National Dairy Development Board v. Indian Immunologicals Ltd.

K.K Balu, Member:— This is an application filed under section 167 of the Companies Act, 1956 (“the Act”) by National Dairy Development Board seeking directions against Indian Immunologicals Ltd. (“the company”) to convene and hold the first annual general meeting of the company to transact the business as contained in the draft notice of the annual general meeting (exhibit 4).

2. The facts, in brief, as reiterated by Shri L.V.V Iyer are that the company was incorporated on October 8, 1999, to take over the activities of the Indian Immunologicals with an authorised capital of Rs. 10,00,00,000 divided into 1,00,00,000 equity shares of Rs. 10 each. The paid-up capital is Rs. 9,00,00,070 subscribed entirely by the applicant, a body corporate constituted under section 4 of the National Dairy Development Board Act, 1987. The company had obtained a certificate of commencement of business on January 11, 2000, from the Registrar of Companies, Andhra Pradesh. In the circumstances, the company ought to have convened and held the first annual general meeting on or before April 8, 2001, in accordance with the provisions of section 166 of the Act.

3. However, the company could not comply with this statutory requirement owing to administrative difficulties and factors beyond its reasonable control. In view of the default committed by the company in holding the annual general meeting as required by section 166, Shri Iyer urged that the company Law Board has the power under section 167 to call or direct the calling of the annual general meeting on the application of any member, in support of which he relied upon the following decisions:

4. Nungambakkam Dhanarakshaka Saswatha Nidhi Ltd. v. Registrar Of Companies, [1972] 42 Comp Cas 632 (Mad), to show that section 167 of the Act (page 635):

“provides for a remedy in case of default in holding the annual general meeting in accordance with section 166. Notwithstanding the provisions of the Act or the articles of association of a company the Central Government may, on the application of any member of the company, call or direct calling of a general meeting of the company. The Central Government are also given power to give such ancillary and consequent directions as they may think expedient in relation to the calling, holding and conducting of the meeting. Sub-section (2) of section 167 provides that a general meeting in pursuance of section 167(1) shall, subject to any directions of the Central Government, be deemed to be an annual general meeting of the company. This is a clear statutory recognition of what should be done in case there is default in holding the general meeting within the time required by the statute. Thus, it is dear that exclusive power is conferred upon the Central Government to permit the calling of a general meeting in case of default to hold the general meeting notwithstanding anything contained in the Companies Act or in the articles of association of a company.”

5. Coal Marketing Co. of India Pvt. Ltd., In re, [1967] 37 Comp Cas 720, to show that any default under section 166 can be excused under section 167 of the Act and that it can be excused by the Central Government, which alone has the power to permit calling of a general meeting of the company.

6. Taihan Electric Wire Co. Ltd. v. TDT Copper Lid., [1999] 96 Comp Cas 415 (CLB), to show that intervention of the Company Law Board is required to regularise a default under section 166.

7. Shri Iyer has, therefore, sought for directions of this Bench against the company to convene and hold the first annual general meeting within thirty days of the order of the Company Law Board.

8. The company and its remaining six members have no objection to the filing of this application.

9. After considering the pleadings and oral submissions made on behalf of the applicant, the issue that arises for my consideration is whether the company should be directed to convene and hold the first annual general meeting in the facts and circumstances of the case.

10. Admittedly, the company ought to have held its first annual general meeting on or before April 8, 2001, but defaulted in holding the meeting as required by section 166 attracting penalty under section 168. Section 167 clearly provides what should be done when default occurs in holding the annual general meeting within the stipulated time. With effect from May 31, 1991, the Company Law Board may exercise the power to call or direct the calling of the annual general meeting, after the statutory time has elapsed. In this connection, it is necessary to refer to the policy with which power has been conferred upon the Company Law Board with regard to calling any general meeting in the case of default to hold a meeting as required under law and with regard to conferment of power on the Company Law Board under section 167. The fourth annual report on the working and administration of the Companies Act, 1956—year ended March 31, 1960: Government of India Publication, Clarifications and Circulars on Company Law, 1977 edition, at page 82 observed:

“Section 167 of the Act empowers the Central Government (now the Company Law Board) to call, or direct the calling of, an annual general meeting of a company, where no annual general meeting had been held in accordance with the provisions of section 166 of the Act.

The power of the Central Government (now the Company Law Board) to call, or to direct the calling, of an annual general meeting of the companies was exercised by the Regional Directors on the strength of the delegation of power which has been made in their favour. The power conferred by section 167 was exercised where the management was found to be unwilling to convene an annual general meeting of the company, with a view to keeping the shareholders in the dark about the affairs of the company or where the management was unable to convene an annual general meeting on account of party faction.”

11. In the present case, the company had defaulted in holding the annual general meeting owing to administrative difficulties and facts beyond its reasonable control The reasons put forward by the applicant are rather vague and do not make it impracticable for the company to call a meeting without intervention of the Company Law Board, which in my view, cannot entitle the applicant to invoke the provisions of section 167. The case-law cited supra can be distinguished from the present case. In the case of Nungambakkam Dhanarakshaka Saswatha Nidhi Ltd. v. Registrar Of Companies, [1972] 42 Comp Cas 632, there was a strike among the members of staff with the result that the normal working of the nidhi was dislocated. Coal Marketing Co. of India Pvt. Ltd., In re, [1967] 37 Comp Cas 720, the ground put forward for not holding the annual general meeting is held to be unsatisfactory. In Taihan Electric Wire Co. Ltd. v. TDT Copper Ltd., [1999] 96 Comp Cas 415 (CLB), the annual general meeting could not be held on account of party faction. Thus, these case-laws do not come to the aid of the applicant. Moreover, section 167 is not intended to enable the Company Law Board to make an order which will excuse persons responsible for failure to call annual general meeting from the consequences of their omission. For these reasons, in my view, the application, though not opposed by the company as well as its members, does not survive and hence is dismissed. No order as to costs.