Holding

The consent order nullifies all earlier and subsequent board resolutions, rendering them non‑existent; only a meeting chaired by a neutral person can validly consider the agenda, and minutes must be authenticated by the chairman, with neither appellant nor respondent permitted to preside.

Summary

The appellants, directors of a motor‑sports club, challenged a series of board resolutions passed in a meeting on 8 November 1995 that removed the appellant as chairman, appointed a respondent as chairman and added twelve directors, alleging the meeting was held without notice. The High Court had earlier ordered a fresh board meeting to be held under a neutral chairman, Satish Shah, to reconsider the agenda, and the parties later agreed that the earlier resolutions would be nullified. The Supreme Court examined whether the consent order wiped out not only the 1995 resolutions but also those passed in subsequent meetings on 29 March 1997 and 17 April 1997, and who was authorized to authenticate the minutes under Sections 175 and 193 of the Companies Act, 1956. It held that the consent order expressly annulled the earlier and later resolutions, that only the minutes signed by the duly appointed chairman are authentic, and that neither the appellant nor the respondent may preside at any board meeting pending a fresh election. Consequently, the appointment of the twelve additional directors was declared invalid and the induction of 57 life members was directed to be decided at the forthcoming Annual General Meeting. The appeal was allowed, setting aside the High Court judgments and directing the AGM to be held under the company registrar.

Issues considered

Whether the consent order passed by the High Court extinguishes the resolutions of the 8 November 1995 board meeting, including removal of the chairman and appointment of additional directors.
Whether the resolutions passed in the board meetings of 29 March 1997 and 17 April 1997 survive the consent order.
Who is the proper authority to authenticate board meeting minutes under Sections 175 and 193 of the Companies Act, 1956.
Whether minutes prepared by the chairman under Section 193(1‑A) must be accepted over those prepared by the secretary.
Validity of the induction of 57 life members approved in the 17 April 1997 meeting.
Who may preside over board meetings pending a fresh election of directors.

Legislation cited

Companies Act, 1956s. 175, s. 193

Subjects

Company lawBoard of directorsRemoval of chairmanAppointment of directorsMinutes of meetingsConsent orderValidity of resolutionsAnnual General Meeting

Judgment

NAZIR HOOSEIN AND ANR. A
v.
DARA YUS BHATTENA AND ORS.

MAY 12, 2000

[A.P. MISRA AND M.B. SHAH, JJ.] B

Companies Act , 1956-Sections 175 , 193-Meeting convened by
respondents I to 3 , without serving any notice upon appellant no. I and
other directors supporting him and passing resolutions removing appellant
no. I and instead appointing respondent no. I as Chairman and appointing C
12 additional directors-Challenge to-Consent Order passed by the High
Court that a fresh meeting of the Board of Directors be held under the
chairmanship of a third person, one S to reconsider afresh the agenda of the
said impugned meeting-Held, as a consequence of the consent order, what
was resolved previously in the impugned meeting is wiped off and has D
become non-est-Thus, the resolution appointing respondent no. I as Chairman
of the Board and consequently authority of respondent no. I to preside under
it also diti,So/ved--No fresh authority having been conferred, respondent no.
I could not preside in Board's meeting-In view of this, the appointment of
12 additional Directors cannot be sustained as the resolution appointing
them stands obliterated in view of the consent order passed by the High E
Court-Further, the resolution passed in another meeting chaired by
respondent no. I regarding the induction of new life members also does not
survive after passing of the consent order-However, in order to keep the
interest of the life members, their cases directed to be placed before the next
Annual General Meeting to be held for its consideration. F
Minutes of meeting-Recording of-Minutes recorded by the secretary
and the one by the Chairman at variance with each other-Acceptance of-
Held, the Chairman of the Board is under an obligation to authenticate the
minutes of the meeting of the Board and is empowered to exercise an absolute
discretion in regard to the inclusion or non-inclusion of any matter in the G
minutes-Jn the present case because of conflict between two groups, a via
media was found to eliminate the ensuing mistrust by appointing a third
agreeable person as Chairman and even if there. be conflict, the minutes
prepared by such third person is to be accepted and not of the other belonging
to one of such conflicting grou~Hence, the minutes prepared by the
269 H
0

270 SUPREME COURT REPORTS [2000] SUPP. I S.C.R.

A Chairman are to be accepted as authentic and not the minutes prepared by
the Secretary which are relied on by one of the conflicting groups.

The appellants and respondent nos. 1 to 3 were the Directors of a
company and the first appellant was the Chairman of the Board of Directors
of the Company. The nucleus of conflict started when in a Board's meeting
B held by respondent nos. 1 to 3 , appellant no. 1 was removed and respondent
no. I was appointed in his place as the Chairman of the Board of Directors. In
the said meeting, which was held without serving any notice upon appellants,
resolutions were also passed shifting the office to the house of respondent
no. I and appointing 12 additional Directors which included respondents 4 to
C 8 along with 7 others.

The appellants filed a suit before the City Civil Court challenging the
said resolutions. The City Civil Court did not interfere with the resolution so
far the shifting of the office and removal of appellant no. 1 as a Chairman but
injuncted the 12 additional Directors from acting as Directors. Aggrieved by
.. D one part of the order, viz, non-interference with shifting of the office and
removal of appellant no. 1, the a11pellants filed an appeal before the High Court.
On the order hand, respondent nos. 1 to 3 and 5 additional Directors, being
aggrieved by the other part of the order, viz., injuncting 12 additional Diriectors
from functioning, filed a cross appeal. ·

E Subsequently, a notice was issued for a meeting of the Board of Directors
for the co-option of another set of 12 additional Directors, in place of the
injuncted Directors which included respondent nos. 4 to 8. This led the
appellants to file another application for injunction to restrain these
respondents from holding the said meeting. Pursuant to it, the Court directed
F that any resolution passed at the meeting shall not be implemented for two
weeks which was subsequently extended. In the said meeting presided by
respondent no. 1, 12 new additional Directors were appointed till such time
as the injunction against the first set of 12 additional Directors remained in
operation. Another meeting was proposed to be held under the chairmanship
of respondent no. 1, for which notices were served upon Directors including
G respondents 4 to 8, which according to the appellants was in breach of the
order of the Court not to ilnplement the resolution appointing respondents 4
to 8 as Directors. On an application thereafter made by the appellants, the
Court by an order recorded respondents' statement that co-opted Directors
will not be permitted to participate in the said meeting.

H The High Court passed a consent order that a fresh meeting of the Board -
NAZIR HOOSEIN v. DARA YUS BHA TTENA 271
of Directors be held with only those who were on the Board of Directors before A
the impugned meeting removing appellant no. 1 and instead appointing
respondent no. 1 as Chairman. The said meeting was to be held under the
Chairmanship of a third person, one S, an advocate. With these directions,
the High Court disposed of the appeal

Thereafter, in pursuance to the aforesaid consent order, a meeting of B
the Board of Directors was held under the Chairmanship of S. There was
difference in the recording of the minutes between one recorded by the
Secretary of respondent no. 1 and the other submitted by S. A dispute arose
as to the question ofacceptance of the minutes.

Subsequently, another meeting was held presided by respondent no. 1 C
instead ofS and attended by respondent nos. 4 to 8. The meeting was also
attended by appellants under protest. In the said meeting, the minutes of the
previous meeting, as per the minutes prepared by the Secretary of respondent
no. 1 and not as prepared by S, were approved.
D
Thereafter, the appellants filed a second suit for the declaration that
the resolutions passed prior to the consent order of the High Court were null
a:id void, i.e. resolutions pertaining to appointment of 12 additional Directors,
which included respondent nos. 4 to 8 ; removal of appellant no. 1 as Chairman
of the Board; appointment of respondent no. 1 as Chairman of the Board;
shifting of the administrative office of the company; appointment of the second E
set of 12 additional Directors in place of the 12 aforesaid injuncted additional
Directors; and enrolment of new additional life members of the company. The
Trial Court dismissed the appellants' injunction application and also the
contention that the consent order by the High Court io the preceding
proceedings wiped off the earlier resolutions passed by the Board of Directors. F
Aggrieved, the appellants filed an appeal before the High Court which was
dismissed with the direction for holding the Annual General Meeting under
Chairmanship of the Company Registrar, to hold the election afresh of the
Board of Directors. Hence the present appeal.

On behalf of the appellants, it was contended that a composite reading G
of the orders passed by the High Court in first proceedings clichingly proved
that the impugned resolutions were scored off, that the first respondent
unambiguously admitted this position in his affidavit in reply to the affidavit
of appellant no. 1 in the second suit filed by the appellants; that the appointment
of first respondent as the Chairman of the Board of Directors and ofthe 12
additional Directors is also knocked off; that the withdrawal of both the appeals H
272 SUPREME COURT REPORTS [2000] SUPP. I $.C.R.

A before the High Court and the suit shows that entire dispute stood dissolved
and settled between the parties; that all resolutions passed in meetings 11t the
behest of the first respondent where he presided as Chairman, were patently
illegal and had no force of law.

On behalf of the respondents, it was contended that the meeting held
B prior to the consent order the High Court were validly held; that even the
Court did not grant any stay against holding of these meetings; that these
meetings were attended by duly qualified Directors; that the meetings were
chaired by respondent no. I whose appointment as the Chairman was held to
be valid by a competent Court; that as per Section 175 of the Companies Act,
C members present at the meeting could elect one among themselves to be the
Chairman; hence no illegality arose even otherwise, if respondent no. I
presided the meeting; that there was no order of the Court setting aside
these resolutions.

Allowing the appeal, this Court
D
HELD : I. Consequent upon the passing of consent order, once the llarties
agreed to hold a fresh meeting under the Chairmanship of a third person,
one S, an advocate, to re-consider afresh the agenda of the meeting in which
appellant no. I was removed and respondent no I was appointed as the
E Chairman, then it implicitly voices, what was resolved in the said meeting
earlier is wiped off and has become non-est. The effect of the consent order
was to undo what was done in the impugned meeting and considered the matter
afresh. This was done in the background of the appellants' case that'it was
held without notice to the appellants. Hence all that was passed previously
cannot be treated to be alive after the consent order. Thus, the resolution
F appointing respondent no. I as Chairman of the Board and consequently
authority of respondent no. I to preside under it also dissolved. Thus without
any fresh authority respondent no. I could not preside in any Board's meeting.
Consequently, the meeting presided by respondent no. I as Chairman, in which
new life members were inducted, cannot be held to be proper. The said
G resolution does not survive after passing of the consent order. However, on
the other hand a submission is, even where there is no Chairman or in case
Chairman not present or as in the present case it is in dispute, it is open for
the Board of Directors to elect anyone to function as such in any meeting.
But this is neither the respondents' case nor it is shown that he was elected
as such on that date. Thus the said meeting was not only not conducted in the
H proper perspective but it also suffers from procedural irregularities. This
NAZIR HOOSEIN v. DARA YUS BHATTENA 273
was part of the tussle between the two groups to gain the majority over the A
other. However, it would not be proper to reject the life members' application.
So, in order to keep the interest of the life members, it is directed that their
cases be placed before the next Annual General Meeting to be held for its
consideration. As for removal of appellant no. 1 and appointment of respondent
no. 1 in his place, it was fairly agreed to that both will not preside the meetings B
of the Board; instead S will preside. In other words, one could be treated to be
the Chairman of the Board. (283-D-H; 288-H; 289-A; 284-A)

Clark v. Workman, (1920) 1 I.R. 107, referred to.

The conduct ofMeetings, T. P. E. Curry and J. Richards Skykes, Twentieth
Edition, referred to. C

... 2. The minutes recorded by the Secretary and the one by the Chairman
are at variance. In the Secretary's report there is no reference of the
consideration by the Board for the appointment of 12 additional Directors,
while in the report of the Chairman it records so. With reference to minutes
of the proceedings as to who shall initial or sign, the sub-section 1-A of Section D
193 of the Companies Act, 1956 mandates, every page of every book shall be
initialled or signed including the last page of the record of proceedings by
the Chairman of the Board. Under Explanation to sub-section (6) of the
aforesaid Section, Chairman is empowered to exercise an absolute discretion
in regard to the inclusion or non-inclusion of any matter in the minutes. Thus, E
this section casts an obligation on the Chairman of the Board to authenticate
the minutes of the meeting of the Board. In the present case when the court
directs S to preside the meeting of the Board he acts as the Chairman in the
said meeting. This apart, in the past, because of the conflict between two
groups, a via media was found to eliminate this mistrust by appointing a third
agreeable person then even if there be conflict, the minutes prepared by such F
third person is to be accepted and not of the other who belong to one of such
conflicting groups. Hence for all these reasons the minutes prepared by S in
his capacity as Chairman are to be accepted as authentic.
(284-B-C; 285-B-E)
G
3. According to the minutes authenticated by S, the Board considered
the question of appointment of 12 additional Directors and after discussion
between the two contesting groups, which is also recorded therein, the proposal
of appellant no. 1 that this item does not survive as it had been agreed to hold
the Annual General Meeting was accepted and objection of respondent no. I
that they should be appointed was rejected by the majority of 4:2. Thus, the H
274 SUPREME COURT REPORTS [2000] SUPP. I S.C.R.

A question of appointment of 12 additional Directors would be treated to have
died both on account of consent order and the resolution rejecting the objection
of respondent No. I that they should be appointed. (285-F-H)

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3425 of
2000.
B
From the Judgment and Order dated 10.2.99 of the Bombay High Court
in A.O. No.1058/98 in N.O.M. No. 6325/98 in S.C. Suit No.6559of1998

M.M. Sakhardande, Nikhil Sakhardande, Ms. Meenakshi Sakhardande,
S.R. Grover and Ms. S. Tandon for the Appellants.
c Navin Parikh and V.D. Khanna for the Respondents.

The Judgment of the Court was delivered by

MISRA. J. Leave granted.

D The present appeal is directed against the order dated 10th February,
1999 passed by the Bombay High Court in A.O. No. 1058of1998 in No. M
No. 6325 of 1997 in Suit No. 6559 of 1997 dismissing appellants' appeal from
Bombay City Civil Court order dated 9th September, 1998 dismissing aforesaid
appellants' notice of motion in the aforesaid suit. In the suit following interim
injunctions were sought:-
E
"[a] Respondents I to 3 from acting on the resolution dated 13.11.97,

[b] Respondents from enrolling new members,

[c] Respondents 4 to 8 from acting as directors of the suit Club and
restraining Respondents I to 8 and life members enrolled after 7 .11.95
F from casting their votes at the AGM,

[d] Respondents I to 8 from holding Board of Directors' meeting dated
19.12.97 and
[e] for an order appointing Mr. Satish Shah. Advocate as a Chairman
G of the meetings of the Club/Company"

The appellants are the Directors of the Indian Automotive Racing Club
(hereinafter referred to as "the Company". As per the appellants, appellant
no.I is the Chainnan of the Board of Directors of the said Company. Respondent
nos. I to 3 are the Directors and respondent nos. 4 to 8 are Additional
H Directors allegedly appointed along with 7 others under the challenged
NAZIR HOOSEIN v. DARA YUS BHA TTENA [MISRA, J.] 275
resolution dated 29th March, 1997. The appellants challenged this resolution A
to be illegal and void, as it stood obliterated by the agreed and consent order
dated 30th June, 1997/2nd July, 1997 in A.0.No.274of1997 before 'the High
Court.

In order to appreciate the controversy it is necessary to shortly dwell
upon certain antecedents and essential short matrix of facts. At the annual B
General Meeting of the Company held on 29th December, 1993 the appellants
and respondent nos. I to 3 were elected as Directors and the. first appellant
as the Chairman of the Board of Directors. The case of the appellants is, on
the 8th November, 1995 respondent nos. I to 3 with under current designs,
purportedly held a meeting, without serving any notice upon appellant no. I C
and other 4 Directors supporting him and passed the following resolutions:-

"[a] to shift the office of the Club to Respondent No. l's office;

[b] to remove appellant No. 1 as Chairman;

(c] appoint Respondent no. 1 as Chairiman in his place and D
[d] appoint 12 additional Directors on the Board of Directors."

Thereafter on the 13th November, 1995, another meeting was held by the
same group, viz., respondent nos. I to 3, to approve the minutes of the
meeting held on 8th November, 1995. On the 16h November, 1995, the appellants E
and two other Directors filed the first Suit No. 7179of1995, challenging the
said resolutions passed at the behest of respondent nos. I to 3, and 4 out
of the 12 newly appointed Directors. On the 18th March, 1997, the City Civil
Court by means of an order did not interfere with the resolution, so far the
shifting of the office and removal of appellant No. 1 as a Chairman but
injuncted the 12 additional Directors which included defendant nos. 4 to 8. F
from acting as Directors. Aggrieved by one part of the order, viz., non-
interference with shifting of the office and removal of Appellant No. 1, the
appellants filed FAO No. 274 of 1997 before the High Court. On the other
hand, respondent nos. I to 3 and 5 additional Directors being aggrieved by
the other part of the order, viz., injuncting 12 Add. Directors from functioning G
filed a cross appeal.

Subsequently on 21st March, 1997 a notice was issued for a meeting
of the Board of Directors for the 29th March, 1997 for the co-option of another
set of additional 12 Directors, in place of the injuncted Directors which
included respondent nos. 4 to 8. This led to the appellants, to file another H
276 SUPREME COURT REPORTS [2000] SUPP. I S.C.R.

A application on the 27th March 1997, for injunction to restrain these respondents
from holding the said meeting. The court, by an order dated 27.3.1997, however,
did not injunct the said meeting, but directed that any resolution passed at
the meeting shall not be implemented for two weeks which was subsequently
extended. As scheduled the said meeting was held, in which again 12 newly
additional Directors were appointed, including respondents 4 to 8 till such
B time as the injunction against th1: first set of twelve additional Directors
remained in operation. Next on 11th April, 1997 notices were issued and
served upon Directors including those covered by the aforesaid order dated
27th March, 1997, proposing a meeting for the 17th April, 1997. This, according
to the appellants, was in breach of the order dated 27th March 1997, not to
C implement the resolution appointing them as Directors. On an application
thereafter made by the appellants, the court by an order dated 17th April 1997
recorded respondents' statement that co-opted Directors will not be permitted
to participate in the said meeting. That meeting was held on the 17th' April
1997, under the Chairmanship of respondent no. I. The appellants though
attended the meeting but did so under protest and without prejudice, which
D was recorded in the minutes of the meeting. It is relevant to record, in this
meeting, question of the induction of more new life members came up for
consideration. Relevant portion of the discussion as recorded in the minutes
is quoted hereunder:

E "Mr. Hussain (Appellant No. I) raised the topic of new applicant
and whether the old practice would be adopted in deciding membership
of new applicant.

Regarding the interview the life member category applicant Mr.
Bhathena (Respondent No. I) pointed out that in the past each Life
F Member applicant was not physically called for the interview ......... Mr.
Bhathena proposed and Mr. G.L. Goenka seconded and it was resolved
that all Life members applications, as well as any other 3 categories,
be invited and become members in their respective categories."

G When this series of on-going resolutions was going on at the behest
of respondent no. I and the appellants were protesting repeatedly through
various applications in court, as aforesaid, then reached some understanding
between the parties.

On the 30th June/2nd July, 1997, the appellants' appeal from order, as
H aforesaid, came up for admission in the High Court. On this date, a consent
NAZIR HOOSEIN v. DARAYUS BHATTENA [MISRA, J.] 277

order was passed that a fresh meeting of the Board of Directors be held with A
only those who were on the Board of Directors on the 8th November, 1995
under the Chairmanship of Mr. Satish Shah, Advocate to consider the earlier
agenda of the 8th November, 1995. Hence, the High Court passed the following
order on the 2nd July 1997:

"In view of this appeal stands disposed of Civil application also does B
not survive. Sarne also stands disposed of. In view of the fact that
appeal has been disposed of, nothing survives in the Suit. Parties to
withdraw the suit".

This is how proceedings in the first Suit No. 6559 of 1997 is said to have
culminated. C
Thereafter in pursuant to the aforesaid consent order, a meeting of the
Board of Directors was held on 4th July, 1997 under the Chairmanship of Mr.
Satish Shah. Two major decisions were taken therein. First 16th September,
1997 was fixed as the next date for holding the Annual General Meeting, and
secondly, it turned down the proposal to appoint 12 additional Directors by D
the group of respondent no. I by the majority of 4 to 2. When parties are at
variance then they try to pull other down, disputes start cropping up from
an insignificant to other magnified issues. One of such dispute raised is of
the recording of the minutes of the meeting dated 4th July, 1997. According
to respondent no. 1, it was the prerogative of the Secretary to write the E
minutes and thus the minutes recorded by him should be accepted. This
dispute is because of the difference in the recording of the minutes between
one recorded by the Secretary of respondent no. 1 and the other submitted
by Mr. Satish Shah. The significant difference is in the record_ing ofltem No.6,
of the agenda of the 8th November 1995, under which the appointment of
twelve additional Directors was considered. There is neither recording nor F
any reference about this consideration in the minutes prepared by the Secretary,
while in the recording by Mr. Satish Shah, it clearly records this. The relevant
part of his report under Item no. 6 is quoted hereunder:-

"To. appoint 12 additional Directors whose influence, contact
would assist the club to procure attractive sponsorships as also G
those who could spare time to assist in organising and running
events.

Mr. Hoosein (Appellant No. I ) said that this item did not survive
because it had been agreed in principle to hold the Annual General
Meeting. Mr. Swadi, Mr. Futehally and Mr. Bhiwandiwalla concurred. H
278 SUPREME COURT REPORTS [2000) SUPP. I S.C.R.

A Mr. Bhathena (respondent No. I) and Mr. Goenka opposed.
Mr. Bhathena said that "he was disagreeing because in his view fresh
blood was required on the Board. Mr. Rao abstained. The view of Mr.
Hoosein was adopted by a majority of 4 to 2."
(Emphasis supplied)

B It was thought, the aforesaid meeting will resolve the conflict and
parties shall restrain themselves from precipitating any other issue till the
Annual General Meeting. But it was so done. Now the succeeding facts and
resolutions gave rise to the cause for the filing of the present second suit.
On the 6 November, 1997, notice was issued proposing a meeting for the 13th
C November, 1997 for the "Adoption of the previous minutes" and for fixing a
date for holding the Annual General Meeting. On the 13th November, 1997,
a meeting was held in which the appellants raised objection about respondent
no. I presiding the meeting instead of Satish Shah and about the presence
of respondent nos. 4 to 8. The appellants' demand for fixing an early date of
Annual General Meeting was overruled and the minutes of the meeting dated
D 13th November, 1995, 29th March, 1997, 17th April, 1997, and minutes of
meeting dated 4th July, 1997 (held as per courts order under chair of Mr.
Satish Shah), as per the minutes prepared by the Secretary of respondent no.
I and not as prepared by Mr. Satish Shah, were approved. Thereafter a notice
was served, proposing for a meeting on the 19th November. 1997 to approve
E and confirm the minutes of the meeting dated 13th November, 1997. The
appellants attended the meeting and reiterated their demand, but the same
was overruled. Thereafter, on 18th December, 1997 the appellants filed the
aforesaid suit No.6559 of 1997 for the declaration that the resolutions dated
13th November, 1997 and 19th November, 1997 are null and void, including
the induction ofnew life members after November 1995, as also the appointment
F of 12 new additional Directors which included respondent nos. 4 to 8.

The respondents contested the said claim of the appellants. Their reply
is that the suit is misconceived, nen-maintainable. Mr. Satish Shah's minutes
can not be relied, because it is the prerogative of the Secretary and it is his
G obligation to prepare the minutes of that meeting. Further, all decisions and
resolutions other than the resolution dated 8th November, 1995 are valid and
binding on the appellants. When earlier suit was withdrawn all interim orders
came to an end.

The trial court dismissed the appellants' injunction application and
H also the CO'!tention that the consent order dated 30th June, 1997 wiped off
NAZIR HOOSEIN v. DARAYUS BHATTENA [MISRA, J.] 279
the earlier resolutions passed by the Board of Directors. The appellants earlier A
sought injunction in the earlier suit, against holding of this meeting dated
17th April, 1997 in which new life members were to be taken in and the court
did pass an order not to implement any resolution passed therein. The
appellants being aggrieved by the dismissal of the injunction application filed
an appeal before the High Court which was dismissed. The High Court held,
there was no effective resolution annulling, rectifying or modifying the B
resolution dated 8th November, 1995. The court rejected the appellants'
contention that order dated 30th June 1997, wiped of all the earlier resolutions
passed. It held, neither party agreed nor the Court set aside the resolution
dated 8th November, 1995. It ordered for holding the Annual General Meeting
under the Chairmanship of Shri A.P. Kothari, the Company Registrar, to hold C
the election afresh of the Board of Directors. Aggrieved by this the appellants
have filed the present appeal.

'
The main thrust of submission on behalf of the appellants is, "whether
the consent order dated 30th June 1997 wipes off:
D
(i) the resolution dated 8th November 1995, in which:

(a) 12 additional Directors were appointed;

(b) Appellant no. I was removed as the Chairman of the Board;

(c) The respondent no. I was appointed as the Chairman of the E
Board of Directors; and

(d) The administrative office of the company was shifted.

(ii) the resolution dated 29th March 1997 appointing the second set
of 12 additional Directors in place of the 12 aforesaid injuncted F
additional Directors;

(iii) the resolution dated 17th April 1997 enrolling, according to
respondent no.I, 57 additional life members of the company.

The submission is, on composite .reading of the orders dated 30th June G
1997 ancl 2th July I 997, in the background of the aforesaid meeting dated 4th
July, 1997 of the Board of Directors, it clinchingly proves that the impugned
resolution dated 8th November 1995 is scored of. Jn further support, it is
submitted that the first respondent unambiguously admits this position in his
affidavit in reply to the affidavit of appellant No. I in the notice of motion
in Suit No. 6559 of 1997. There respondent No. I clearly averred that there H
280 SUPREME COURT REPORTS [2000] SUPP. I $.C.R.

A could be no dispute that the meeting to be held under the Chairmanship of
Mr. Satish Shah would consider the matter de novo and except the resolution
passed in the meeting held after 8th November 1995 all other resolutions are
valid, implidely admit that the meeting and the resolutions dated 8th November
1995 were not valid. Thus, it proves that the clock was set back to 8th
B November 1995. Hence all edifices built on it subsequently, through various
resolutions since looses its base and also goes. In any case, the appointment
of first respondent as the Chairman of the Board of Directors and of the 12
additional Directors is also knocked off. In fact withdrawal of both the appeals
before the High Court and the suit shows that the entire dispute including
removal of first appellant as the Chairman, appointment of 12 additional
C Directors including induction of life members stood dissolved and settled
between the parties. Jn view of this, all resolutions passed in a meeting at the
behest of the first respondent where he presided as Chairman, are patently
illegal and have no force of law. ,

Challenge to the resolution dated 29th March 1997 is also the same. Its
D base is also the resolution dated 8th November 1995, which was also held
under the Chairmanship of the first respondent and it also stands wiped off
by the consent order dated 30th June 1997. As said before, when this meeting
was to be held, appellants applied for injunction to restrain respondents from
holding this meeting. On this Court ordered that any resolution passed in this
E meeting shall not be implemented. By this resolution, as aforesaid, 2nd set of
I 2 additional Directors was appointed.

Next challenge is to the resolution dated 17th April 1997. This resolution
is also challenged on the same ground, viz., it was illegally chaired by
respondent No. I. Even for this meeting court directed resolution passed
F therein shall not be implemented. Submission is, this meeting was also held
in not haste to overreach the order of the Court. On I 0th April 1997 the
aforesaid A.O. 274 of 1997 was adjourned to 21st April 1997 for admission.
Coming to know of this, on the 11th April 1997 notice was issued for a
meeting on the 17th April 1997. TI1is clearly exhibits, the unholy motive of the
G respondents to overreach the order of the Court. At this meeting it is said
57 new life members were enrolled. This was opposed by the appellants in
the meeting which was turned down by the respondent No. I.

For the respondents the aforesaid submissions were challenged.
Submission is, both meetings dated 29th March, 1997, and 17th April, 1997,
H were validly held. Even the court did not grant any stay against holding of
NAZIR HOOSEIN v. DARAYUS BHATTENA [MISRA, J.) 281

these meetings. These meetings were attended by duly qualified Directors. A
The meetings were chaired by respondent no. I whose appointment as the
Chairman was held to be valid by a competent court by an order dated 18th
March, 1997 in the Notice of Motion No. 6337 of 1995 in the earlier suit No.
7179 of 1995. Reference is also made to Section 175 of the Companies Act,
1956- i.e. members present at the meeting could elect among one of themselves B
to be the Chairman, hence no illegality would arise even otherwise, if
respondent no. I presided the meeting. The order by consent on 30th June,
1997 did not and could not wipe off what was done on the aforesaid two dates
of meetings. There is no order of the court setting aside these resolutions.

The crux of the grievance of the appellants which requires our C
consideration is three fold: (i) removal of appellant no. I and the appointment
of respondent no. l as Chairman of the Board of Directors by means of
resolution dated 8th November, 1995; (ii) The induction of 12 additional
Directors through resolution dated 29th March, 1997; and finally (iii) the
induction of 57 life members through resolution dated 17th April, 1997, both
of these two last meetings were presided by respondent no. I. D
The aforesaid facts reveal that the proceedings of the first suit culminated
in the passing of the consent order dated 30 June/2nd July, 1997. It was
expected that litigation would come to an end but that was not to be. The
present second suit is filed in view of resolution dated 13th November, 1997 E
which in effect brings back to life the matter which was subject matter of the
1 earlier suit. In the meeting dated 13th November, 1997 the minutes of the
meeting dated 13th November, 1995, 29th March, 1997 and 17th April, 1997
inch:ding the minutes of the meeting dated 4th July, 1997 as prepared by the
Secretary and not by Mr. Satish Shah, were approved. The meeting dated 19th
November, 1997 approved and confirmed the minutes of meeting dated 13th F
November, 1997. The question is, whether passing of the consent order in the
earlier suit obliterates the meetings and resolutions passed on 29th March,
1997 and 17th April, 1997? Also what was the resolution passed in the
meeting dated 4 July, I 997 and in this context, whether the minutes prepared
by the Secretary or what is prepared by Mr. Salish Shah should be accepted? G

It is very unfortunate, though very common, in any organisation,
including companies, there is tussle for holding dominant position to control
the functioning of such organisation. It is often said, "it is not like sportsman
spirit". Meaning, the spirit of a sportsman is treated to be highly cooperative
even in the hour of defeat. He is always in the best of spirit. But such spirit H
282 SUPREME COURT REPORTS (2000] SUPP. I S.C.R.

A now even in the field of sports seems to have receded to oblivion. The
present company is also one of such companies, working in the field of
sports. But this spirit between the parties is lacking. The battle of supremacy
to control started between respondent no. I and appellant since 8th November,
1995 leading to two separate suits and the battle is still raging for about five
B years.

Now, we proceed to test the submissions for the appellants regarding
the consent order obliterating the resolutions dated 29th March and 17th
April, 1997. As we have said, the nucleus of conflict started on the 8th
November, 1995 when in this Board's meeting, appellant no. I was removed
C and respondent no. I was appointed in his place as the Chairman of the Board
of Directors and 12 additional Directors were also appointed. When the first
suit was filed by the appellants, they challenged this meeting as it was held
without any notice to them. The very texture of this resolution shows two
clear distinctive groups, and the group of respondent no. I by removing
appellant no. I came in full control of the Board. Next another meeting was
D held on the 13th November, 1995 to confirm the resolution dated 8th November,
1995. It is at this stage, appellants filed their first suit on the 16th November,
1995 along with injunction application, in which 12 additional Directors were
injuncted to function. However, undaunted another meeting was held under
the Chairmanship of respondent no. I, of the Board of Directors on the 29h
E March, 1997 in which resolution was again passed appointing another set of
12 additional Directors till injunction against earlier 12 additional Directors
remained in operation. When this stress and strain between the parties was
going on, with various interim orders of the court, good sense prevailed on
both the parties which led to the passing of the consent order. Through the
consent order, dated 30th June and 2nd July, 1997, the parties agreed for
F holding a fresh meeting of the Board, under the Chairmanship of Mr. Satish
Shah, to consider afresh the original agenda of 8th November, 1995. In this
regard submission for the appellants is, even concerned respondents including
respondent no. I understood that agenda was going to be considered de
nova. For this, reliance is on the following affidavit filed by respondent no.
G I in reply to the notice of motion filed before the trial court by the appellants.
Tlie relevant portion of the said statement is reproduced below:-

"I say that. the gravamen of the charge, inter alia, levelled in the
previous suit revolved round the allegation that the Meeting of the
Board of Directors of the Club held on 8th November 1997 was never
H held and no notice therefor was given. In view of the fact that the
NAZIR HOOSEIN v. DARAYUS BHATTENA (MISRA, J.) 283
Club is primarily brought into existence to promote motor sports, it A
was felt that no scope would be left for any complaint and therefore
it was agreed that the items of Agenda of the said meeting which was
held on 8th November 1995 should be convened de novo and under
the said Mr. Satish Shah, Advocate."

On the other hand, learned counsel for the respondents submits that B
neither the said consent order nor the resolution passed on the 4th July, 1997,
in any way set asides any resolutions passed prior to the said consent order.
Thus, it would be deemed that they continued notwithstanding holding of the
said meeting dated 4th July, 1997.

We have considered the submissions made by the parties including the
c
various orders passed, both in the earlier and the present suit. In our considered
opinion, the culmination of the appeal, the suit by its withdrawal as per
court's order, as a consequence of the consent order indicates one and the
only inference that once the parties agreed to hold a fresh meeting under the
Chairmanship of Mr. Satish Shah to re-consider afresh the agenda of the D
meeting dated 8th November, 1995, then it implicitly voices, what was resolved
in the said meeting earlier is wiped off and has become non-est. The very re-
consideration of the earlier agenda clinchingly reveals that what was done
then is wiped off. How can earlier resolution dated 8th November, 1995, would
survive when it is to be considered afresh? Of course, it is open to the Board E
to pass the same modify or pass entirely different resolution .. Thus company
would be bound by the resolution passed in this later meeting. The High
Court committed error of law by concluding to the contrary. The High Court
misdirected itself and misconstrued the consent order that "neither parties
agreed nor did the court set aside the resolution of the Board of Directors
dated 8th November, 1995". The effect of the order passed by the court was F
to undo what was done on the 8th November, 1995 and consider the matter
afresh. This was done in the background of the appellants' case that it was
held without notice to the appellants. This is also clearly spelt out from the
aforesaid quoted statement of respondent no. I himself. The meeting which
was held under the Chairmanship of Mr. Satish Shah was not a meeting to G
confirm, modify or annul the resolutions dated 8th November, 1995 but was
to consider the agenda afresh. Hence, all that was passed on the 8th November,
I995 cannot be treated to be alive after the consent order followed by resolution
dated 4th .July, 1997. Thus, appointment of 12 additional Directors on that
date also goes. So far removal of appellant no. I and appointment of respondent
no. I in his place, it was fairly agreed to that both will not preside the H
284 SUPREME COURT REPORTS [2000] SUPP. I S.C.R.

A meetings of the Board, instead Mr. Satish Shah will preside. In other words,
no one could be treated to be the Chairman of the Board.

Next we proceed to scrutinize the resolution dated 4th July, 1997, which
was held as a consequence of the court's order, under the Chairmanship of
Mr. Satish Shah. But here again we find a dispute is raised, whether the
B minutes prepared by the Secretary or the one by the Chairman Mr. Satish
Shah be accepted. We find the minutes recorded are at variance between the
two. The relevant variance is under item no. 6. In the secretary report there
is no reference of the consideration by the Board for the appointment of 12
additional Directors, while in the report of Mr. Satish Shah it records so under
C item no. 6, which is reproduced below:

"Item No. 6: To appoint 12 additional Directors whose influence,
contact would assist the club to procure attractive sponsorships as
also those who could spare time to assist in organising and running
events.

D Mr. Hoosein said that this item did not survive because it had
been agreed in principle to hold the Annual General Meeting. Mr.
Swadi, Mr.Futehally and Mr. Bhiwandiwalla concurred.

Mr. Bhathena and Mr. Goenka opposed. Mr. Bhathena said "that
he was disagreeing because in his view fresh blood was required on
E the Board. Mr. Rao abstained. The view of Mr. Hoosein was adopted
by a majority of 4 to 2."

Before drawing our conclusion we may refer to Section 193 of the
Companies Act, 1956. The relevant portion of Section 193 is quoted below:-

F "Section 193: Minutes of proceedings of general meetings .and of
Board and other meetings:

(I-A.) Each page of every such book shall be initialled or signed and
the last page of the record of proceedings of each books shall be
dated and signed -
G (a) in the case of minutes of proceedings of a meeting of the Board
or of a committee thereof, by the Chairman of the said meeting or the
Chairman of the next succeeding meeting.

H (6) If default is made in complying with the foregoing provisions of
NAZIR HOOSEIN v. DARAYUS BHATTENA [MISRA, J.] 283
Club is primarily brought into existence to promote motor sports, it A
was felt that no scope would be left for any complaint and therefore
it was agreed that the items of Agenda of the said meeting which was
held on 8th November 1995 should be convened de novo and under
the said Mr. Satish Shah, Advocate."

On the other hand, learned counsel for the respondents submits that B
neither the said consent order nor the resolution passed on the 4th July, 1997,
in any way set asides any resolutions passed prior to the said consent order.
Thus, it would be deemed that they continued notwithstanding holding of the
said meeting dated 4th July, 1997.

We have considered the submissions made by the parties including the
c
various orders passed, both in the earlier and the present suit. In our considered
opinion, the culmination of the appeal, the suit by its withdrawal as per
court's order, as a consequence of the consent order indicates one and the
only inference that once the parties agreed to hold a fresh meeting under the
Chairmanship of Mr. Satish Shah to re-consider afresh the agenda of the D
meeting dated 8th November, I995, then it implicitly voices, what was resolved
in the said meeting earlier is wiped off and has become non-est. The very re-
consideration of the earlier agenda clinchingly reveals that what was done
then is wiped off. How can earlier resolution dated 8th November, 1995, would
survive when it is to be considered afresh? Of course, it is open to the Board E
to pass the same modify or pass entirely different resolution. Thus company
would be bound by the resolution passed in this later meeting. The High
Court committed error of law by concluding to the contrary. The High Court
misdirected itself and misconstrued the consent order that "neither parties
agreed nor did the court set aside the resolution of the Board of Directors
dated 8th November, 1995". The effect of the order passed by the court was F
to undo what was done on the 8th November, 1995 and consider the matter
afresh. This was done in the background of the appellants' case that it was
held without notice to the appellants. This is also clearly spelt out from the
aforesaid quoted statement of respondent no. I himself. The meeting which
was held under the Chairmanship of Mr. Salish Shah was not a meeting to G
confirm, modify or annul the resolutions dated 8th November, 1995 but was
to consider the agenda afresh. Hence, all that was passed on the 8th November,
1995 cannot be treated to be alive after the consent order followed by resolution
dated 4th .July, 1997. Thus, appointment of 12 additional Directors on that
date also goes. So far removal of appellant no. I and appointment of respondent
no. I in his place, it was fairly agreed to that both will not preside the H
284 SUPREME COURT REPORTS [2000] SUPP. I S.C.R.

A meetings of the Board, instead Mr. Satish Shah will preside. In other words,
no one could be treated to be the Chairman of the Board.

Next we proceed to scrutinize the resolution dated 4th July, 1997, which
was held as a consequence of the court's order, under the Chairmanship of
Mr. Satish Shah. But here again we find a dispute is raised, whether the
B minutes prepared by the Secretary or the one by the Chairman Mr. Satish
Shah be accepted. We find the minutes recorded are at variance between the
two. The relevant variance is under item no. 6. In the secretary report there
is no reference of the consideration by the Board for the appointment of 12
additional Directors, while in the report of Mr. Satish Shah it records so under
C item no. 6, which is reproduced below:

"Item No. 6: To appoint I 2 additional Directors whose influence,
contact would assist the club to procure attractive sponsorships as
also those who could spare time to assist in organising and running
events.

D Mr. Hoosein said that this item did not survive because it had
been agreed in principle to hold the Annual General Meeting. Mr.
Swadi, Mr.Futehally and Mr. Bhiwandiwatla concurred.

Mr. Bhathena and Mr. Goenka.opposed. Mr. Bhathena said "that
he was disagreeing because in his view fresh blood was required on
E the Board. Mr. Rao abstained. The view of Mr. Hoosein was adopted
by a majority of 4 to 2."

Before drawing our conclusion we may refer to Section 193 of the
Companies Act, 1956. The relevant portion of Section 193 is quoted below:-

F "Section 193: Minutes of proceedings of general meetings .and of
Board and other meetings:
(I-A.) Each page of every such book shall be initialled or signed and
the last page of the record of proceedings of each books shall be
dated and signed -
G (a) in the case of minutes of proceedings of a meeting of the Board
or of a committee thereof, by the Chairman of the said meeting or the
Chairman of the next succeeding meeting.

H (6) If default is made in complying with the foregoing provisions of
NAZIR HOOSEIN v. DARA YUS BHATTENA [MISRA, J.] 287
to Articles of association is void and is not regularized by mere A
acquiescence and consequently resolutions carried by the casting
vote of such a chairman arc inoperative."

It cannot be disputed that the Chairman of the Board of Directors is
the central figure in holding the meeting and is the controlling factor in the
conduct of meeting. He authenticates the minutes of the meeting and performs B
such other functions as empowered under the Companies Act. A Chairman
is always elected by the Board of Directors thus he had the full support of
the majority of Directors which helps him in the control of meeting and
recording authenticated minutes.
c
In the present case unfortunately since I994 no Annual General Meeting
could be held both on account of the aforesaid dispute and also as per the
respondents, the accounts could not be finalised. When appointment of Mr.
Satish Shah to chair Board meeting was made both appellant no. I and
respondent no. 1 fairly conceded their claim to preside over the meeting. Thus
their serious dispute got temporary respite. Still the question remains, as to D
who could have presided in the meeting dated 17th April, 1997, which was
antecedent to the consent order. It is true by that date consent order was not
in existence and the tussle between the two was continuing. If the resolution
dated 8th November. 1995 evaporated, authority of respondent no. I to preside
under it also dissolved, unless some fresh authority was given to him. Thus E
without any fresh authority respondent no. 1 could not preside in any Board's
meeting. In fact this meeting dated 17th April, 1997, at that point of time was
challenged and the court on this date injuncted the respondents to implement
the resolution passed in this meeting. It is during continuation of this injunction
order, the said consent order was passed. Consent order was to consider 8th
November, 1995 agenda de novo. In view of this then how could resolution F
passed in this meeting survive after passing of the consent order.

In the meeting dated 4th July, 1997, no resolution was passed as to who
shall henceforth preside in the meeting of the Board of Directors. The resolution
dated 4th July, 1997 could be construed that the parties differed the question G
as to who shall preside the meeting till holding of fresh election of the Board
of Directors in the Annual General Meeting. It is significant in the minutes
recorded by Mr. Satish Shah that before item no. I was taken up Mr.
Bhiwandiwalla and Mr. Bhathena (respondent no. I) stressed the need to hold
an early Annual General Meeting. Another Director Mr. Swadi also suggested
the same for electing a new Board which could finalise the accounts. Finally, H
288 SUPREME COURT REPORTS [2000] SUPP. l S.C.R.

A Mr. Bhiwandiwalla suggested the following:-

"(i) that the Accounts be finalised and approved as soon as possible.

(ii) that all the members of the present Board should resign and an
entirely new Board should be elected: and
B
(iii) that in any event the Annual General Meeting should be convened
as early as possible even if the Accounts were not ready.

The other members were agreeable to this and it was resolved that the
Annual General Meeting should if possible be held on 16th September,
c 1997."

This also indicates that the Board desired holding an early Annual General
Meeting and in favour of all members of this Board resigning. In this context
presiding by respondent no. l as Chairman of the meeting held on 17th April,
cannot be held to be proper. However, on the other hand a submission is,
D even where there¢s no Chairman or in case the Chairman not present or as
in the present _case it is in dispute, it is open for the Board of Directors to
elect any one to function as such in any meeting. But this is neither the
respondents' case nor it is shown that he was elected as such on that date.
His authority if at all was only through the resolution dated 8th November,
E 1995. Strong submission for the respondents was that appointment of
respondent no. I as Chairman was held to be valid by a competent court of
law by order dated 18th March, 1997 in Notice of Motion No. 6337 of 1995.
But this order was challenged by the appellants through A.O. No. 274of1997
in the High Court. It is in this extent that consent order was passed which
obliterated various resolutions including of 8th November, 1995. So this
F submission of respondents has no force.
Lastly, we have considered the question of induction of 57 new life
members. So far in their application no defect could be pointed out. It is true,
these new life members are not parties before us. It will be in the best of
G interest that question of their induction as life members instead of rejecting,
be placed for consideration, in the Annual General Meeting to be held by the
Company. So we come to the conclusion, that meeting dated 17th April, 1997
was not only not conducted in the proper perspective but it also suffers from
procedural irregularities. This was part of the tussle between the two groups
to gain the majority over the other. However, it would not be proper to reject
H the life member$' application. So in order to keep the interest of the life
NAZIR HOOSEIN v. DARAYUS BHATTENA [MISRA, J.] 289
members, we direct that their cases be placed before the next Annual General A
Meeting to he held for its consideration.

Since the dispute, as to who shall preside, is still not resolved, in spite
of this long drawn litigation which can only come to an end by fresh election
of the Board of Directors in the next Annual General Meeting, it is proper in
the interest of the Company that neither appellant no. I nor respondent no. B
I presides in any Board of Directors' meeting.

Thus, so far the direction of the High Court to hold Annual General
Meeting under the Chairmanship of Mr. A.P. Kothari, the Company Registrar
seems to be proper, hence needs no interference to that extent. The relevant
portion of this is quoted hereunder: C
"However, it is clear that a meeting of the Board of Directors has been
held pursuant to an order passed by this Court and it is common
ground before me that the Board of Directors decided to hold the
annual general meeting of the company immediately, in this view of
the matter, therefore, in my opinion, it would be just and proper to D
direct that the Annual General Meeting of the Company should be
held for holding elections to the Board of Directors of the Company.
In my opinion, considering that the parties are fighting, it would be
proper to direct that the Annual General Meeting should be held
under the Chairmanship of Shri A.P. Kolhari, the Company Registrar." E

Hence for all the aforesaid reasons we allow the appeal of the appellants,
set aside both the judgments of the High Court dated 10th February, 1999,
exci:pt to the aforesaid extent, and the trial court order dated 9th July, 1998,
and further direct holding of Annual General Meeting at the earliest under the
Chairmanship of Mr. A.P. Kothari. Registrar Company as aforesaid. Even if F
any prior meeting before Annual General Meeting is to be held of the Board
of Directors, the same shall also be presided by the same Mr. A.P. Kothari,
Registrar. In view of the aforesaid findings our conclusions are:

(A) Neither appellant no. I nor respondent no. I shall preside in any
of the meetings of the Board of Directors. G
(B) The appointment of 12 additional Directors cannot be sustained.
Hence resolutions dated 8th November 1997, 29th March, 1997
and 17th April, 1997 stand obliterated in view of the consent
order dated 30th June/2nd July, 1997.
H
290 SUPREME COURT REPORTS [2000] SUPP. I S.C.R.

A (C) So far resolution dated 17th April, 1997 for the induction of 57
life members, in view of our findings, they not be deemed to
have been inducted on that date as member but their induction
as such would be placed for consideration before the Annual
Gener.4 Meeting to be held later.
B (D) Annual General Meeting shall be held under the Chairmanship
of Mr. A.P. Kothari, Registrar, Company who shall expedite the
holding of Annual General Meeting at a very early date possibly
within three months of this order being communicated to him.

Accordingly, the aforesaid appeal is allowed. Costs on the parties.
c Office shall send a copy of this order to Mr. A.P. Kothari, Registrar,
Company.

M.P. Appeal allowed.

[