1. This application raises a short and interesting question of law ;regarding the right construction to be put insurrection 87 to 90 of the companies Act, 1956,. These sections which relate to voting rights did not find a place in the Indian Companies Act, 1913, and have been introduced for the first time in the Companies ACt, 1956. there is no provision in the English Companies Act, 1948, corresponding to theses section nor is there any authority of any High court in this country which throws light on the interpretation of these section. the question of construction posed by this application has, therefore, to be decided ;by me on the language of these section unpaid by any authority or dicta of any court in this court or in England. The facts gins rise to this application are few and for the most part undisputed and may be briefly stated as follows:
The Lakhtar Ginning Company Private Limited was incorporated as a public company limited by shares in the old Lakhtar4 state in December, 1912, under the company law then in force in the old Lakhtar state. the company had a share capital of Rs. 32,000 divided into 128 ordinary shares of ?Rs.250 each and the entire share capital was issued, subscribed and fully aid up. the voting rights were prescribed by article 76 of the articles of association of the company ad under that article each member of the company had one vote irrespective of the number f shares held by him, The voting rights of the members were not proportionate to their respective shares of the paid up capital of the company but ;were distributed equally among the members in the sense that teach member had one vote irrespective of his hare of the paid up capital of the company. At an extraordinary general main of the company held on August 5, 1951, a special resolution was passed where by the old articles of association were deleted and new articles of association were adopted. Under the new article of association each member of the company was given voting rights in proportion to his share of the paid up capital of the company in contradiction to the voting rights given to each member by the old articles of association irrespective of the share of the paid up capital of the company. As a result of to adoption of the new articles a association the company was converted into a private limited company hence the addition of the word 'Private' in the name of the company. Originally there where seventeen members of the company; and they were divided into two groups, one group consisting of nine members need the other group consisting of the remaining eight members. The nine members who formed one group were in a position to control the affairs of the company if the voting rights remained as provided in. e old articles of association. their voting strength was, however affected by the adoption of the new articles of association sick their share in the paid up capital of the company was less than the share of the remaining member in the paid up capital of the company. These members of to company therefore filed a petition in the then High Court of Saurashtra under sections 397 and 398 of the companies Act, 1956, contending inter alia that the extraordinary general meeting of the Company y h end n August 5, 1951, at which the new articles of association were adopted was not a validly convened meeting nor was it validly h led and conducted and that the resolutions passed at thee m,being were therefore illegal and via According to these members to whom I shall refer as petitioner for the purpose of thee judgment the special resolutions passed at the extraordinary general meeting of the company held on August 5, 1951, being illegal and via the new articles of association were not a adopted by the company and the company contained top be governed by the old articles of association. Thee necessary corollary of this argument was that the voting rights of the member of the company remained unaffected and each member continued to have one by irrespective of thee number f shares held by him in the share capital f the company and the company all continued to be a public limited company. There were various other contentions raised in. ear petition but I am not con creed with those contentions for the purpose of its application and I need not therefore rehearse the facts relating to those contentions, Suffice it to state that the petitioner challenged the adoption of the new articles of association which altered the voting rights enjoyed by th e members of the company under the old articles of association. If the new articles of association were not validly adopted at the extraordinary general seeing held on August 5, 1951, the petitioner would be entitled to voting rights in accordance with the old articles of association, i.e. the petitioner between themselves would have nine votes as against high votes of the remaining members who formed the other group and the petitioner would in that event be able to controller the affairs of the company. O course this result would follow on the assumption that the transfer of five shares made by respondent No.1 to respondent No. 1 to respondent No.4 and himself jointly on July 1, 1950, were unlawful and void as contended by the petitioners. If theses transfer were valid the members other than the petitioner would be able to control the affairs of the company, for their voting strength would e augmented by two votes of responds Nos.3 and 4 who became members as a result of these transfer and the would thus have ten votes against nine vote's of the petitioner But apart from this circumstance, whether these transfer were valid or not if the mew articles off association validly replaced the old articles of association the petitioner would not be in a majority at a general meeting of the company for the petitioner between themselves hold less than fifty per cent, of the paid up capital of the company and their voting strength would therefore be less had that of the remaining member who freed to the other groups. Thee struggle for power and supreme in the affairs of the company this depended to a large extent on the question whether the special resolution passed at the extraordinary general meeting of the company held on August 5, 1951, was valid and the old articles of association were valid y and effectally replaced by the new articles of association. the petitioner therefore conceded the the special resolution re voting the old articles of association and adopting the articles of association was illegal and void, The petitioner immediately after filling the petitioner made an application for an interim injunction restraining the company from holding any general l meeting since the dispute as regards the validity of the special resolution which affection the voting rights of the member was held pending determination of that dispute it would create serious complications for it would not be authoritatively known how the voting rights were exercised in accordance with the new articles of association the resolutions passed at the general meeting would be illegal and via and in that invite grave and irreparable injury would be caused tot he petitioner ., The application was granted b the High Court of Bombay at Rajkot and an interim injunction was issued restraining the company from holding any genial meeting pending thee hearing and final disposal of the petition The interim injunction was issued, I am told, on November 5, I956. the petition was thereafter not heard for a considerable time and it ultimately reached hearing before me. After the petition n was heard for some time, I suggested to the parties that this was per-eminetly a cases fit for settlement and that they might try to see if it was possible for them to arrive at a compromise on terms mutually acceptable to them. Mr. M.P. Thakkar, learned advocate on behalf of the petitioners, there upon asked for an adjournment since the petitioners were not in Ahmedabad and it would require some time e to consult them. Mr. L.M.Zaveri, on behalf of the company, stated that he had no objection to the petition being ad journey, but that in the meantime the anteroom injection granted against the company should be dissolved, since as a result of the operation of the interim injunction, the company was not in a position to hold any general matting and this had the effect of paralyzing the working of the company. Mr. L.M. Zeveri pointed out section 87 to 90 of the Companies Act , I956, and contended that having regard to these sections it was immaterial to consider whether the special resolution passed at the extraordinary general meeting of the company held on August 5, I95I, was valid or not, since by the operation of these section the same result was brought about which was intended to be achieved by the specials resolution in regard to voting rights. Mr. L. M. Zeveri argued that even if the special resolution was illegal and void and the old article of association contained to govern the company, th e voting rights conferred by the old articles of association came to an end from Its April, I956, when the Companies Act, I956, came into force or at any rate on the expiration of the prior of one year from the commencement of the Companies Act, I956, by reason of sections 87 to 90 of the Companies Act, I956, and form that date each member of the company was entitled to exercise voting rights in proportion to his share of the paid of the paid up capital of the company. If that was the position argued Mr. L M Zeveri , it was futile to continue the interim adjunction for whatever be the fate of the special resolution substituting the new articles of association of the old artilce was association the voting rights at at every general meeting of the Company held after 1st April 1956 or at any r ate after 1st April 1957, were required to be exercised by to members inn proportion to their respective e shares of the paid up capita of the company and were not restricted to one vote per member irrespective of his share of the paid up ca vital of the company. Mr. M P Thakkar disputed this construction and effect of sections 87 to 90 of the companies Act, 1956 and contended that these section detain to had the effect of aborad giant the voting rights conferee day the old articles of association and that despite these section the voting rights contained to be as provided in the old articles of association. these were the rival co intentions urged b the parties on the questions of interpretation of sections 87 to 90 of the companies Act, 1956, and both Mr. L M Zeveri and Mr. M P Thakkar invited me to decide the question and agreed that if it was held by me that as result of t operation of these sections the voting rights could not be exercised as provide in. he old articles of association but were retired to be exercised as provided in t he old articles of association b at were required to be exercised in proportion to the respective shares of the member in the paid up capital of the company from 1st April, 1956, or at any r ate from 1st April, 1957, the interim injunction should e dissolved but if it was held that these sections did not affect the voting rights provided in. e old articles of association and that even after 1st April, 1957, each member could have one vote irrespective of his share of the paid up capital f the company th e interim injunction should not be dissolved. The sole questions ch therefor arise on this application is: Whats is the trues interpretation and effect of s actions 87 to 90 of the companies act, 1956?
2. Section 87 to 90 occur in Part I under the heading 'Kinds of share Capital', These section are preceded by sections 85 and 86 which also occur under the same heading. Section 85 d evades the has are capital of a Company into two classes namely preference share capital and equity share capital. 'Preference share capital' with reference to these requirements does not constitute any departure from the ordinary concept of preference share capital but merely r estates the concept in precise ad accurate language. There was not definition of preference share or preference share capital in. he india Companies Act, 1913 and the preference shares are de scribed as such by r reason old of the fact that they carried some preference rights in relation to other classes shares particularly in relating to ordinary shares, These preferentila rights were of great variety but referred normally to ea. or two of the principal rigthness carried by the share namely the right to dividend and the right, on winding up to receive the amount of the capital paid up or deemed to haven been paid up, Now b y sector 85(I) a more precise and accurate definition is introduced and these characteristics here made the statutory tests for determining the preference share capital The tests are whether the share capital fulfills the following requirements namely:
'(A) that, as respects dividends it acquires r will carry a preferenctial r right to be paid a fixed amount or an amount calculated at a fixed rate which may be either free of or subject income tax and
(b) that as respects capital it cares or will carry on a worn- down up or repayment of capital a preferentila right to be repaid the amount of t he capital paid up r deemed to have been paid up whether or not there is a preferential rights to the payment of either or both of the following amounts, namely:
(i) any money remaining unpaid in respect of the amounts specified in clause (a), up to the date of the winding up or repayment of capital; and
(ii) any fixed premium or premium on any fixed scale, specified in the memorandum or articles of thee company.'
3. It is also declared by section 85(I) that the fact that a preference share is entitled in addition to the preferential right to the fixed dividend , to a portion of the divided depending upon the quantum of the profit or th at on a winding up it carries in addition to the preferential right to repayment of capital a right t participate in. he surplus assets after the entire capital has been paid unfurl will not have the effect of making the definition of 'preference shares capital' inapplicable to the case. 'Equity share capital' is defined by section 85(2) as meaning all share capital which is not preference share capital, The definition of 'equity share capital' is thus an exclusive definition and comprehends within its scope all share capital other than prefers share capital. theere are therefore now under the companies Act, 1956 only two kinds of share capital namely preference share capital and equity share capital. Prior to the enactment of the companu new Act, 1956 it w as not unusual to divide the shares in. he capital of a company into two or more classes as for example, preference shares and ordinary shares or preference shares and A ordinary shares and B ordinary shares or ordinary shares and deferred shares iii preference shares, ordinary shares and founder share's also on and so froth and to attach various special rights privileges and conditions to such shares. Where a company divide its share capital into different classes the classes were usually given distinguishing descriptions and thee company was at liberty to attach to them such descriptions as appeared appropriate, the classes were often described as 'ordinary shares','preference shares','deferred shares' and 'founders' shares', as mention aid above but sometimes a m ore complicated terminology was also used by the company such as 'first preference shares', 'ordinary preference shares', etc. The law did not attach a rigid uniformly applicable meaning to these descriptions and the rights carried bat e saris were not dependent upon the descriptions but were always to be gathered from t he terms of issue which normally reproduced the relevant provisions of the memorandum and articles of association. these different description are however now abolished by the companies Act, 156. That part o the share capital f the co many which satisfies the requirements set out in section 85(I) is now described as 'preference share capital' and the rest of the share capital is described as 'equity share capital' and the rest of the share capital is described as 'equity share capital' no matter what its description ore nomenclature was before the commencement of the companies Act, 1956. Even if any share were issued prior to the commencement of the companies Act, 1956, they would be considered as equity share's for the purpose of the companies, Act, 1956, unless the fall within the definition in section e85(I) in which event they would be considered as preference shares, All the share capital issued before thee commencement of the companies Act, 1956 must, therefore fall in either of the two classes namely preference share capital or equity share capital and the incidents of one or the other of the two classes must attach to such share capital. this insistence upon classification off share capital into preference share capita and quiets share capital is also to be found in regard t future issue of share capital for section 86 prescribes that the share capital of a company formed after the commencement of to companies Act, 1956 or issued after such commencement shall be of two kinds only , namely preference share capital and equity share capital The scheme of the companies Act, 1956, therefore is that there should be only tow kinds of share capital namely preference share capital and equity share capital and it is i n relating to these t o kinds of share capital that voting rights are prescribed by section 87 to 90. If this contextual background of sections 87 to 90 is borne din mind the interpretation of those s actions does not prescient any difficulty .
4. Thee is also another rule of interpretation which is no less important and which affords considered guidance in. thee interpretation of sections 87 to 90 That is th rule in Heydon's case. It is a sound rule of construction established firmly in England as far back as 1584, when Heydon's case was decided that'
'.....for the sure and true interpretation of all statutes in general (be they anal or beneficial restrictive or enlarging of tee common law) four things are to be discerned and considered:
1st. what was the common law before the making of the Act, 2nd. what was the mischief and defect for which the common law did not provide. 3rd. What remedy the Parliament hate resolved and appointed to cure the disease of he commonwealth and 4th. The true reason of the remedy and then the office of all the judges is always to make such construction as shall suppress the mischief, and advance the remedy and to suppress subtle inventions and visions for continuance of the mischief and pro private comedo and to add force and life to the cure and remedy, according to the true intent of the makers of the Act , pro boon publics.' this rule was reaffirmed by the Earl of Halsbury in Eastman photographic Materials co. Ltd. v. comptroller-General of patents, Designs and Trade-Marks in. he following words: 'My Lords, it appears to me that to construe the statute now in question , it is not only legitimate but highly convenient to refer both to the former act and to the ascertained evils to which the former act had given rid and to the later act which provided the remedy. these three things being compared, I cannot doubt the conclusion.'
5. In order to arrive at a correct interpretation of section 87 to 90. it is therefore necessary to consider how the matter stood immediately before the en actment of these sections what the mischief was for which the old law did n to provide and the remedy. these three things being compared I cannot doubt the conclusion'
6. In orders to arrive at a correct interpretation of sections 87 to 90 it is therefore necessary to consider how the matter stood immediately before et e enactment of these sections what the mischief was for which the old law did not approved and the red,die which has been provided by theses sections to cure that mischief.
the position that prevailed prior to the commencement of the companies Act, 1956 was that a company could make any provision it liked in the articles of association regarding voting rights in respect of varies classes of shares in the shares capital of the company. there was nothing in the law which required that any particular voting rights shall attach to any particular class of shares, The voting rights depended entirely on the articles f association and it was for the articles of association to determine whether any particular class of shares shall carry any votes and if so what voting rights shall attach to such class of shares. the mischief which resulted was that a few person could control the affairs of a company through a small investment by holding shares which through of less face value carried larger voting rights. The articles of association could provide for different voting rights for different classes of shares irrespective of the amount paid up on the shares and persons holding shares carrying larger voting rights could therefore by owning a sufficient number of such shares control the affairs of the company even though the amain of paid up capital on such shares was less than the amount of paid up capital on the other shares, Person in management of the affairs of a company cold also collect share capital for he company from other by issue of new shares without in any manner affecting their control of the company by the simple expedient of attaching proportion Italy less voting rights to such new shares, there being no requirement of the law that the voting rights should be proportionate t the amounts of paid up capital n the shares, person who had contributed less to the paid up capital of the company cold enjoy greater voting right than those who had contributed more and consequently control the affairs of the company even though there contribution to the paid up capital of the company was less than that of the others.
7. It was in order to cure this mischief the section 87 to 90 where introduced in the companies Act, 1956. these sections were en acted with the object of removing the inequality in the voting rights attaching to different classes of shares. this object has been achieved by the legislature by making the total paid up equate capital of the company as the pivot round which the structure of voting rights should be centered. Sections 87(I) provides that subject to the provisions of sections 89 and 92(2) the voting right of every member of a company holding equity share capital in the company shall on a poll be in proportion to his share of the paid up capital of the company, The voting right of every member holding equity share capital in a company is thus made commensurate with the extent of his holding in the equity share capital of the company so that there would be no inequality of voting rights as between members headline equity share capital in the company would have voting rights in proportion to the amounts contributed by them to the paid up equity capital of the company. the member we have contributed less to the paid up equity capital of the company would have lesser voting rights than the member who have contributed more and there would thus be no inequality in respect of voting rights which could be brought about by any provision in the articles of association as was being done in the past, The total paid up equity capital o the company is taken as the basis or the norm and the voting rights attached to equity shares are prescribed with refereed sore to this basis or norm, the principle laid down being that the voting rights of members holding equity shares should be in proportion to their safe i of the paid up equity capital of the company. Now it must be remembered that by reason of the definition contained i section 85 equity share capital includes all share capital other than preference share capital so that the provision that the voting right of every member of a company holding equity share capital other than preference share capital no matter what the description or nomenclature of such classes of share capital was before the commencement of the companies act, 1956. this provision this strikes down in one wide sweep the inequality in voting rights attached to all shares other than preference shares and places all shares other than preference shares on the same footing as regards voting rights. Section 87(2)(c) makes a similar provision in regard to voting rights attached to preference share and declares that the voting rights of the holder of a preference share shall subject to the provisions of sections 89 and 92(2), be in the same proportion as the capital paid up in respect of the preference share bears to the total paid up equity capital of the company. It will be noticed that here again thee total paid up equity capital of t he company is taken a s the basis or the norm and it is with reference to this basis or n or that the voting rights attached to preference shares are prescribed, the voting rights attached to preference share are placed on the sea footing as the voting rights attached tie equity shares, In both cases tea total paid up equity capital o the company is taken as the standard and the voting rights capital of the company is taken as the stand and the voting rights are r required to be in the same proportion as the capital paid up in respect of the share beards to the total paid up equity capital o he company. Section 87 the removes the inequality in voting rights not only as between member holding equity share capital i.e. share capital other than preference share capital enters but sale as between member s holding equity share capital and member holding equity share capital, i.e. share capital others than preference share capital entire se but also as between members holding equity share capital and member holding preference share capital so f ar tree is no dispute between the parties but the real dispute between the parties arise where one turns to the provision of section 89 the provisions of section 89 are very material to the determination of the question which has arisen before me and the main controversy between the parties has centered round the true interpretation of this section . Ordinarily section 87 wool h ave applied immediately on the commencement of he companu new Act, 1956 to voting rights attached t equity shares as well as preference shares and no matter what the provision was in the articles of association the voting rights in respect of both equity shares and preference shares would have had o be exercised inn accordance with the provisions so section 87 right from the date of the commencement of the Act, for section 9 proves that, save as other wise expressly provided in the act, the provisions of the act. shall have effect notwithstanding anything to the contrary cannonade inn the memorandum or articles of association of a company., whatever inequality in respect of voting rights e listed under the articles of association would have come to an end immediately on the coming in. force of the companies Act, Section 93e however, provides that nothing in sections 85 to 89 shall in the case of any shares issued before he commencement of the Act, affect any voting attached to the shares save as otherwise provided in section 89. there is thus an express provisions in the Act that the provisions of section 87 shall not in the c ask f any shares issued before the commencement of the Act, affect any voting rights attached to existing shares are affected by the enactment of the companies Act, 1956.
8. Before I proceed to discuss the provisions of section 89, I must refer to section 88 which enacts that no company formed after the commencement of the companies Act, 1956, or issuing any share capital after such commencement shall issue any share the than preference shares which carry voting right which are disproportionate to the rights attaching to the holder of other share's not being preference shares, This section in express terms prohibits the issue of equity share can therefore be made after the commencement of the companies Act, 1956 which would carry voting rights disproportionate to the voting right attached t to e holder of the existing equity shares, Now it is clear from this provision that the legislature does not was any equity shares with disproportionate voting rights, The legislature is keen that there should be no equity shares which carry voting rights disproportionate to the voting rights attaching to others equity shares. The object of the legislature clearly is that there should be no inequality in voting rights attached to equity shares and th at the voting rights should be in the proportion which the capital paid up in respect of the share bears to the total paid up equity capital o the company. this object must be boned in mind while interpreting the provisions of section 89 and if there are possible construction that construction must be adopted which best carries out and effectuates th is object, there is also another aspect of section 88 which must be burned in mind while interpreting the provisions of section 89. Section 88 prohibits the issue f equity share's after the commencement of the companies Act, 1956,. which carry voting rights disproportionate to the voting rights attaching to the holder of the existing equity shares. Section 88 prohibits the issue of equity shares after the commencement f the companies Act, 1956. the voting right should not be disproportionate to the voting right attaching to thee existing equity shares, Now, how can this be possible unless the voting rights attach in to the existing equity shares are themselves proportionately uniform? If the voting rights attaching to the existing equity shares are disproportionate to one another there would be no one standard with reference to which the voting rights can be prescribed for the new shares to be issued fate the commencement of the companies Act, 1956. It is therefore clear that section 88 assumes that there is no inequality in voting rights attached to the existing equity shares are no disproportionate to one another. It is only if the voting right attached tot he existing shares are proportionately uniform that it would be possible to give affect to section 88 The legislature has thus clearly proceeds n the assumption that, after the commencement of the companies act, 1956 the voting rights attached to to existing equity shares would one be disproportionate to one another and that no one class of existing equity shares would have disproportionately excessive voting rights as co,pared to any other class of existing equity shares. the construction to be put upon section 89 must, t hereof be such as supports this assumption of it is only be putting such a construction that fl effect can be given to section 88. Of course, if the language f section 89 is clear and unambigums and does not yield the meaning which supports th is assumption the court will not stain the language merely with a view to giving effect to the supposed intention of the legislation but will construe the words according their plain and grammatical meaning, If however the language used can bear a meaning consistent with the assumption of the legislature the court will certain interpret the language in a manner which will carry out the intention of t her legislature as gathers from the assumption made by it. Bearing these consideration I mind, I shall now proceed to examine the provisions of section 89.
9. Section 89 provides that if at the a commencement of thee companies Act, 1956, any shares by whatever name called, of any existing company carry voting rights attaching under section 87(I) to equity shares inn respect of which the same amount of capital has been paid up the company shall within a period of one year form the commencement of the act , reduce the voting rights i respect of the shares first mentioned ss as to bring them 8n conformity with the voting rights attached to such equity shares under section 87(I) As the language how the clear and manifest purpose of the section is to terminate disproportionate excessive voting rights of the existing shares and to bring them into conformity with he voting rights as prescribed under section 87(I). The section applies to all shares 'by whatever name called' and lays down one uniform rule for all shares with the object of removing the inequality in voting rights and bringing the voting right attached to equity shares under section 87(I) Ordinarily the voting rights of all shares would have t be in conformity with the prescription of section 87 right from the date of them commencement of the companies Act, 1956, by reason of the combined operation of action 87 and 9, but by section 89 a period of one year is laid down during which the existing structure f voting rights can confine even though it may b e contrary to the provisions of section 87. Even if any shares carry voting in excess of the voting rights attaching under section 87(I) to equity shares in respect so which the same amount of capital has been paid up the holder so such shares can exercise their disproportionately excessive voting rights for a period of one year from the commencement of the companies ACt, 1956. the structure of voting rights m use be brought by the company into conformity wit t he requirements of section 87 befores the exepiration of a period of one year from the commencement of the companies act, 1956e. Though during this period of one year the holder of the shares can exercise voting rights even if they be disproportionately excessive having regard to the provisions of section 87, such voting rights can't be exercised i n respect of certain resolutions mentioned in section 89(2) These resolutions relate to important matters and the legislature has therefore en acted i section 89(2) that in respect of these resolution the holder of shares carrying disproportionately excessive voting rights in excess of what would have been exercisable by them if the capital paid up n their share had verb equity share capital . the n et effect of these profane is that if there are at the commencement of the Company use act, 1956, any shares of any existing company which carry voting rights in excess of voting right attaching under section 87(I) to equity shares in respect of which the same amount of capital has been paid up the provision of section 87 would be to immediately apply to such share's, but the company would have a period of one year we thing which to reduce the voting rights of shaky shares as right he into conformity with the stretcher of voting rights attached to such shares even though they may be disproportionately excessive but in respect of the resolutions set to in section 89(2) the holder would not be entire to exercise such voting rights even during this period of one year but would have to exercise voting rights in accordance with the requirements of section 87. If this i s the position it is clear the the inequality in voting rights in respect of existing shares would have to be brought in c infirmity with the requirements of section 87. the arguments of Mr. M P Thakkar was that section 89 was intended to remove the inequality of voting rights in r expect of share capital other than equity share capital. The intention of the legislature was, argued Mr. M P Thakkar to bring the voting rights in respect of such share capital into conformity with the voting right in respect of equity shares capital so that to other shares should have the same voting rights as equity shares on which the same amount of capital had b been paid up. this arguments was for need n a supposed contradistinction between the voting rights of share ' by whatever name called' and the voting rights 'attaching under sub-section (I)of section 87 to equity shares in respect of which the same mount of capital has been paid up' t be found in section 89(I) The arguments was that since the voting rights of the shares mentioned in section 89(I) are compared with the voting rights attaching under section 87(1) to equity shares in respect of which the same amount of capital has been paid u of the purpose of determining whether they are excessive the shares first mentioned must be shares other than equity shares and section 89 cannot, therefore apply so as to affect t he voting rights in respect of equity shares. Mr. M P thakkar contended the sin see section 89(I) does not apply so as to affect the voting rights in respect of equity shares but ifs merely intended to bring the voting rights in respect of o there shares in to conformity with he voting right in respect t of other shares into confirm with with e voting rights in respect of equity shares, the voting rights provided into old articles of association in the present case continue to remain unaffected and can be exercised notwithstanding the enactment of the companies Act, 1956. Mr. M P Thakkar sought to reinforce this argument by reference to the language o section n 89(2) which provides that before the voting right are brought into conformity in accordance with the requirements of section 89(I)e the holder of the shares in question shall not exercise in respect thereof voting rights in excess of what would have been exercisable by them if he capital paid up on their shares had been equity share capital in respect of certain resolutions to which I have already referred a little earlier The arguments of Mr. M P Thakkar wash the words the holder of the shares in question shall not exercise in respect thereof voting rights in excess of what would have been exercisable by them if the capital paid up on tore she had been equity share capital' in section 89(2) clearly indicate that the capital paid up on the shares whose voting rights are required to be brought into conformity under section 89(I) is not equity shares capital and that such shares are no equity shares, The argument was stressed in the form of an interrogation if the shares in question are equity shares and the capital paid up on such share's been equity shares and the capital paid up on such shares i equity share capital why should the legislature have sad a the holder of such shares should not exercise in respect thereof voting rights i n excess of what would have been exercisable no them if the capital paid up on their shares had been equity share capital These words argued Mr.M P Thakkar, clearly presuppose that the shares in question are no equity share an that the capital paid up on such shares is not equity share capital. If th is a argument of Mr. M P Thakkar were correct there can be no doubt that section 89 would not apply so as to affect the voting rights of equity share and in that event, despite the enactment of the companies Act, 1956 the voting rights as prescribed by the old articles of association would continue to be exercisable by the member of the company subject of course to the validity of the special resolution substituting the new articles of association of the old articles of association of association. this arguments is however no on lea repugnant to the object of t hen legislature be is also defective in ignoring a number of relevant a material considerations which in my judgment must weight with the court in interpreting this section.
10. The construction contended for by Mr. M. P. Thakkar ignores the crucial word 'any shares by whatever name called 'occurring in section 89(1). Section 89(1) in terms applies to all 'shares by what assessor name called ' and affects their voting rights if such voting rights are in excess of the voting rights if such voting rights are in excess of the voting rights attaching under section 87(1) to equity shares in respect of which the same amount of capital has been paid up. The words 'any shares by whatever name called' according to the plain and grammatical meaning would include all classes of shares as ordinary shares, preference shares, deferred shares, founders' shares as ordinary shares, preference shares, deferred shares, founders' shares, etc. Unless, therefore, there is something in the section or the context which requires that the plain and grammatical meaning of these words should be cut down and confined to any particular class or classes job shares, I must give full effect to the plain and grammatical meaning and hold that section 89(1) applies to all classes of shares whether they are called ordinary shares or preference shares or deferred shares job founders' shares or any other class of shares. The only thing to which Mr. M.P. Thakkar could draw my attention was that section 89(1) itself has made a distinction between shares whose voting rights are sought to be affected and enquiry shares and that this destination between shares whose voting rights are sought to be affected and equity shares and that this distinction is emphasized by the words 'the holders of the shares in question shall not exercise in respect thereof voting rights in excess of what have been exercisable by them if the capital paid up on their shares had been equity share capital ' in section 89(2) and he argued that the shares to which section 89(1) applies must, therefore, be shares other than Equity shares and the words 'any shares by whatever name called ' must be construed not according to their plain and grammatical meaning to include all classes of shares but in a narrow and limited sense so as not to includes equity shares. I cannot accept this argument of Mr. M.P. Thakkar. This argument, as I have already pointed out above, tights are sought to be affected and equity shares. In my opinion there is no such contrasistinction to be found either shares. In my opinion there is no such contradistinction to found either in section 89(1) or in section 89(2). Since the total paid up equity capital of the company is taken as the basis or the norm for the purpose of prescribing the voting rights in respect of equity shares as well as preference shares and the voting rights of both equity shares and preferences shares are required to be in the same proportion as the capital paid up in respect of the shares bears to the total paid up equity capital job the company and the voting rights job preference share's are thus places on the same footing as the voting rights of equity shares. Section 89(1) has taken the voting rights attaching to equity shares under section 87(1) as the yardstick for the purpose of determining whether the voting rights of the existing shares are disproportionately excessive. There is no contradistinction sought to be made between existing shares whose voting rights are sought to be made between existing shares whose voting tights are sought to be affected and equity shares. All existing shares are brought within the scope and ambit of section 89(1) and the question whether the voting rights of such shares are dispropotionately excessive or not is to be determined with reference to the yardstick of voting rights attacking under section 87(1) to equity shares in respect of which the same amount of capital has been paid up. The existing shares must by reason of the provisions of section 85 fall in either of the two classes, namely,equity shares job preference shares. If the existing shares are equity shares and they carry voting rights in excess of the voting rights prescribed under section 87(1) for equity shares in respect of which the same amount of capital has been paid up, their voting rights would have to be reduced and brought into conformity with the voting rights attaching to such equity shares under section 87(1). The yardstick of voting rights attaching under section 87(1) to equity shares in respect of which the same mount of capital has been paid up would apply and with reference to this yardstick the voting rights of the existing shares in question would have to be reduced so as to bring them into conformity with the requirements of section 87(1). There would equally be no difficulty in applying its yard-stick even though the existing shares be preference shares. The voting rights of preference shares are placed on the same footing as the voting rights of equity shares and the yardstick job voting rights attaching under section 87(1) to equity shares would hold god equally for preferences shares. If the voting rights o;f existing preference shares are in excess of the voting rights attaching under section 87(1) to equity shares in respect of which the same amount of capital has been paid up, they would equally be in excess of the voting rights attaching under section 87(2)(c) to preference shares in respect of which the same amount of capital has been paid up and when such voting rights are reduced and brought into conformity with the voting rights attaching under section 87(1) to equity shares in respect of which the same amount of capital has been paid up, they would equally be in conformity with the voting rights attaching under section 87(2)(c) to preference shares in respects of which the same amount of capital has been paid up. The words 'the voting rights attaching under sun-section (1) of section 87 to equity shares in respect job which the same amount of capital has been paid up' in section 89(1) are not intended to bring out any contradistinction between equity shares an d other shares, nut they merely provide a yardstick with reference to which it must be determined in the case of all shares, be they equity shares job preference shares, whether their voting rights are disproportionately excessive and if such voting rights are, tested by this yardstick, disproportionately excessive, they have to be reduced and brought into conformity with the standard provided by this yardstick, which is nothing more than the requirement of section 87. There is, therefore, which is nothing more than the requirement of section 87. There is , there, nothing in section 89(1) which would compel me to put any narrow constructions on the words 'any shares by whatever name called' so as to exclude from their scope and ambit equity shares. There is equally nothing in section 89(2) which would compel me to put such narrow construction on the words 'any holders of the shares in question shall not exercise in respect thereof voting rights in excess of what would have been exercisable by them of the capital paid up on their shares had been equity share capital' , they are again used not for the purpose of bringing out any contradistinction but merely for the purpose of describing the voting rights exercisable under section 87 so that in respect of the resolutions set out in section 89(2) the holders of the shares in question should not exercise voting in excess of those prescribed under section 87. The test for the purpose of determining what are the voting rights which can be exercised by the holders of the shares in respect of these resolutions is formulated by providing that the voting rights shall be such as would be exercisable by them if the capital paid up on their shares had been equity share capital and the test is so formulated because the total paid up equity capital of the company is made the basis or the norm and the voting rights in respect of the shares are required to be in the same proportion as the capital paid up on the shares bears to the total paid up capital of the company. Section 89(2) therefore says: whatever be the shares in question, treat them as equity shares and the voting rights attaching to such equity shares under section 87(1) would be entitled to exercise in respect of the resolutions se out in section 89(2). If the shares in question are equity shares, there is no difficulty in applying the test for the capital paid up on such shares would be equity share capital and the the voting rights attaching to such S. ares under section 87(1) would be exercisable by the holders of such shares. If, however, the shares in question are preference shares, the voting rights in respect of such shares must be determined as if the capital paid up on such shares is equity share capital and the voting rights so determined would be exercisable by the holders of such shares. It would be noticed that the voting rights determined in this manner by reference to this test would be the voting rights prescribed by section
11. 87 so that the net effect of section 89(2) is that, in respect of the resolutions st out in that section, the holders of the existing shares cannot exercise voting rights except in accordance with the provisions of section 87. In my opinion , therefore, there is nothing in section 89(2) which requires any narrow or limited construction to be put on the words 'any shares by whatever name called ' in section 89(1). These words must, therefore, be construed according to their plain and grammatical meaning to include all kinds of existing shares whether they be preference shares or equity shares.
12. Apart from this plain and grammatical construction, there are various circumstances which militate against the construction which Mr. M.P. Thakkar wants me to place upon section 89. If section 89(1) applies to all shares other than equity shares as contended by Mr. M.P. Thakkar, the only shares to which this section can possibly apply could be preference shares for, under the Companies Act, 1956, shares are divided old into two classes, namely , equity shares and preference shares and if equity shares are excluded from the scope and ambit of this section, preference shares would be the old shares to which this section can apply. The logical conciliation of this argument would be that section 89(1) provides for termination of disproportionately excessive voting right the any in respect of preference shares and disproportionately excessive voting rights in respect of equity shares continue to remain unaffected. This result could never have bane intended by the legislature. It is inconceivable that th legislature could have intended that disproportionately excessive voting rights in respect of preference shares should come to an end while disproportionately excessive voting rights in respect of equity shares which in almost all cases comprise a large bulk of equity share capital should continue to remain unaffected. What possible object could the legislature have had in views in leaving out equity shares from the scope and ambit so section 89(1) I cannot think of any. If the legislature for which the law as it stood prior to the commencement of the Companies Act, 1956, did not provide and that it was a defect in the law which required to be remedied and provided the remedy for such mischief and defect by unexciting sections 87 to 90, could it ever have been intended by the legislature that so far as the existing shares are concerned, this remedy should apply to preference shares but not to equity shares / I must put such constriction as will 'suppress the mischief and advance the remedy ...and ... add force and life to the cure and remedy, according to the true intent of the makers of the Act, provide public'. If I construct section 89(1) as applying only to preference shares, the remedy provided by sections 87 to 90 would in the case of existing shares loses all meaning for, as I have pointed out anode, equity shares in almost all cases constitute a large bulk of the share capital of the company and in respect of this large bulk of share capital, the members would be entitled to exercise disproportionate voting rights and the mischief resulting from such disproportionate voting rights should be perpetuated. On the other hand the construction which the company wants me to place on section 89(1) not only accords with the plain and grammatical meaning of the section but also suppresses the mischief resulting from disproportionate voting rights and advances the remedy provided for curing the mischief. The marginal note cannot be referred to for curing the mischief. The marginal note to section 89 also supports this construction. No doubt the marginal note cannot be referred to for the purpose o f constructing a section but it certainly furnishes some clue as to the meaning and purpose of the section. The marginal note to section 89 clearly indicates that the object and purpose of the section is to effect termination of disproportionately excessive voting rights in existing companies. There are no words in the marginal note limiting the object and purpose of the section to termination of disproportionately excessive voting rights only in respect of preference shares. The marginal note also thus indicates that section 89(1) applies to all existing shares whether they be preferences shares or equity shares.
13. These considerations would be sufficient to dispose of the contention urged by Mr. M.P. thakkar that section 89(1) applies only to preferences shares and does not apply to equity shares. But there are still two further considerations which clearly show that the construction contended for by Mr. M. P. Thakkar is not correct. If sec lion 89(1) applies only to preference share's, the application of section 89(2) would also be confined only to preference shares but, if that where so, section 89(2) would be meaningless in almost all cases. The resolutions set out in section 89(2) are resolutions which ordinarily do not directly affect the rights attached to preference share's and the holders of preference shares would not, therefore be entitled to exercise any voting rights in respect of these resolutions unless the dividend due on the preference shares has remained unpaid to the extent provided by section 87(2)(b).
14. Now it is not a normal feature of companies that divided on preference shares should remain unpaid to the extant provided by section 87(2)(b). In fact such cases would be quite rare. In most of the cases dividend on preference shares would not be i arrears to the extent provided in section 87(2)(b) and the holders of preference shares would not, therefore, be entitled to exercise and voting rights in respect of the resolutions asset out in section 89(2). If that is the position it is difficult to see why the legislature should had made an provision i section 89(2) why the legislature should have made any provision in section 89(2) for restricting the voting rights of preference shares in respects of these resolutions. Such voting rights would be exercisable only in the remote contagions of dividend remaining unpaid to the extent provided in section 87(2)(b) and the legislature could not have possibly made this provision with a view to providing for such remote contingency. These resolutions are important resolutions and the legislature, therefore, obviously wanted that in respect of these resolutions the voting right should be exercised in accordance with the provisions of section 87 right from the date of the commencement of the Companies Act, 1956, and that is why the revision was enacted in section 89(2) that the holders of the holders of the shares shall not exercise, in respect of these resolutions, voting rights in excess of what would have been exercisable by them if the capital paid up on their shares had been equity share capital. Now if this provision is confined only to preference shares, the whole object of the legislature would be defeated. The holders of equity shares which constitute a large bulk of the share capital would be entitled to exercises their disproportionate voting rights in respect of these resolutions and section 89(2) would have no meaning. In that event section 89(2) might as well not have been enacted , for it would be achieved only if section 89(2) is held to apply to all existing shares, for then, the holders of all existing shares would have to exercise their voting rights in accordances with the provisions of section 87 right from the date of thee commencement of the Companies Act, 1956, in so far as these resolutions area concerned. If section 89(2) applies to all existing shares, equally must section 89(1) apply to all existing shares and section 89(1) cannot in that even be construed so as to be applicable only to preference shares and not to equity shares. Par from this the construction which includes within the scope and ambit of section 89(1) all existing shares, whether they be preference shares or equity shares, is consistent with the assumption made by the legislature in section 88. As pointed out by me above, section 88 assumes that the voting rig has in respect of all existing equity shares would be proportionately uniform after the commencement of the Companies Act, 1956, and this would not be possible unless section 89(1) is construed so as to apply to all existing shares including equity shares. If in any particular case the existing equity shares carry disproportionate voting right's and section 89(1) does not apply to existing equity shares as contended by Mr.M.P. Thakkar, the voting rights of the existing equity shares would continue to remain disproportionate notwithstanding the enactment of the Companies Act, 1956, and in that even section 88 would be rendered meaningless and ineffectual, for there would be no one standard of comparison for the purpose of determining whether the voting rights carried by new equity shares issued after the commencement of the Companies Act, 1956, are disproportionate to the voting rights attaching to the holders of existing equity shares. None it is a well known principle of interpretation of statutes that the court should always lean against a construction which has the effect of rendering any provision of the statute meaningless or ineffectual. All the parts of the statute must be read to general so as to make as far as possible a consistent enactment of the whole statute giving full meaning and effect to every part and not rendering any company accords with this well known principle of interpretation and gives full meaning and effect to section 88. Section 88 clearly showed the legislative intent that the voting rights of all assisting equity shares should be proportionately uniform and this legislative intent is best should be [proportionately u uniform and this legislative intent is best carried out by the construction contended for by the company. I must, therefore hold that section 89(1) applies to all existing shares including equity shares.
15. There is one further aspect of thins question to which I must make a reference since that also supports the construction which the company wants me to place on section 89(1). The provisions of section 87(1) regarding voting rights attaching to equity shares are expressly made subject to the provisions of section 89. If, therefore, there is any conflict between the privations of section 87(1) and section 89(1) the provisions of section of section 89(1) operate on the same field as the provisions of section 87(1) at least to some extent, for otherwise there would be no possibility of any conflict between the provisions of section 87(1) and the provisions of section 89(1). Now the provisions of section 87(1) deal only with voting rights of equity shares and it must, therefore, a fortiori follow that the provisions of section 89(1) also relate to voting voting rights rights of equity shares. The provisions of section 87(2)(c) regarding voting fight attaching to preference shares are also held on a parity of reasoning that the provisions of section 89(1) relate to voting rights of preference shares. It is, therefore obvious that section 89(1) applies to all existing equity shares whether they be preference shares or equity shares equity shares whether they be preference shares or equity shares and the contention of Mr. M. P> Thakkar that section 89(1) is confined in its application only to existing equity shares must be negatived.
16. It was next contended by Mr. M. P. thakkar that the only mischief which the legislature sought to remedy by annexation sections 87 to 90 was that arising out of the inequality of voting rights in respect of the same class of shares on w high different amounts of capital might be paid up and th at sections 87 to 90 would, therefor, apply only if there were shares of the same class on which d afferent amounts of capital were paid up. The argument of Mr. M. P Thakkar was the the emphasis throughout sections 87 to 90 was on the amount of capital paid up on the shares and voting rights were made proportionate to the amounts of capital paid up on the shares. If, therefore, there were shares on which different amounts of capital were up and the voting rights of such shares were not proportionate to th e amounts of capital paid up on the shares, sections 87 To 90 would apply. Mr. M. P. Thakkar argued that in the present case the same amount of capital was paid up on all the shares and section 89(1) did not, therefore , apply so as to affect the voting rights of all shares. This argument of Mr. M. P. Thakkar is fallacious and cannot be accepted. Section 87 requires that the voting rights of all shares shall be in the same proportion as the capital of the company and by reason of section 89 the voting right capital paid up in r expect up in respect of the respect of resolutions other than those set out in section 89(2), the existing voting of such shares may continue for a period of one year from the date of t he commencement of the Companies Acts, 1956. Even if the same amount of capital is paid up on all the shares, yet if the voting rights attached to such shares are different, the voting rights would obviously not be in the proportion as the capital paid up in respect of the shares bears to the total paid up equity capital of the company ans would thus not be in accordance with the provisions of section 87. The test is not weather the amount of capital paid up on the shares in question is the same or different. The test is whether the voting rights of the shares are in the same proportion as the capital paid up in respects of the shares bears to the total paid up equity capital of the company, no matter what the capital paid up in respect of the shares is. If the capital paid up in respect of the shares is the same, the voting rights must equally be the same, for otherwise the proportion would be violate If th e capital paid up in respect of the shares is different, the voting rights must equally be different in the same proportion. Sections 87 to 90 do not require as a condition of their applicability that Theere should be shares on which different amounts of capital have been paid up. This argument of Mr. M.P. Thakkar must, therefore, be rejected.
17. It is clear from this discussion that section 89(1) applies to the shares of the company in the present case. The question therefore is whether the shares of the company care voting rights in excess of those prescribed under section 87(1). The answers to the question is self evident of one turns to the old articles of association. Under the old articles of association. Under the old articles of association e act me bed of the company has one vote irrespective of the number of shares held by him. The voting rights of the member are not proportionate to their respective shares of the paid up capital of the company. A member holding one share has on e vote while a member holding ten shares held by the letter is ten times the capital paid ups in respect of the one share held by the former. The voting rights carried by the shares under the old articles of association are , therefore, clearly in excess of those prescribed under section 87(1) and the company was bound to bring rights into conformity with the voting rights 87(1) latest at the expiration of a period of one year from the date of the commencement of the Companies Acts, 1956. If the old articles of association were not validly substituted by the new articles of association as contended by Mr. M. P. Thakkar, it is obvious that the company failed to bring the voting rights of the shares into conformity with the voting rights prescribed by section 87(1) within the period o f one year prescribed by the section 89(1), but that can't make any difference. Even if the company did not b ring to voting rights of the shares into conformity with the voting rights prescribed by section 87(I) as required after the expiration of the period of the year from the date of the commencement of the Companies Act, I956, in view of thee provisions of section 9. The company could not by refusing to carry out the provision of section n 89(1) perpetuate the disproportionate voting rights provided under the old articles of association. It was only for a period of one year from the date of the commencement of the Companies Act, I956, that the old voting rights could continue and thereafter the voting rights had to be exercised in accordance with the provisions of section 87. Thee period of one year expired on April I, I957, and each member of the company was, therefore, from and after that date, not entitled to exercise nothing rights in respect of the shares held by him in accordance with the old articles of association but was bound to exercise voting rights in proportion to his share of the paid up capital of the company.
18. This being the position, I vacate the interim injunction granted by the High Court of Bombay act Rajkot on November 5, I956, restraining the company from holding any general meeting pending the hearing and final disposal of the petition. Costs of the application will be costs in the petition.
19. Interim injunction vacated.