The Judgment of the Court was as follows:—
B.B Ghose, J.:— This is an appeal by Defendant No. 2, one of the Directors of a Limited Company at Cachar. The suit out of which this appeal arises was by one of the share-holders. The learned Judge states the fact as follows:— There is an Insurance Company with a registered office at Silchar. This Company has a capital of over a lakh of rupees, and according to the opinion of the learned Judge everything does not appear to have gone on well with this Company and internal faction has been causing a good deal of trouble. The Directors of the Company were elected in 1921. According to the Articles of Association of the Company the Directors are to be elected annually. A general meeting was convened on the 22nd June 1922 at which among other things it was proposed to elect new Directors. Before the election of the Directors was completed the meeting came to an end and therefore there was no general meeting for election of Directors. The old Directors apparently continued to act, and the present suit was brought for a declaration that the Directors elected in 1921 were no longer the Directors of the Company and that all acts done by them were illegal and void. The Subordinate Judge made the declaration asked for. The Defendants appealed and the learned Judge has affirmed the decision of the Subordinate Judge.
The first question that arises in this case is whether such a suit for declaration is maintainable under the provisions of sec. 42 of the Specific Relief Act. There cannot be any doubt that in order to obtain a declaratory decree the Plaintiff must bring his suit within the provisions of sec. 42 of the Specific Relief Act. With regard to the question of declaratory decrees it is useful to refer to the observations of Sir Lawrence Jenkins, C.J, in the case of Musstt. Deokali Koer…Plaintiff, v. Babu Kedar Nath & Ors.…Defendants, . At p. 708 the learned Chief Justice says with reference to sec. 42 of the Specific Relief Act as follows:—“It is in this section (apart from particular legislative sanction) that the law as to merely declaratory decrees applicable in the circumstances of this case is now to be found. The terms of the section are not a precise reproduction of the provision contained in the Act of 1859 and the English law: in one direction they are more comprehensive, in another, more limited. It is common tradition that the section was designed to be a substantial reproduction of the Scotch action of declarator, but whether this be so or not is of no great moment. We have to be guided by its provisions as they are expressed. The section does not sanction every form of declaration, but only a declaration that the Plaintiff is ‘entitled to any legal character or to any right as to any property; it is the disregard of this that accounts for the multiform and at times, eccentric declarations which find a place in Indian plaints. If the Courts were astute—as I think they should be—to see the plaints presented conformed to the terms of sec. 42, the difficulties that are to be found in this class of cases, would no longer arise. Nor would Plaintiffs be unduly hampered if the provisions of sec. 42 were enforced, for it would be easy to frame a declaration in such terms as would comply with the provisions of the section where the claim was one within its policy.”
Sir Lawrence Jenkins when a member of the Judicial Committee again observed in delivering the judgment of the Judicial Committee in Sheoparsan Singh v. Ram Nandan Singh as follows:—“The Court's power to make a declaration without move is derived from sec. 42 of the Specific Relief Act, and regard must therefore be had to its precise terms.” After reciting the terms of sec. 42 the Judgment goes on:—“A Plaintiff coming under this section must therefore be entitled to a legal character or to a right as to property. Can these Plaintiffs predicate this of themselves?”
It is hardly necessary to point out that in this case the Plaintiff does not claim to be entitled to any legal character or to any right as to any property which has been denied by the Defendants. It follows therefore that such a declaratory suit is not maintainable under the provisions of sec. 42 of the Specific Relief Act and as there is no other special legislative sanction such a suit would not in my opinion be at all tenable.
The next question is, even assuming that such a suit was maintainable, should such declaration be made by the Court in the exercise of its discretion. It need hardly be pointed out that sec. 42 provides that the Court may in its discretion make a declaration with regard to certain matters. What would be the effect of such a declaration as the present even if the Plaintiff was entitled to ask for it? The effect would be that the Directors who were acting as such would be declared to be no Directors at all. In effect there would be no Directors of the Company to carry on the business of the Company. The learned Judge says in one part of his judgment that a Company may go on without Directors. No doubt it may in certain special cases, but in such a case the Company itself must determine that it should have no Directors; but some other agency should carry on the business of the Company. In this case the Company has not so determined; and therefore assuming that the Court may have jurisdiction to make such a declaration in my judgment such declaration ought not to be made in the exercise of its discretion. I may refer to the observations of Viscount Finlay in the case of Russian Commercial and Industrial Bank v. British Bank for Foreign Trade, Limited , where his Lordship stated that jurisdiction to give a declaratory judgment should be exercised sparingly, with great care and jealousy, and with extreme caution, citing authorities for each of these statements.
With regard to the merits, the Articles of Association provided that the Directors should be elected annually at a general meeting. It follows therefore that so long as the general meeting is not held in which the Directors are to be elected the Directors elected at the previous general meeting would continue in office. It is contended by the learned Advocate for the Respondent that according to the true interpretation of the articles the Directors would hold office only for one year from the date of their appointment, and if no general meeting is held at the lapse of one year the Directors would automatically vacate their office and the Company would go on without any Directors at all. I am unable to accept this contention of the learned Advocate as it seems to me that it would be unreasonable to hold that this is the true meaning of the Articles of Association.
On all these grounds I am of opinion that the judgment and decree of both the Courts below should be discharged and the Plaintiff's suit dismissed with costs in all the Courts.
Garlick, J.:— I agree.
C.C