N. Srinivasan vs K.S. Narayanan and Others

Gokulakrishnan, J.—The Plaintiff is the Appellant. He filed the suit Original Suit No. 6886 of 1978, on the file of the City Civil Court,

Madras for a declaration that he is entitled to hold office as Joint Managing Director till 31st December, 1979 as per the service contract entered

into with the twelfth Defendant company on 27th April, 1977 pursuant to the appointment made at the General body meeting of the company in

1975 and for a consequential injunction restraining Defendants 1 to 11 from dissociating him from the office of Joint Managing Director. He also

prayed for a declaration that the decision of Defendants 1 to 11, as per resolutions of the Board of Directors, dated 27th February, 1978, 8th

May, 1978 and 25th May, 1978 followed by a show cause notice on 27th May, 1978 are null and void and are of no legal effect and for a

consequential injunction as mentioned above. Along with the plaint, the Plaintiff filed Interlocutory Application No. 14648 of 1978 under Order

XXXIX, Rules 1 and 2 read with Sections 94 and 151 CPC for a temporary injunction restraining Defendants 1 to 11 from dissociating him from

the management of the twelfth Defendant company as Joint Managing Director, pending disposal of the suit., or from implementing any decision, if

they have taken in this direction pending disposal of the suit.

It may be necessary to state a few facts to appreciate the nature of the interim relief asked for in the interlocutory application. The twelfth

Defendant-company, after amending Article 265 of its Articles of Association, appointed the Plaintiff, who is the Appellant herein, as its Joint

Managing Director for a period of five years and again the term was renewed for a further period of five years, which period expires on 31st

December, 1979. The Appellant is also one of the directors of the company and. he is to hold office as director until removed by the General

Body for cause shown. The first Defendant is the Managing Director of the company. The Plaintiff alleges various misdeeds as having been

committed by the first Defendant is relation to the affairs of the company. Suffice it to say that there was ill-feeling between the first Defendant and

the Plaintiff, launched upon a plan to oust the Plaintiff from the Joint Managing Directorship. It has been alleged in the plaint that with this end in

view the first Defendant started enlisting the support of the co-directors of the company and has been waiting for an opportunity to wreak

vengence on the Plaintiff. As early as 7th February, 1977, due to intervention of persons interested in the welfare of both the Plaintiff and the first

Defendant, a memorandum styled as memorandum of understanding was drawn up. This has been marked as exhibit A-4 in this case. Apart from

other things, this memorandum states that both the Plaintiff and the first Defendant shall co-operate with each other and that at the end of the term

of office of the Plaintiff as Joint Managing Director, expiring on 31st December, 1979, the Plaintiff would be helped to become the Managing

Director of the twelfth Defendant-company and the first Defendant would extend his whole-hearted co-operation in this regard subject to re-

approval of the Board and the General Body. As per this solemn agreement, it is the case of the Plaintiff, he transferred his shares in Messrs

Chemical and Plastics India Ltd. in favour of the first Defendant. But the first Defendant, in spite of such agreement, continued to have hostile

attitude towards the Plaintiff and carried on vilifying propaganda against the Plaintiff. It has been further alleged in the plaint that in July, 1977, the

first Defendant, under the guise of bringing organisational reforms in the company wanted to reduce the powers of the Appellant and make him

only a mere figure head. At the Board''s meeting of the twelfth Defendant-company on 10th July, 1977. under a resolution, passed as item 3, the

powers of the Plaintiff to operate bank accounts singly were withdrawn and the cheque-signing powers were in effect restricted. In spite of the

request of the Plaintiff to en large his powers, the Board, according to the Plaintiff, acted against him under the instructions of the first Defendant.

Even though the Plaintiff absented himself at the Board''s meeting, the same was discussed and duly ratified by the Board of Directors in the

Board''s meeting on 27th June, 1977. The Appellant has further alleged in the plaint that at the instance of the first Defendant, the then Chairman of

the Board Sri Ramjeedas Iyer addressed a letter on 24th September, 1977 once again re-opening the question of absence and certain other

matters and calling for the Plaintiff''s explanation. The second Defendant, who had by then become the chairman of the company, issued a letter,

dated 10th October, 1977, stating that the Board viewed seriously the absence of the Plaintiff in the company. The Plaintiff sent two replies on

17th December, 1977 stating that his absence was due to his pre-occupations in settling his affairs of the business at Singapore and on the ground

that he was undergoing treatment for his illness and pleading that apart from the leave entitlement, lie would also be entitled for leave on medical

grounds and, he expressly stated that he did not have any objection not to claim any remuneration or perquisites for the excess period of his

absence from the twelfth Defendant-company. In the meanwhile, the Plaintiff had issued a notice on 27th December, 1977 calling upon the first

Defendant to re-transfer the shares in Messrs. Chemicals and Plastics India Ltd. in view of the fact that the memorandum of agreement reached

between the first Defendant and the Plaintiff had become a dead letter consequent on the first Defendant committing breach of the terms thereof.

The first Defendant sent a reply thereto on 30th December, 1977, which was received by the Plaintiff on 31st December, 1977. The Plaintiff gave

detailed explanation and the Plaintiff alleged that the same (sic) be seen from the copy of the reply notice, dated 17th December, 1977 and that on

a consideration of the merits he had an excellent case on which he should have been fully exonerated. It is the further allegation in the plaint that the

Board in its meeting held on 3rd January, 1978 held that the absence of the Plaintiff, which was the main charge that was raised in the letters, dated

27th September, 1977 and 10th October, 1977, was absolutely justified and the absence was ratified and it was expressly held by the Board that

the Plaintiff''s absence was not deterimental to the interests of the company. The Board decided that the Plaintiff shall refund certain amounts by

way of perquisites drawn by the Plaintiff on the basis that, he had exceeded his leave quota, and that, in respect of certain advances, he should

take some personal responsibility of paying the same, though in law he was not liable, as the advances had been made only in the normal course of

business. What was expected of the Plaintiff thereafter, that is, after 3rd January 1978, was that, he should work in co-operation with the

Managing Director and obey instructions issued by the Board. The Plaintiff, keeping in mind the interests of the twelfth Defendant-company,

accepted with all grace, the decision of the Board on the premise that a curtain was drawn completely on whatever that had happened and on

whomsoever there was a mistake and that the parties should work in the spirit of absolute co-operation and co-ordination. According to the

Plaintiff, a perusal of the minutes of the meeting, dated 3rd January, 1978 would also show that the decision taken at that meeting was not arrived

at subject to any condition that the Plaintiff should give up his personal claim against the first Defendant in regard to matters unconnected with the

twelfth Defendant-company. No such, assurance was given by the Plaintiff to any Director. The parties by action, also treated all the happenings

prior to 3rd January, 1978 as a closed chapter and proceeded on that footing. Even when the Board considered various matters on 3rd January,

1978, they were aware of the existence of controversies between the Plaintiffs on the one hand and the first Defendant on the other, and the Board

members were aware of the exchange of notice, dated 24th December, 1977 and the reply, dated 30th December, 1977. The Plaintiff, in

acceptance of the decision and acting in furtherance thereof, had paid back the monies and did not choose to question the legality of the position in

regard to fixing up of personal responsibility on him for the re-payment of the advance, but, in fact, saw to it, that these advances were completely

re-paid to the company.

It has been further alleged in the plaint that after the meeting, dated 3rd January, 1978 the Plaintiff was attending to the work as before, and

there have been meetings of the Board. He was also taken into confidence by the Board in regard to other committees on which he was appointed

as a member. There are no specific duties attached to the post of Joint Managing Director, but he was to function and perform the duties delegated

to him by the Managing Director. The first Defendant Managing Director did not allocate any particular work to the Plaintiff at any point of time

after 3rd January, 1978. After the Board meeting held on 13th February, 1978, the Plaintiff obtained the permission of the Chairman to go to

Singapore for a period of ten days and, he left India. In the meanwhile, on 14th February, 1978, he was advised by his counsel that certain

questions of fact erroneously stated by the first Defendant in his reply, dated 31st December, 1977 as an answer to the Plaintiff''s notice, dated

24th December, 1977 called for a detailed rebuttal, lest the Plaintiff would be subjected to a comment that, he has not repuidated the statements,

false to the knowledge of the first Defendant, and they would be construed as an admission on the Plaintiff''s part. Therefore, the Plaintiff issued a

re-joinder on 15th February, 1978 to the first Defendant. Enraged at this, it is the case of the Plaintiff, the first Defendant manouvered to bring

about certain resolutions at the Board meeting held on 27th February, 1978. According to the Plaintiff, between the previous Board''s meeting,

dated 13th February, 1978 and the next Board''s meeting on 27th February, 1978, the Plaintiff had been abroad with the permission of the

Chairman and before that there was no complaint of any non-co-operation. The re-joinder issued by the Plaintiff, according to him, had provoked

the first Defendant to manouvere and make the Board pass the resolution, dated 27th February, 1978 to dissociate the Plaintiff from the

management of the twelfth Defendant-company. The Board by its resolution dated 23rd May. 1978 called upon the Plaintiff to show cause as to

why he should not be dissociated from the management of the company. According to the Plaintiff the members of the Board have not taken

proper action on the confidential circular sent to them by the Plaintiff regarding the first Defendant. He would allege that the main spirit behind the

entire show as also the resolutions referred to above, was the first Defendant, who got the resolution passed to his dictation enlisting the support of

a few of the other directors. The Board had already taken the view, according to the Plaintiff, by way of pre-judgment, that the Plaintiff must be

dissociated from the company, and in effect they have come to the conclusion to exclude the Plaintiff, as could be seen from the wordings of the

resolution. The main object of the resolution was to somehow or other get rid of the Plaintiff from the Board, having been conceived and put

through by at the instance of the first Defendant. The calling for of an explanation from the Plaintiff is only an empty formality since the resolution,

dated 23rd May, 1978 was a mala fide one, having been motivated and brought about by the first Defendant. The Plaintiff has specifically alleged

that the hand of the first Defendant in acting with the intention of some how or other getting rid of the Plaintiff is seen in the entire proceedings,

dated 27th February, 1978, and 23rd May, 1978 and at every stars anterior and subsequent to the said dates. After the meeting held on 23rd

May, 1978, the Chairman of the Board issued a notice to the Plaintiff on 27th May, 1978. The Plaintiff submitted his explanation on 5th August,

1978, setting out as to how the whole matter which had been closed as early as 3rd January, 1978, has been again brought in for a discussion. The

Plaintiff has further alleged that the resolutions dated 27th February, 1978 and 23rd May, 1978 are mala fide and prompted by absolute personal

vendatta on the part of the first Defendant in collusion with Defendants 2 to 11, that the action intended to be taken is beyond the authority and

powers of Defendants 1 to 11 and is ultra vires arbitrary and opposed to principles of natural justice, that the action of Defendants 1 to 11 is

without authority and highly discriminatory, that Defendants 2 to 11 had acted in a one-sided manner only listening to and acting upon the

representation made by the first Defendant and ignoring all the representations made by the Plaintiff against the first Defendant, that the action of

Defendants 1 to 11 is unjust and dis-honest, that the Plaintiff has not suffered any disqualification coming within the categories enumerated in

Article 299 of the Articles of Association and that the matter once closed as early as 3rd January, 1978 has been unnecessarily re-opened in order

to get rid of the plain tiff from the Joint Managing Directorship of the twelfth Defendant-company. The Plaintiff has also specifically alleged that

there is conspiracy to oust him and install R. Jagannathan in his place and as sack the resolution passed by the Board should not be discussed or

put before the General Body. With the abovesaid allegations, the Plaintiff, who is the Appellant herein, prayed for the reliefs mentioned in the

paragraphs supra.

In the affidavit filed in support of the application for temporary injunction, the allegations mentioned in the plaint as regards the personal ill-

feelings between the Plaintiff and the first Defendant and also about the resolution passed on 3rd January, 1978 by the Board have been repeated.

The Appellant has further stated in the affidavit that the main two allegations levelled against him at the Board''s meeting, dated 3rd January, 1978

were that he was absent and that he had made certain advances which in the opinion of the Board were imprudent. The further allegations were:

The Board, on 3rd January, 1978, condoned the Appellant''s absence and called upon him to see to it that the alleged imprudent advances were

reimbursed. Accordingly the Appellant performed his part of the obligation under resolution, dated 3rd January 1978 by fully paying the amounts

covered by the advances, and the Board has no authority to re-open the question thus closed. The Appellant''s appointment by the General Body

as Joint Managing Director cannot be taken away by a resolution of the Board. The conduct and character of Defendants 1 to 11 are

discriminatory, unjust and arbitrary. There is a conspiracy to oust him from office and appoint R. Jagannathan the seventh Defendant in his place,

so that all the irregularities, acts of omission and commission on the part of the first Defendant would be completely screened and they may place a

veil on the same with a view to allow the first Defendant to go scot-free. The Appellant reiterated his contention to the effect that he is to continue

as the Joint Managing Director to his full term which expires on 31st December, 1979 and that the Board''s resolutions dated 27th February 1978,

8th May 1978 and 23rd May 1978 to dissociate him from the management are arbitrary and against the principles of natural justice. The Appellant

has stated that he has a strong prima facie case and that the balance of convenience is in favour of maintaining the status quo ante pending disposal

of the suit. The action of the Board, if allowed to take place, the Appellant has alleged, will result in loss of reputation which could never be

compensated by more damages. There is also the specific allegation in the affidavit of the Appellant that the Respondents-Defendants will in no

way be prejudiced by the grant of injunction, for as Joint Managing Director the Appellant has no powers of or signing cheques singly and all the

financial affairs of the company are always capable of being safeguarded by. Court With the above allegations, the temporary injunction was

prayed for.

The first Defendant, in his counter-affidavit to the injunction application, questioned the maintainability of the suit and stated that no declaration

of the nature sought for by the Appellant can be granted, nor can an injunction as prayed for be issued to the Appellant. Reserving his right to deal

with the averments in the affidavit, in his written statement, the first Defendant completely denied the allegations that a conspiracy is being hatched

to remove the Plaintiff from the office of Joint Managing Director, and that he has influenced Defendants 2 to 11 to fall in line with him. The

allegation that the actions of the Appellant were ratified in the Boards meeting on 3rd January, 1978 was denied by the first Defendant. The first

Defendant has not even taken part in the meeting which discussed the matters relating to the Plaintiff. The first Defendant has further alleged that the

post of Joint Managing Director is not of a legal character or status and the Plaintiff cannot seek any declaration or injunction in regard to the same.

It has been further averred that Defendants 1 to 11 are not purporting to remove the Plaintiff from office, but they are only seeking to place a

resolution before the General Body for its consideration. It is entirely a matter for the General Body to decide, whether to approve or reject the

said resolution. The Appellant has thus no bona fids case justifying into grant of an injunction which would in effect prevent the Board of the

company from placing before the General Body a resolution for its consideration. Such an injunction would amount to interfering with the internal

management of the company and in the discharge, by the Directors, of their duties and functions as such. With the above averments, the first

Defendant prayed for the dismissal of the injunction application.

The second Defendant adopted the counter-affidavit filed by the third Defendant and also the twelfth Defendant. The third Defendant in his

counter-affidavit adopted the averments made in the counter-affidavit filed by the twelfth Defendant-company, and stated, that he and other

directors never acted at the instance of the first Defendant and they were not based against the Appellant Plaintiff. He has also further alleged that

he and the other directors have exercised their individual judgment and taken such action at each Board''s meeting as they considered necessary in

the interest of the company. He has also submitted that the Court cannot interfere by way of injunction and prevent the General Body of the

company from considering the resolution sought to be placed before it. With the above allegations, the third Respondent wanted the Court to

dismiss the injunction application.

Defendants 4, 5, 6, 7, 8, 9 and 11 have filed counter-affidavits adopting the counter-affidavits filed by the third and twelfth Defendants. The

twelfth Defendant-company, in its counter-affidavit, has stated that neither the suit nor the injunction application is maintainable, that the Appellant

is endeavouring to stifle the proper and smooth functioning of the company and trying to prevent the company from exercising its undoubted

powers and duties, that no relief has been claimed against the company, that the members of the Board have at all times acted correctly and

without any bias or favour of any person and in the best interests of the company, that the members of the Board are people of independence in

public life, that R. Jagannathan, J. Vincent and D.G. Ramaiah are nominee Directors of financial institutions, viz. Industrial Development Bank of

India, Unit Trust of India and Industrial Financial Corporation of India, that to attribute any conspiracy between such persons to oust the

Petitioner-Appellant from office or to allege that they are acting on the instructions of the first Defendants is defamatory and also a total travesty of

facts and that enforcing of a service contract by way of the present suit is prohibited under the general law and the provisions of the Specific Relief

Act. Finally the twelfth Defendant has stated that in any event, if the company is found to have breached any of its obligations, the Plaintiff can be

compensated in damages. With the above contentions, the twelfth Defendant prayed for the dismissal of the injunction application.

The Appellant-Plaintiff, in his reply affidavit, has reiterated his averments made in his affidavit filed in support of the injunction application and

also the averments made in his plaint. Therein, he referred to the Board''s meeting held on 3rd January, 1978 and stated that the resolutions passed

at the said meeting will clinchingly show that the question of absence was no more in issue after 3rd January, 1978. He has further averred that

subsequent to the reply notice dated 14th February, 1978 sent by him, the first Defendant managed to push through the resolutions bearing the

dates 27th February, 1978 and 28th February, 1978. What happened on 8th May, 1978 and 23rd May, 1978 were mere follow-up actions on

the decisions taken without complying with any known legal formalities. The entire basis of the three resolutions dated 27th February, 1978 8th

May, 1978 and 25th May, 1978 has no foundation or legs to stand, on The Appellant in the reply affidavit has also referred to certain treatment

meted out to him in the Board''s meeting, dated 14th August 1978 by some of the members of the Board''s and submitted that they were

prejudiced against him. He has further clarified the relief he has sought for by stating the recommendation of the Board to place the resolutions

passed on 27th February, 1978, 8th May, 1978 and 23rd May, 1978, which according to him are illegal and mala-fide, cannot be placed before

the General Body. He has also stated that the position of Joint Managing Director is of a legal character and status and that the Directors have not

exercised their individual judgment for placing such resolutions before the General Body. He has further elucidated his stand by stating that he is

holding the position of Joint Managing Director, an office of profit and status and, that he has acted on the understanding and on the terms of the

contract he holds the position till 31st December, 1979, and any attempt to snap that position without any legal or moral justification is clearly an

action which is illegal. It is only to set right things the present suit has been fild. Accordingly to him, the suit is not one for specific performance of

any contract, but is only to set right an illegal action taken by the Board which is sought to be perperated by getting the seal of the General Body.

With the above allegations, the Appellant prayed for the grant of the interim injunction.

The trial Court, after discussing various Board''s resolutions passed prior and subsequent to 3rd January, 1978, and also the notices which were

exchanged between the Plaintiff and the first Defendant, held that the Appellant has a strong prima facie case to the effect that on account of certain

personal differences of opinion between him and the first Defendant, the latter swore vengance against him to throw him out of office and that the

first Defendants''s action is for the purpose of screening himself against certain acts of irregularities and mismanagement committed by him in the

course of the administration of the twelfth Defendant-company and his action is not at all in the interests of the company and that somehow he was

able to enlist the support of the other Directors. The trial Court further held that the Plaintiff has a strong prima facie case that the first Defendant

has been taking action mainly to further his own interest to oust the Plaintiff from office. After thus holding that there is a prima facie case, the trial

Court discussed the pleadings including the pleading in the interlocutory application and held that the prayer in the injunction petition is beyond the

ambit of prayer (a) in the plaint and it may fall within the ambit of prayer (b) in the plaint. The trial Court further held that granting injunction as

prayed for in the application would in effect mean granting injunction restraining the General Body from passing any resolution it may wish and such

an injunction is beyond the ambit of the suit. The trial Court felt that it is for the Board to place any resolution it likes before the General Body and

it is for the General Body to take action on the resolution placed before it and as such the same cannot be restrained from doing so It also felt that

the injunction, if granted, will result in enforcing the service contract which is prohibited by the Specific Relief Act In yet another place in its order,

the trial Court after dealing with the case-law cited by the parties concerned, observed that the resolutions of Defendants 1 to 11 cannot be said to

be null and void, illegal and inoperative, and that at the most it can be said that the resolutions are motivated and such resolutions cannot be illegal

or invalid. Finally, the trial Court, after observing that the grant of injunction, in the circumstances, would certainly amount to interference with the

internal affairs of the company and as such the Court may not have jurisdiction to issue such injunction, held that it is not possible to say that the

Plaintiff''s claim is so frivolous or vexations as to hold that he has no prima facie case. Even on the ground of delay, the trial Court refused to grant

the discretionary relief of interim injunction. On the question of balance of convenience, the trial Court, after observing that the General Body

meeting was scheduled to be held on 25th September, 1978, that large number of persons had been summoned for the said meeting, that the

company will be put to unnecessary expense if the said meeting was postponed, and that the Plaintiff will have ample opportunity to discuss the

matter before the General Body, found that the balance of convenience was in favour of refusing the injunction. In the result, the trial Court

dismissed the injunction application:

Aggrieved by the order of the trial Court in Interlocutory Application No. 14648 of 1978, the Appellant herein preferred Civil Miscellaneous

Appeal No. 425 of 1978 before this High Court. Sathiadev, J., who dealt with the appeal, made reference to the findings of the trial Court and

stated in his order that the trial Court dealing with exhibit A-4 has clearly held that the Petitioner has a prima facie case but after dealing with the

totality of the materials it has found that the Appellant has not made out a prima facie case for the grant of interim injunction at that stage. Dealing

with the discussion of exhibit A-4, which is the memorandum of under standing entered into between the Plaintiff and the first Defendant he earned

Judge found that exhibit A-4 shows that there was admittedly misunderstanding between the Plaintiff and the first Defendant in respect of certain

affairs of the twelfth Defendant company and also in respect of another company in which the future prospects of the first Defendant''s son are

involved. The learned Judge has also observed that it is quite clear that the Plaintiff and the first Defendant had not been getting on well since 1976

and the first Defendant, had, as found in exhibit A-4 tried to find a comfortable berth for his son in the other company by offering to extend support

to the Plaintiff to become the Managing Director of the twelfth Defendant, company when his term of Managing Directorship comes to an end or at

any time earlier, that by extending such inducement, the first Defendant has achieved what he wanted for his son that, therefore, the first Defendant

after receipt of the rejoinder notice exhibit A-16evidently took an attitude to see that the Plaintiff is no longer associated with the company. There

is also an observation by the learned Judge to the following effect:

It is surprising to note that two persons in a company should decide the fate of Public Limited Companies, and bargain between themselves as to

how their future should be shaped or as to, who should head such public limited companies. It is evident that first Defendant was very much

interested in furthering his interests and finding out a comfortable berth for his son. The first Defendant has proved to be no exception to the cult of

son and son-in-law preference borne by filial endearments alone for conferring benefits and in this case, even at the inception, the Court below

itself could make it act and hold as follows:

From what has been stated above, it is clear that we can safely hold that the Plaintiff has a strong prima facie case as far as this aspect of the case

is concerned. The documents referred to in the proceeding paragraphs go to show that the action of the first Defendant, if any, is only his own

interest. It may be incidental in the interest of the company or it may not be. It is more probable that it may not be, rather than may be.... This is a

matter to be finally decided and in this sense the Plaintiff has certainly a prima facie case.

Sathiadev, J., has observed in his order that, he is in entire agreement with the above observations of the trial Court. He further held that it is quite

evident that the first Defendant, for obvious reasons, is trying to exclude the Plaintiff from the company. According to the learned Judge, it may be,

because the Plaintiff in 1976 itself, had come forward to expose certain transactions which had been entered into with the close associates of the

first Defendant, which in turn has enabled the members of the family of the first Defendant to enrich themselves, regarding which there was an

enquiry by the Company Law Board. The learned Judge agreed with the conclusion of the trial Court to the effect that the memorandum exhibit A-

4 cannot be said to be in the interest of the twelfth Defendant-company. For the purpose of the present proceedings, the learned Judge has taken

that misunderstandings have existed between the Plaintiff and the first Defendant at the time when the challenged resolutions were passed. The

learned Judge also held that it is for the Board to decide about the nature of the acts committed by the Plaintiff and in this case the Board has taken

the absence of the Appellant as a serious one. On the question of mala fides of Defendants 1 to 11, the learned Judge no doubt held that there is

animosity between the Plaintiff and the first Defendant and the same is quite evident from exhibit A-4. But the learned Judge held that no material

has been placed before the Court by the Plaintiff to show that Defendants 2 to 11 have any ill-feelings towards the Plaintiff. The learned Judge,

citing certain portions of the Board''s resolution, dated 3rd January, 1978, which read as follows:

5(c) Certain restrictions already imposed on his powers (i.e., signing of cheques etc.) will continue, until the Board reviews this position in the light

of Joint Managing Director''s future performance.

The Board trusts that the Joint Managing Director will appreciate the spirit in which the above decisions have been taken by the Board and give

of his best in co-operation with the Managing Director for the smooth and successful functioning of the company and in accordance with such

directions as may be given to him by the Board through the Managing Director from time to time.

held that the Board had decided to which the Plaintiff''s performance and review it, if circumstances warrant. The learned Judge would continue to

state:

In February, 1978 when Plaintiff went to Singapore with a restricted grant of leave, he tried to extend it and the Board at its meeting on 27th

February, 1978, had taken note of the attitude and felt that it should view this attitude with serious concern and that in future, there should be no

such absence from duty at all, and any absence could only be with prior approval of the Board. In this Board meeting, the re-joinder notice, dated

15th February, 1978 also came up for consideration on a note being issued by the Managing Director, of what it contained in the re-joinder notice.

It was felt that this attitude of the Plaintiff showed that, he was not inclined to co-operate with the Managing Director, which co-operation was

expressed in resolution, dated 3rd January, 1978. In the meeting held on 3rd January, 1978, the Chairman and various Directors spoke to the

Plaintiff, about the absence without leave in February-March, 1978 and about his failure to fulfill the undertaking given in December, 1977, and the

lack of real contribution by the Plaintiff to the company and the lack of any co-operation extended by him to the first Defendant. The Directors

present felt that the situation was totally unsatisfactory and that strict action would have to be taken. No doubt, at this stage Plaintiff had tried to

bring to the notice of the Board certain aspects about the manner in which the first Defendant with the assistance of his close associates syphoned

off the funds of the company. But what was mainly taken into consideration by the Board in the next meeting on 2nd May, 1978 was about the

attitude of the Plaintiff towards the Managing Director in relation with the affairs of the company. The suit filed in Civil Suit No. 205 of 1978 had

been brought to the notice of the Board. The Plaintiff contended before the Board that it was based on personal issues and will not affect his

functioning as Joint Managing Director of the company and his co-operating with the Managing Director. The Managing Director and the Joint

Managing Director thereafter, withdrew from the meeting of the Board and it held discussions on the issue and, thereafter, met on 8th May, 1978

and decided to issue a show cause notice to Plaintiff about the proposed action to be taken against him. It is in this meeting that a decision to call

for remarks and explanations from the first Defendant about the allegations made against him was taken. On 14th August, 1978, it was resolved to

call for the General Body to consider the issue of the removal of the Plaintiff from the post of Joint Managing Director. The first Defendant did not

participate in that meeting during the discussions or when the resolution was voted....

After observing so, the learned Judge held that it will be seen that whatever be the ill-feelings that may exist between the Plaintiff and the first

Defendant, the Plaintiff was not able to show by any evidence, in these proceedings, at that stage that Defendants 2 to 11 had been influenced by

the first Defendant or that they had acted to his dictates. The learned Judge also held that the Appellant had failed to establish that the first

Defendant had been able to influence Defendants 2 to 11 and that the impugned resolution was passed in order to oblige the first Defendant. On

the question of maintainability of the suit, the learned Judge held:

Whether the suit is maintainable or not, this issue is yet to be taken up and considered by the trial Court, and the present proceedings had been

confined only about the grant of injunction or otherwise, and the main contention was stemmed only on the plea of ''mala fides'', which having

failed, Plaintiff cannot claim the relief of injunction.

Finally, the learned Judge summed up stating that since the Plaintiff has failed at this stage to establish that Defendants 2 to 11 have acted with mala

fide intentions, he cannot ask for an interim injunction pending disposal, of the suit. The trial Court, according to the learned Judge, has held that the

Plaintiff has not made out a prima facie case to show that the impugned resolutions had been passed without authority or that they are illegal. With

the above observations and findings, the learned Judge dismissed the appeal.

Aggrieved by the order passed in Civil Miscellaneous Appeal No. 425 of 1978 the Plaintiff has preferred the above Letters Patent Appeal.

Thiru G. Ramaswami the learned Counsel, appeared for the Appellant, while Thiru T. Raghavan, the learned Counsel appeared for the first

Defendant, Thiru Govind Swaminathan, the learned Counsel, though appeared for the twelfth Defendant, argued for Respondents 3 to 12, and

Thiru V.P. Raman, the learned Advocate-General represented the second Respondent. Thiru Srivatsamani, on behalf of Thiru V.P. Raman at the

end of the argument of Thiru Govind Swaminathan, submitted that he completely adopted the argument of Thiru Govind Swaminathan.

Thiru G. Ramaswami, the learned Counsel for the Appellant, took us through exhibits A-1, A-2, A-4, A-11, A-12, A-14, A-16, A-17, A-19,

A-20, A-25, A-26, A-30 and A-31 and the pleadings in this case and submitted that the documents referred to by him would clearly spell out

illegality in the resolution passed by the Board of Directors on 27th February, 1978, which has been marked as exhibit A-17 in this case, and that

the first Defendant, who had been against the Plaintiff had influenced the Board of Directors and thus the impugned resolutions were passed with

malafide intentions to disassociate the Appellant-Plaintiff from the management of the company. According to Thiru G. Ramaswami, the first

Defendant, who was syphoning out the funds of the company for purpose other than for the benefit of the company, had exercised his influence in

the Board passing the resolution to dissasociate the Appellant from the management of the company. The learned Counsel further submitted that

the documents referred to by him would clearly reveal how the Board of Directors, under the influence of the first Defendant had acted with mala

fides, and passed the impugned illegal resolution, and that if the said illegal resolution passed by the Board of placed before the General Body, it

will definitely prejudice the Appellant herein. According to the learned Counsel, it is just like mixing drop of poison in a cup of milk. The learned

Counsel, made it clear that he is not questioning the powers of the General Body to discuss any matters and decide on the issues pertaining to the

affairs of the company. The removal of the Joint Managing Director is no doubt within the powers of the General Body. But to place the impugned

resolution passed by the Board of Directors which bad mala fide intentions against the Appellant herein, will not be fair, and the proceedings at the

General Body will be vitiated is such a resolution passed by the Board of Directors is discussed therein. The main question, according to the

learned Counsel appearing for the Appellant, in these proceedings is to discuss and decide about the mala fide nature of the impugned resolution.

Once the Court comes to the conclusion that the impugned resolution is illegal and passed on account of the influences exerted by the first

Defendant on the Board, mala fide intentions can be easily inferred from the documents available on record. The learned, Counsel further

submitted that the allegation against the Appellant, both as regards his absence from India and his making certain, advances, had been clearly

condoned after giving certain directions to the Appellant by the Board at its meeting held on 3rd January 1978, as evidenced by exhibit A-14,

marked in this case. On 13th February, 1978 the Appellant left for Singapore with the permission of the Chairman of the Board of Directors after

taking three days'' leave. Subsequently, he applied for an extension of leave by a week. This was agreed to by the Chairman. On 25th February,

1978, the Appellant requested for leave of absence for the meeting to be held on 27th February, 1978. Thus, it is clear at least for ten days as and

from 13th February, 1978, the permission of the Chairman had been obtained for his absence during that period. That would take one to 23rd

February, 1978. By a telex message, dated 25th February, 1978, it is seen that the Appellant has requested for leave of absence for the Board''s

meeting on 27th February, 1978. No doubt that leave has not been sanctioned. Thiru G. Ramaswami, drawing our attention to these facts,

submitted that actually the absence without permission was only from 23rd February, 1978 to 27th February, 1978, which would come to only

five days. On the ground of this absence, and taking into account the note on the re-joinder notice, exhibit A-16 sent by the Appellant to the first

Defendant, the Board, at its meeting held on 27th February, 1978, passed the resolution for once and for all disassociating the Appellant from Joint

Managing Directorship in the company subject to the approval of the General Body. The learned Counsel further submitted that once the Board

has decided to disassociate the Appellant, even without asking him as to why, he should not be disassociated from the company the subsequent

absence after 27th February, 1978 does not assume any importance. The very purpose of passing such a resolution is to get rid of the Appellant

somehow or other, owing to the fact that, he had issued, exhibit A-16 the re-joinder notice, dated 15th February, 1978 to the first Defendant

alleging irregularities on the part of the first Defendant. The first Defendant had placed note on this re-joinder notice before the Board and had

influenced the Board to pass such a resolution, which, according to the learned Counsel, establishes the conspiracy among, and the mala fide

intentions on the part of, the Board of Directors in getting rid of the Appellant from the management of the company. Thiru G. Ramaswami further

stated that inasmuch as both the Courts below have found a prima facie case having been made out by the Appellant, they should have maintained

the status quo by granting the temporary injunction. The learned Counsel challenged the orders of the Court below and of Sathiadev, J., stating that

they have missed the point and have launched upon a discussion on the question of the powers of the Board and also of the General Body. The

powers of the General Body are not at all questioned and the General Body has ample powers to take up any resolution of the Board for a

discussion and decision provided such resolution placed before it is not the outcome of mala fide intentions of the persons who place the some

before it. According to Thiru G. Ramaswami, the Appellant has made out a prima facie case as to the illegal nature of the resolution and also the

mala fide intention of the first Defendant who influenced the other Directors of the Board to pass the impunged resolution. It is only at the final

hearing of the suit the whole matter can be decided conclusively as to the mala fide nature of the impugned resolution. For the purpose of obtaining

the interim relief sought, the party has to make out only a prima facie case. As far as the present case is concerned, it is the submission of Thiru G.

Ramaswami, a triable and a prima facie case has been made out and therefore the Court below and Sathidev, J., ought to have granted the

temporary injunction prayed for. The learned Counsel also cited certain decisions in support of his contentions, which will be discussed later in this

judgment. The learned Counsel also submitted that the question of maintainability of the suit has not been taken up for decision. The Courts below

have definitely found that a prima facie case has been made out by the Appellant herein. The prayer in the suit is not to enforce strictly the service

contract, but to get a declarartion that the resolution of the Board sought to be placed before the General Body are null and void and of no legal

effect. No doubt, there is an additional prayer in the plaint for declaring that the Plaintiff is entitled to hold office as Joint Managing Director till 31st

December, 1979 as per the service contract under exhibit A-4. The prayer in the suit to declare the resolutions as null and void is maintainable,

and the balance of convenience is in favour of the Appellant for getting a temporary injunction, and if the interim injunction is not granted, the

statute and the reputation of the Appellant will be jeopardised, which cannot be compensated by way of damages. On the other hand, according to

Thiru G. Ramaswami, the Respondents-Defendants will not be prejudiced in continuing the Appellant as the Joint Managing Director of the twelfth

Defendant-company, pending disposal of this suit, when especially his powers have been cut down and he is to act under the Managing Director

and on the instructions and advice of the Board of Directors. The company will not be put to any loss also, and there is absolutely no allegation

against the, Appellant except for stating that there is no co-operation coming from him to the first Defendant. On these submissions, the learned

Counsel appearing for the Appellant prayed for the issuance of a temporary injunction pending disposal of the suit. He also submitted that, he has

no objection to the trial Court being directed to dispose of the suit as expeditiously as possible.

Thiru Govind Swaminathan,the learned Counsel arguing for Defendants 3 to 12, took is through exhibits A-3, A-8, A-9, A-10, A-11, A-12,

A-14, A-15, A-16, A-17, A-18, A-21, A-22, A-25, A-26, A-30 and A-31 and submitted that no prima facie case has been made out by the

Appellant to ask for a temporary injunction pending disposal of the suit. The learned Counsel reiterated the argument, he submitted before

Sathiadev, J., and stated that the suit itself is for enforcing the service contract and the same is not maintainable. He also submitted that no

particulars about the alleged mala fides have been given by the Appellant, and it is incumbent on the person alleging such mala fides not only to give

details about them but also to strictly prove the same. The learned Counsel invited our attention to Section 299 of the Companies Act, 1956, and

submitted that there is a specific procedure where a Director has some interest in certain resolution, and, therefore, the present suit cannot be

sustained. Thiru Govind Swaminathan farther submitted that the Board has taken a very lenient view for the prolonged absence of the Appellant in

the company and despite such attitude taken by the Board the Appellant has not changed his attitude for the betterment of the company. He also

pointed out that there is no allegation of mala fides against Respondents 2 to 11 until today and nothing has been prayed against the company

which is the twelfth Defendant in the suit. The learned Counsel pointing out that the Appellant was aware of the Board''s meeting held on 27th

February, 1978 and also participated in the Board''s meeting held on 3rd April, 1978 and 8th May, 1978, submitted that the Appellant had not

agitated his rights, if any, at those meetings. The Board, at its meeting held on 3rd April, 1978, in which the Appellant participated, confirmed the

proceedings of the Boards'' meeting held on 27th February, 1978. It was only in the Board meeting held on 27th February, 1978 a resolution was

passed for taking steps to disassociate the Appellant from the management of the company. Finally, the learned Counsel submitted that there is no

prima facie case made out by the Appellant, that some of the Directors are not parties to the suit, such as K. Palani and V. Ramachandran, and

that mala fides have not been alleged against every one of the Directors. With these submissions, the learned Counsel wanted this Court to dismiss

the appeal.

Thiru T. Raghavan, the learned Counsel appearing for the first Respondent, submitted that there was no misunderstanding between the Plaintiff

and the first Defendant subsequent to the memorandum of agreement, exhibit A-4, and that all the actions taken by the Board were only in the

interest of the company and correctly the Managing Director brought all the facts before the Board of Directors. There is absolutely no mala fides

as suggested by the Appellant either on the part of the first Defendant or on the part of any of the other Directors of the company and hence the

application for temporary injunctions was misconceived.

Thiru G. Ramaswami, the learned Counsel appearing for the Appellant, in reply after reiterating his arguments advanced at the inception,

submitted that the balance of convenience is in favour of the Appellant for the grant of the interim injunction and that a prima facie case has been

made out by the Appellant for obtaining an order of interim injunction.

We have carefully gone through the pleadings and the documents pointed out by the learned Counsel appearing on either side.

As already noticed, the suit is for declaration and injunction The declaration sought for are that the Plaintiff-Appellant is entitled to hold office

as Joint Managing Director till 31st December, 1979 as per his service agreement and that the resolutions of the Board of Directors dated 27th

February 1978, 8th May, 1978 and 23rd May, 1978 are null and void. The injunction is for restraining Defendants 1 to 11 from placing the

resolution before the general Body for dissociating the Plaintiff from the office of joint Managing director and the management of the company

Along with the plaint, the Plaintiff-Appellant filed Interluctory Application No. 14648 of 1978 praying for a temporary injunction restraining

Defendants 1 to 11 from disassociating him from the management of the twelfth Defendant-company as Joint Managing Director, pending disposal

of the suit or from implementing any decision, if they have taken in this direction, pending disposal of the suit. In his affidavit filed in support of the

application, the Appellant has alleged that on account of some personal differences of opinion between himself and the first Defendant, the first

Defendant swore vengance against him, that the first Defendant hatched a plan to throw him out of office, that the action of the first Defendant is for

the purpose of screening himself from certain irregularities and acts mismanagement committed by him in the course of his administration of the

company and that the first Defendant has enlisted the support of the other Directors who are Defendants 2 to 11. It has been further stated by the

Appellant in his affidavit that the Board by its resolution, dated 3rd January 1978 condoned the absence of the Appellant and there is no question

of renewing the said complaint once over. Since the Appellant gave a re-joinder notice to the first Defendant 15th February, 1978, the first

Defendant got annoyed by the same and he managed to push through at the Board meeting, dated 27th February, 1978 the decision to

disassociate the Appellant from the affairs of the company. Ultimately the first Defendant got the resolution passed in the Board''s meeting. This

was followed by the issue of a formal show cause notice, for which the Appellant submitted his explanation on 25th July, 1978 and 4th August,

1978. The Appellant has also specifically alleged in the affidavit in support of the injunction application that out of mala fide intentions, the first

Defendant got the resolution passed by the Board in spite of the fact that the Board by its resolution dated, 3rd January 1978 had condoned the

Appellant''s absence from the company and the advance made by him and that the Appellant has paid the amounts covered by the advance made

by him. The character and conduct of Defendants 1 to 11, according to the Appellant, in pushing through such resolution is discriminatory, unjust

and arbitrary. There is a specific allegation in the affidavit filed in support of the application filed by the Appellant to the effect that he reliably learnt

and understands the same to be true that a conspiracy has been hatched to out him from office and appoint R. Jagannathan the seventh Defendant

in the said place, so that all the irregularities, acts of omission and commission on the part of the first Defendant would be completely screened and

a veil placed in the same so as to allow the first Defendant to go scot-free. Requesting the Court to read the allegations in the plaint filed by him as

part and parcel of his affidavit, the Appellant has submitted that he has made out a strong prima facie case to enable him to get the temporary

injunction and that the balances of convenience is in favour of maintaining the statue quo ante pending disposal of the suit. The Appellant has further

submitted that, he holds a very respectable place in the society both by virtue of his heritage and of position in the business circle, that both in his

individual capacity and as Joint Managing Director of the twelfth Defendant-company, he has a place in society, that if he were to be thrown out of

the position of Joint Managing Director without any legal justification, he will suffer very seriously and that such a loss will not only be of his

reputation and money, but the loss could never be compensated for by mere damages. The Appellant has also submitted in his affidavit filed in

support of the injunction application that the Respondents will in no way be prejudiced by the grant of the temporary injunction, for, as Joint

Managing Director, he at present, has no cheque signing powers singly and all the financial affairs of the company are always capable of being

safeguarded by Court.

In the counter-affidavits filed by the first Defendant, the third Defendant and the twelfth Defendant, which we have already extracted in the

foregoing paragraphs, there is absolutely nothing to state that the balance of convenience will be in favour of the company, if the injunction is

refused. The twelfth Defendant except for vaguely stating that the smooth functioning of the company will be affected, if the Appellant is permitted

to continue as the Joint Managing Director, has not opposed the grant of injunction on the ground of balance of convenience.

At the Board''s meeting held on 3rd January, 1978, the proceedings of which have been recorded in exhibit A-14, the Board took into

consideration three main issues. The first is the totality of the Plaintiff''s absence from duty as Joint Managing Director. With certain directions, the

Board condoned the said absence, which was prior to 3rd January, 1978. The second issue related to a total advance of Rs. 7 lakhs to Messrs.

Ramraj Associates. The Joint Managing Director took the responsibility of making good the balance of Rs. 35,000 due from the said concern.

Upon this, the matter was closed with a direction that the Joint Managing Director will hold himself responsible to pay this balance to the company.

The third issue was with regard to loan advances made by the Appellant amounting to Rs. 2 lakhs. On the assurance given, and the personal

responsibility taken, by the Joint Managing Director, this matter also was closed. No doubt, the Board in its resolution, which is exhibit A-14, has

stated:

5(c) Certain restrictions already imposed on his powers (i.e., signing of cheques, etc.) will continue until the Board reviews this position, in the light

of Joint Managing Director''s future performance.

The above resolution under exhibit A-14, in our view, will give right to the Board to impose certain restrictions or relax then watching the future

performance of the Appellant in relation to the affairs of the company. To say that the future performance of the Appellant in relation to the affairs

of the company will give right to the Board either to re-open the three issues discussed by it on 3rd January, 1978, or close them, is not correct.

What all happened prior to 3rd January, 1978, in our opinion, were dismissed and decided after issuing certain directions to the Appellant at the

Board''s meeting, the proceedings of which are evidenced by exhibit A-14, Between 3rd January, 1978 and 13th February, 1978 there was

absolutely no complaint against the Appellant and the Appellant actually left for Singapore on 13th February, 1978 with the permission of the

Chairman. On 15th February, 1978, we see, a re-joinder notice was issued by the Plaintiff in reply to the reply notice that had been sent by the

first Defendant to the Plaintiff. This is exhibit A-16. In this re-joinder notice, the Appellant has alleged various misdeeds as having been committed

by the first Defendant as Managing Director of the company and also the anxiety of the Managing Director to oust the Appellant from Joint

Managing Directorship. This re-joinder notice according to Thiru G. Ramaswami has infuriated the first Defendant, who is the Managing Director

of the company and he exercised his influence over the other Directors and all of them together decided to disassociate the Appellant from the

Joint Managing Directorship.

In this background, we have the extract from the proceedings of the Meeting of the Board of Directors of the twelfth Defendant-company,

dated, 27th February, 1978, marked as exhibit A-17. At this meeting, we find that the Managing Director, even though he did not participate in the

discussion, had placed note on exhibit A-16 re-joinder notice issued to him by the Appellant on 15th February, 1978. There is also mention in

exhibit A-17 that the Managing Director requested the Board to consider, on the basis of exhibit A-16 as to how far the hopes expressed by the

Board regarding the co-operation to be extended by the Joint Managing Director in the smooth and efficient running of the company could be

achieved. We see the Board expressing its view in exhibit A-17 in the following terms:

The Board decided that the Joint Managing Director should be informed that certain acts of omission and commission of the Joint Managing

Director had been considered and discussed at the Board meeting held on 3rd January 1978 and on these, the Board had taken a less stringent

view than it would normally have taken only on the definite exceptions that the Joint Managing Director would in future co- operate with the

Managing Director for the smooth and successful functioning of the company and also on his assurance to some of the Directors that the then

threatened legal proceedings would not be pursued. However, it now appears to the Board the Joint Managing Director intends to pursue his legal

action which would have from the point of view of India Cements Limited a clearly prejudicial effect on its efficient management. Therefore, the

Board is of the view that his association as Joint Managing Director may not be in the interests of the company and it has become necessary for the

Board, subject to the appropriate procedure of hearing the Joint Managing Director on this aspect, to take suitable action for dissasociating him

from the management of the company. The Chairman was requested to inform the Joint Managing Director about the above decision of the Board

as well as the Board''s views of this present absence.

A reading of the above proceedings in exhibit A-17 in our few, prima facie makes out the influence exerted by the first Defendant by placing

exhibit A-16 before the Board. The Board, even without discussing the averments in exhibit A-16, wherein serious charges were made against the

first Defendant by the Plaintiff simply felt that there would be no future co-operation by the Joint Managing Director extended to the Managing

Director in the affairs of the company''s management and the Board has also with concern, noted the threatened legal proceedings mentioned by

the Appellant in exhibit A-16, Thiru. G. Ramaswami the learned Counsel appearing for the Appellant, submitted that the legal proceeding intended

to be taken was a purely personal affair between the Appellant and the first Defendant and the same has nothing to do with the company''s affairs).

Thus, the documents referred to above, prima facie, make out the influence exercised by the first Defendant on the Board for the purpose of

disassociating the Appellant from Joint Managing Directorship.

Then, we have exhibit A-19, dated 2nd May, 1978, which is a note given by the Appellant to the Chairman of the Board of Directors of the

company. In this note, the Appellant has averred various irregularities and misdeeds as having been committed by the first Defendant in relation to

the affairs of the twelfth Defendant-company. In spite of exhibit A-19 we see that the Board without calling for any explanation from the first

Defendant, passed a resolution on 23rd May, 1978 for the purpose of calling for explanation from the Appellant by the issue of a proper show

cause notice to him. In the show cause notice, which exhibit is A-26 we see that matters which had been closed on 3rd January 1978 (exhibit A-

14) have been raked up. The entire absence of the Appellant in the company prior to 27th February, 1978 was catalogued in that show cause

notice and explanation of the Appellant was called for. As far as this allegation of absence is concerned we have already noticed the proceedings

of the meeting of the Board marked exhibit A-14 which condoned the Appellant''s absence prior to 3rd January, 1978. Subsequent to the said

Board meeting dated, 3rd January 1978, the Appellant with the permission of the Chairman of the Board went to Singapore for three days in

January, 1978. Again on 13th February, 1978, at the Appellant''s request a period of three days'' leave to proceed to Singapore in connection

with the personal work of the Appellant was approved. This leave was extended at the Appellant''s request, by a week. This takes to 23rd

February, 1978. Even subsequent to that, the Appellant has sent a telex message on 25th February, 1978 requesting for leave of absence for the

meeting of the Board on 27th February, 1978. In spite of that in the Board meeting held on 27th Februaryl978 the Board decided to disassociate

the Appellant from Joint Managing Directorship of the company. Taking into account the fact that the absence prior to 3rd January, 1978, had

been condoned and for absence upto 23rd February 1978 the Appellant had the permission of the Chairman of the Board the actual number of

days of absence without permission, even considering that the telex, dated 25th February, 1978 requesting for leave of absence is rejected, will be

only five days. This period of absence has been taken seriously by the Board of Directors. Thiru G. Ramaswami, the learned Counsel appearing

for the Appellant, contended that the real reason for the Board''s action is not the absence of the Joint Managing Director, but the influences

exerted by the first Defendant on the Board of Directors since the Appellant had issued exhibit A-16 to the first Defendant. In the show cause

notice, we also find reference to the advance to the tune of Rs. 7 lakhs and another sum of Rs. 2 lakhs, which had been considered in the Borad''s

meeting, dated 3rd January, 1978 (exhibit A-14). Thiru G. Ramaswami submitted that the Board has acted with malafide intentions in raking up the

closed matters once over and that is on account of the influence exerted by the first Defendant on the Board. Various other lapses have also been

mentioned in the show cause notice. For this show cause notice, the Appellant has given an explanation under exhibit A-31. Thiru G. Ramaswami

also invited our attention to exhibit A-31 with which the Appellant sent exhibit A-30 in a sealed cover stating:

I am herewith annexing a sealed cover which contains my detailed explanation on merits of the charges also. If the Board does not appreciate my

attitude and close the chapter, then it may open the sealed cover and deal with my explanation on merits, in which case, I may be given an

opportunity of an oral hearing to explain my stand.

This, according to Thiru G. Ramaswami, shows the intention of the Appellant to Co-operate with the management of the Company.

From all the above facts, we find that a prima facie case has been made out for the grant of a temporary injunction. The contention of Thiru S.

Govind Swaminathan to the effect that the suit is not maintainable has not been agitated in that form before the courts below. Such as issue can as

well be raised and argued as a preliminary issue in the suit. At this stage, we find a prima facie case on the pleadings and the documents before us,

and it is unnecessary to go into the details and proof of such allegations. Thiru S. Govind Swaminathan, no doubt took us through the various

Board''s proceedings and the participation of the Appellant subsequent to 27th February, 1978 therein and stated that there could not have been

any mala fides on the part of the Board of Directors in ousting the Appellant from the management of the company. The learned Counsel

vehemently submitted that mala fides have, not been alleged against each of the Directors independently and as such the Plaintiff''s suit has to fall.

As we have noticed already the Board''s proceedings take root from the differences that existed between the first Defendant and the Plaintiff.

Exhibit A-16 the rejoinder notice of the Plaintiff and exhibit A-30 his explanation prima facie establish the ill-feelings between the Managing

Director and the Joint Managing Director. The proceeding taken by the Board with a remark even at the inception that the Appellant-Plaintiff has

to be disassociated from the Joint Managing Directorship prima facie strengthen the allegation of the Plaintiff against the Board of Direction. The

contention of Thiru''s. Govind Swaminathan is that the Appellant can as well put forth all his defences before the General Body which is the ultimate

authority to disassociate him from the Joint Managing Directorship. We find, the Appellant does not question the authority of the General Body,

but he does not want the resolutions passed by the Board of Directors, who, in his opinion, have acted with biasand mala fides under the influences

of the first Defendant to be placed and dealt with at the General Body. No doubt, this question of bias and mala fide has to be gone into in detail

only at the final hearing of the suit. It is for the trial Court to decide on the evidence that will be let in, as to whether the Appellant has proved mala

fide in the resolutions passed by the Board of Directors and as to how far they are illegal and void. To observe anything with regard to the

resolutions passed by the Board of Directors at this stage will definitely prejudice one or the other of the parties. In these proceedings, we have

only to consider whether the Appellant has made out a prima facie case to get interim injunction pending disposal of the suit.

Thiru G. Ramaswami, cited the decision in American Cyanmid Co. v. Ethicon Ltd. (1975) 2 W.L.R. 316 wherein the House of Lords

reiterating the principle that the test is balance of convenience for grant of injunction, held:

Nevertheless this authority was treated by Graham, J. and the Court of appeal in the instant appeal as leaving intact the supposed rule that the

court is not entitled to take any account of the balance of convenience unless it has first been satisfied that if the case went to trial upon no other

evidence than is before the court at the hearing of the application the Plaintiff would be entitled to judgment for a permanent injunction in the same

terms as the interlocutory injunction sought.

Your Lordships should in my view take this opportunity of declaring that there is no such rule. The use of such expressions as a probability, a

prima facie case, or a strong prima facie case it the context of the exercise of a discretionary power to grant an interlocutory injunction leads to

confusion as to the object sought to be achieved by this form of temporary relief. The Court no doubt must be satisfied that the claim is not

frivolous or vexatious; in other words, that there is a serious question to be tried.

No doubt the proposition has been widely slated by the House of Lords in this decision for the grant of injunction. We do not think, it is necessary

for us to go so far to decide the present appeal. We have considered as to whether a prima facie case is made out by the Appellant and as to the

balance of convenience for grant of the injunction.

Thiru G. Ramaswami, next cited the decision in T.P. Daver v. Lodge Victoria No. 363, S.C. Belgaum (1964) 1. S.C.R. 1 for the proposition,

that the civil Court has jurisdiction to interfere even in respect of decision passed by private bodies like Masonic Lodge. In that decision the

following principles have been stated:

A member of a masonic lodge is bound to abide by the rules of the lodge; and, if the rules provide for expulsion, he shall be expelled only in the

manner provided by the rules.

The lodge is bound to act strictly according to the rules, whether a particular rule is mandatory or directory falls to be decided in each case,

having regard to the well settled rules of construction in that regard.

The jurisdiction of a civil court is rather limited; it cannot obviously sit as a court of appeal from decisions of such a body; it can set aside the

order of such a body, if the said body acts without jurisdiction or does not act in good faith or acts in violation of the principles of natural justice as

explained in the decisions cited supra.

Another case by Thiru G. Ramaswami which can be use fully referred is G. Sarana Vs. University of Lucknow and Others, wherein the

Supreme Court has observed (head note):

What has to be seen in a case where there is an allegation of bias in respect of a member of an administrative Board or body is, whether there is

reasonable ground for believing that he was likely to have been biased. In other words, whether there is substantial possibility of bias animating the

mind of the member against the aggrieved party. In deciding the question of bias, human probabilities and ordinary course of human conduct have

to be taken into consideration, In a group deliberation and decision like that of Selection Board, the members do not function as computers. Each

member of the group or Board is bound to influence the others, more so if the member concerned is a person with special knowledge. His bias is

likely to operate in a subtle manner.

Considering the principles laid down in the above said decision and also bearing in mind the facts and circumstances of this case, we have to

hold that the Appellant has made out a prima facie case for getting an interim injunction from this Court. There is definitely misunderstanding and

strong ill-feelings between the first Defendant, who is the Managing Director, and the Appellant-Plaintiff. It is at the hearing of the suit the court has

to finally decide, whether the first Defendant has influenced the other Directors of the Board in a subtle manner or openly.

We do not think that Section 299 of the Companies Act, 1956, referred to by Thiru S. Govind Swaminathan, has any application to the facts

of the present case. That section is in respect of the procedure to be followed in cases where a particular Director has some interest in a contract

or arrangement which the company has to enter into.

Thiru T. Raghavan, no doubt, stated that after exhibit A-4 memorandum of agreement, there was no misunderstanding between the Appellant

and the first Respondent in respect of the company affairs. According to the learned Counsel, the Managing Director has correctly placed the re-

joinder notice exhibit A-16 issued by the Appellant to him at the Board Meeting, that as Managing Director it was his duty to bring to the notice of

the Board all that pertains to the company and that exhibit A-16 relates to the affairs of the company. But, we feel, prima facie the documents

referred to in the paragraphs supra spell out misunderstanding between the Appellant and the first Defendant even, after exhibit A-4.

It is clear from the facts of the case that the Appellant had the benefit of interim injunction until the filing of the appeal. The resolution has not

been placed before the General Body. It is also clear from the facts discussed supra that the powers of the Joint Managing Director, who is the

Appellant, have been curbed to a great extent. There is a definite allegation by the Appellant in his affidavit filed in support of the injunction

application that the balance of convenience is in favour of the grant of interim injunction. There is absolutely nothing in the counter affidavits filed by

the Defendants-Respondents to show that any irreparable loss or prejudice would be caused to the company, if the injunction sought for is

granted. There is enough check by the Managing Director and by the Board of Directors on the affidavits of the Appellant. As such, we are of the

view that no prejudice would be caused to the company, if the interim injunction sought for is granted in favour of the Appellant. On the other

hand, the whole suit will become infructuous a part from the fact that the reputation and honour of the Appellant will be very much affected if the

injunction sought for is not granted pending disposal of the suit.

We make it clear that any discussion or observation made by us in the course of this judgment is only tentative for the purpose of finding out,

whether the Appellant has made out a prima facie case for the grant of temporary injunction, and will not in any way prejudice the parties to this

appeal when the suit is ultimately taken up for final disposal by the trial Court.

Inasmuch as we find that a prima facie case has been made out by the Appellant herein and that the balance of convenience is in favour of the

Appellant for the grant of the interim injunction, we are of the view that there should be a temporary injunction as prayed for pending disposal of

the suit, and we accordingly grant the same.

With the above said observations, this letters patent appeal is allowed. There will be no order as to costs.