Directors

I am quoting two paragraphs which is relevant to your first case law:-

87. The last point raised in the present appeal is about the maintainability of the suit. Mr. Nariman, consistent with the appellants' stand in the lower court, submits that the plaintiffs have come to the court with certain grievances about the irregularities committed by the company while appointing the appellants as directors. Mr. Nariman relied upon a decision of this court in V. N. Bhajekar v. K. M. Shinkar. It was a suit by the shareholders challenging irregularities committed by the directors. It was held that such a suit was not competent. The headnote indicates that there are certain recognised exceptions to the rule that mere irregularities committed during the course of the management of the internal affairs of the company do not furnish any cause of action to the shareholders. The relevant headnote is to the following effect : "The supremacy of the majority of shareholders is subject to certain exceptions, viz. :

(1) Where the act complained of it ultra vires the company;

(2) where the act complained of is a fraud on the minority; and

(3) where there is an absolute necessity to waive the rule the order that there may not be a denial of justice."

88. Mr. Nariman submits that the present case is not covered by any one of these three exceptions. The appellants were appointed directors by an unanimous resolution passed by at the meeting of the company. The plaintiffs after a long lapse of time had no reason to rust to the court for any relief. It is not an act which is patently illegal or ultra vires the company. But, I find it difficult to accept this contention of Mr. Nariman, I have already held that section 173 is mandatory and not directory. Any non-complains with the provisions of section 173 will result in the nullification of the Act. The plaintiffs have alleged that there was contravention of section 258 of the Indian Companies Act, as there was no valid resolution proposing the increase in the number of directors. It may be that the plaintiffs have not eventually succeeded in the suit. In view of the findings recorded by me, it cannot be said that the suit as framed is not competent. In my opinion the plaintiffs' case will be covered by the first of the three exceptions mentioned above. The learned judge was, therefore, right when he held that the suit as framed was maintainable.

Regards,

Both the case are correct and second one is more clear but the first case was decided as special case. Gothrough the whole judgement (attached).

Regards,

Dear Friend

The both cases define the two issue:

1. Before appointment there is no need to pass special resolution for increase in number of director. For example if a company article fixed 15 no of director and at present the company has 12 director there is no need to pass SR for increasing no of director. You just appoint a director within limit.
2. In case no 2 says if the company’s article fixed the no of director should be 12 and at present your company have 11 directors and you want to appoint 2 directors in additions  to 11 then first of all you alter the article by special resolution to increase the no. of directors on Board.

Regards

CS Ajay Mishra

Thank you Vivek Sir and Ajay Sir.