Introduction

Company meetings are a cornerstone of corporate governance, providing a platform for shareholders to exercise their rights and for companies to make critical decisions. However, circumstances may arise where the normal machinery for convening such meetings breaks down. In India, Section 186 of the Companies Act, 1956 (hereinafter "the 1956 Act"), provided a crucial statutory mechanism for judicial intervention, empowering the Court (and later the Company Law Board) to order the calling, holding, and conducting of company meetings when it was otherwise "impracticable." This power is now vested in the National Company Law Tribunal (NCLT) under Section 98 of the Companies Act, 2013 (hereinafter "the 2013 Act").

This article seeks to provide a comprehensive analysis of the scope, interpretation, and application of this judicial power to convene company meetings, drawing upon key precedents. Furthermore, it will address a distinct but identically numbered provision, Section 186 of the 2013 Act, which pertains to loans and investments by companies, to provide clarity and avoid potential confusion arising from the shared section number across different legislative eras and subjects. The analysis will also briefly touch upon the historical context, including references to Section 186 of the Companies Act, 1913, which dealt with a different matter altogether—the recovery of dues from contributories during winding up.

Legislative Framework for Convening Meetings: Section 186 of the 1956 Act and Section 98 of the 2013 Act

The primary focus of this part of the analysis is the power of judicial bodies to order company meetings. Section 186(1) of the 1956 Act stated:

"If for any reason it is impracticable to call a meeting of a company, other than an annual general meeting, in any manner in which meetings of the company may be called, or to hold or conduct the meeting of the company in the manner prescribed by this Act or the articles, the Court may either of its own motion or on the application of any director of the company, or of any member of the company who would be entitled to vote at the meeting,— (a) order a meeting of the company to be called, held and conducted in such manner as the Court thinks fit; and (b) give such ancillary or consequential directions as the Court thinks expedient, including directions modifying or supplementing in relation to the calling, holding, and conducting of the meeting, the operation of the provisions of this Act and of the Company's articles." (Ruttonjee And Co. Ltd., In Re, Calcutta High Court, 1967).

The Supreme Court in R. Rangachari v. S. Suppiah And Others (Supreme Court Of India, 1975) noted that this section corresponded, with slight variation, to Section 79(3) of the Companies Act, 1913, and Section 135 of the English Companies Act, 1948. The power under Section 186 of the 1956 Act was later exercised by the Company Law Board (CLB), as seen in Kumbakonam Mutual Benefit Fund Ltd. v. S. Kalyanasundaram And Others (Madras High Court, 2012). With the advent of the 2013 Act, this power was transferred to the National Company Law Tribunal (NCLT) under Section 98, which largely mirrors the provisions of the erstwhile Section 186 of the 1956 Act. The constitutional validity and establishment of the NCLT and NCLAT, which now handle such company law matters, were addressed in Union Of India v. R. Gandhi, President, Madras Bar Association (Supreme Court Of India, 2010), emphasizing the need for such tribunals to maintain judicial independence.

Scope and Judicial Interpretation of the Power to Convene Meetings

The "Impracticability" Threshold

The cornerstone for invoking Section 186 of the 1956 Act (now Section 98 of the 2013 Act) is the condition that it is "impracticable" to call, hold, or conduct a meeting in the usual manner. The Calcutta High Court in Bengal And Assam Investors Ltd. v. J.K Eastern Industries Private Ltd. (Calcutta High Court, 1956) provided significant guidance on this term. It was held that "the word 'impracticable' means 'impracticable from the reasonable point of view' and the Court should take a commonsense view of the matter and must act as a prudent man of business."

Impracticability can arise from various situations, including:

• Deadlock and Factionalism: As observed in R. Rangachari v. S. Suppiah And Others (Supreme Court Of India, 1975), where two Managing Directors had fallen out and shareholders were divided into factions, leading to apprehensions about the proper conduct of a requisitioned meeting.
• Non-Functioning Directorate: The Delhi High Court in Shri B.R Kundra, Proprietor, Film Exploiters v. Motion Pictures Association (Delhi High Court, 1975) noted that where Executive Committee members/Directors are not functioning de jure, they cannot call a meeting themselves, thus necessitating intervention under Section 186.
• Doubt Regarding Regular Process: The same judgment in Shri B.R Kundra also suggested that "even when there is doubt as to whether a meeting in the regular course could be called... it would be a proper case therefore for the exercise of the power conferred under section 186."

Nature and Exercise of Judicial Power

The power vested in the Court/CLB/NCLT under this section is extraordinary and discretionary. The Calcutta High Court in Bengal And Assam Investors Ltd. characterized Section 186 of the 1956 Act as "a piece of incongruous paternalism" and an "extraordinary power." It cautioned that "As the power is great, unsuitable and irresponsible, the discretion granted under Section 186 of the Companies Act must be very sparingly used and it should be used with great caution, so that this Court does not become either a Shareholder or a Director of the Company trying to participate in the internecine squabbles of the Company."

Despite its cautious approach, the Court/Tribunal is granted wide latitude. It may "order a meeting of the company to be called, held and conducted in such manner as the Court thinks fit; and give such ancillary or consequential directions as the Court thinks expedient" (R. Rangachari v. S. Suppiah And Others, Supreme Court Of India, 1975). These directions can include modifying the provisions of the Act or the company's articles for that specific meeting. An important ancillary power, highlighted in the Explanation to Section 186(1) of the 1956 Act and affirmed in cases like Kumbakonam Mutual Benefit Fund Ltd., is the direction that "one member of the company present in person or by proxy shall be deemed to constitute a meeting."

The power also extends to appointing a Chairman for the meeting, as was sought in Century Flour Mills Ltd. v. S. Suppiah And Others (Madras High Court, 1975), which was the subject of the appeal in the R. Rangachari Supreme Court case.

Locus Standi and Limitations

An application under Section 186 of the 1956 Act (and correspondingly Section 98 of the 2013 Act) could be made by "any director of the company, or of any member of the company who would be entitled to vote at the meeting," or the Court/Tribunal could act "of its own motion" (Ruttonjee And Co. Ltd., In Re, Calcutta High Court, 1967).

It is important to note the limitations of this section. As clarified in Ravinder Kumar Jain v. Punjab Registered (Iron And Steel) Stockholders Association Ltd. (Punjab & Haryana High Court, 1978), Section 186 is not the appropriate remedy for challenging the validity or regularity of a meeting that has already been held. Such challenges typically require a civil suit.

The Distinct Provision: Section 186 of the Companies Act, 2013 – Loans and Investments by Company

It is crucial to distinguish the aforementioned power to convene meetings from Section 186 of the Companies Act, 2013, which deals with an entirely different subject: "Loan and investment by company." This provision regulates how companies can give loans, provide guarantees or security, and make investments.

The National Company Law Tribunal, in UKG STEELS PVT. LTD. v. EXOTIC BUILDCON PVT. LTD. (NCLT, 2022), referred to this Section 186 of the 2013 Act. The Tribunal reproduced parts of the section:

"186. Loan and investment by company (1) Without prejudice to the provisions contained in this Act, a company shall unless otherwise prescribed, make investment through not more than two layers of investment companies... (2) No company shall directly or indirectly — (a) give any loan to any person or other body corporate. (b) give any guarantee or provide security in connection with a loan to any other body corporate..." (as quoted in UKG STEELS PVT. LTD., NCLT, 2022).

This section imposes limits and conditions on inter-corporate loans and investments, aiming to protect shareholder interests and ensure financial prudence. The NCLT in the UKG STEELS case considered whether a financial creditor, not being a bank/NBFC, was authorized to give a loan amount, referencing Section 186 of the 2013 Act in its analysis of inter-corporate loan limits. This provision is thus geared towards financial regulation within corporate structures, distinct from the procedural remedy for convening meetings.

A Note on Section 186 of the Companies Act, 1913

For historical completeness, it is pertinent to mention that Section 186 of the Companies Act, 1913, dealt with yet another matter: the power of the Court to make an order on any contributory to pay money due to the company during winding up. This section was interpreted by the Privy Council in Hans Raj Gupta v. Official Liquidators of the Dehradun-Mussoorie Electric Tramway Company Ltd. (AIR 1933 PC 63). The Court held that this section provided a summary procedure for enforcing existing legal liabilities and did not create new rights or revive time-barred debts. As stated in New Delhi Municipal Committee v. Kalu Ram And Another (Supreme Court Of India, 1976), "It is a section which creates a special procedure for obtaining payment of moneys; it is not a section which purports to create a foundation upon which to base a claim for payment. It creates no new rights." This principle, that a procedural section does not typically override substantive law like limitation, has been reiterated in various contexts (e.g., Malabar Petroleum Co. And Official Liquidator, Madras High Court v. E. Duraiswami., Madras High Court, 1963, regarding Section 469 of the 1956 Act, which was similar to Section 186 of the 1913 Act; Best And Crompton Engineering Ltd.… v. The Official Liquidator, Madras…, Madras High Court, 1994). This historical Section 186 is distinct from both the power to convene meetings and the regulation of loans/investments discussed earlier.

Conclusion

Section 186 of the Companies Act, 1956 (now Section 98 of the Companies Act, 2013) serves as a vital tool for judicial intervention to resolve corporate deadlocks and ensure that the machinery of corporate democracy does not grind to a halt due to the "impracticability" of convening meetings. Judicial pronouncements have consistently emphasized that this extraordinary power must be exercised with caution and sparingly, respecting the general principle of corporate self-governance, yet providing a remedy when internal mechanisms fail. The transfer of this jurisdiction to the NCLT aligns with the broader trend of specialized tribunals handling complex corporate matters.

It is also essential for legal practitioners and scholars to clearly differentiate this provision from Section 186 of the Companies Act, 2013, which addresses the distinct area of corporate loans and investments, reflecting a legislative focus on financial discipline and transparency. The historical Section 186 of the 1913 Act, concerning recovery of dues, further underscores the need for precise contextual understanding when encountering statutory section numbers that may have been repurposed over time. Ultimately, the careful application and interpretation of these varied provisions under the umbrella of "Section 186" contribute to the robust framework of company law in India, balancing procedural fairness with substantive regulation.