Varghese Kalliath, J.
1. This is an appeal against the order of a learned single judge of this court in Application No. 253 of 1990 in C. P. No. 28 of 1984. The said application was filed under rule 9 of the Companies (Court) Rules, 1959, by a shareholder of the company for an order declaring the election of directors and managing director of the company (Sreerama Vilas Press and Publications (P.) Ltd., Quilon) held on March 10, 1990, as illegal, void and inoperative.
2. These are the facts : The applicant is a shareholder of the company. There was a winding up order by the company on November 4, 1976. Subsequently, the company court approved a scheme for revival of the company. As a consequence of that order, the board of directors as on the date of the winding up petition was revived. A general body meeting of the company was held on April 19, 1985, and a new board of directors was elected. On February 25, 1986, another general body meeting was held wherein a resolution was passed removing one of the directors, N. Madhavan Nair, who was the managing director of the company. Madhavan Nair filed Application No. 63 of 1986 before the company court on February 25, 1986, for a declaration that the resolution removing him was invalid. He also filed another petition for stay of operation of the said resolution. The company court passed an order of interim stay on March 3, 1986.
3. When the petitions came up for hearing, the period of appointment of the managing director and the board of directors of the company had expired. The company court did not consider the question on merits, but directed a fresh election to the board of directors and managing director. In order to enable a proper election, the company court appointed advocate, Shri V. A. Mohammed, as the chairman to convene a general body meeting of the company for the purpose of conducting the elections. The meeting held under the directions of the company court elected the board of directors and N. Madhavan Nair was also elected as the managing director.
4. A misfeasance application was filed against N. Madhavan Nair. The company court directed N. Madhavan Nair to pay to the company a total amount of Rs. 44,550. Madhavan Nair has filed M. F. A. No. 174 of 1989. A cross-appeal also was filed. Both are now pending.
5. Two of the shareholders of the company made a requisition to the board of directors, under Section 169 of the Companies Act on December 31, 1988, requesting it to convene an extraordinary general body meeting of the company. The managing director did not convene any meeting. Another director of the company filed a suit, 0. S. No. 34 of 1989, praying for an injunction restraining the requisitionists from holding an extraordinary general body meeting. Although an interim order of injunction was passed by the Munsiff's Court, that order was stayed by the District Judge in C. M. A. No. 22 of 1989. That order was again challenged before this court in C. R. P. No. 861 of 1989.
6. The extraordinary general body meeting convened as per the requisition elected five directors. Before the company court, S report was filed. Another application was also moved before the company court to allow the newly elected board of directors to function. When the matter came up before the company court, it suggested that the disputes can be settled by convening a general body meeting so that further steps for revival of the company can be speeded up. One of the directors agreed that for the time being he will meet the expenses of the meeting. The company court, as per order dated October 30, 1989, appointed Shri A. T. James, an advocate of this court, as chairman/Commissioner to convene a general body meeting of the company for the purpose of electing a managing director and members of the board of directors. When notices of the meeting were issued, the former managing director submitted an application as Application No. 187 of 1990 to stop the convening of the meeting. That application was dismissed by the company court.
7. The meeting was held on March 10, 1990. Out of the shareholders of the company, six were present and three by proxy attended the general body meeting. Those nine members together held 2,630 shares out of 4,689 shares held by the total number of members, viz., 15, Ordinarily, there were 17 members of whom two persons had died. The present strength of members is 15. In the meeting held under the directions of the company court, a board of directors and managing director were elected. The Commissioner filed a report on March 22, 1990. The present Application No. 253 of 1990 was filed challenging the election and its proceedings. Another application was filed as Application No. 254 of 1990 for an order of stay of further proceedings pursuant to the election till the disposal of the present application (Application No. 253 of 1990). The company court dismissed the application for stay. An appeal was filed as M. F. A. No. 322 of 1990, which was dismissed on June 18, 1990, with certain directions.
8. The company court has now dismissed Application No. 253 of 1990. The applicant is aggrieved and she has filed this appeal.
9. Counsel for the appellant raised certain points before us which he has raised in the petition and before the company court. He submitted that the notice convening the meeting by the chairman appointed by the company court is defective, since an explanation as contemplated under Section 173(2) of the Companies Act was not annexed to the notice. Further, it was submitted that the notice is defective since, along with the notice, the names of candidates for elections were not furnished. It was also contended that individual notices to the members of the company regarding the candidature of a person were not sent and that it is a violation of Section 257(1A) of the Companies Act. Counsel submitted that the appointment of Commissioner and direction to convene an extraordinary general body meeting of the company itself are without jurisdiction. The above contentions were raised before the company court also. The company court found no merit in those contentions and negatived those contentions. Counsel argued the case elaborately. We are obliged to consider the points raised by counsel, since he pressed all the points with equal emphasis.
10. The first question we have to consider is whether the notice is defective on account of lack of explanatory statement under Section 173(2) of the Companies Act. Section 173(2) of the Companies Act provides thus :--
'173. Explanatory statement to be annexed to notice.-- ... (2) Where any items of business to be transacted at the meeting are deemed to be special as aforesaid, there shall be annexed to the notice of the meeting a statement setting out all material facts concerning each such item of business, including in particular the nature of the concern or interest, if any, therein, of every director, and the manager, if any.'
11. It has to be remembered that the chairman appointed by the company court was seeking directions in the matter of conducting the meeting. The company court gave certain directions for the proper conduct of the meeting. The former managing director, Sri N. Madhavan Nair, filed Application No. 187 of 1990 to stop the convening of the meeting on the ground that the notice is not in conformity with Sections 171, 173 and 257(1A) of the Companies Act. The company court overruled the objections, found the notice in order and dismissed the application of the former managing director. He filed an appeal, M. F. A. No. 333 of 1990. The appeal was dismissed by a Division Bench of this court observing that it will be open to the appellant to urge various contentions including the contention regarding the order in Company Application No. 187 of 1990 in the course of trial of the main Application No. 253 of 1990. So even though the company court has found that the notice sent by the chairman appointed by the company court was not defective, that matter was left open to be considered by the company court at the final stage of the main application, viz., Applicalion No. 253 of 1990. But it has to be noted that the meeting was held as early as on March 10, 1990, and the period of appointment of the board of directors and managing director of the comany has expired by efflux of time and an election to a new board of directors and managing director became necessary.
12. Nevertheless, we feel that we are bound to consider the correctness of the judgment challenged in this appeal. The company court, in its order, has extracted in full the notice issued by the chairman appointed by the company court and we do not want to repeat it in this judgment. The purpose for which the meeting is held is clearly stated in the notice. The purpose is for conducting an election to the board of directors and managing director of the company. There is no difficulty to hold that the notice was issued following the provisions contained in the articles of association and no argument was advanced by counsel for the appellant stating that the notice is defective on account of the fact that it has not complied with the provisions contained in the articles of association.
13. The gravamen of the charge against the notice is that it has not complied with the provisions contained in Section 173 of the Companies Act. The articles of association provide for the nature of the notice to be sent to the effect that what has to be done is to inform the members of the company of the general nature of the business to be transacted at the meeting. The learned single judge observed that since there is a specific provision in the articles of association regarding the notice of a general meeting where special business is to be transacted, Section 173 of the Companies Act may not apply to the present case. Further, the company court said that the notice issued contains all material facts concerning the business that was to be transacted in the meeting, viz., election of managing director and directors and that the order to convene the meeting was passed after hearing all parties and the notice itself was approved by the company court. It was also pointed out that the meeting was convened by the chairman appointed by the company court and not exactly by the company. The intent and purpose of Section 173 of the Companies Act is to give directions to the shareholders in the matter of holding a meeting by the management.
14. In Sitaram Jaipuria v. Banwarilal Jaipuria, AIR 1972 Cal 105, the Calcutta High Court has held that the provisions like Section 173(2) of the Companies Act should not be construed in a rigid manner and an interpretation should not be made so as to hamper the conduct of business. The notice has to be construed in a realistic and businesslike manner and if it satisfied the essence of Section 173 of the Companies Act, the meeting should not be invalidated on the technical ground that the notice has not complied with the provisions of Section 173(2) of the Companies Act. The intention behind the provisions contained in Section 173 of the Companies Act has to be understood in a meaningful manner. Of course, if a transaction of business has not been sufficiently notified or which is substantially different from the notification, it would be invalid. Beyond that on technicalities the meeting should not be invalidated. It is clear from the notice that the transaction of business to be carried out in the meeting is the election of the board of directors and managing director. That was the only transaction scheduled in the meeting and for which alone the meeting was called.
15. The notice was found to be valid by the company court. All proceedings for the conduct of the election were supervised by the company court and the parties had opportunities before the company court to raise points against the validity of the notice. Even before the holding of the meeting, the company court has considered it and found it to be valid. It is also necessary to note that neither the notice nor the explanatory note omits to disclose material facts pertaining to the transaction to be carried out in the meeting. The decision taken in respect of that transaction would he invalid and ineffective (sic). But if a shareholder is aware of the facts, he cannot reasonably complain of insufficiency of the notice or any irregularity. If he is present at the meeting, he must point out to the chairman about the irregularity before the meeting proceeds with the agenda. There is no case for the petitioner, who is the appellant herein that she has raised any objection in the meeting itself.
16. The provisions contained in Section 173 of the Companies Act making some requirements for a valid notice is to enable the members to understand and appreciate the nature of the business or items of business proposed to be considered at the meeting and make up their mind whether to go to and attend and vote at the meeting or abstain from voting (see Pearce, Duff and Co. Ltd., In re [1960] 3 All ER 222 (Ch D)). We feel that the requirement of Section 173 of the Companies Act is that the members of the company should be informed truly of the nature of business to be transacted at the general meeting. Too rigid an interpretation would not advance the object of the provision which will only hamper the conduct of business.
17. In this case, it has to be noted that the meeting was called by the chairman appointed by the company court and all proceedings were subjected to scrutiny and directions of the company court. No one can attribute any mala fide motive on the part of the chairman to cover up or to mislead the members as to the object and purpose of the meeting. In our view, the learned single judge has rightly rejected the contention of the appellant based on Section 173(2) of the Companies Act.
18. Counsel for the appellant submitted before us that the provision contained in Section 257(1A) of the Companies Act has not been complied with. It is contended that Section 257(1A) of the Companies Act mandates the company to inform its members of the names of the persons who proposed to stand for election to the board of directors. In order to understand this submission of counsel for the appellant, we feel that it is apposite to quote Section 257 of the Companies Act.
'257. Right of persons other than retiring directors to stand for directorship.--(1) A person who is not a retiring director shall, subject to the provisions of this Act, be eligible for appointment to the office of director at any general meeting, if he or some member intending to propose him has, not less than fourteen days before the meeting, left at the office of the company a notice in writing under his hand signifying his candidature for the office of director or the intention of such member to propose him as a candidate for that office, as the case may be, along with a deposit of five hundred rupees which shall be refunded to such person or, as the case be, to such member, if the person succeeds in getting elected as a director.
(1A) The company shall inform its members of the candidature of a person for the office of director or the intention of a member to propose such person as a candidate for that office, by serving individual notices on the members not less than seven days before the meeting :
Provided that it shall not be necessary for the company to serve individual notices upon the members as aforesaid if the company advertises such candidature or intention not less than seven days before the meeting in at least two newspapers circulating in the place where the registered office of the company is located, of which one is published in the English language and the other in the regional language of that place.
(2) Sub-section (1) shall not apply to a private company, unless it is a subsidiary of a public company.'
19. His Lordship Justice John Mathew considered this question very elaborately and found that Sub-section (IA) of Section 257 of the Companies Act has no application in regard to a private company and the company in this case is a private company. Sub-section (1A) of Section 257 is really interlinked with Sub-section (1) of Section 257 of the Companies Act. It has to be noted that in Sub-section (1) of Section 257 of the Companies Act the statute provides that 'a person who is not a retiring director shall, subject to the provisions of this Act, be eligible for appointment to the office of director at any general meeting, if he or some member intending to propose him has, not less than fourteen days before the meeting, left at the office of the company a notice in writing under his hand signifying his candidature for the office of director or the intention of such member to propose him as a candidate for that office, as the case may be'. It is significant to note that it is a provision intended for controlling the procedure for the election of a director at the general meeting. It was found that Sub-section (1) of Section 257 of the Companies Act was not complete and so Sub-section (1A) of Section 257 was introduced by an amendment. The integrant of Sub-section (1) of Section 257 of the Companies Act if analysed, can be read as follows : (1) a person who is not a retiring director shall, subject to the provisions of the Companies Act, be eligible for appointment to the office of director, (2) it can be done in a general meeting, (3) for appointment as a director that person or some member intending to propose him should have left at the office of the company a notice in writing under his hand signifying his candidature for the office of director or the intention of such member to propose him as a candidate for that office not less than 14 days before the meeting, and (4) the notice should accompany a deposit of Rs. 500 which shall be refunded to such person or, as the case may be, to such member, if the person succeeds in getting elected as a director. What has to be done with the notice under Sub-section (1) has been provided for in the provisions contained in Sub-section (1A) of Section 257 of the Companies Act. So as an adjunct or part of Sub-section (1), an amendment was introduced as Sub-section (1A) of Section 257 of the Companies Act wherein it is mandated that when such a notice is received, the company is bound to inform its members of the candidature of a person for the office of director or the intention of a member to propose such person as a candidate for the office of a director by serving individual notices on the members not less than seven days before the meeting. So, in effect, both Sub-section (1) and Sub-section (1A) of Section 257 of the Companies Act together postulate a procedure with regard to the election to the office of director of a company. It is significant to note that the company shall inform its members about the candidature of a person for the office of director or the intention of a member to propose a person as a candidate. Both these are referred to only in Sub-section (1A) of Section 257 of the Companies Act. Only in Sub-section (1) the procedure is prescribed by which 14 days' notice has to be given signifying by a member his intention to stand as a candidate for the office of director or any other member who wants to propose a member as a candidate for the office of director. Sub-section (1A) can have any meaning only if we read Sub-section (1A) along with Sub-section (1) of Section 257 of. the Companies Act. Otherwise, Sub-section (1A) will be incomprehensible. Sub-section (1A) cannot be separated from Sub-section (1) of Section 257 of the Companies Act. It is on account of this intimate relationship with Sub-section (1) that the provisions contained in Sub-section (1A) of Section 257 of the Companies Act have been termed as section (1A).
20. Sub-section (2) of Section 257 of the Companies Act makes it clear that Sub-section (1) shall not apply to a private company unless it is a subsidiary of a public company. There is no point in saying that Sub-section (1) is not applicable by virtue of the provisions contained in Sub-section (2) of Section 257 of the Companies Act as far as this company is concerned, but nevertheless, Sub-section (1A) of Section 257 of the Companies Act is applicable to this private company. If such a construction is adopted, it will lead to manifest absurdity. The learned judge also found so. We see no error in this interpretation of the provision. In view of this, we see no merit in the second ground urged by counsel for the appellant.
21. Counsel for the appellant next contended that the court has no jurisdiction to convene an extraordinary general meeting of the company. This contention was raised on the basis of Section 186 of the Companies Act. By Section 14 of Act 41 of 1974, the word 'court' was substituted by the words 'Company Law Board' with effect from February 1, 1975. We also share with the opinion expressed by the learned single judge that the power of the court to exercise control over any extraordinary general meeting of a company in respect of which a proceeding is pending in the court is not taken away by the said amendment. In Dineker Rai D. Desai v. R. P. Bhasin [1986] 60 Comp Cas 14 (Delhi), the Delhi High Court held that the court has such power. We also respectfully agree with this view.
22. In this case, yet another important fact has to be taken into account. The meeting itself was convened at the behest of the court, since the company was in the process of implementing a scheme sanctioned under Section 392(1) of the Companies Act under the direct supervision of the court. In Indian Hardware Industries Ltd. v. S. K. Gupta [1981] 51 Comp Cas 51 (Delhi), it has been held that under Section 392 of the Companies Act, the court has the power to supervise the carrying out of the revival scheme and also in the course of implementation of the scheme, if the court is of the view that an extraordinary general meeting of the company is to be held in order to elect a new board of directors, the court has the power to do so. That power under Section 392 of the Companies Act is not in any way affected or circumscribed by Section 186 of the Companies Act. We are of the view that the point raised on the basis of Section 186 of the Companies Act has no merit in the circumstances of the case. The learned judge has also found so.
23. We cannot forget the fact that the meeting was convened overruling the objection, which was subject to an appeal and that appeal was also dismissed and now, as it is, the period of the board of directors has expired by efflux of time. Section 392 of the Companies Act empowers the court sanctioning a scheme to supervise the implementation of that scheme and to give such direction in regard to any matter or to make such modifications, compromises or arrangements as it may consider necessary for the proper working of the revival scheme. It is difficult to read any limitation in that power so as to exclude the power to call a meeting of the company for the purpose of electing the directors if the court feels that it is necessary for the proper working of the scheme to appoint a board of directors of the company. The width and scope of the power under Section 392 of the Companies Act is no longer in doubt. Section 392(1) of the Companies Act confers power of the widest amplitude on the High Court to give directions and if necessary to modify the scheme and that power implies in itself all incidental powers like convening a meeting of the members to elect directors. In S. K. Gupta v. K. P. Jain [1979] 49 Comp Cas 342, the Supreme Court has observed thus (at page 35) :
'The purpose underlying Section 392 is to provide for effective working of the compromise and/or arrangement once sanctioned and over which the court must exercise continuous supervision (see Section 392(1)), and if over a period there may arise obstacles, difficulties or impediments, to -remove them, again, not for any other purpose but for the proper working of the compromise and/or arrangement. This power either to give directions to overcome the difficulties or if the provisions of the scheme themselves create an impediment, to modify the provision to the extent necessary, can only he exercised so as to provide for smooth working of the compromise and/or arrangement. . . But the Legislature, foreseeing that a complex or complicated scheme of compromise or arrangement spread over a long period may face unforeseen and unanticipated obstacles, has conferred power of the widest amplitude on the court to give directions and, if necessary, to modify the scheme for the proper working of the compromise or arrangement. The only limitation on the power of the court, as already mentioned, is that all such directions that the court may consider appropriate to give or make such modifications in the scheme, must be for the proper working of the compromise and/or arrangement.'
24. This vast power cannot he whittled down by the 1974 amendment. The history of the amendment also fortifies the view we have taken. The amendments were brought on the recommendation of the Administrative Reforms Commission. It recommended that the functions which are discharged by the courts under the Companies Act may be reviewed and those which are essentially of an administrative nature may be transferred to the executive. It also recommended that there was a case for relieving the courts of items of merely administrative nature. These can be transferred to the Company Law Board and as a result of that, a new section, Section 186 of the Companies Act was introduced. It is true that if, after the 1974 amendment, any person wishes to call an extraordinary annual general meeting, he will have to apply to the Company Law Board. But the present is not a case where a meeting is being called in the normal course by a member. The learned company judge who directed the calling of the meeting did so because he felt that the only way in which the court can supervise the carrying out of the scheme was to order that a general meeting of the company be held in order to appoint the directors of the company. It would be quite anomalous to hold that if the court felt the necessity of calling such a meeting, it would have to request the Company Law Board to call such a meeting.
25. The court cannot ignore this vital aspect and adopt a course which might be inconsistent with the provisions of the section. We cannot think that the Legislature intended such a result because it is well-settled law that if an interpretation leads to absurdity and anomaly, the same must be avoided. There is nothing in Section 186 which ousts the jurisdiction of the court by expressly or impliedly saying that the company court which is supervising the scheme under Section 392 of the Companies Act cannot call a meeting of the company, if it feels that such a course is necessary to do justice in the matter and to make the scheme effective. We cannot accept an interpretation which puts the court in the position of a supplicant before the Company Law Board. It will be against the widest amplitude given to the power under Section 392(1) of the Companies Act as interpreted by the Supreme Court.
26. In the result, we see no merit in this appeal and the appeal is only to be dismissed. We do so.