Research › Browse › Judgment

Madras High Court · body

1954 DIGILAW 177 (MAD)

E. v. Srinivasachariar VS Srirangam Janopakara Bank Limited

1954-04-14

N.RAJAGOPALA AYYANGAR

body1954
Judgment :- RAJAGOPALA AYYANGAR J. This is a petition to revise the order of the District Munsif of Tiruchirapalli, regarding certain findings on two preliminary issues, which were raised for his decision The first defendant is the petitioner in this revision petition. He was the president of the Srirangam Janopakara Bank Ltd., which is a banking company incorporated under the Indian Companies Act. This company was managed by a board of 13 directors, with the first defendant as the president. There appear to have been some differences and disputes in the board of management, which at this stage it is unnecessary to detail, and the directors called for a meeting of the board on November 14, 1953, when they purported to remove the first defendant from the office of presidentship and appointed the second plaintiff in his stead. As the petitioner refused to recognise the validity of his removal and to hand over charge to the person appointed as president, the suit out of which this revision arises was filed by the company by its newly elected president as the first plaintiff, the newly elected president as the second plaintiff, and plaintiffs 3 to 10 being 8 other directors. To this suit were impleaded as defendants, the petitioner as the first defendant, and as defendants 2 to 5 the other four directors stated to be siding with the first defendant and refusing their co-operation to the plaintiffs. The paid secretary of the bank was impleaded as the sixth defendant The plaint, after setting out the circumstances which necessitated the proceedings for the removal of the first defendant from his office as president, and, after affirming the validity of the proceedings held therefore, went on to state in paragraph 17 "In the circumstances stated above it has become necessary for the plaintiffs to sue for a declaration that the first defendant has ceased to be the president and for an injunction against him from functioning as such and from interfering with the second plaintiff functioning as president of the first plaintiff's board directors." * The plaintiffs valued the relief claimed in the suit in the sum of Rs. 100 for the purpose of court-fee and jurisdiction and paid a court-fee of Rs. 11-3-0 under Section 7(iv)(c) of the Court-fees Act. 100 for the purpose of court-fee and jurisdiction and paid a court-fee of Rs. 11-3-0 under Section 7(iv)(c) of the Court-fees Act. The reliefs claimed in the plaint were stated in paragraph 21 as follows (a) for a declaration that the first defendant's office as president of the board of directors has validly been terminated at the meeting of the board of directors held on November 14, 1953, and that the second plaintiff has duly been appointed president of the board of directors, and consequently (b) for an injunction restraining the defendants from interfering with the second plaintiff functioning as president of the board of directors (c) for costs of suit, and (d) for such further or other relief as may be deemed fir and proper to grant in the circumstances of the case The first defendant filed a written statement, in which several contentions raising questions of law and fact were formulated, but this petition is concerned only with two objections raised by him. The first is contained in paragraphs 3 and 4 of the written statement and they read as follows "The plaintiffs are not in possession of the bank or any of its properties. The person in actual possession of the bank, its documents and its properties is the secretary who has been impleaded as the sixth defendant in this suit subject to the control of the first defendant the president. The second plaintiff is not in possession of all or any portion of the bank or its properties and has never functioned as president. The plaintiffs ought therefore to have sued defendants 1 and 6 for possession as they are in actual possession of the bank and its properties. The plaintiff's suit has to be dismissed as it offends Section 42 of the Specific Relief ActThe suit has not been properly valued. Even according to the balance sheet of the first plaintiff the properties of the bank are worth many lakhs. If properly valued the suit will be beyond the pecuniary jurisdiction of this court. The court fee paid is also insufficient." The second objection is contained in paragraph 5 and is stated in these terms "The plaintiffs have no right to maintain this suit. Under the articles of association the only person who can maintain a suit for and on behalf of the bank are the president and the secretary. The court fee paid is also insufficient." The second objection is contained in paragraph 5 and is stated in these terms "The plaintiffs have no right to maintain this suit. Under the articles of association the only person who can maintain a suit for and on behalf of the bank are the president and the secretary. So far as the second plaintiff is concerned his claim to the office of the president has still to be established. The allegation that the sixth defendant was asked to joint as plaintiff and refused to do so is false. In any event the articles do not contemplate a suit being filed on behalf of the bank by anybody other than the president and the secretary. The other plaintiffs have also no right to sue on behalf of the bank." * Issues were framed in the suit, and the points covered by these paragraphs were raised by three issues, which run as follows 1. Whether the plaintiff is entitled to the declaration and injunction prayed for ? 2. Whether the suit as laid is not maintainable ? and an additional issue 3. Whether the suit is beyond the pecuniary jurisdiction of this court ? These there issues were heard as preliminary issues, and the learned District Munsif has held in favour of the plaintiffs on all of them. It is this finding of the District Munsif that is challenged in this revision as erroneous and illegal The learned counsel for the petitioners argued before me two points. The first is as regards the valuation of the suit for the purposes of court fee and jurisdiction, and the second whether the suit by the first plaintiff, that is the company, was maintainable, without the secretary also figuring as a co-plaintiffThe argument upon the first point is this. The suit in substance is one for the recovery of the office of the president based upon the resolution of the board of directors appointing the second plaintiff as the president. Under article 41 of the articles of association the president has a general control over all the affairs of the Nidhi. The affairs of the Nidhi include the management of the properties of the Nidhi. Under article 41 of the articles of association the president has a general control over all the affairs of the Nidhi. The affairs of the Nidhi include the management of the properties of the Nidhi. The office of president, it is therefore stated, is intimately connected with the right to possession of the properties of the bank, and as the office and the right to manage the property are intimately connected, it is stated that a suit for the recovery of such an office is virtually a suit for the possession of the properties, which the holder of such an office has the right to manage. Reliance is also placed on certain other powers of the president under the articles. On the basis of this reasoning, it is urged that the suit ought to be valued under Section 7(iv)(c) of the Court-fees Act, on the basis of the market value of the properties of the institution of which the second plaintiff claims to be the president. For this position reliance is placed on the judgment of this court in Karupanna Nadar v. Karuppa Nadar. The dispute there related to an educational institution, known a Nadar Kshatria Vidyasala situated in the village of Ilupaiyur in Pallimandam Taluk of Ramanathapuram District. The plaint alleged that the first defendant in the suit had been validly removed from the office of membership of the committee, and the management of the institution, and prayed for a declaration that he had been duly appointed as a member of the committee and as the manager thereof, and that as such he alone was entitled to be in management of the institution. He also asked for a permanent injunction, restraining the first defendant from managing the plaint-institution. The plaintiff valued the relief for declaration at Rs. 100 under Section 7(iv)(c) of the Court-fees Act, and paid court fee of Rs. 11-3-0. The alternative relief of possession of the office of managership was stated in the plaint to be incapable of valuation, and the plaintiff valued that relief at Rs. 20 and paid a court fee of Rs. 2-3-0. 100 under Section 7(iv)(c) of the Court-fees Act, and paid court fee of Rs. 11-3-0. The alternative relief of possession of the office of managership was stated in the plaint to be incapable of valuation, and the plaintiff valued that relief at Rs. 20 and paid a court fee of Rs. 2-3-0. An objection was raised by the defendant that a suit for the recovery of the office of managership of the institution was in effect and substance a suit for recovery of possession of the school building, and its properties, and that consequently the court could treat the suit on the footing that all these reliefs were asked for and required the plaintiff to value the same accordingly, and pay the requisite court fee. The learned District Munsif held that the relief for possession of the office of managership was incapable of valuation, and that the plaintiff's valuation could be accepted. SOMAYYA J. who heard the revision petition, held that a suit, where the plaintiff does not in express terms sue for the recovery of possession of the properties of the institution but asks merely for possession of the office, the relief was incapable of valuation, and therefore confirmed the decision of the District Munsif on the pointThe next question dealt with was as to the valuation of the suit for purposes of jurisdiction. The properties owned by the institution, including the school building were worth at least Rs. 12, 000. The learned Judge referred to the decision in Vasireddi Veeramma v. Butchayya, and held that where the subject matter of the suit is wholly unrelated to anything which can be readily stated in definite money terms, the plaintiff, having to put some money value for the purpose of jurisdiction, must put a more or less arbitrary value; but that where the subject matter is so related to things, which have a real money value that the relief asked for will effect these, then the value of the suit for the purpose of jurisdiction is to be taken as the market value of the property affected. Examples of the former class - where the subject matter of the suit is not related to anything which can readily be sated in money value were stated to include a suit for restitution of conjugal right, and a suit for declaration that the plaintiff is a member of a charity committee. Examples of the former class - where the subject matter of the suit is not related to anything which can readily be sated in money value were stated to include a suit for restitution of conjugal right, and a suit for declaration that the plaintiff is a member of a charity committee. "Of the second class we have suits to establish a right to a fishery or a right to a royalty, to set aside an award or to establish or set aside an adoption." * The learned Judge then went on to state that the District Munsif was wrong in holding that the suit with which that revision petition was concerned came under the first category. "It cannot be said that the relief of possession of the office of the managership is not related to things which have a definite money value and that the reliefs do not affect those things. The right to the managership certainly affects the right to be in possession of an to manage the institution and its properties. Hence the value for purpose of jurisdiction is the value of the properties affected." * It will be seen that in that case the properties belonged to an institution, which was not a corporation, but were vested in the committee and the members of the committee were alone entitled to be in possession of the properties, which were committed to their managementIn the present case, the bank is an incorporated company which owns the properties. Its directors have merely the custody and management of the affairs of the bank, and it is only in such capacity and in such relationship, that they deal with the property of which the company is the owner. There is, therefore, no analogy furnished at all by the decision in Karupanna Nadar v. Karuppa Nadar. Further it will be noticed that the decision in Vasireddi Verramma v. Butchayya, which is referred to and followed by SOMAYYA J. puts in the category of suits "whose subject matter is wholly unrelated to anything, which can be stated in definite money terms", suits for a declaration that the plaintiff is a member of a charity committee. The case referred to for this illustration, which is approved in Vasireddi Veeramma v. Butchayya is a decisions of BAKEWELL J. in Murza Hyder Ali v. Hussain Rasa. The case referred to for this illustration, which is approved in Vasireddi Veeramma v. Butchayya is a decisions of BAKEWELL J. in Murza Hyder Ali v. Hussain Rasa. The learned Judge stated there "The plaint in this case does not set out the properties of the charity, or their value; nor even alleged that they consist of land. And the declaration sought relates to an office and not to property. On the other hand it has been held in Kunhan v. Sankara, that a suit for the removal of a karnavan is incapable of valuation and within the jurisdiction of a District Munsif and I think that a suit with respect to an office not of profit falls within the principle of that decision." * I respectfully agree with this observation and reasoning. In the present case what is sought for by the plaintiff is merely a declaration to the office and though the holder of such office might enjoy certain powers under the articles of association, the subject matter of the suit is unrelated to anything, which can be stated in definite money terms. The learned District Munsif was perfectly correct in holding that the suit as framed was within the jurisdiction of his courtThe next point relates to the maintainability of the suit by the first plaintiff. The point arises this way. Under article 40 the management of the Nidhi is vested in a board, consisting of not more than 15 directors. Under sub-clause (5) of article 40 after the board of directors is elected by the general body, they are to elect from among themselves certain office bearers, and among them are the president and certain other officers. Under article 48 it is provided that the Nidhi shall sue and shall be sued in the name of the president and the secretary and treasurer. The present suit is filed by the bank, by its president, the second plaintiff. It is stated in the plaint that as the secretary refused to join as plaintiff, he had been made a defendant, and he is the sixth defendant in the case. The present suit is filed by the bank, by its president, the second plaintiff. It is stated in the plaint that as the secretary refused to join as plaintiff, he had been made a defendant, and he is the sixth defendant in the case. The objection raised is that the articles of association are binding upon the members of the company, and that the company cannot without an alteration of its articles institute a suit or other proceeding, except through the president and secretary, and that the suit as instituted at present cannot be treated as a suit by the company. One thing might be mentioned before dealing with the legal contention, and that is that it is not denied that the secretary, who has been impleaded as the sixth defendant, refused to join the plaintiffs in filing the present suit. Further a majority of the directors figure as co-plaintiffs, along with the bank, and if the company could sue through its directors, the present suit would certainly be a competent one, as the majority of the directors are desirous of proceeding with the suit. The learned District Munsif has repelled this contention holding that the suit has been properly instituted by the company. I am clearly of the opinion that the District Munsif was right in rejecting the objection raised by the first defendantIn the first place, the defendants have to admit that the second plaintiff was entitled to the reliefs claimed by him in the plaint, even without impleading the first plaintiff. This is not a case wore without the company being on the record, as the plaintiff, the suit must fail, for here we have a case where the second plaintiff, who claims to be validly appointed as president is seeking to assert as against the first defendant, and certain other directors siding with him, his right to the office of president. This would certainly be an injunction without impleading the company as plaintiff. It is, therefore, only as matter of abundant caution that the first plaintiff has been impleaded and the relief is prayed for the favour of the company also. This would certainly be an injunction without impleading the company as plaintiff. It is, therefore, only as matter of abundant caution that the first plaintiff has been impleaded and the relief is prayed for the favour of the company also. I am saying this because as the relief prayed for can be granted to the second plaintiff without reference to the other plaintiffs on record, the objection taken by the first defendant can in no sense be taken as a preliminary objection, which must be one which goes to the root of the suit, and which if decided in favour of the defendant, must result in the dismissal or rejection of the suit The next point for consideration is whether the first plaintiff is properly on record through its president, but with the secretary figuring as a defendant. This point may be viewed from more than one angle Let us first proceed on the footing that article 48 under which the two functionaries are designated in whose name the company shall sue and be sued were not there and that the articles had merely made the usual provision that the company might sue and be sued in the name of the directors, in whom the management of its affairs is vested. If in such a case, there is a difference of opinion among the directors, if the argument of the learned counsel for the petitioner were sound, the company can never file any suit, since the entire number of the directors would not be willing to sue on behalf of the company, and even the addition of the dissentient directors as defendants would not satisfy the article. An exactly similar situation arose in Satya Charan v. Rameshwar Prasad which came up before the Federal Court. The relevant articles of association of the Lothian Jute Mills Co. An exactly similar situation arose in Satya Charan v. Rameshwar Prasad which came up before the Federal Court. The relevant articles of association of the Lothian Jute Mills Co. Ltd., which was the subject of consideration ran as follows "Article 149(6) : Without prejudice to the general powers conferred by the last preceding article and to any other power or authorities conferred by these presents on the directors or on the managing agents, it is hereby expressly declared that the directors shall have the following powers, that is to say power subject to the provisions of Section 86-H(b) of the Act, to institute, conduct, defend, compound or abandon any legal proceedings by or against the company or its officers or otherwise concerning the affairs of the company and also to compound and allow time for payment or satisfaction of any debts due and of any claims or demands by or against the company." * In the suit the company was named as a plaintiff with three of the directors also figuring as co-plaintiffs, while 4 other directors whose conduct was impugned in the proceedings were impleaded as defendants. An objection was taken to the form of the action on the ground that it was the directors alone who could file a suit on behalf of the company, in view of the articles of association set out above. This argument is set out at page 42 thus "It is contended on behalf of the appellants that, on the basis of the above articles, the directors alone are authorised to use the name of the company in any litigation concerning the company and if the majority of the ordinary shareholders are dissatisfied with the policy adopted by the directors, the only course open to them is to change the articles of association or remove the directors by a special resolution and to appoint other directors in their place by an ordinary resolution. It is also contended that, by adopting these articles, the shareholders must be taken to have divested themselves of the control and management of the company and, even if they are in a majority, they have no right to conduct any litigation on behalf of the company, nor can a numerical majority of the shareholders, at a general meeting of the company, impose its will upon the directors, who can be deprived of their control and management of the company only by a statutory majority which can alter the articles." * As on the facts of the case it was a matter of admission that plaintiffs would be able by a majority to assure the passage of a resolution in the general body of members empowering them to continue the suit, their Lordships negatived the contention raised by the defence and held that the suit as framed was maintainable The argument addressed by the learned counsel for the petitioner in this case is exactly identical with that raised by the appellants before the Federal Court, and I do not see any difference in substance between the scope of the article as contained in the Lothian Jute Mills case, and the present. In the present case, the directors would act on behalf of the company, but for the special provision which names particular officers of the company for the purpose of proceeding with action in court. But that does not mean that without them, the company cannot be brought into the court. Nor is it necessary that the board of management must dismiss the secretary, and replace him by another of their choice, and institute proceedings in his name as well, which was the argument raised by the learned counsel for the petitioner in answer to an objection that if the secretary was colluding with a minority of the directors, there must be some way for the company to assert its rights in a court of law. This answer further shows that there is really no substance in the objection raised to the procedure now followed for impleading the company as plaintiff The usual manner in which an objection is taken to a suit in the name of a company by a defendant, who contests the fact that the company is properly brought as a plaintiff, is by an application for striking off the plaint on the ground that the plaintiffs have not right to use the name of the company, as they are not in a majority in the company. If such an objection were raised, and the facts are disputed, the court would determine the question, after ascertaining the wishes of the majority of the shareholders. In the present case, there can be no doubt at all that the majority of the directors are supporting or are in favour of the company's name appearing in the record as the plaintiff. In such circumstances, I do not see any point in the objection that the company is not entitled to be a co-plaintiff in this actionHolding as I do that the decision of the learned District Munsif of Tiruchirapalli on the preliminary issues is correct, the civil revision petition fails and is dismissed with costs. One set Petition dismissed.