notices also stated that "two directors, A. S. Padmanabhan and B. V. Raman retire. The vacancies created by their retirements have to be filled up. Of the retiring directors Mr. B. V. Raman offers himself for re-election." * On 9th October, 1950, two of the directors, Veeramani and B. V. Raman passed a resolution co-opting K. N. Narayana Iyer as a director in the place of one Dakshinamurthi who had resigned on 18th June, 1950. On 11th October, 1950, V. R. Veeramani resigned his office as an elected director and was nominated by the managing agents as a director under Article 82A, and in the vacancy thus created K. C. Chandy was co-opted as a director. Both the co-options took place after the court had passed an order on 26th September, 1950, for holding the annual meeting on 29th October, 1950, and after notices thereof had actually been issued. Both the co-options took place after the court had passed an order on 26th September, 1950, for holding the annual meeting on 29th October, 1950, and after notices thereof had actually been issued. Thus on 29th October, 1950, the position was that V. R. Veeramani had become a nominated director; two directors had to be elected in the place of Padmanabhan and B. V. Raman whose terms of office had expired; and K. N. Narayana Iyer and K. C. Chandy had been co-opted as directorsAt the annual meeting held on 29th October, 1950, when the subject of "Election of directors in the places vacant" was taken up disputes arose as to the number of vacancies which are available to be filled. On behalf of Mrs. Ananthalakshmi Ammal it was contended that the expression "places vacant" would include the maximum number of directors that could be elected under Article 75 and that should be determined by the general body that further the co-options of K. N. Narayana Iyer and K. C. Chandy were invalid. The management contended that the election should be limited to the two vacancies mentioned in the notice and that the co-options of Narayana Iyer and K. C. Chandy were invalid. The management contended that the election should be limited to the two vacancies mentioned in the notice and that the co-options of Narayana Iyer and K. C. Chandy were valid. In this conflict of opinion it was decided to adjourn the meeting and obtain from the court a clarification of the order dated 26th September, 1950. Application No. 4025 of 1950 was then filed by Mrs. Ananthalakshmi Ammal for that purpose and on that Krishnaswami Naidu, J., passed an order on 3rd November, 1950, that apart from the two vacancies mentioned in the notice there was also a vacancy as well. On the question of the validity of the co-options he observed that it was unnecessary to go into the question in these proceedings Against this order the management filed O.S.A. No. 103 of 1950. Their contention being that as there was valid co-option in the place of Dakshinamurthi there were only two vacancies. Mrs. On the question of the validity of the co-options he observed that it was unnecessary to go into the question in these proceedings Against this order the management filed O.S.A. No. 103 of 1950. Their contention being that as there was valid co-option in the place of Dakshinamurthi there were only two vacancies. Mrs. Ananthalakshmi Ammal filed O.S.A. No. 110 of 1950 claiming that V. R. Veeramani was the only director validly in office, that all the other places were vacant and that the shareholders had the right to fill the vacancies up to the maximum as provided under Article 75. Both these appeals were disposed of by the judgment of this court dated 9th February, 1951. Therein it was held that for the purpose of election of directors "in the places vacant" as provided in the order dated 26th September, 1950, it was necessary to determine the number of vacancies and that to decide that, it was necessary to decide whether the co-options were valid or not. The matter was accordingly remanded for decision on the validity of the co-options of K. N. Narayana Iyer and K. C. Chandy. There was also a direction that the court might order, at its discretion, addition of parties for the purpose of a satisfactory disposal of the points in disputeIn pursuance of this order of remand Applications Nos. 2813 of 1950 and 2814 of 1950 came for re-hearing before Krishnaswami Naidu, J. The two directors, the validity of whose co-option was at issue, Narayana Iyer and K. C. Chandy, were also impleaded as parties. The whole case was reheard and on 14th November, 1951, Krishnaswami Naidu, J., pronounced judgment upholding the co-option of K. N. Narayana Iyer and rejecting that of K. C. Chandy. It is against this judgment that the present appeals have been brought. In O.S.A. No. 120 of 1951 Mrs. Ananthalakshmi Ammal contends that the co-option of K. N. Narayana Iyer on 9th October, 1950, is invalid. In O.S.A. No. 15 of 1952 Mr. K. C. Chandy contends that his co-option on 11th October, 1950, is valid. These are the questions that fall to be determined in these appeals In O.S.A. No. 120 of 1951 Mr. Ananthalakshmi Ammal contends that the co-option of K. N. Narayana Iyer on 9th October, 1950, is invalid. In O.S.A. No. 15 of 1952 Mr. K. C. Chandy contends that his co-option on 11th October, 1950, is valid. These are the questions that fall to be determined in these appeals In O.S.A. No. 120 of 1951 Mr. Vasantha Pai, the learned advocate for the appellant contends that the co-option of Narayana Iyer on 9th October, 1950, was invalid because there was only one director who was entitled to act on that date and that the power to co-opt could not be exercised when there was no board of directors competent to act under Article 75; that in any event such a power could not be exercised after an annual meeting had been called; that at any rate on the facts of the present case such a power could not be exercised as the court had ordered on 26th September, 1950, that the shareholders should elect the directors in the vacancies at an annual meeting to be 1950, did not comply with the requirements of Article 99 of the articles of the company. It was further argued that even if the power to co-opt could be validly exercised on 9th October, 1950, it was not in fact so exercised as the co-option was made not in the interests of the shareholders but of the management. The management controverts the soundness of these contentionsThe position that the power to co-opt directors comes to an end when once an annual meeting is convened, is not sought to be supported by anything in the Companies Act or in the articles of the company. Nor is any authority cited in support of it. We have no hesitation in rejecting it. Nor is there any substance in the argument that the order of the court dated 26th September, 1950, directing that the annual meeting be convened for filling up vacancies has the effect of extinguishing that power. Though interim injunction was issued against co-option in Application No. 2826 of 1950 on 18th August, 1950, that became dissolved on the dismissal of that application on 26th September, 1950. It is true that the order of dismissal was made not on the merits but in view of the orders passed in Applications nos. Though interim injunction was issued against co-option in Application No. 2826 of 1950 on 18th August, 1950, that became dissolved on the dismissal of that application on 26th September, 1950. It is true that the order of dismissal was made not on the merits but in view of the orders passed in Applications nos. 2813 of 1950 and 2814 of 1950 and it must have been assumed that all the places would be filled by election, at the annual meeting, on 29th October, 1950. This circumstance, though material on the question whether the exercise of power on 9th October, 1950, and 11th October, 1950, was bona fide or not, does not operate to deprive the management of its powers under Article 81. The objection based on Article 99 that the resolution dated 9th October, 1950, was not signed by all the directors but only by two of them must also be rejected inasmuch as no contention is raised by the management that the co-option of K. N. Narayana Iyer, if not valid under Article 81 could still be upheld as one passed in circulation under Article 99 The two substantial contentions urged on behalf of the appellant are (1) that on 9th October, 1950, there was only one director competent to act and according to the articles of the company he would have no power to co-opt a director and (2) that in any event the exercise of the power was not for the benefit of the shareholders and therefore void. With reference to the first contention it is necessary to set out the relevant articles of the company on which it is based. With reference to the first contention it is necessary to set out the relevant articles of the company on which it is based. Under Article 75 "Until otherwise determined by a general meeting the number of the directors shall not be less than four or more than nine." Article 83 provides that "at the first ordinary meeting of the company the whole of the directors shall not be less than four or more than nine." Article 75 "Until otherwise determined by a general meeting the number of the directors shall not be less than four or more than nine." Article 83 provides that "at the first ordinary meeting of the company the whole of the directors excepting the ex-office directors, shall retire from office and at the ordinary meeting in every subsequent year, one-third of the directors (other than the ex-officio directors) for the time being or if their number is not three or a multiple of three, then the number nearest to one-third shall retire from office." * Section 83A(1) of the Indian Companies Act enacts that "every company shall have at least three directors." Turning to the facts it should be remembered that the last annual meeting was held on 31st January, 1949. Even at that time there was only three directors in office, A. S. Padmanabhan, M. S. Periasami Nadar and V. R. Veeramani. Of these Padmanabhan was due to retire under Article 83 at the next annual meeting. Periasami Nadar resigned in August 1949 and in his place Dakshinamurthi was co-opted on 25th September, 1949, . On 22nd March, 1950, one B. V. Raman was co-opted as the fourth director but he was also to retire at the next annual meeting. The meeting should have been held under Article 55 on 30th April, 1950, at the latest. Periasami Nadar resigned in August 1949 and in his place Dakshinamurthi was co-opted on 25th September, 1949, . On 22nd March, 1950, one B. V. Raman was co-opted as the fourth director but he was also to retire at the next annual meeting. The meeting should have been held under Article 55 on 30th April, 1950, at the latest. On 18th June, 1950, Dakshinamurthi resigned and it was in his place that K. N. Narayana Iyer was co-opted by a resolution of the directors, Veeramani and B. V. RamanOn these facts it was argued by the learned advocate for the appellants that two of the directors, Padmanabhan and B. V. Raman who were due to retire at the annual meeting next to that held on 31st January, 1949, should be held to have vacated their office on the last date on which the annual meeting should have been held and that in consequence they ceased to be directors after 30th April, 1950. This contention is amply supported by the authorities. In Re Consolidated Nickel Mines Ltd. The question arose whether two directors, Steel and Phillips, were entitled to remuneration as directors. Article 101 of the company provided that at the ordinary meeting all the directors should retire from office. Section 49 of the Companies Act provided that the directors were bound to summon a general meeting of the company once in every calendar year. After 1905 no meeting was called but the two directors continued to Act. It was held that they vacated the office on the 31st December, 1906, and that therefore they were not entitled to remuneration thereafter In Srinivasan v. Watrap Subramania Iyer Cornish, J., followed the decision in re Consolidated Nickel Mines Ltd. In Kanssen v. Rialte the point for decision was whether the allotment of shares made at a directors' meeting held on 30th March, 1942, was valid. Two persons Cromie and Strelitz purported to act as directors and made the allotment. Strelitz claimed to have been appointed as director at a meting held on 1st February, 1940. It was found that there was no such meeting or appointment. Two persons Cromie and Strelitz purported to act as directors and made the allotment. Strelitz claimed to have been appointed as director at a meting held on 1st February, 1940. It was found that there was no such meeting or appointment. Cromie was one of the original directors but under Rule 73 of Table A of the Companies Act, 1929, which in substance corresponds to article 83 in the present case, the directors would have to retire at the annual meeting and the last day on which such a meeting should have been held was 31st December, 1941. On these provisions Lord Greene, M.R., who delivered the leading judgment of the Court of Appeal observed as follows :- "Neither Mr. Cromie nor Mr. Strelitz was then (on 30th March, 1942) a director of the company. Mr. Cromie had been a director but he had vacated the office on 31st December, 1941, by reason of Article 73 of the company's articles of association. See Re Consolidated Nickel Mines Ltd." * This decision was affirmed by the House of Lords in Morris v. Kanssen. On the point now under consideration the decision is thus stated in the head note :- "No general meeting was held in 1941 and accordingly by the effect of Article 73 of Table A as varied by Article 22 of the company's articles of association there were thereafter no de jure directors." * Vide the observations in the speech of LORD SIMONDS at pages 467, 468 and 471. In Buckley on Companies Acts the learned author commenting on Rule 89 in Schedule I of the Companies Act, 1948, which in terms corresponds to the present Article 83 states the law as follows :- "If in any calendar year an annual meeting is not held under an article in this form, those directors who would have retired at the meeting had the same been held will vacate office on the last date of the year." * (12th edition, page 882) On these authorities it must be held that both Padmanabhan and B. V. Raman ceased to be directors after 30th April, 1950, and that at the time of the co-option of K. N. Narayana Iyer on 9th October, 1950, there was only one director, Veeramani, who was lawfully in office What follows on this conclusion ? The appellant contends that if on 9th October, 1950, there was only one director, then there was no board of directors as required by Article 75 and that therefore there could be no valid co-option as the power to co-opt could only be exercised by the board. The respondent relies on Article 81 which is in these terms :- "The continuing directors may act notwithstanding any vacancy in their body; but, so that if the number falls belows the minimum above fixed the directors, shall not, except in emergencies or for the purpose of filling up vacancies, act so long as the number is below the minimum." * The argument is that this is a special provision made for meeting contingencies like the present and that the co-option made thereunder is valid. The contention of the appellant is that even for invoking the power under Article 81 there must be a board with the minimum strength as required by Article 75 but this is opposed to the plain language of the article which expressly confers power on the continuing directors to fill vacancies when the number falls below the minimum and the minimum that is referred to in this articles is the minimum prescribed under Article 75 There is also considerable body of authority in England on the construction of clauses similar to Article 81. In Re Scottish Petroleum Company the article fixed a minimum strength of the board of directors at four and the quorum for the board's meeting at two as do Articles 75 and 93 in the present case. The strength of the board came down to two; when they co-opted another director and allotted shares to him. Article 83 of the company provided that the continuing directors may act notwithstanding any vacancy in the board. On these provisions it was held that the power to co-opt a director could be exercised even though the strength of the board had fallen below the minimum. The following observations occuring in the judgment of BAGGALLAY, L.J., may be usefully quoted :- "It is also contended that though by the articles two directors form a quorum when the board is duly constituted, there could not be a quorum capable of transacting business when the board of directors was not filled up to the minimum number. The following observations occuring in the judgment of BAGGALLAY, L.J., may be usefully quoted :- "It is also contended that though by the articles two directors form a quorum when the board is duly constituted, there could not be a quorum capable of transacting business when the board of directors was not filled up to the minimum number. I assume that the retiring directors had ceased to be directors, and if that be so, the board was not made up to the minimum number. Still I think that having regard to Article 83, the objection cannot be maintained. It is urged that this article can only apply when the number of directors is more than four, but I see no reason for adopting that view." * In Re Bank of Syria, Owen and Ashworth's claim, Whitworth's claim Article 38 of the company provided that the members of the council shall be not be less than three and not more than nine. At the time of the transaction there were only two directors and the question arose whether they had the power to act. Article 42 provided that "the continuing council may act notwithstanding any vacancy." It was held by WRIGHT, J., that under this clause the directors were entitled to act. He observed "I am asked to say that in as much as there were only two directors acting at that time, they had no power to bind the company. But it seems to me that I ought to hold, having regard to the authorities, that Article 42, that the principle in Re Scottish Petroleum Company applies to the present case." * There was an appeal against this decision. Vide Re Bank of Syria, Owen and Ashworth's claim, Whitworth's claim LORD ALVERSTON, C.J., in agreeing with the decision of WRIGHT, J., on this point observed that even if the number of directors fell below the quorum fixed for a directors' meeting the principle laid down in Re Scottish Petroleum Company would apply and that the continuing directors would be entitled to act under Article 42. That is to say the power to co-opt might be exercised notwithstanding that the strength of the directorate has fallen below the minimum required, and below the quorum prescribed, by the articles In Re Sly Spink and Co., the articles required that the number of directors should not be less than four, that the quorum for a board's meeting should be three and Article 88 gave authority to the continuing directors to fill in vacancies. From the very start the company had never a board of four directors. Only three directors were appointed and they allotted shares. The company having gone into liquidation the question arose whether the allotment of shares was valid. It was contended that the three directors had authority to act under Article 88 and that the allotment was consequently valid. NEVILLE, J., held that article 88 would apply only if there had been a properly constituted board of directors in the first instance but that where there never was a board with the minimum strength, Article 88 would not apply. The following observations may be quoted :- "It is said that they were continuing directors because they had not ceased to be directors. I do not think that is a reasonable interpretation to put upon the words contained in the articles. The expression is a familiar one and it applies to cases where the number of the original board had been reduced by death or otherwise, and in such cases those who are left, subject to the provisions of Article 88, would be entitled to conduct the business of the company. With regard to that, I think the two cases which were cited In re Scottish Petroleum Company and In re British Empire Match Co. show very clearly the distinction between the case where the directors too few in number can and cannot act as continuing directors. In one case you have a board insufficient in number from the first and notwithstanding the continuing clause it was held that the board could not transact business. In the other case you have a board which was originally competent to transact business but was diminished retirement to a number less than that provided for by articles. In one case you have a board insufficient in number from the first and notwithstanding the continuing clause it was held that the board could not transact business. In the other case you have a board which was originally competent to transact business but was diminished retirement to a number less than that provided for by articles. The continuing clause was had to apply and those directors were held to be competent to transact the business of the company." * The company in the present case started with four directors, being the minimum strength under Article 75. Vide the allegations in paragraph 5 in the affidavit of Davar in Application No. 2954 of 1950; and therefore the continuing directors would under the decision in Re Sly, Spink and Co. have power to act under Article 81. In Channel Collieries Trust Ltd. v. Dover, St. Margaret's and Martin Mill Light Railway, the articles of the company provided that the minimum number of directors should be three, that the quorum for the board's meeting should be two and Article 89 gave power to the "remaining directors" to fill vacancies. The company began with three directors, then two of them resigned leaving only one director in office and he co-opted a director under Article 89. It was contended that this co-option was invalid because the board had neither the minimum strength nor even the quorum provided by the articles. Rejecting this contention Lord Cozens Hardy M.R. observed as follows :-"Sir John Jackson thus became sole directors." What was his power ? Under the Companies Clauses Act, 1845, as continuing director, he had power to fill up the vacancies on the board. The fact that a person exercising that power does not constitute a quorum is not really a relevant matter. The generality of the language used in Section 99 is so clear that it is impossible for us to overlook it. Any other view on that point would paralyse many a company." The following observations occurring in the judgment of Swinfen Eady, L.J., might also be safely quoted :- "I think that the context requires that the words 'remaining directors' should include the case of a remaining director. Any other view on that point would paralyse many a company." The following observations occurring in the judgment of Swinfen Eady, L.J., might also be safely quoted :- "I think that the context requires that the words 'remaining directors' should include the case of a remaining director. It is obvious that the number of the board may, by death or resignation or otherwise, be so reduced that it many be below the quorum, as well as that there may be vacancies occurring in the board whilst still leaving a quorum, but in either case it is necessary or proper that the vacancy should be filled up. In my opinion the necessity of the case requires that 'the remaining directors' should be read as including the case of the remaining director, so that if and so long as there is any remaining director he may proceed to fill up the board by appointing persons when casual vacancies occur. For these reasons I am of opinion that it was one to Sir John Jackson as the sole remaining director, under Section 89, to appoint duly qualified persons to be directors in the place of the two who had ceased to be members of the board." * Applying these principles it must be held that the power under Article 81 could be exercised even though the strength of the board had fallen below the minimum prescribed by Article 81 and below the quorum mentioned in Article 92 and even when there is only one director capable of acting. The Co-option of Narayana Iyer on 9th October, 1950, must, therefore, be held to be within the scope of the authority conferred on the continuing directors under Article 81The only question that remains to be decided is whether on the facts and circumstances of this case the co-option of Narayana Iyer is open to attack as improper and mala fide. The learned advocate for the appellant argued that the directors stand in a fiduciary relationship to the shareholders, that any power conferred on them must be exercised for the benefit of the shareholders, that the co-option of directors should also be made only in the interests of the shareholders and that Narayana Iyer was co-opted only for the purpose of strengthening the hands of the management in this fight with their shareholders and it is, therefore, invalid. That the directors, are in a fiduciary position in relation to the shareholders cannot seriously be questioned. In Ferguson v. Wilson Lord Cairns held that while the directors of the company were in the position of agents of the company in its dealings with the outside world, they were in the position of the trustees in relation to the shareholders. Similar observations are to be found in the judgment of Lord Selbourne in G. E. Railway v. Turner The position is thus summed up in Palmer's Company Precedents "Where the directors of a company are invested by the regulations with certain powers, the authority thus conferred is to be read subject to the general rules applicable to the exercise by directors of the powers vested in them, and in particular to the rule that the directors are to exercise the powers for the benefit of the company and in the true interests of the company and according to the best of their judgment, for they stand in a fiduciary position, and must act accordingly." * (Vide Vol. 1, page 434, paragraph 21; 16th edition) We, therefore, agree with the appellant that if the co-option of a director under Article 81 is not made in the interests of the shareholders but for other purposes it cannot standWhat then are the facts ? It is common ground that the affairs of the company were during this period in a very unsatisfactory condition. For want of funds the coffee and tea estates were in a state of neglect. More than Rs. 96, 000 had to be paid for income-tax and the Government were taking coercive steps to recover the same. Interests due to the debenture-holders had not been paid; not dividends which had been declared on the shares. The creditors had obtained decrees against the company and execution proceedings were in progress. These facts are stated in the affidavits filed on behalf of the appellants in these proceedings. But it also appears from these affidavits that the coffee and tea plantations owned by the company we extensive and valuable and if finance was forthcoming they could be properly worked and made to yield profits. These facts are stated in the affidavits filed on behalf of the appellants in these proceedings. But it also appears from these affidavits that the coffee and tea plantations owned by the company we extensive and valuable and if finance was forthcoming they could be properly worked and made to yield profits. It is clear from the records that the managing agents were making strenuous attempts to get at a financier who would be willing to advance the necessary funds for the working of the estate and at last they found him in Narayana Iyer. This Narayan Iyer was the managing director of a company called Messrs. Parkins (India) Ltd., which has under its management several plantation companies owning tea, coffee and rubber estates. He has had experience in this line of business for about twenty years and is a man of considerable worth. It cannot be doubted that it would be to the advantage of the company if he could be persuaded to join it. It appears from paragraph 3 of his affidavit that early in August, 1950, the shareholders themselves approached him with a request to join the company and advance the necessary funds. This is borne out by a letter dated 7th September, 1950, written by a director of Messrs. Parkins (India) Ltd., to the advocate for the appellant. This letter gives particulars about the status of Messrs. Parkins (India) Ltd., and of its managing director, Narayana Iyer and proceeds to state :- "Messrs. Parkins (India) Ltd., are willing and they are in a position to provide working finance and other finance required immediately to pay the pressing creditors of the Amalgamated Coffee Estates Ltd." * A reading of this letter leaves no doubt that the shareholders considered that the accession of Narayana Iyer would add to the strength of the company and enable it to tide over its difficulties. It is admitted in the affidavit filed in Application No. 2826 of 1950 that as early as August the management itself had been negotiating with Narayana Iyer with the object of bringing him in. He insisted naturally that if he should advance the necessary funds, he should have a voice in the control and management of the company. The management agreed to this and co-opted him as director on 9th October, 1950. He insisted naturally that if he should advance the necessary funds, he should have a voice in the control and management of the company. The management agreed to this and co-opted him as director on 9th October, 1950. It appears from the affidavit of Narayana Iyer that after his co-option he advanced monies to the extent of a lakh of rupees for the working of the estate and harvesting coffee. The facts clearly show that the company was in need of finance, that Narayan Iyer was co-opted for the purpose of finding the necessary funds and that both from the point of view of his experience and financial status he would be a source of strength to the company But it is argued on behalf of the appellant that notwithstanding the above circumstances, the co-option of Narayana Iyer must be rejected as improper and mala fide because the vacancy in which he was filled arose on 18th June, 1950, when Dakshinamurthi resigned, that the management did not choose to fill that vacancy then; that on the other hand they stated in this counter-affidavit in Applications Nos. 2813 of 1950 and 2814 of 1950 that they though it fair not to co-opt a director in view of the general body meeting that was proposed to be convened; that an injunction was actually issued on the 18th of August, 1950, restraining the managing agents from making any co-option and though it became dissolved on 26th September, 1950, it was understood by all persons that the vacancy would be filled by the shareholders at the annual meeting had that therefore, the co-option on 9th October, 1950, must be held to have been made with the object of depriving the shareholders of their right to elect a directorBut it must be remembered that during this period the management was on the look out for a suitable financier and that it was responsible on their part to have left the place vacated by Dakshinamurthi vacant until a suitable person could be found and to have left it to the shareholders to fill the place if their endeavours to get at a financier did not succeed. Nor can any sinister purpose be spelt out of the fact that the co-option was made after a general meeting had been called. Nor can any sinister purpose be spelt out of the fact that the co-option was made after a general meeting had been called. It is admitted that the coffee corps were ready for harvesting and if early steps were not taken coffee crops were ready for harvesting and if early steps were not taken to gather them considerable damage would result. In paragraph 13 of the counter affidavit filed by Davar in Appln. No. 2954 of 1950 it is alleged that "the coffee plantations in Palghat and the cardamoms are deteriorating; crops were being spoilt and what little can be gathered from the crops would be lost to the shareholders and the debenture-holders on account of the neglect and irresponsible attitude of the managing agents." * This was in August, 1950. It is obvious that the urgency must have been greater in October and the managing agents acted in the best interests of the shareholders in concluding a bargain with Narayana Iyer on 9th October, 1950 On a review of all the circumstances we agree with Krishnaswami Naidu, J., that the co-option of Narayana Iyer was a proper exercise of the power under Article 81. O.S.A. 120 of 1951 must accordingly be dismissed with costs In O.S.A. 15 of 1952 the point for determination is whether the co-option of K. C. Chandy on 11th October, 1950, was a valid exercise of the power under Article 81. The facts relating to this co-option present a picture totally different from what has been seen in the case of Narayana Iyer. No particular reason has been shown why this co-option should have been made on 11th October, 1950, when the annual meeting had been called for 29th October, 1950. It is not stated that this co-option was made under any arrangement to advance funds for the company. That arrangement had already been concluded with Narayana Iyer. Nor does K. C. Chandy possess anything like the experience which Narayana Iyer undoubtedly does possess. He is an Advocate practicing at Kottayam. The circumstances under which the co-option was made clearly stamp it as made fide. V. R. Veeramani who was one director who has been in active management resigned his place as an elected director on 11th November, 1950, and as part of the same proceedings he became a nominated director. He is an Advocate practicing at Kottayam. The circumstances under which the co-option was made clearly stamp it as made fide. V. R. Veeramani who was one director who has been in active management resigned his place as an elected director on 11th November, 1950, and as part of the same proceedings he became a nominated director. It is clear that this maneuver was adopted for co-opting a director of the choice of the managing agents and it is open to the objection that it was made with a view to strengthen the hands of the managing agents and not in the interests of the shareholders. We agree with Krishnaswami Naidu, J. that this co-option cannot be upheldIt was argued by Mr. V. Radhakrishnayya the learned advocate for the appellant that the validity of this co-option cannot be gone into in these proceedings, but the matter is concluded by the judgment of this court dated 9th February, 1951, and even otherwise the decision on the validity of the co-option is incidental to the exercise of the powers under Section 76(3) of the Companies Act. In the result the appeal fails and is dismissed with costs Appeals dismissed.