JUDGMENT 1. THIS is a suit for an injunction restraining the defendants from holding the extraordinary general meeting of March 31, 1960 and also from implementing or giving effect to any resolution which may be passed at the meeting and for a further declaration that the resolutions mentioned in paragraph 12 of the plaint are illegal, void and ultra vires the Articles of Association and the Companies Act, 1956. 2. NEW Central Jute Mills Company Ltd., is a company incorporated under the Indian Companies Act, 1913. The share capital of the company, according to the plaintiff, consists of subscribed 33,000, 7 p. c. cumulative preference shares of Rs. 100/- each fully called up and 1282500 ordinary shares of Rs 10/- each fully called up. The company states that the ordinary shares are 17,10,000 and not as alleged by the plaintiff. The company at its annual general meeting on January 15, 1960 wherein the balance sheet and profit and loss accounts for the year ending March 31, 1959 were passed, elected directors and a dividend of Rs. 1. 50 np. per share (that is 15 p. c.) was declared and paid for the said year. By a notice dated March 7, 1960 an extraordinary general meeting of the company was convened to be held on March 31, 1960 to declare further dividends in respect of the year ending March 31, 1959. The proposed resolution is set out in paragraph 12 of the plaint. It reads:- "resolved that a further dividend in respect of the year ended March 31, 1959 be and is hereby declared out of the General Reserve No. 1 at the rate of Re. 1. 50 np. per share (i.e., 15 p. c. without deduction of income-tax) on ordinary shares payable to the shareholders whose names stand registered in the books of the company on March 31, 1960." In paragraph 14 of the plaint the plaintiff challenges the notice as illegal and ultra vires on several grounds. The main grounds are:- (i) The dividends can be declared only at the annual general meeting. (ii) The extraordinary general meeting has no power of sanctioning any dividend. (iii) The final dividend in respect of the year ended March 31, 1959 was declared in the meeting dated January 15, 1960, and at the said meeting the shareholders finally approved and passed the dividends recommended. (ii) The extraordinary general meeting has no power of sanctioning any dividend. (iii) The final dividend in respect of the year ended March 31, 1959 was declared in the meeting dated January 15, 1960, and at the said meeting the shareholders finally approved and passed the dividends recommended. (iv) The balance sheet ending March 31, 1959 was duly passed at the annual general meeting dated January 15, 1960 and that it is not competent for the company and/or its directors and/or the management to declare a fresh dividend in addition to those already declared and/or to change the figures already stated in the balance sheet. (v) The powers of the company in respect of the declaration of dividend cannot be used for speculative transactions and that the convening of the extraordinary general meeting and the attempt to declare the said dividend are in furtherance of the fraudulent objects of forcing up the market value of the shares; and (vi) The only body competent to recommend dividend for the year ended March 31, 1959 was the Board of Directors prior to the general meeting dated January 15, 1960 and the only body competent to sanction such dividend was the shareholders as on the date of the general meeting dated January 15, 1960 and finally the explanatory statement given with the notice was misleading and incorrect and not in conformity with the provisions of law and the material facts answering the proposed resolution have not been stated in the explanatory statement. 3. ON behalf of the company there is an affidavit of Shyamlal Agarwal affirmed on April 1, 1960. That affidavit was treated as written statement. In paragraph 12 of the affidavit it is stated that a sum of Rs. 1,07,80,000/-representing accumulated profits as on March 31, 1959 were available to the company and the Board of Directors at the meeting held on March 7, 1960 considered the provisions of the Income Tax Act regarding development rebate and the provisions of the tax proposals of the Central Government and decided and recommended to the shareholders to declare a further dividend to be paid to all the shareholders (holders of original as well as newly issued ordinary shares) and to declare the same in respect of the year ending March 31, 1959. It is further stated in the affidavit that under the provisions of the Income tax Act, the Company is allowed deduction on account of what is known as development rebate, provided an amount equivalent to 75 p. c. of the development rebate to be actually allowed for that year is to be debited to the Profit and Loss Account and credited to a Reserve Account which cannot be utilised by the assessee for a period of ten years for distribution by way of dividend. The facts relating to the accumulated reserve, the setting up of the Chemical Plant in Varanasi, and the provisions regarding development rebate, it is alleged in the affidavit, are matters well known to the shareholders and it is obvious to them that the step which has been taken by the Directors is in the interest of the company and of the shareholders. The allegations made in the plaint are denied in the affidavit. 4. THE only question canvassed in this suit was whether it was competent to declare further dividend at the extraordinary meeting held on March 31, 1960. It is necessary to set out some of the Articles. Table A of the Act is not to apply. Articles 82 to 86 relate to general meetings. "82. General Meetings shall be held once at least in every calendar year at such time, not being more than fifteen months after the holding of the last preceding General Meeting, and at such place as may be determined by the Directors. 83. The General Meetings referred to in the last preceding Article shall be called ordinary meetings; all other meetings of the company shall be called extraordinary meetings." Proceedings at General Meetings are dealt with in Articles 87 to 97. "87. The business of any ordinary meeting shall be to receive and consider the Profit and Loss Account, the Balance Sheet and the Reports of the Directors and of the Auditors, to elect Directors, Auditors and other officers in the place of those retiring by rotation, or otherwise, to declare dividends and to transact any other business which under these presents ought to be transacted at an ordinary meeting. All other business transacted at an ordinary meeting and all business transacted at an extraordinary meeting shall be deemed special." 5. DIVIDENDS are dealt with in Articles 153 to 168. "153. All other business transacted at an ordinary meeting and all business transacted at an extraordinary meeting shall be deemed special." 5. DIVIDENDS are dealt with in Articles 153 to 168. "153. Subject to the rights of members entitled to shares (if any) with preferential or special rights attached thereto the profits of the company which it shall from time to time be determined to divide in respect of any year or other period shall be applied in the payment of a dividend on the ordinary share of the company but so that a partly paid-up share shall only entitle the holder with respect thereto to such a proportion of the distribution upon a fully paid-up share as the amount paid thereon bears to the nominal amount of such share and so that where capital is paid up in advance of calls upon the footing that the same shall carry interest such capital shall not, whilst carrying interest, confer a right to participate in profits. 154. The company in general meeting may declare a dividend to be paid to the members according to their rights and interest in the profits and may fix the time for payment. 155. No larger dividend shall be declared than is recommended by the Directors, but the company in general meeting may declare a smaller dividend. 156. No dividend shall be payable except out of the profits of the company of the year or any other undistributed profits, and no dividend shall carry interest as against the company. 157. The declaration of the Directors as to the amount of the net profits of the company shall be conclusive. 158. The Directors may from time to time pay to the members such interim dividends as in their judgment the position of the company justifies." 6. ACCOUNTS and Balance Sheets are dealt with in Articles 172 to 175. "172 (1 ). The declaration of the Directors as to the amount of the net profits of the company shall be conclusive. 158. The Directors may from time to time pay to the members such interim dividends as in their judgment the position of the company justifies." 6. ACCOUNTS and Balance Sheets are dealt with in Articles 172 to 175. "172 (1 ). At all ordinary meetings the Directors shall lay before the company a balance sheet and profit and loss account made up to a date not earlier than the date of the meeting by more than nine months, or if the company is carrying on business or has interest outside British India by more than twelve months, subject in either case to the right of the Registrar to extend the period for any special reason by a period not exceeding three months under section 131 (1) of the Act. (2) The said Balance Sheet shall be in the form marked 'f' in the Third Schedule to the Act, or as near thereto as circumstances admit. (3) The Profit and Loss Account shall, in addition to the matters referred to in subsection (3) of section 132 of the Act, show, arranged under the most convenient heads, the amount of gross income, distinguishing the several sources from which it has been derived, and the amount of gross expenditure, distinguishing the expenses of the establishment, salaries and other like matters. Every item of expenditure fairly chargeable against the year's income shall be brought into account, so that a just balance of profit and loss may be laid before the meeting, and, in cases where any item of expenditure which may in fairness be distributed over several years has been incurred in any one year, the whole amount of such item shall be stated, with the addition of the reasons why only a portion of such expenditure is charged against the income of the year. Provided always that the provisions of this Article shall be deemed to require that a statement of the reasons why, of the whole amount of any item of expenditure which may in fairness be distributed over several years, only a portion thereof is charged against the income of the year, shall be shown in the Profit and Loss Account, unless the Company in General Meeting shall determine otherwise. (4) The Auditors' Report (to be prepared in accordance with the provisions of Article 179 (2) hereof) shall be attached to the Balance Sheet and Profit and Loss Account or there shall be inserted at the foot thereof a reference to the Report, and the Report shall be read before the company in general meeting and shall be open to inspection by any shareholder." 7. COUNSEL on behalf of the plaintiff contended first that the power to declare dividend was subject to and was dependent on limitation contained in the Act and/or in the Articles and on the observance of certain formalities envisaged therein. The formalities, counsel contended, were annual general meeting, a balance sheet for a period of not over nine months from the date of the meeting and placing of the balance sheet at the meeting, a report of the Directors and recommendations of dividend and a provision in the balance sheet of an amount towards dividend. The counsel contended that non-observance of any of the formalities would render it beyond the power of the company to declare dividend. It was secondly contended that on a declaration of final dividend there was an exhaustion of powers under the Articles and there could be no more declaration of dividend. Counsel for the plaintiff made it clear that there could be interim dividend and a final dividend and in no event could there be a further dividend after the declaration of the final dividend for the year. Thirdly, it was contended that the explanatory statement with regard to impugned meeting was not correct and did not set out all material facts and reading the notice it would not appear that the company was declaring the dividend for the purpose alleged in the affidavit of Shyamlal Agarwal. Fourthly, the counsel contended that the Board which declared dividend for the year ending March 31, 1959 had ceased to exist and the new Board was incompetent to declare dividend for the same year. A person who might have been on the Board of the previous year and of the following year would not have the same character of director and the power of directors to declare dividend would be of the directors constituting the Board for the relevant year. 8. A person who might have been on the Board of the previous year and of the following year would not have the same character of director and the power of directors to declare dividend would be of the directors constituting the Board for the relevant year. 8. COUNSEL for the plaintiff invited my attention to Art. 82 and 83 to show as to what general and extraordinary meetings were and to Art. 87 as to what would be the business of ordinary meetings. Art. 87 states that the business of an ordinary meeting shall be. inter alia, to receive and consider profit and loss account, the balance sheet and to declare dividends. Art. 153 states how profits shall be divisible and it refers to the year as a unit and Art. 154 states that the company in general meeting may declare a dividend to be paid to the members and Art. 157 states that the declaration of the directors as to the amount of the net profit of the company shall be conclusive. Art. 155 states that no longer dividend shall be declared than is recommended by the directors, but the company in general meeting may declare a smaller dividend. Art. 172 refers to the accounting period Counsel for the plaintiff invited my attention to the provisions appearing in the Companies Act 1956 in Sec. VI (II), Clause 3 (XIV) in support of the proposition that the profit and loss account shall set out the aggregate amount of the dividends paid and proposed and stating whether such amounts are subject to deduction of income tax or not. Counsel for the plaintiff contended that on a construction of the Articles the company had no power to declare further dividend and further that the company had no power to declare dividends at an extraordinary meeting. Reliance was placed by counsel for the plaintiff on a decision reported in (1897) 1 Chancery Div. 434 (Nicholson v. Rhodesia Trading Co. (1) for the contention that dividends could not be declared at an extraordinary general meeting. That appears to be the only reported decision on the point. This decision is referred to in Buckley on Companies Act, 13th Edition, at p. 895, foot-note (n). 434 (Nicholson v. Rhodesia Trading Co. (1) for the contention that dividends could not be declared at an extraordinary general meeting. That appears to be the only reported decision on the point. This decision is referred to in Buckley on Companies Act, 13th Edition, at p. 895, foot-note (n). That is an authority for the proposition that under the form of articles obtainable in the Nicholson's case, the declaration of dividends could hake place only at an ordinary general meeting at which accounts were laid before the company. Nicholson's case is referred to in Palmer's Company Precedents, 15th Edition at p. 719 in the comments of the author under Art. 119 which relates to the declaration of dividend by the company at general meetings. In the 17th edition of Palmer's Company Precedents that decision has not been referred to. Nicholson's case is cited in Halsbury's Laws of England, 3rd Edition, Volume 6 paragraph 778 at page 402 footnote (p) as an authority for the proposition that a final dividend can, as a general rule, only be sanctioned at the annual meeting, when the accounts are presented to it, and the articles usually contain a specific provision to this effect. Article 114 in Table A of the English Companies Act, 1948 is referred to as the provision in that behalf. Article 154 of the company in the present case is in essence the same as Article 114 in Table A of the English Act, namely, that the company in a general meeting may declare a dividend. The declaration of dividend under Article 114 in Table A has been construed in Palmer's Company Law 20th Edition at page 624 as part of the ordinary business of the annual general meeting. The articles in the present case make a distinction between the nature and scope of ordinary general and extraordinary meetings and the declaration of dividends pertains to the ordinary general meetings. 9. IN the decision reported in (1897) 1 Ch. (Nicholson's case) the company was incorporated on April 15, 1895. The second annual general meeting of the company was held on August 21, 1896. At that time, owing to the disturbed state of Rhodesia, where the company's business was carried on, accounts of the trading of the company had not been received, and the only accounts submitted to the meeting related to transactions in England, and were not audited. The second annual general meeting of the company was held on August 21, 1896. At that time, owing to the disturbed state of Rhodesia, where the company's business was carried on, accounts of the trading of the company had not been received, and the only accounts submitted to the meeting related to transactions in England, and were not audited. The directors of the company had issued a report to the shareholders, and by notice indorsed on the report, called an extraordinary general meeting of the company for February 11, 1897 for the purposes (1) to receive and consider the annual statement of accounts and balance sheet and the reports of the directors and auditors thereon; (2) to sanction the declaration of a dividend; (3) to consider, and if thought fit to pass, a resolution altering the articles of association of the company so as to have the annual general meeting held in January or February instead of July or August in each year. In Nicholson's case counsel for the plaintiff contended that it was not competent for the company to sanction the dividends except at the ordinary general meeting of the company, which must be held, under the articles as they stood, in July or August. 10. COUNSEL for the defendant in that case contended that sanction of dividend for the past period was under the peculiar circumstances special business and therefore could be passed at an extraordinary meeting. On a construction of the articles it was held in Nicholson's case that final dividends could not be sanctioned except at an annual general meeting. Mr. Advocate-General appearing on behalf of the company contended that in Nicholson's case there was no Article comparable to Article 154 of the present case and therefore the decision does not apply here. Mr. Advocate-General also invited my attention to the report at p. 439 where North, J., said as follows:- "if the directors could obtain the sanction of a dividend in the way proposed, without submitting the accounts required by the articles, by calling an extraordinary meeting, it would be giving a goby to the provisions made for the protection of the shareholders. Advocate-General also invited my attention to the report at p. 439 where North, J., said as follows:- "if the directors could obtain the sanction of a dividend in the way proposed, without submitting the accounts required by the articles, by calling an extraordinary meeting, it would be giving a goby to the provisions made for the protection of the shareholders. I am of opinion, therefore, that a dividend cannot be sanctioned at an extraordinary meeting and that even if it could be sanctioned, it would be necessary to follow the requirements of the articles and lay before the company the matters required to be so laid before them by the articles." Mr. Advocate-General contended first, that in Nicholson's case the accounts were not audited and therefore the declaration of dividend was ultra vires or illegal and secondly, that the observation of North, J., indicated that there could be a declaration of dividend at extraordinary meeting if the articles so permitted. Thirdly, it was contended that in Nicholson's case there was no article similar to Article 154 in the present case and therefore dividends could be declared at extraordinary meetings. 11. ON a construction of the Articles in the present case I am unable to accept the contention of the defendant that there can be a declaration of dividend at an extraordinary meeting. First, the declaration of further dividend is nowhere laid down in the Articles. It is beyond the power of the company. What has been permitted by the Articles is declaration of interim dividend and final dividend. The declaration of dividend on March 31, 1960 is indisputably not interim dividend. As to the meaning of the word 'further', if it could be contended that further meant something beyond a final dividend I am of opinion that the articles forbid such a power or such construction. Secondly, I am of opinion on the construction of the Articles that the declaration of dividend is a matter pertaining to the Board for the relevant year. The recommendation is to be made by the Board for that particular year. The accounts were before the Board and they made a recommendation for declaration of dividend at the meeting held on January 15, 1960. The recommendation is to be made by the Board for that particular year. The accounts were before the Board and they made a recommendation for declaration of dividend at the meeting held on January 15, 1960. The declaration of further dividend by the Board of Directors is not the recommendation by the Board of Directors of the relevant year and therefore on a construction of the Articles I am of opinion that the declaration of dividend is beyond the powers of the new directors and is ultra vires the powers of the company. Thirdly, Articles 82, 83, 87 in the present case indicate that declaration of dividend is a business of the ordinary meeting, In Nicholson's case there were similar Articles. The business of the ordinary meeting is under Article 87 to declare dividend. Article 154 does not empower the declaration of dividend at an extraordinary meeting. Article 154 reiterates that the company in general meeting may declare a dividend to be paid to the members according to their nights and interest in the profits and may fix the time for the purpose. Article 154 is similar to Regulation 85 in Table A of the Companies Act 1956 and Article 114 in Table A of the Companies Act 1948 of England. The declaration of dividend at general meeting under the Articles in the present case is to be made at the ordinary general meeting, namely, the annual general meeting. Articles 154, 155 and 87 fortify that conclusion. Further, sections 166, 186, 210, 211, 217 and provisions in Schedule VI Part II Clause 3 (XIV) of the Act indicate that the declaration of dividend is a business of the annual general meeting. Clause 3 (XIV) in Schedule VI states that the profit and loss account is to set out the aggregate amount of dividends paid and proposed. It is therefore manifest that interim dividends and dividends proposed at the annual general meeting exhaust the dividends for the year. Section 178 of the Companies Act 1956 which is comparable to Article 52 in Table A of the English Act makes declaration of dividend a business of the ordinary general meeting. For all these reasons I am of opinion that there is no power under the Articles in the present case to declare further dividend at an extraordinary meeting. 12. Section 178 of the Companies Act 1956 which is comparable to Article 52 in Table A of the English Act makes declaration of dividend a business of the ordinary general meeting. For all these reasons I am of opinion that there is no power under the Articles in the present case to declare further dividend at an extraordinary meeting. 12. IN view of my finding that the Articles forbid a declaration of further dividend the question whether there was an explanatory statement to the notice is of less importance. In view of the arguments of the counsel I propose in short to discuss the rival contentions. Mr. Sen, counsel on behalf of the plaintiff, did not contend that it was a 'tricky' notice but that the notice was misleading and did not correctly set out the facts. He relied on the decisions in Tiessen v. Henderson (2) reported in (1899) I Ch. 861, Baillie v. Oriental Telephone and Electric Co. (3) reported in (1915) I Ch. 503 and Kaye v. Croydon Tramways (4) reported in (1898) I Ch. 358 in support of the propositions that the notice did not fairly disclose the purpose for which it was called and secondly that the notice of extraordinary meeting should be one to enable the shareholder to determine if he ought to attend it. In other words counsel for the plaintiff contended that the test would be whether the real fact was placed before the shareholders. Thirdly, counsel for the plaintiff contended that there was no full and frank disclosure of facts on which the shareholders were asked to vote. Mr. Advocate-General relied on the unreported decision of the Appeal Court in Appeal from Original Decree Nos. 142 and 143 of 1953 where alt these cases were considered. Two broad principles can be extracted from the authorities. First, that notice must be fairly and intelligently framed and it must not be misleading or equivocal. A benevolent construction cannot be applied. Secondly, some matters must be brought pointedly to the attention of the shareholders, for example, where the directors are interested in a contract or matter which is to be submitted to a meeting for confirmation or approval, it appears to be desirable and in certain cases absolutely necessary to disclose the fact in the notice convening the meeting or in some accompanying circular. In the present case counsel for the plaintiff did not allege 'trickery' or fraud but he did contend that the notice was misleading in the sense that the facts set out in the affidavit affirmed by Shyamlal Agarwal were not there. I agree with the contention of counsel for the plaintiff. I cannot help observing that if the company really wanted to put up before the shareholders what the company stated in the affidavit of Shyamlal Agarwal there was nothing to prevent them from saying so. The test laid down by Kekewich, J., is that "the man I am protecting is not the dissentient but the absent shareholder." Mr. Advocate-General contended that the notice could not be characterised as misleading the shareholders. In the present case the facts disclosed in the affidavit of Shyamlal Agarwal, in my opinion, should have been disclosed before the shareholders. On this ground also I am of opinion that the plaintiff is entitled to succeed. I, therefore, make an order declaring that the resolution passed at the extraordinary general meeting on March 31, 1960 appearing in P. D. 5, D. D. 6 and also set out in the plaint in paragraph 12 declaring further dividend in respect of the year ending 31st March 1959 is illegal, void and ultra vires the Articles of Association and the Companies Act. There will be an injunction restraining the defendants its servants and agents from impleading or giving effect to the said resolution. Apart from this question no other question was canvassed at the trial. The plaintiff is entitled to the costs in this suit. Certified for two counsel.