Oriental Metal Pressing Works (Private) Ltd. & Others Vs. Bhaskar Kashinath Thakoor & Another

In The High Court Of Judicature At Bombay
A.F.O.D. No. 540 Of 1958
In Suit No. 2935 Of 1957
Oriental Metal Pressing Works (Private) Ltd. & Others
v.
Bhaskar Kashinath Thakoor & Another
Date: 02-02-1959

S.T. Desai, J.

1. This appeal raises an important question of construction of S.312 of the new Companies Act which section now imposes total prohibition against any assignment of his office by a Director. The prohibition applies in case of both a public and a private limited company. The facts are not in dispute nor disputable. The first appellant (original first defendant) is a private limited company incorporated on 21-5-1955. Prior to that Dadoba Kashinath Thakoor was the sole proprietor of a business of metal pressing works which he carried on in the firm name of Oriental Metal Pressing Works. The first appellant company acquired that business as a going concern. The agreement dated 7-7-1955 between Dadoba and the Company states that Dadoba was appointed Managing Director of the company and was entitled to hold that office for life. Clause 7 of that agreement is as under:

“Mr. Thakoor shall be entitled by deed inter vivos or by will or codicil to appoint any person to be a Managing Director in his place and stead and in default of such appointment the legal representatives of Mr. Thakoor shall be entitled to exercise the said power. Any appointee as aforesaid shall whilst holding office also be designated as a Managing Director and shall be entitled to be paid by the Company the same remuneration and to exercise the same powers and authorities as are vested in Mr. Thakoor and the appointee as aforesaid shall have a power of appointing any person to be Managing Director as his successor on the remuneration of not less than Rs. 1,000 (Rupees one thousand) per month and upon some other terms and conditions as are herein contained.”

Under the agreement Dadoba was to be allotted a certain number of fully paid up shares of the company. Article 109 of the Articles of Association of the company is material and is as under :

“109 (a). The said Shri Dadoba Kashinath Thakoor shall be the first Managing Director of the company at a remuneration of Rs. 2,500 per month subject to the said remuneration being increased by the Board of Directors of the Company. He shall be entitled to hold such office for life and will not be subject to clauses 87, 88 and 91 of these Articles.

(b) The said Shri Dadoba Kashinath Thakoor may by deed inter vivos or by will or codicil appoint any person to be a Managing Director in his place and stead and in default of such appointment, the legal representatives of the said Shri Dadoba Kashinath Thakoor shall be entitled to exercise the power;

(c) Any appointee as aforesaid shall, whilse holding office, also be designated a Managing Director and shall be entitled to the same remuneration and to exercise the same powers and authorities as were vested in the Managing Director in whose place and stead he is appointed;

(d) The appointee as aforesaid shall have a power of appointing any person to be a Managing Director as his successor on the remuneration of not less than Rs. 1,000 per month and with the same powers as are vested in Shri Dadoba Kashinath Thakoor.”

Dadoba died on 14-1-1957. By his will executed on 18-8-1956, he appointed his son, the second appellant (original 2nd defendant) to be the Managing Director of the company from the date of his demise. The 1st Respondent to the appeal (plaintiff to the suit) is the brother of Dadoba. The 2nd Respondent to the appeal (original 4th Defendant) is another son of Dadoba. The first Directors of the Company were (1) Dadoba; (2) Bhaskar, and (3) Govind, one of the sons of Dadoba. The same persons continued to be directors till 14-1-1957 when Dadoba died. At the time of Dadoba’s death, the shares of the company were held as under :

Dadoba…1971 shares.

Plaintiff…845 shares.

2nd Defendant…844 shares

4th Defendant…843 shares.

We are told that Dadoba died leaving 3 sons and his shares were inherited by his three sons as part of his estate.

2. Dispute arose between the plaintiff and the second Defendant soon after Dadoba’s death when the latter assumed the Managing Directorship and Chairmanship of the Board of Directors of the company on the basis of the appointment made by the will of Dadoba. Defendant No. 2 began to act as the Managing Director and the Chairman of the Board of Directors of the company and also began to draw a salary of Rs. 3,500 per month. The plaintiff addressed letters to the Second Defendant on 23-3-1957 and 29-3-1957 and contended that the 2nd defendant had no right to act as Managing Director and/or Chairman of the Board of Directors of the Company. He also contended that the second defendant had no authority to call a meeting of the Board of Directors as he had purported to do and that the appointment of Defendant No. 2 as Managing Director of the Company by the Will of Dadoba was not valid and not binding on the plaintiff or the Company. Correspondence ensued in the course of which the second defendant contended that he was the Managing Director and entitled to call meetings and conduct the business of the Company as its Managing Director. The plaintiff contended that the power of Dadoba to appoint a Managing Director by his Will given by the Articles of Association and the Agreement was invalid, illegal and inoperative on the ground that in the meantime the new Indian Companies Act had come into force and the provisions of that enactment rendered any such power invalid and illegal. The plaintiff also contended that defendant No. 2 was acting in his own interest and in a manner detrimental to the interest of the company. He made reference to the Agenda of a meeting dated 13-5-1957 which included an item viz. ‘To consider the provision for bonus to late Shri Dadoba Kashinath Thakoor in his capacity as the Managing Director”. The plaintiff also contended that defendant No. 2 claimed to be the beneficiary under the Will of Dadoba and his attempts were to add to the estate of Dadoba to the detriment of the company. In the last week of June, 1957 the plaintiff received a letter dated 28-6-1957 from the second defendant alleging that the plaintiff had ceased to be a Director of the Company under S. 283 (g) of the Companies Act and Art. 85 (f) of the Articles of Association of the Company owing to his absence without leave at three consecutive meetings of the Board of Directors and/or at all such meetings for a continuous period of three months. The plaintiff brought a suit for a declaration that he was and continued to be a Director of the first Defendant Company and was entitled to act as such. He also sought a declaration that the appointment of the second defendant as a Managing Director and/or Chairman of the Board of Directors of the first defendant Company was void, invalid and inoperative. He also sought a declaration that the appointment of the third defendant as a Director was invalid, illegal and inoperative. It seems that some time before the suit was filed, the second defendant in the purported exercise of his powers had co-opted the third defendant as a Director of the Company. The plaintiff also sought relief by way of certain injunctions in that suit. He asked for an injunction restraining defendant No. 2 from acting as Managing Director of the Company and for an injunction against defendant No. 3 restraining him from acting as a Director of the Company. He also sought a further injunction restraining the defendants from holding an annual general meeting of the company which was proposed to be held on 28-11-1957. In the suit, he impleaded the company as Defendant No. 1. Defendant No. 3 to the suit (appellant No. 3) as I have already mentioned, was co-opted by defendant No. 2 as a Director of the Company. Various issues were raised by the learned Judge, City Civil Court, who tried the suit. It is not necessary for the purpose of the present narrative to state them and it will suffice to observe that the main question which had to be determined by the learned Judge was whether the appointment of Defendant No. 2 as the Managing Director of the Company by the Will of Dadoba was invalid and ineffective in law by operation of S. 312 of the new Companies Act. That section, as I shall have occasion to point out little later appears under the heading “Miscellaneous provisions” and is as under :

“Prohibition of assignment of office by a director. – Any assignment of his office made after the commencement of this Act by any director of a company shall be void.”

It will be convenient here to set out S. 9 of the new Companies Act which is as under :

“Act to override memorandum, articles, etc. Save as otherwise expressly provided in the Act –

(a) the provisions of this Act shall have effect notwithstanding anything to the contrary contained in the memorandum or articles of a company, or in any agreement executed by it, or in any resolution passed by the company in general meeting or by its Board of Directors, whether the same be registered, executed or passed, as the case may be, before or after the commencement of this Act; and

(b) any provision contained in the memorandum articles, agreement or resolution aforesaid shall, to the extent to which it is repugnant to the provisions of this Act, become or be void, as the case may be.”

The expressions “director” and “managing director” are defined in the Act. I shall refer to those definitions a little later when examining one of the arguments urged on behalf of the appellants. It will be noticed that the marginal note to S. 312 suggests that the section lays down a prohibition of assignment of office by a Director and the section is in terms of such prohibition. The learned Judge took the view that the object of the Legislature in imposing the prohibition laid down in S. 312 was that a Director should not be clothed with the power to transfer his office to any person whether by an act inter vivos or by a testamentary instrument. He reached the conclusion that the expression “assignment” in the section should not be given a restricted meaning but must be read in a broad sense as applicable also to an appointment of any person as Managing Director of the Company made by his Will by a Managing Director to come into effect on his demise. He upheld the contentions of the plaintiff and gave the declarations and the injunctions sought by him. The Company and defendants Nos. 2 and 3 have now come to this Court in this appeal.

3. The first and the principal contention of the appellants pressed before us by Mr. Manekshaw, learned counsel for the appellants, is that the appointment of the second defendant as a Managing Director made by Dadoba by his Will is not “an assignment of an office” within the meaning of that expression in S. 312. It is said that what Art. 109 conferred on Dadoba is not any power of assignment but merely a power of appointment. It is also said that the word “assignment” means actual transfer. A transfer of office by a Director, it is stressed can only be by an act inter vivos and in no circumstances by a testamentary instrument. The greatest emphasis has been laid on the factor that on his death Dadoba naturally ceased to be a Managing Director. The argument has been stressed in the form of an interrogation : By Will a person can bequeath any property; he can by an act inter vivos transfer any property. But how can a person transfer something which is non-existent? – something he ceased to hold immediately on his demise? It will be noticed that the argument is founded in the context of property and not of an office of a director which is purely personal and is not property. It is impossible to contend, says Mr. Manekshaw, that there could be any assignment when Dadoba’s appointment as Managing Director was only for his life and nothing was left for him to give at the point of time of his death. It is said that this is the most crucial question.

4. At first blush the argument, under the latter head, that a person cannot transfer what he has not got may perhaps seem somewhat attractive from a sheer legal point of view, however repugnant it may be to the object of the Legislature in laying down the absolute bar against the transfer of an office of a Director. But on closer examination I think it defective even from the legal standpoint in paying too little attention to a number of relevant and material considerations, which, in my judgment, must weigh with the Court on this question of interpretation of the rule which aims to prevent use and abuse of a power. The argument, if I may so describe it, asks us to apply to the situation before us the maxim Nemo dat cuod non habet – you cannot give what you do not have; you cannot give what you do not have the right to give. The equivalent maxim is assignatus utitur jure auctoris – An assignee is clothed only with the right of his principal. Now, these maxims pithily express one of the leading rules as to titles and tersely state the well-known general rule that no man can transfer a greater right or interest in property than he himself possesses and if he has none he can give no title whatever to the property which is the subject matter of the transaction.

5. The principle of these maxims is indubitably sound and it has bearing firstly on the quantity and secondly on the quality or nature of interest in property which can be assigned by the owner to another party. Now, what Mr. Manekshaw contends for is the same principle but the contention assumes as a major premise an equivalent between the nature of a right or interest in properly and the office of a Director which by no stretch of argument can be termed as property or any interest or right in property. Such an equation, to my mind, is impermissible. We have nothing to do with any right or interest in property nor are we concerned with any question of title or transmission of a title which could or could not vest in Dadoba. The question before us is not whether a person can or cannot give what he has not got. The question is whether a Director in a public or private company who is empowered by the Articles of Association of a company to appoint another person in his place and stead by an act inter vivos or by his will can be said to assign that office to the latter when he does so by an act inter vivos or by his will. It has not been possible for Mr. Manekshaw to dispute that if this was done during the life-time of the Director by an act inter vivos it would be an assignment and hit by S. 312, though at one stage of the argument that position was not accepted. But that line had to be abandoned in view of the language of certain sections in the Act and particularly S. 86B of the repealed Act of 1913 and the proviso to the same to which I shall refer a little later. This present argument of learned counsel for the appellants is founded on certain observations of the learned editors of Gore-Browne’s work on Companies law and it will be necessary for me to quote the same and examine them when I refer to S. 86B of our repealed Act of 1913. It will suffice here to state that those observations are made in the context of a private company and not a Director of a public company and even in the context of a Director of a private company the opinion of editors of standard treatise on Companies law in England, as I shall point out, is to treat that point as one in dubio. Besides the point has little cogency since there is no section in the English law analogous to S. 312 of our Act of 1956.

6. We are concerned primarily and principally with the connotation of the expression “assignment of his office……..by a Director” and the legal inhibition contained in the section which is applicable in case of a Director both in a public and a private company and the question is can he, if the Articles of Association permit it, appoint a person to be the Director of the company in his place and stead by making such appointment by his will or is he prohibited by S. 312 from doing so notwithstanding such Articles since S. 9 renders void any such Articles which are repugnant to any provisions of the Act. (Section 312 applies equally to a Director in a public and a private company and I have stressed that aspect because considerable emphasis was laid on behalf of the appellants on the fact that there are cases where an owner of a business transfers it to a private limited company and he is appointed a Managing Director of the company with powers to appoint any person in his place and stead by a deed or will as for instance in the case before us. I am not concerned with the object of giving such powers but with the validity of such powers and the considerations relating to the object of conferring such powers in case of a private company would mostly be irrelevant in the case of a Director of a public company. The prohibition in S. 312 i3 imposed for an object which I shall point out little later can be gathered from the enactment itself. I prefer in the first place to examine the language of the section itself and shall turn to an enquiry as to its object only in so far as it is permissible and required by the well-known canon of construction that the meaning of the words of a statute is to be found not so much in strictly grammatical or in etymological propriety of language, nor even in its popular use, as in the subject, or in the occasion on which they are used and the object to be attained. Of this more hereafter.

7. The crucial consideration, therefore, is not that a person cannot transfer something which he has not got. But it must be as to what is the connotation of the expression “assignment” in the context of an office of a Director which, indisputably, is not property or any right or interest in property. The Legislature has said that a Director cannot assign his office, meaning thereby that he cannot transfer it to any other person. It is not questioned and could not be questioned that transfer of the office of a Director in any shape or form is expressly prohibited by the Statute. The crux of the matter, therefore, is what is it that is prohibited when it is enacted that you cannot assign the office of a Director of a company. Now, one thing is clear that in a case of a prohibition or restriction of this nature which is absolute and unqualified, the intention and object of the law-giver is to restrain and prevent a Director from putting some one in his place and stead by any act on his part or doing any act which would have the same effect. The question of course must be : Has the intended object been carried out in a appropriate language capable of bringing out that result? I put to myself the question : Is this word “assignment” to be read in the narrow sense – in a sense wanting in breadth in which it is used in conveyancing language and by conveyancing men in the context of rights m property where it may mean only a transfer by an act inter vivos or is to be understood in the broad comprehensive sense that the holder of the office is not to give it by any act of his in presenti and also not to give it to another by any testamentary disposition or direction or appointment. I have perhaps dwelt little longer than I need have done on the argument of learned counsel for the appellants that Dadoba could not transfer what he did not have at the point of time of his death because his office came to an end that very time and therefore, the appointment by him of the second defendant cannot be called an assignment of the office of a Director. The argument would have cogency if there was any dispute about the quantity or quality or the nature of any interest or right in property when such consideration would certainly have had bearing on the enquiry. But in the context of an assignment of an office of the nature before us. it has little import.

8. The argument suffers from a patent weakness and it is this. It is indubitable that a right can be transferred by assignment of the nature of transfer inter vivos or by operation of law provided the transfer of that right is not prohibited by law and it is made in accordance with the requirements of law as to form such as writing, registration etc. In respect of a right not ordinarily transferable, for instance one which involves personal element and which ceases on death or disablement, the law lays down that the right cannot be transferred unless other parties interested in the matter gave their consent to the transference of the right or imposes conditions subject to which alone the right may be transferred, as for instance in a case of a company if it is accepted in a meeting of the shareholders. In all such cases there is in the first instance no right of transfer either by an act inter vivos or by a testamentary instrument. But when the right is given and the condition necessary for the exercise of the power of transference is fulfilled as required by law, it is extremely difficult to see how it can be said that there cannot be a transfer of the right by testamentary disposition. To my mind, there is here no justification for any over-refined distinction between appointment and assignment. In the first place, we are not dealing with property. We are dealing with an office which can only be the subject matter of an appointment. Whether you call it an assignment or transfer or alienation or appointment, it has the same meaning and the effect is the same. I fail to see how in such a case it can be said that what is done is not a transfer because the right to transfer was not there. Of course it was not there at the inception but it was there when the power to transfer the right was conferred. This, to my mind, is the weakness underlying the argument of learned counsel so strongly pressed for our acceptance.

9. To turn to the former head of the argument of Mr. Manekshaw relating to the connotation of “assignment of an office” within the meaning of that expression as used in S. 312. Now, it is well understood that the expressions “assign” and “transfer” are often used in our statutes to convey the same meaning and the same sense and that the primary meaning of the word “assign” is to legally transfer or to legally make over any property or any right. It is equally well understood that the expression “transfer” is one of wide import and embraces both a transfer by an act inter vivos as well as a transfer by operation of law, that is by sale in execution, forfeiture, insolvency, intestate succession or testamentary disposition. In view of this connotation of the word “transfer” the argument on behalf of the appellants was that a distinction must be drawn between an assignment of the office of a Director and appointment of another person as a Director by a person holding the office of Director. Learned counsel, however, had to agree that if a Director in a private company appointed for life and clothed with the power to appoint any other person in his place and stead were to exercise that power by an act inter vivos that would be an assignment of an office and hit by S. 312 even though it might be called an appointment. But it was said that appointment by a will in such a case would be wholly a different matter. It would not be within the ambit of the section because that would not be an assignment. The argument of necessity had to rest on the principle “one cannot give what one has not got”. 1 have already examined that argument.

10. It has been argued by Mr. Khambatta, learned counsel for the respondents that there is no justification for giving a limited and narrow construction to the expression “assignment of office” which can mean passing of any right from one person to another. Counsel has referred to Law Lexicons and to Murray’s English Dictionary. In Wharton’s Law Lexicon, 14th Edition, as to the verb “assign” it is stated that the verb is variously applied and the meaning given, in that Lexicon to the word “assign” is “generally to transfer property, especially personal estate, or set over a right to another, or appoint a deputy”. It is common knowledge that the draftsmen of our Indian Statutes do not prefer to use the expression “assign” in the context of property and have for a long time since the enactment of the Transfer of Property Act chosen to use the expression “transfer”. Wharton defines “assignee” as a person appointed by another to do an act or perform’ any business. The expression “assignment” is defined as transfer of an estate or interest in property”. Mr. Khambatta has strongly relied on the meaning of the verb “assign” given in Murray’s Dictionary and one of the meanings is “to appoint”. He has also relied on the meaning of that verb given in that Dictionary as “to transfer or formally make over to another”. He has also relied on the meaning given there as “to appoint authoritatively” as also another meaning which is “to appoint, designate, ordain, depute”. Counsel has also referred to certain provisions of the Transfer of Property Act. But I do not think it necessary to refer to those provisions because it has not been disputed and could not be disputed by Mr. Manekshaw that the meaning of the expression “transfer” includes a transfer by an act inter vivos as well as by a testamentary disposition or direction. Great reliance has been placed by Mr. Khambatta on the meaning of the verb “assign” as to “appoint or to designate”. Mr. Khambatta has also argued that the contention on behalf of the appellants in asking the Court to give a restricted meaning to the expression “assignment” ignores the existence of a third party viz. the company. It is said that this is not a case of an ordinary assignment between an assignor and an assignee whereby some property is transferred by the assignor to the assignee. Here, what was being done, though called an assignment, was really an appointment to the post of the office of a Director and which had the effect of imposing the will of one person on a third party and the third party was affected. This aspect of the matter, to my mind, cannot be ignored. It is not a bilateral act pure and simple with which we are concerned in this case. We are concerned with the office of a Director in a company and one person is clothed with the power to appoint another person and the appointee is the third party. Therefore, the ordinary sense in which the expression “assignment” may be used in the context of transfer of property by an act inter vivos is a concept which need not be introduced in reading the expression “assignment” in S. 312. Learned counsel has also drawn our attention to the scheme of the Act. He has referred to S. 253 which lays down that only an individual can be a Director of a public or a private company and not any body corporate or association or firm of partners : and he has also drawn our attention to S. 254 which requires that subscribers to the Memorandum of any company can only be individuals and in default of and subject to any regulations in the articles of a company, subscribers of the memorandum who are individuals shall be deemed to be the Directors of the company until the Directors are duly appointed under S. 255. He has also drawn our attention to S. 255(2). These sections have been referred to for the purpose of showing that the Act does not contemplate any continuity in the matter as must accur if the Director could be a body corporate or an association or a firm of partners. It is urged that it is clear from various provisions of the Act that the intention of the Legislature was to prevent the mischief of any Director introducing into the company any other person as a Director at his own volition even though he might have been authorised by an agreement between him and the company to do so and even though the Articles of Association of a company may expressly permit that to be done. Numerous prohibitions have been laid down by the new Companies Act in case of Managing Agents, Managing Directors, Managers and Directors of the Company and other officers of a company. It is not necessary for me to examine the scheme of the Act in any detail since it is now well-understood that the new Companies Act aims at eradicating many serious mischiefs which the principle of perpetual management of companies had caused in the past. The argument of counsel is : Why permit that mischief to continue by reading S. 312 in a narrow sense by attributing any undue restricted meaning to the words “assignment of his office”? It is stressed that the real meaning of this expression and one to be gathered from the section itself is that a person cannot introduce another person as a Director in that company even though authorised to do so by the Articles of Association of the Company. This it is urged is the effect of reading S. 9 with S. 312. Then it is said that if the argument urged on behalf of the appellants were to be accepted, an inconsistent and incongruous position is bound to arise.

11. In my opinion, Mr. Khambatta is right when he says that an inconsistent and incongruous position must arise if the argument urged on behalf of the appellants is to be accepted by us. Of course the Court will not attach any undue importance to this consideration but any inconsistent or incongruous position that might arise has to be borne in mind even in interpreting a statute the language of which is plain and unambiguous. Moreover it is not possible to say that the expression “assignment” is capable of only one meaning and one meaning alone nor has any such attempt been seriously made before to suggest that the word “assignment” is capable of only one meaning. The inconsistent and incongruous position that can arise if the argument for the appellants is accepted is that while a Director cannot during his life time appoint another person as a Director in his place and stead, though authorised by an agreement between him and the company and the Articles of Association to do so, he can do so by an appointment which is to be effective immediately on his demise. Of course where the language of the section is plain, unambiguous and is not capable of more than one meaning, then ordinarily that meaning would have to be given by the Court. But in such a case, question of interpretation can hardly be said to arise. There will be no need of interpretation. The language itself being clear and manifest best declares the intention of the Legislature – Absoluta sententia expositore non indiget . But it is not possible to say that the expression “assignment” which is usually used in the context of property law and which has been pitchforked in a provision relating to the Companies Act in the context of a personal office which is neither an interest nor a right in any property and obviously is not an office of profit can be said to have a plain and simple meaning and which, as Wharton has said, is variously applied even in England.

12. Learned counsel for the Respondents has also drawn our attention to S. 317 of the Companies Act. That section rules that a Managing Director of a company cannot be appointed for more than 5 years at a time. The argument has been that a Managing Director of a public company if clothed by any agreement between him and the company and the Articles of Association to appoint a successor would have power to make a Will and appoint a successor and in such a case on his demise within the period of the allotted span of five years mentioned in S. 317 the appointee would step in as a Managing Director. The suggestion is that in case of a public company such a position would be inconceivable and intolerable. It is not necessary for me however, to examine in any detail what would happen in case of a Managing Director clothed with any power as in the illustration suggested by learned counsel. But it does seem that such a strange and impermissible situation can arise and it does seem that the present argument lends support to the contention pressed on behalf of the respondents.

13. The next argument of Mr. Khambatta turns on the meaning and effect of Art. 10

9. It is said that clause (b) of that Article authorised Dadoba to appoint any person to be a Managing Director in his place and stead and in default of such appointment the legal representatives of Dadoba were entitled to exercise the power. It is said that the appointment by Dadoba by an act inter vivos of any person as Managing Director in his place and stead would be within the mischief of S. 312 and if he appointed any person to be a Managing Director in his place and stead by a Will or Codicil, the appointment would be valid if the contention of the other side were to be accepted. The argument here is that there is no warrant for splitting Art. 109 under two heads of “appointment by Deed” and “an appointment by Will or Codicil”. It is said that if one part of Art. 109 is bad, then the whole of Art. 109 is bad. It is also said that not merely Dadoba but the legal representatives of Dadoba have also been given the power to appoint a Managing Director. The contention is that for this reason the whole of Art. 109 (b) must be treated as bad because it is not divisible. Now, this argument can have force only in case of matters which are not severable. I do not think that an appointment by a Deed inter vivos and an appointment by a Will or Codicil are matters which are not severable. Therefore, there is little scope for the present argument urged before us by Mr. Khambatta. There is, however, considerable force in the argument of learned counsel that a restricted meaning should not be given to the expression “assignment” in the context of the personal office of a Director of Company under our Company law. Evidently, the construction pressed for our acceptance by learned counsel for the appellants relies – to put it in his own words on “the rule of literal construction”. It has been strenuously urged that S. 312 must be literally construed and so construed the expression “assignment” must be given the meaning pressed for our acceptance on behalf of the appellants. Not only that, but the argument asks us to put a restricted meaning on an expression ordinarily used in the context of property and rights and interest in property, whereas in the section which we have to interpret, it is not used with reference to property but a personal right involving confidence as a main element as well as the character, credit and substance of the person who is a Director and who is sought to be appointed as a Director in his place and stead. It also involves a third party viz. the company.

14. We have to construe an expression which is capable of a sufficiently flexible meaning as well as a restricted and narrow meaning. The elementary rule of literal construction, as has so often been said, is confined to cases where the language is precise and capable of but one construction or where neither the history nor the cause of the enactment, nor the context, nor the consequences to which the literal interpretation would lead, show that that interpretation does not embrace the real intention. It has also been repeatedly said that language is so often capable of being used in more than one sense and to adhere rigidly to its literal and primary meaning in all cases would be to miss its real meaning in many words if sufficiently flexible must be construed in the sense which, if less correct grammatically, is more in harmony with the intention of the law-maker. These are well settled principles of interpretation of a Statute.

15. To turn to examine the object of the enactment. The expression “director” includes any person occupying the position of Director by whatever name called and “Managing Director” means a Director who is entrusted with any powers of management which would not otherwise be exercisable by him, and includes a Director occupying the position of a Managing Director by whatever name called. Only an individual can be a Managing Director of a company. It is plain from Art. 109 that the right to appoint a Director was given to Dadoba and the right could be exercised from generation to generation. A company is a perpetual body and the effect of accepting the construction pressed on behalf of the appellants would be that in this private limited company which is a perpetual body the Managing Director was given a right to appoint the future managing director and if the right was not exercised by him, then his legal representatives could exercise that right so that the same process of appointment could continue from generation to generation. That, to my mind, is wholly foreign to the object and scheme of the new Companies law. I entertain no doubt that the object of the mandatory prohibition in sec. 312 was to prevent any such appointment being operative in the lifetime of the director as well as after his death and the only doubt that must naturally arise is from the fact that my brother K. T. Desai holds a view different from mine. This type of perpetual management whether in the form of a director, manager, managing agent or managing director was an evil which had to be eradicated and the precise object of the whole Act read in the context of sec. 9 was to eradicate that evil. I do not propose to burden this judgment by referring to the numerous sections of the Act which leave no doubt that such was the intent and object of the law-giver. I shall have occasion to refer a little later to sec. 86B of the repealed Act of 1913 the language of which when compared with sec. 312 does throw considerable light on this point. According to the argrument of learned Counsel for the appellant, the Legislature, although it has dealt with the matter of appointment of the nature before us made by a director in his life time, has not dealt at all with the matter of such appointment if it is to operate after death. It is said that if there is any lacuna in the Act, it is for the Legislature to remedy the defect. Of course the court cannot reach a casus omissus and no canon of construction permits the court to cure a lacuna in a statute. That is simple. But it is equally true that omissions are not to be readily inferred. The court, it is firmly established, will not wrest the language of a Statute and will not lightly create or infer a lacuna. It will at the same time see “that the true meaning of any passage is to be found not merely in the words of the passage, but in ascertaining also among other things what was the circumstance with reference to which the words are used, in what context they are used and what was the object which the Legislature had in view.”

16. There is another aspect of the same question. We are not dealing with a codifying enactment but with an Act to consolidate and amend the law relating to Companies and certain other Associations. It is well-settled that in an enactment of this nature, it is legitimate to refer to the previous state of the law for the purpose of ascertaining the intention of the Legislature. Many provisions of the Indian Companies Act of 1913 were adopted from analogous provisions in the English Companies Acts. A number of provisions in our Companies Act of 1956 have been adopted from the English Act of 194

8. It is also true that there are numerous sections in which the language of the English enactment has only partially been adopted. There is no section in the analogous English enactment similar to sec. 312 of our Act which, as I have already said, enforces prohibition of assignment of office of a director and that prohibition is absolute and unqualified. Under our repealed Companies Act. there was some analogous provision in sec. 86B, the relevant part of which was as under :-

“If in the case of any company provision is made by the articles or by any agreement entered into between any person and the company for empowering a director or manager of the company to assign his office as such to another person, any assignment of office made in pursuance of the said provision shall notwithstanding anything to the contrary contained in the said provision, be of no effect unless and until it is approved by a special resolution of the company :

Provided that the exercise by a director of a power to appoint an alternate or substitute director to act for him during an absence of not less than three months from the district in which meetings of the directors are ordinarily held, if done with the approval of the board of directors, shall not be deemed to be an assignment of office within the meaning of this section :

XX XX XX”.

That section was one of a group of secs. 86A to 861 which were inserted in 1936 in the Companies Act of 1913. The corresponding provision in the English enactment was sec. 151 of the Act of 19

9. Section 204 of the English Act of 1948 was in part materia with sec. 151 of the earlier English enactment. Section 151 of the English enactment was as under :-

“If in the case of any company provision is made by the articles or by any agreement entered into between any person and the company for empowering a director or manager of the company to assign his office as such to another person, any assignment of office made in pursuance of the said provision shall, notwithstanding anything to the contrary contained in the said provision, be of no effect unless and until it is approved by a special resolution of the company.”

It is noticeable and it is of some importance to observe that the first proviso to our sec. 86B which I have quoted above did not find place in sec. 151 of the English Act of 1929 nor did it find place in the later English enactment of 194

8. Section 86B laid down certain restrictions on the powers of a director or a manager of a company to assign his office as such to another person. The restriction was that even though the Articles of the Company might have permitted it, no such power could be exercised unless and until the assignment was approved by a special resolution of the company. The proviso engrafted a material rule on the section. The effect of the proviso was that the power to make a temporary appointment of an alternate or substituted director to act for him which could be exercised by a director in favour of another person during his absence from the district could be exercised without any special resolution of the company and it was sufficient if the Board of Directors gave its approval to the same. Such a case, the proviso expressly stated, would not be deemed to be an assignment of office. It is clear from the language of the proviso that the Legislature took the view that there was ample scope for the suggestion that even such a temporary appointment of alternate and substituted director for a short period may be regarded as an assignment of office by a director. Therefore, one thing is clear from the language of that proviso read with the section that it was thought possible that a temporary appointment for a short period of a substituted director to act for him during his temporary absence made by a director could fall within the meaning of the expression “assignment of office”. It is implicit in the proviso that even though the Articles of Association may permit it, a director or a manager of a company had no right to put in his place and stead another person as a director even during his temporary absence. I have referred to that section to show what the intention of the Legislature was even under the provisions contained in sec 86B. Although Articles of Company do in some cases empower a director to appoint an alternate or a substituted director, the Legislature did not approve of any such right being created in favour of a director by an agreement between the director and the company or by recognising that right in the Articles of Association and laid down conditions which were restrictive of that right. It is a well-established principle of construction that when one finds a proviso to a section, the presumption is that but for the proviso the enacting part of the section would have included the subject matter of the proviso. Of course, that presumption need not arise where it is clear that the proviso was inserted only ex abundanti cautela. A comparison of sec. 86B and the first proviso to the same with the language of section 312 with which we are here concerned seems very instructive. In section 312 the Legislature not being content with the restrictions imposed under the old section, decided to lay down an absolute and unqualified prohibition against the assignment of the office of a director in any circumstance and the only qualification that it has made is contained in sec. 313, the relevant part of which is as under :

“313. Appointment and term of office of alternate directors. –

(1). The Board of Directors of a company may, if so authorised by its articles or by a resolution passed by the company in general meeting, appoint an alternate director to act for a director (hereinafter in this section called ‘the original director’) during his absence for a period of not less than three months from the State in which the meetings of the Board are ordinarily held.”

Now, I have already pointed out that sec. 86B followed the language of sec. 151 of the English Act of 1929 and sec. 204 of the English Act of 1949 is in pari materia with sec. 151, and neither that section nor the earlier section 151 contained any proviso of the nature engrafted on sec. 86B of our Act of 1913. I have referred to the sections of the English enactment for the purpose of showing that the language of sec. 86B without the proviso had been borrowed from the English Act of 19

9. I may observe that sec. 204 of the English Act of 1949 does not impose any rigid bar on the assignment of his office by a director but the condition it imposes is that there should be a special resolution of the company. A curious and somewhat interesting position emerges if one turns to the standard text books on the English Companies Act. The note of the editors of Palmer’s Company Precedents under sec. 204 of the Act of 1949 is as under:

“The precise connotation of a power ‘to assign office’ as mentioned in the section is not clear. It is not thought that it would refer to a provision for the appointment of a successor; see. for example, paragraph (4) of Form 255 ante.”

Now, Form 255 is in respect of a peculiar type of Managing Directorship and the person who holds that directorship is referred to in England as a Governing Director. It is not necessary for me to examine the Form 255 which is given in Palmer’s Company Precedents. No clear opinion seems to have been expressed by the editors but they say that it is not thought that sec. 204 would refer to a provision for the appointment of a successor by a governing director. They also say that the precise connotation of a power “to assign office” is not clear. Therefore, one thing is certain that the Editors of that Book were not inclined to state any definite opinion about the meaning of the expression “to assign office” in sec. 204 and left the matter as one in dubio. Since the greatest reliance has been placed by Mr. Manekshaw, learned Counsel for the appellants, on certain observations made by the editors of the forty-first edition of Gore-Browne’s Text Book of Companies law I shall set out those observations in extenso:

“Where in the case of a private company, the vendor of a business to the company is appointed a director by the Articles, he is frequently styled a ‘governing director’, and has conferred upon him all the powers of a Board of Directors, with a right from time to time to appoint a successor during his life or by his will, or for his legal personal representatives to make such appointment after his death. In connection with such powers to appoint a successor the question whether its exercise constitutes an ‘assignment’ of the office within sec. 204 may arise. That section renders the assignment of the office of director as such to another person of no effect unless and until it is approved by a special resolution of the company. It is difficult to see how a deceased person or his legal personal representatives could assign an office, and possibly in no case would the exercise of a power to appoint a successor under such an Article constitute an ‘assignment’ of the office, unless the appointment is made by the governing director during his life. The point is, however, a doubtful one and it would be advisable for any person appointed as successor under such a power to obtain the support of a special resolution.”

I do not think these observations are helpful in interpreting section 312 of our Act of 1956. The, argument on behalf of the appellants leans heavily on the very insecure foundation of these observations of the learned editors made in the context of a section (204) which does not contain any proviso similar to that under the repealed sec. 86B of our Act of 1913. What is more important is that sec. 204 is not in pari materia with sec. 312 with which we are really concerned and which lays down a stricter prohibition on the powers of a director. It is also noticeable that in England this point is not one of particular importance because there is no provision in the English Act similar to our sec. 312 which imposes an absolute prohibition on the assignment of the office of a director. All that is required there is a special resolution of the company. None of the two statements of the learned editors of Palmer’s Company Precedents or Gore-Browne’s work claim the high authority of the illustrious authors of the works and the editors also have left the matter in doubt. It is well-known that Buckley who’ was later Lord Wrenbury was conservative in the matter of expressing his opinion and the editors of that work have been conservative in the matter of expression, of opinions and that is one reason why Buckley’s work has been very often referred to by courts both in England and India. Now, the editors of the present edition of Buckley’s work on Company law have made a significant note under sec. 204 and the note is this :

“Quere, what is meant by the expression ‘assignment of office’ used in this section which reproduces sec. 151 of the 1929 Act.”

Mr. Manekshaw says that the expression “quere” only means that a question is put by the editors. To my mind, it is more than that. It is a question of the nature of objection. It is used at times to question accuracy of what has been said or written by another. In any case one thing is plain that the opinions of these editors expressed in the context of a rule which is different from the rule laid down in sec. 312 would be slender support for the construction urged on behalf of the appellants.

17. We have here an express and unqualified rule in sec. 312 which is manifestly intended to set at nought the mischief which must result if a director of a Company public or private were to be permitted to exercise the power of introducing another person of his own choice as a director in his place and stead by assigning his office in favour of such person. The expression “assignment” so dear to the heart of English conveyancing lawyers is not used here in any context of conveyancing or transfer of any property or any right or interest in property but in the context of making over of an office of director by one person to another. The expression is capable of being variously applied and I see no reason and no principle why its connotation should be confined to transference of any right by an act inter vivos. It is an expression of larger import than that. In reference to something which is not property or right or interest in property it can certainly mean making over or setting over of any right by one person to another or appointment to an office by one person of another when the person holding the office makes it over to another by appointing him to hold that office. The argument pressed for our acceptance, as I have already mentioned, could not go to the length of suggesting that a director can during his life time make over his office to another person by calling it an appointment and not an assignment. It makes no difference to my mind whether he does it in his life time by an act inter vivos or by a will so that it operates from the date of his death. In either case it is an appointment to the office of director. In the course of the arguments I put it to learned counsel for the appellants if he could suggest any reason why the Legislature should deem it necessary to prohibit a director of a company from appointing another person as a director in his place and stead by an act inter vivos, that is, during his lifetime and should not deem it necessary to prevent him from doing so by a will. No answer was given save that it would be entering the region of speculation. It would be strange indeed to attribute to the Legislature the intention to create the anomalous position that must arise if it were to be accepted that sec. 312 prohibits appointment by a director to his office of another person in his place and stead by an act inter vivos and yet permits such appointment to be made by him by his will. Moreover this incongruous position can arise not only in case of a director in a private company but also in case of a director in a public company if the construction urged on behalf of the appellants is to be accepted. To take the simple illustration of a case where by Articles of Association of a public company the promoters or managing agents are given the power to appoint one or more ex-officio directors for life. Such a power would be valid under sec. 255 of the Companies Act so long as the number of such directors does not exceed one-third of the total number of directors of the company. Section 255 is as under :

“255. Appointment of directors and proportion of those who are to retire by rotation – (1) Not less than two-thirds of the total number of directors of a public company, or of a private company which as a subsidiary of a public company, shall –

(a) be persons whose period of office is liable to determination by retirement of directors by rotation; and

(b) save as otherwise expressly provided in this Act, be appointed by the company in general meeting

(2) The remaining directors in the case of any such company, and the directors generally in the case of a private company which is not a subsidiary of a public company, shall, in default of and subject to any regulations in the articles of the company. also be appointed by the company in general meeting.”

So if the regulations in the Articles of the company empower the promoters or managing agents to appoint a director or directors within the number permissible under sub-sec. (2) for the life-time of such director or directors the appointment would be valid. Now in such a case if the Articles were to provide that a director or directors so appointed will have the power to appoint another person to his or their office of director by an act inter vivos or by will the position would be that the appointment by an act inter vivos would be void while the appointment, by will would be valid if the construction which we are asked to put on the expression “assignment” were to be accepted. It is inconceivable to my mind that such is the object or effect of sec. 312 of the Act of 1956. It seems indubitable to me that any such appointment of a director in a public company by will is within the prohibition imposed by the section. Cadit question it is within the ambit of the prohibition in case of appointment of a director in a private company. The only answer to this suggested by learned Counsel for the appellants was that section 317 prevents appointment of a managing director of a public company for a term exceeding five years at a time. But that section has no bearing whatever on the present discussion about assignment of his office by a director. It is extremely difficult for me to see why an intention should be attributed to the law-giver of laying down a rule the effect of which would be to rule that a director in a public or private company, authorised by the Articles of the Company, cannot make any such appointment five minutes before his death – that would be by an act inter vivos – and yet he can do it by inserting a clause to that effect in his will. It was, however, said that sec. 255(2) has the effect of permitting appointment of a director in a public or private company A. I. R. being made by a third person who may be a total outsider and not a director of the company and the argument was that an appointment made by such third person cannot be called an “assignment” of the office of director. The argument ran that there was no difference between any such appointment made by a third party and an appointment made by a person who happens to be a director. The argument to my mind is not sound. The section speaks of assignment of his office by a director and the prohibition is evidently imposed on a person who is a director. It is the office held by a person as a director that is not permitted to be assigned by any act on his part. Therefore, there is a difference between an appointment made by a third party and one made by a director. In the former case it cannot be said that there is an assignment of his office by the person exercising the power. On a consideration of the whole matter it seems to me that having regard to the nature of the office of a director it cannot make any difference whether the act is called an assignment of his office by a director or transfer of his office by a director or appointment by such director of another person to that office in his place and stead either by a deed or will. I fail to see any reason why we should recognise the over-refined distinction sought to be made in case of an appointment by will by attributing any restricted and technical conveyancing meaning to the expression “assignment” of the nature suggested on behalf of the appellants. This is not a matter of doctrinaire technicalities but a matter to be considered on broad principles and rules of interpretation.

8. I have not yet made any reference to another argument urged before us by learned Counsel for the appellants. It has been argued that sec. 312 speaks only of a director and the prohibition imposed is against the assignment of office of a director and not against the assignment of office of a managing director. Section 312 is one of a group of three sections headed “miscellaneous provisions”. Chapter II of the Companies Act deals with Directors. Learned Counsel for the appellants has drawn our attention to certain sections where the Legislature has referred to a director and certain sections where reference is made to a managing director. The suggestion is that in respect of every provision of law affecting a managing director, the framers of the Act have taken care to lay down separate rules affecting them and where they have only referred to a director, the rule is only applicable to a director, though a managing director being a director the rule may also apply to him. But that, it is said, would be in a distinguishable capacity as a director and not as a managing director. An examination of the relevant provisions of the Companies Act would show that such is not the position. There are sections which apply to a director and are equally applicable to a managing director. Moreover in section which speaks of a director the Legislature has taken special care to state necessary qualifications to the rule there stated if the section is not to apply to the case of a managing director. Before I examine one or two of such sections I should refer to the definitions of “director” and “managing director” which are as under :

“Section 2(13) “director” includes any person occupying the position of director, by whatever name called.”

“Section 2(26) “managing director” means a director who, by virtue of an agreement with the company or of a resolution passed by the company in general meeting or by its Board of Directors or by virtue of its memorandum or articles of association, is entrusted with any powers of management which would not otherwise be exercisable by him, and includes a director occupying the position of a managing director, by whatever name called.”

The definition of “managing director” makes it abundantly clear that a managing director is necessarily a director entrusted with powers of management and that the expression managing director includes a director occupying the position of a managing director by whatever name called. In certain sections the Legislature has drawn a distinction between a director and a managing director by express words of qualification and it is impossible to say that the expression “director” wherever it is used in the Act excludes a managing director. The definition of “director” is rather comprehensive than restrictive. Now these expressions which are defined by the Legislature are always to be read in their context and as is usual in modern legislative practice sec. 2 which gives definitions begins with the words “Unless the context otherwise requires”. The expression “director” is not to be read in sec. 312 or any other section as if it could apply only to a person who is a director and not to one who is also a managing director or to put it slightly differently as if it excluded per se a director who is also a managing director. When question arises whether the expression “director” in any section is to be understood in a comprehensive or exclusive sense it would be necessary to examine the scope and ambit of the particular section and the nature and object of the rule and the context in which it is used. Now as I have already pointed out sec. 312 is one of the sections under the heading of “Miscellaneous Provisions”. That itself to my mind is some indication that the expression director is used in the sections under that head in a comprehensive and not an exclusive sense. What is more important is that there is ample support to be derived for the view that the expression director in these miscellaneous provisions is used in a general sense. Section 313 must evidently apply to a managing director although only the expression “director” is used there. Then if sec. 314 is scrutinised it is clear that the Legislature having used the expression director has expressly mode reference to a managing director. Now one thing is quite clear that secs. 312 and 313 are to be read as dealing with a matter of the same nature and that the expression “director” in those sections must have the same meaning. Section 307 also lends support to the same view and it is not possible to rule out consideration of that section by saying that a managing director is also a director, and that it must be read as applicable to a managing director only in his capacity of a director and not of a managing director. The point is whether the expression is always used in the exclusive sense contended for on behalf of the appellants. I may permit myself to refer to sec. 86B of the repealed Act for the purpose of examining the present argument. That section applied both to a director and a managing director. Section 2(24) of the Act of 1956 defines “manager” to mean :-

“an individual (not being the managing agent) who, subject to the superintendence, control and direction of the Board of Directors, has the manage ment of the whole, or substantially the whole of the affairs of a company and includes a director or any other person occupying the position of a manager, by whatever name called and whether under a contract of service or not.”

Section 86B to which I have already made reference placed certain restriction on the powers of a director as well as a manager of a company. Section 383 of the Act of 1956 rules that the provisions of section 312 shall apply in relation to a manager of the company as they apply to a director thereof. If we accept the argument urged on behalf of the appellants, the effect of the rule read with sec. 312 would be that the manager of a company who is a paid employee or servant of a company can by his will ap-point another person to occupy the post of manager after his death if the Articles of Association of the company authorise him to do so. It is extremely difficult for me to see that such could be the intention or object of the law-maker. The prohibition in sec. 312 applies equally to a director as to a manager and not only in a private company but also in a public company. No reason whatever could be suggested why the Legislature should have wanted to exclude a managing director and that too of a public as well as a private company from the salutary prohibition laid down in sec. 312. Here also it was said on behalf of the appellants that sec. 317 lays down that a managing director of a public company cannot be appointed for more than five years at a time and that it does not apply to a private company. I do not think that advances the contention urged on behalf of the appellants. I need not pursue the examination, of some other sections which, to my mind, support the view that the expression “director” when used without any qualifying words is to be read in a comprehensive sense as inclusive of a managing director and not in the exclusive sense in which we are asked to read it. These considerations, in my judgment, lead to the result that the expression “director” in sec. 312 includes a managing director of a public or a private company.

9. Another phase of the argument on behalf of the appellants on the question of construction of the expression “assignment” in sec. 312 was that Article 109 only amounts to delegation of power by the directors to one of them viz. Dadoba. I have read the relevant Articles 105 to 109 of the Articles of Association of the company more than once and I see no support whatever in them for the present argument. There is nothing in those articles which even faintly suggests anything like delegation nor any exercise by Dadoba of any delegated power. The present argument must therefore fail.

20. For all these reasons, the conclusion seems to me inescapable that the expression “assignment of his office” cannot be read in the narrow restricted sense in which we have been asked to read it on behalf of the appellants and sec. 312 must be read as applicable to a director including a managing director and in the comprehensive sense in which it would include appointment by any testamentary disposition or direction. In my judgment the learned Judge was right in the conclusion reached by him.

21. I now turn to examine another contention urged before us by Mr. Manekshaw. It has been argued that in any event the plaintiff ceased to be a director of the company because he failed to attend certain meetings of the directors and became disqualified from acting as a director by operation of Art. 85(f) and sec. 283(g). A few dates and facts are necessary to dispose of this contention. There was a meeting of the Board of Directors soon after the death of Dadoba which was in the nature of a condolence meeting and it was attended by the plaintiff. That was on 13-2-1957. On 14-2-1957 the second defendant sent out a notice calling a meeting of the Board of Directors of the company for 14-2-1957. He sent that notice as Chairman of the company. The next notice sent out by the second defendant was signed by him as a director and was on 19-3-1957. By his letter dated 23-3-1957 the plaintiff protested against the notice of 19-3-1957 which had been sent out by the second defendant. A notice dated 27-3-1957 convening a meeting of the Board of Directors was sent by the second defendant as a managing director of the company. A notice dated 4-5-1957 was also sent by the second defendant describing himself as a managing director. A notice dated 21-5-1957 was also sent by the second defendant as a managing director of the company. So also a notice dated 23-5-1957 was sent by the second defendant as the Managing Director of the company. It will be seen that all but one of the notices relating to the convening of the meeting of Board of Directors were sent by the second defendant as Chairman or managing director and at all relevant period the plaintiff protested against the right of the second defendant to convene any meeting in his capacity as Managing Director or Chairman of the Board of Directors of the company. Since I have taken the view that the appointment of the second defendant as the Managing Director was invalid and bad in law, it must follow as a necessary corollary to that conclusion that the second defendant had in law no power to convene any meeting as a managing director of the company and if he did so, those meetings were not duly and legally convened meetings and if they were not duly and legally convened meetings, it cannot be said that the plaintiff absented himself from any properly convened meeting of the Board of Directors of the company. I must point out that it was also argued by Mr. Manekshaw that in any event the second defendant had continued all along to be a director of the company and even if it be held by the Court that he had no right to convene the meetings as a managing director of the company, he had the right to convene those meetings as a director and on that ground the plaintiff should be disqualified because he had failed to attend the meetings as required by the Articles of Association and by the provisions of law. I do not think this argument is tenable. In express terms, the meetings were called by the second defendant in his alleged capacity as a managing director and there is nothing on the record to show that he called those meetings simply as a director of the company. It is not, therefore, necessary to examine this argument at any length. The meetings being called by him in the exercise of a capacity which he did not have, were bad and it is not open to him now to fall back on his position as a director of the company. I may also refer to Article 94 of the Articles of Association of the company which deals with the question as to when a director may summon a meeting. That article lays down that the managing director may at any time and shall upon request of any Director convene a meeting of the directors. The power to call a meeting of the directors is primarily with the managing director and the second defendant in terms called those meetings as managing director. Mr, Manekshaw has also drawn out attention to Form No. 184 from Palmer’s Company Precedents and relied on the following observation :

“In the absence of any article otherwise providing or a contrary practice established by the directors it would seem that any director may summon a meeting.”

There is nothing before us to show that any contrary practice has been established and Art. 94 is the relevant article which must be taken into consideration in this matter. There is no other article in the Articles of Association of the company which can be said to deal with the matter. The present contention fails and must be negatived.

22. There remains to consider one more contention urged before us by Mr. Manekshaw. It is said that the appointment of the third defendant has been erroneously declared by the trial court to be bad in law. It is not necessary to refer to what I have already said in my judgment about the appointment of the second defendant as a managing director being invalid and bad in law. If his appointment was invalid and bad in law, he had no power to appoint the third defendant as a director by co-option.. That contention also must be rejected.

23. In the result I agree with the conclusion reached by the learned Judge that the plaintiff was entitled to the reliefs sought by him. I would hold that the appeal fails and should be dismissed with costs.

24. K.T. Desai:

A point of law involving the construction of Section 312 of the Companies Act, 1956, arises in this appeal. The facts are few and are not in dispute. One Dadoba Kashinath Thakoor was carrying on business at Bombay under the name and style of the Oriental Metal Pressing Works. On 26-5-1955 a private limited company was, floated named The Oriental Metal Pressing Works Ltd. The subscribers to its Memorandum were, Dadoba, his son Govind, who is the second defendant in the suit, and his brother Bhaskar who is the plaintiff in the suit. One of the principal objects of the company was to acquire and take over as a going concern the business then carried on at Bombay by the said Dadoba Kashinath Thakoor under the name and style of Oriental Metal Pressing Works, and enter into an agreement in that connection and to carry into effect such agreement. After the company was formed, a meeting of the Board of Directors was held on 7-7-1955. At that meeting Dadoba was appointed as Chairman of the Board of Directors for the period of his life-time. At that meeting Dadoba was appointed as the Managing Director of the company for the period at the remuneration and upon the other terms and conditions contained in the draft agreement which was placed before the meeting of the Board of Directors which was to be entered into by the company with Dadoba. It was resolved at that meeting that the company should enter into that agreement. On that very day, an agreement was entered into between the company on the one hand and Dadoba on the other in terms’ of the said draft. By clause 1 of the agreement it was provided that Dadoba was appointed Managing Director of the company with powers and upon the terms and subject to the conditions thereafter set out. By cl. 2 of the agreement it was provided that he was to hold the said office of Managing Director for life from the date of the incorporation of the company. By cl. 4 of that agreement it was provided that Dadoba as such Managing Director shall be one of the Principal Officers of the company and subject to the control and supervision of the Directors he shall have the general control and management of the business and affairs of the company. Clause 7 of that agreement, which is material for the purpose of the present appeal, runs as follows :

“Mr. Thakoor (Dadoba) shall be entitled by deed inter vivos or by will or codicil to appoint any person to be a Managing Director in his place and stead and in default of such appointment the legal representatives of Mr. Thakoor shall be entitled to exercise the said power. Any appointee as aforesaid shall whilst holding office also be designated as a Managing Director and shall be entitled to be paid by the company the same remuneration and to exercise the same powers and authorities as are vested in Mr. Thakoor and the appointee as aforesaid shall have a power of appointing any person to be Managing Director as his successor on the remuneration of not less than Rs. 1,000 (Rs. one thousand) per month and upon the same other terms and conditions as are herein contained.”

Article 109 of the Articles of Association of the company also provided as follows.

“109 (a). The said Shri Dadoba Kashinath Thakoor shall be the first Managing Director of the company at a remuneration of Rs. 2,500 per month, subject to the said remuneration being increased by the Board of Directors of the Company. He shall be entitled to hold such office for life and will not be subject to cls. 87, 88 and 91 of these Articles.

(b) The said Shri Dadoba Kashinath Thakoor may by deed inter vivos or by will or codicil appoint any person to be a Managing Director in his place and stead and in default of such appointment, the legal representatives of the said Shri Dadoba Kashinath Thakoor shall be entitled to exercise the power;

(c) Any appointee as aforesaid shall, whilst holding office, also be designated a managing director and shall be entitled to the same remuneration and to exercise the same power; and authorities as were vested in the Managing Director in whose place and stead he is appointed.

(d) The appointee as aforesaid shall have a power of appointing any person to be a Managing Director as his successor on the remuneration of not less than Rs. 1,000 per month and with the same powers as are vested in Shri Dadoba Kashinath Thakoor.”

The said Dadoba continued to be the Managing Director of the company right up to the date of his death. On 18-8-1956 the said Dadoba made his last will and testament. The relevant provision of that will so far as it concerns the present appeal, is as under :

“I am the Managing Director of The Oriental Metal Pressing Works Private Limited on the remuneration and subject to the terms and conditions contained in an Agreement, dated the 7th day of July 1955 and made between the said Company of the one part and myself of the other. Under the Articles of Association of the said Company and under the said Agreement dated the 7th day of July 1955, I am entitled by deed inter vivos or by will or codicil to appoint any person to’ be a Managing Director in my place and stead. Accordingly, I hereby appoint my said son Govind Dadoba Thakoor to be a Managing Director of the said Company from the date of my demise.”

The said Dadoba died on 14-1-1957. Govind Dadoba, the second defendant, claimed that he had been validly appointed as a Managing Director of the company under the provisions contained in the will of the said Dadoba set out above. It is this appointment of Govind as the Managing Director of the company which is sought to be challenged by the plaintiff in the suit.

25. The plaintiff contends that this appointment is bad having regard to the provisions contained in sec. 312 of the Companies Act. 1956. That section provides as follows :

“Any assignment of his office made after the commencement of this Act by any director of a company shall be void.”

Reliance has also been placed upon the provisions contained in sec. 9 of the Act. That section runs as follows :

“9. Save as otherwise expressly provided in the Act – (a) the provisions of this Act shall have effect notwithstanding anything to the contrary contained in the memorandum or articles of a company, or in any agreement executed by it, or in any resolution passed by the company in general meeting or by its Board of directors, whether the same be registered, executed or passed, as the case may be, before of after the commencement of this Act; and

(b) any provision contained in the memorandum, articles, agreement or resolution aforesaid shall, to the extent to which it is repugnant to the provisions of this Act, become or be void, as the case may be.”

It is not disputed that the appointment that was made by Dadoba by his will was an appointment that fell within the terms of Article 109 and the terms of the agreement referred to by me above. what is contended is that to the extent that this Article and the agreement provide for such an appointment being made by a will, the provisions contained in the Article and in the agreement are void in law and are inoperative and that the power thereby conferred cannot be exercised. It is urged that the expression “director” in sec. 312 is wide enough to cover a Managing Director and that the appointment of the second defendant, who was already a director of the company, as the Managing Director was void by reason of the provisions contained in sec. 312 of the Act. It may be mentioned here that Govind, the second defendant, is and has continued to be a Director of the company since the date of its incorporation.

26. It is streneously urged by Mr. Manecksha, the learned counsel for the appellants, that sec. 312, of the Companies Act, 1956, has no application to the facts of the present case. He says that the only thing done by Dadoba by his will was to appoint Govind, who was already a director of the company, as the Managing Director and that the appointment was to take effect from the date of the demise of Dadoba. He says that in order to invoke the provisions of sec, 312, it is necessary that there must be an assignor, that such assignor must be the holder of the office of a director and that he should assign his office as such director. He says that Govind was already a director of the company and that there cannot be an assignment of the office of a director to a person who already holds that office. He further says that there cannot be the assignment of his office by a director to operate after his death. The argument is that office of a director is personal to the holder and that his office would, in any event end with his death. Mr. Manecksha urges that the office of a director is by its very nature such that it must of necessity cease, so far as the holder is concerned, on his death, and that it is an office which cannot be assigned by will which can only operate on the death of the holder. He says that the words of the section read in their context must necessarily refer to an assignment of office by an act inter vivos.

27. As against these weighty arguments, it has been contended that the expression “assignment” is an expression of wide import. Diverse meanings of the expressions “assignment”, “assignee”, “assigns” appearing in various dictionaries and lexicons were cited at the Bar and it was urged that as the word “assignment” would include an assignment by a will or a testamentary instrument, there was no reason, why the ambit of the section should be confined to an assignment only by act inter vivos. It was further urged that this section was enacted in order to prevent the ill effects which might result from the assignment of his office by a director and that if the expression “assignment” was wide enough to cover an assignment by a testamentary writing, full effect should be given to that expression. It is said that if persons are permitted to appoint others as directors by will and if the persons so appointed could equally have the power to appoint others by will, there would result a perpetuity which it must have been the object of the legislature to prevent. Reference in this connection was made to the provisions of law contained in S. 86B of the Indian Companies Act, 1913. Section 86B was introduced by the legislature in the year 1936. That section provided inter alia as follows :

“86B. If in the case of any company provision is made by the articles or by any agreement entered into between any person and the company for empowering a director or manager of the company to assign his office as such to another person, any assignment of office made in pursuance of the said provision shall, notwithstanding anything to the contrary contained in the said provision, be of no effect unless and until it is approved by a special resolution of the company.”

This provision was enacted as a remedial measure. This remedial measure being found insufficient, the legislature when it passed the consolidating and amending Act of 1956 laid down by S. 312 that after the commencement of the Act the assignment of his office by any director would be void.

8. The question that falls for consideration in the present case is whether the assignment that is contemplated by the section is the assignment of his office held by a director whose term has not expired or whether it contemplates the appointment of a person to fill that office after the holder of that office is to cease to hold it by reason of lapse of time or by reason of his death. In my view, when the legislature uses the expression “assignment of office”, it is of the essence that the office was one which not merely the assignor was holding at the moment of the assignment, but was one which he would have continued to hold if the assignment had not been made. In the case of an appointment which is to take effect after the period of office of the assignor expires by reason of lapse of time or death, it would be inappropriate to use the expression “assignment of his office”. If a person has the power to appoint another as a director after the appointor ceases to be a director by reason of lapse of time or death, it would be purely the exercise of the power of appointment and not an assignment of his office. In the present case, the appointment of Govind as a Managing Director was to take effect after the period of office of Dadoba was to expire on the death of Dadoba and it cannot be said that there is an assignment of his office by Dadoba within the meaning of S. 312.

9. In determining the meaning to be attached to the words “assignment of his office X X X by any director of a company” within the meaning of S. 312, one has to bear in mind the scheme of the Act. Under the Act the office of a director is personal to him. Section 253 of the Companies Act, 1956, in terms provides that no body corporate, association or firm shall be appointed director of a public or private company, and only an individual shall be so appointed. The legislature has now confined the appointment of directors to individuals. Not merely that, but by S. 280 of the Companies Act. 1956, an age limit for directors is sought to be provided in the case of a public company and of a private company which is subsidiary of a public company except in cases provided by S. 2

81. When the legislature was dealing with the question of the assignment by a director of his office as a director in the context of the company law of 1956, it was only dealing with the assignment of an office which must of necessity in all events terminate on the death of the assignor. The assignment by a director of his office cannot possibly operate beyond the period for which the assignor could have held that office. If that period is limited to the life of the assignor, there is no scope for effecting an assignment by means of a testamentary instrument, which must of necessity operate on the death of the person executing that instrument. In this view of the matter, it is not necessary for me to examine the dictionary meaning of the expression “assignment” and it is not necessary to consider whether an assignment in the abstract can or cannot be effected by a testamentary instrument.

30. Even if the expression ”assignment” was wide enough to include an assignment by devise i.e., by means of a will or testamentary instrument, having a regard to the context in which that expression is used it cannot refer to any assignment that may be made by a testamentary instrument. It can refer only to an assignment by act inter vivos. It is urged that the expression “assignment” has not been used in the context of property law and that it is used in connection with an office. It is undoubtedly true that the expression “assignment” has been used in connection with an office. It is because it is used in connection with an office, which the assignor must cease to hold on his death, that it is possible to say that the section only contemplates an assignment by act inter vivos. The appointment of Govind as a Managing Director by Dadoba by his will does not fall within the ambit of S. 312.

31. It is then urged that the expression “assignment” may be equated with appointment, and that in the context in which that expression is used in S. 312 of the Companies Act, the parties involved are not merely the assignor and the assignee, but a third party viz., the company and that quake the company the assignment must of necessity operate as an appointment to the office of a director. It is no doubt true that when an assignment by a director of his office is permitted by an agreement with the company or under the Articles of Association of the company, it must of necessity result in the appointment of the assignee as a director of the company. But that does not mean that every appointment must result in the assignment of his office by a director. The power of appointment can be exercised by a person who is not a director. Such appointments are contemplated under the company law and do take place. The power may be reserved to third parties to appoint directors. See British Murac Syndicate Ltd. v. The Alperton Rubber Co. Limited, (1915) 2 Ch 186. Sometimes a vendor who sells his property to a company may be given a right to appoint directors by the articles. Sometimes a person who advances moneys to the company may be given a right to appoint his nominee on the Board. It is usual for banking companies and finance corporations making loans to companies to acquire a right to appoint a representative on the Board of Directors to see to the proper utilisation of the funds for the purpose for which they are lent. Debenture-holders are often given such a right. So far as the Act is concerned power is given to the Government in certain circumstances and in the case of certain companies to appoint directors. It is not every appointment that is covered by S. 312. The section is operative only when that appointment is made by a director by the assignment of his office.

32. It is urged by the learned counsel for the appellants that in the present case the second defendant was the holder of the office of a director, that he had been a director since the date of the incorporation of the company and that there could not possibly be an assignment to him of the office of a director which he already held. It is urged that S. 312 is applicable to these cases where the office of a director is assigned by the holder of that office to a person who is not a director of the company. There is considerable force in this argument of Mr. Manecksha. It is urged on behalf of the respondents that the expression “assignment of his office*** by any director” in S. 312 is wide enough to cover the case of the assignment of the office of a Managing Director. It is no doubt true that a managing director is a director. But the converse is not true. A director need not be a managing director. All cases of transfer of the office of a managing director are not covered by the section. It may be possible for a person, who is a managing director, to appoint another person who is a director to be the managing director of the company, he himself ceasing to be the managing director and remaining only as a director. In such a case, there can only be an assignment of the office of a managing director without there being an assignment of the office of a director. The section, as it is worded, is not wide enough to cover such an assignment. There are separate provisions in the Act dealing with directors and managing directors. A director is defined by S. 2(13) of the Act to include any person occupying the position of director, by whatever name called. A managing director is defined by S. 2(26) of the Act to mean a director who by virtue of an agreement with the company or of a resolution passed by the company in general meeting or by its Board of directors or by virtue of its memorandum or articles of association, is entrusted with any powers of management which would not otherwise be exercisable by him, and includes a director occupying the position of a managing director, by whatever name called. Sections 267, 269, 316 and 317 deal with managing directors. It is not necessary for the purpose of the present case to consider the effect of these sections. It is sufficient to say that in a case where an assignment of his office by a managing director to another operates as an assignment by such managing director of his office as a director to another person, who does not hold any office as a director, it would fall within the ambit of the provisions contained in S. 312. In cases where there is no such assignment of the office of a director, they would fall outside the ambit of that section. In the present case, the person appointed was already a director. The person appointed was to hold office from the date of the demise of the person appointing and in my view it is not possible to say that there was any assignment of his office by a director within the meaning of S. 312 of the Act.

33. Some support for the conclusion to which I have reached may be derived from a statement by the editors of Gore-Browne’s Hand-book on Joint Stock Companies, 41st Edition, at p. 341, 342 and of Palmer’s Company Precedents, 17th Edition at page 736. There the editors were dealing with the provisions contained in S. 204 of the English Companies Act, 194

8. That section is in these terms:

“204. If in the case of any company provision is made by the articles or by any agreement entered into between any person and the company for empowering a director or manager of the company to assign his office as such to another person, any assignment of office made in pursuance of the said provision shall, notwithstanding anything to the contrary contained in the said provision, be of no effect unless and until it is approved by a special resolution of the company”.

In connection with this section, the editors of Gore-Browne’s Hand-book on Joint Stock Companies observe at pages 341 and 342 as follows :

“Where, in the case of a private company, the vendor of a business to the company is appointed a director by the Articles, he is frequently styled a governing director’ and has conferred upon him all the powers of a board of directors, with a right from time to time to appoint and remove other directors, and with a power to appoint a successor during his life, or by his will, or for his legal personal representatives to make such appointment after his death. In connection with such powers to appoint a successor the question whether its exercise constitutes an ‘assignment’ of the office within S. 204 may arise. That section renders the assignment of the office of director as such to another person of no effect, unless and until it is approved by a special resolution of the company. It is difficult to see how a deceased person or his legal personal representative could assign an office, and possibly in no case would the exercise of a power to appoint a successor under such an Article constitute an ‘assignment’ of the office, unless the appointment is made by the governing director during his life”.

After expressing themselves in these terms, they further proceed to observe that the point was, however, a doubtful one and that it would be advisable for any person appointed as successor under such a power to obtain the support of a special resolution.

34. In Palmer’s Company Precedents, 17th Edition, at p. 874, the editors of that work observe in connection with S. 204 as follows :

“The precise connotation of a power ‘to assign office’ as mentioned in the section is not clear. It is not thought that it would refer to a provision for the appointment of a successor”.

The editors of Buckley on the Companies Acts, 13th Edition, have in connection with S. 204 merely observed at page 401 as follows :

“Quaere, what is meant by the expression ‘assignment of office’ used in this section, which reproduces S. 151 of the 1929 Act”.

The editors of Palmer’s Company Precedents and Gore-Browne’s Hand-book on Joint Stock Companies prefer to express their individual opinions on the subject. The editors of Buckley on Companies Acts have chosen to remain silent.

35. It is urged on behalf of the respondents that in construing the provisions of S. 312 which appear in a consolidating and amending Act, the Court must consider the mischief which was sought to be avoided and the evil which was sought to be remedied. It is well known that persons when making advances to companies or persons when transferring properties to companies reserve to themselves the power to appoint directors by act inter vivos as well as by will. As observed by the learned editors in Palmer’s Company Precedents, 17th Edition, at page 736 :

“The most natural persons, by reason of their interest, to fill the office of director, as well as the most competent, are generally the original owners of the business, and accordingly the articles of a private company commonly provide that some or one of such owners shall be the directors. The terms of their tenure of office vary. Sometimes it is provided that the owner or owners shall be entitled to hold office, for instance, for so many years, or for life, provided he or they continue to hold a certain number of shares; sometimes an owner is empowered at any time, and from time to time, to act, so long and whenever he chooses, as sole director and at his discretion to appoint and remove other directors. Occasionally an owner is empowered to authorise his executors or trustees, whilst holding a certain number of shares, to appoint directors, and to define and restrict their powers and give them their share qualification”.

Reservation of such powers had been so extensive and so common that in Form No. 255 contained in Palmer’s Company Precedents, 17th Edition, at pages 734 to 736 there is an express clause which runs as follows :

“If the said A B dies whilst he holds the office of Governing Director he may by his will or any codicil thereto appoint any person to be Governing Director in his place, and direct and determine within the limit of this article what shall be the powers, authorities and discretions of such Governing Director, and his remuneration and qualification, and how long he shall be entitled to hold office, and in default of such direction and determination such appointee shall only have the powers of an ordinary Director”,

Now, what I have to consider in this case is the extent to which this was regarded as an evil by the legislature and the extent to which the legislature has sought to interfere with the freedom of persons to enter into contracts with companies when transferring properties to companies or lending moneys to companies. As I have already stated, it is well known that powers of appointment were being conferred which could be exercised by a testamentary instrument. Is there anything in the Act to show that the. exercise of such a power to appoint directors by testamentary instruments has been rendered void by the legislature? Now, so far as the power to appoint a director by a person, who does not hold the office of a director, by will is concerned, one does not find a single section, in the Act which prohibits such an appointment in toto. The restrictions which have been put by the legislature on the powers of appointment of directors are contained in Chapter II. Section 255 which deals with appointment oi directors provides as follows :

“255. (1) Not less than two-thirds of the total number of directors of a public company, or of a private company which is a subsidiary of a public company, shall

(a) be persons whose period of office is liable to determination by retirement of directors by rotation; and

(b) save as otherwise expressly provided in this Act be appointed by the company in general meeting.

(2) The remaining directors in the case of any such company, and the directors generally in the case of a private company which is not a subsidiary of a public company, shall, in default of and subject to any regulations in the articles of the company also be appointed by the company in general meeting.”

This provision makes it abundantly clear that so far as a public company and a private company which is a subsidiary of a public company are concerned, two-thirds of the directors have to be appointed by the company in general meeting. There is a fetter imposed to that extent upon the powers of appointment. As regards the remaining one-third, it is provided that such appointments can be made in accordance with the regulations in the articles of the company, and it is only in those cases where there is an absence of a provision in the articles of the company that such appointments have to be made by the company in general meeting. As regards a private company which is not a subsidiary of a public company, that section provides that all the directors of the company have to be appointed in accordance with the regulations in the articles of the company, and it is only in default of any provision therein contained that they are to be appointed by the company in general meeting. The result is that the power to appoint directors in accordance with the articles, whether it vests in a stranger or in the directors, whether it is exercisable by act inter vivos or by will has been kept intact and has been preserved quae a public company and a private company which is a subsidiary of a public company to the extent of one-third of the directors, and quake a private company which is not the subsidiary of a public company, to the fullest extent. If such a power is so preserved, there is nothing in the policy of the Act or the scheme of the Act which can make me infer that when such a power of appointment is vested in a director, the same cannot be exercised by will. It is no doubt true that when as a result of the exercise of such a power by act inter vivos there is the assignment by the appointing director of his office as a director, then S. 312 will supervene and nullify the said appointment. There is nothing in the scheme of the Act which would lead to the conclusion that the legislature by S. 312 sought to render a testamentary appointment by a director invalid.

36. As regards the scheme of the Act, it may be observed that there are various provisions in the Act dealing with the assignment of his office by the holder thereof. Section 312 is the section which deals with assignment by a director of his office. Section 343 is the section which deals with transfer of his office by a managing agent. That section provides as under :

“A transfer of his office by the managing agent of a company shall not take effect unless it is approved both by the company in general meeting and by the Central Government”.

In the case of transfer of his office by a managing agent there is no total prohibition, but safeguards are provided in the shape of an approval by the company in general meeting and an approval by the Central Government. So far as managers of companies are concerned, S. 388 provides that the provisions of S. 312 shall apply in relation to the manager of a company, as they apply to a director thereof. It is somewhat interesting to observe that when the legislature was considering the case of a managing agent, it has thought fit to enact two other sections which deal with the question of succession to the office of a managing agent by inheritance or device. Section 344 runs as follows :

“Any agreement made by a company other than a private company which is not a subsidiary of a public company, with its managing agent after the commencement of this Act shall be void in so far as it provides for succession to the office by inheritance or device”.

Section 345 runs as follows :

“345. (1) Where the office of the managing agent of a company is held by an individual at the commencement of this Act and the managing agency agreement provides for succession to the office by inheritance or device, no person shall succeed to the office on the death of the holder thereof, unless the succession of such person thereto is approved by the Central Government; and that Government shall not accord such approval unless in its opinion, such person is a fit and proper person to hold the office of managing agent of the company.

2. The provisions of sub-section (1) shall not apply to a private company which is not a subsidiary of a public company”.

These provisions make it clear that the legislature contemplated in the case of a managing agent the question both of transfer of his office by a managing agent and of the succession to that office by inheritance or devise. The legislature in the case of a director of a company has not sought to legislate specifically for succession to the office by inheritance or devise. The question is whether the legislature not having done so, the Court should so interpret section 312 as to see in it the expression of the will or the intention of the legislature to legislate also in connection with succession to die office of a director by inheritance or device. I see no warrant for doing so. The words used in the section are not wide enough to include the case of appointment of a director by will or by a testamentary instrument and I do not see anything in the scheme of the Act which would enable me to give an extended meaning to those words in furtherance of what is stated to be the object of the legislature which I, speaking for myself, am unable to see. The provisions contained in section 312 are provisions which are intended to take away the rights thitherto exercised by directors of companies. If there is to be any interference with such rights and if any of such rights are intended to be taken away, the legislature must use appropriate language. Where such language has not been used by the legislature, it is not for the Court to speculate about the intention of the legislature and attempt to give effect to. it. In the view which I take of the matter, the appointment of the 2nd defendant as a managing director from the date of the demise of Dadoba is a valid appointment as a managing director and is not rendered void by S. 312 of the Companies Act, 1956.

37. Mr. Maneksha urged that S. 312 does not apply to private companies. I am unable to see how the operation of the provisions of Section 612 can be so excluded. Wherever the legislature has thought it fit not to apply any particular provision of the Act to a private company or to apply a particular provision of the Act only to a public company or to a private company which is a subsidiary of a public company, it has expressly stated so. In the Chapter in which S. 312 appears S. 315 also appears. That section in terms says that sections 318 and 317 shall not apply to a private company unless it is a subsidiary of a public company. There is no such reservation in connection with S. 312 and there is nothing in the language of S. 312 which would exclude its operation in relations to private companies.

8. It has also been urged by Mr. Manekshaw that the provisions of Article 109 of the Articles of Association of the company tantamount to a delegation of the power of appointing a managing director by the directors of the company. Article 105 of the Articles of the company provides that the directors may, from time to time, appoint one or more of their body to be Managing Director Or Managing Directors of the company, either for a fixed term or without any limitation as to the period for which he or they is or are to hold such office, and may from time to time (subject to the provisions of any contract between him or them and the company) remove or dismiss him or them from office and appoint another or others in his or their place or places. The power conferred on Dadoba is an express power conferred by the Articles of Association themselves and cannot be regarded as a power which arises by virtue of any delegation by the directors of their power. The instrument giving rise to the power of the directors to appoint a managing director and to the power of Dadoba to appoint a managing director is one and the same. The source of the power being the same, it is not possible to say that the directors having derived their power under that instrument have thereafter delegated it to Dadoba.

9. It has been urged on behalf of the respondents that Article 109 contains provisions which are rendered void under Sec. 312. It is said that Article 109 deals with the power of Dadoba, who was the managing director for life, to appoint by deed inter vivos a managing director in his place and stead, that such appointment is rendered void under Sec. 312 and that if that be so, no other power under Article 109 can be exercised. In my view, this argument is not well founded. The power to appoint by will is severable from the power to appoint by deed inter vivos. One power can be exercised without exercising the other.

40. The next point that has been urged on behalf of the appellants is that the plaintiff has ceased to hold his office as a director. Reliance has been placed for this purpose on section 283(l)(g) of the Companies Act, 1956, and Article 85(f) of the Articles of Association of the company. Sec. 283(l)(g) runs as follows :-

“283(1). The office of a director shall be vacated if * * *

(g) he absents himself from three consecutive meetings of the Board of directors, or from all meetings of the Board for a continuous period of three months, whichever is longer, without obtaining leave of absence from the Board.”

Article 85(f) is to the same effect. After the death of Dadoba various meetings of the Board of Directors of the company had been called by the second defendant. On 19th March 1957 the second defendant purporting to act as a director of the company called a meeting of the Board of Directors on 25th March 1957. On 23rd March 1957 the plaintiff addressed a letter to the second defendant protesting against the action of the second defendant in calling that meeting. He contended that under the Articles of Association of the company the second defendant was not entitled to call a meeting of the Board of Directors of the company. In the course of the letter it was stated that as the second defendant was neither the Chairman nor the Managing Director, he was not entitled to call a meeting of the Directors. The plaintiff did not attend that meeting. On 27th March 1957 the seconds defendant purporting to act as the managing director of the company called a meeting of the Board of Directors of the company on 2nd April 1957. On 29th March 1957 the plaintiff addressed a letter to the second defendant contending that the notice convening the meeting on 2nd April 1957 was invalid as the second defendant was neither the Chairman nor the Managing Director of the company and was not entitled to call a meeting of the Directors without the consent or concurrence of the plaintiff. The plaintiff did not attend the meeting of the Board of Directors on 2nd April 1957. On 4th May 1957, the second defendant purporting to act as the managing director of the company called a meeting of the Board of Directors on 13th May 1957. On 8-th May 1957 the plaintiff addressed a letter to the second defendant reiterating his earlier stand. The plaintiff did not attend that meeting. On 21st May 1957 the second defendant purporting to act as such managing director called a meeting of the Board of Directors on 29th May 1957. The notice was duly served on the plaintiff. On 23rd May 1957 the second defendant as such Managing Director issued another notice stating that the meeting of the Board of Directors of 29th May 1957 was postponed to 31st May 1957. The said notice was duly served on the plaintiff. The plaintiff did not attend that meeting. If these meetings had been validly convened, it is not disputed that the plaintiff would cease to be a director of the company having regard to the provisions contained in Article 85(f) and section 283(1)(g) of the Companies Act. 1956. Article 94 of the Articles of Association of the company which deals with the summoning of meetings of the Board of Directors provides as follows :-

“94. The Managing Director may at any time and shall upon the request of any Director convene a meeting of the Directors.”

As I have already held that the second defendant was duly appointed as a managing director of the company at the time when the notices for calling these meetings were given by the second defendant and these meetings were called, he had the right under the provisions of the Articles to call such meetings. Such meetings were validly convened and held. The plaintiff absented himself from these meetings without leave of absence from the Board of Directors and in my judgment he ceased to be a director of the company. On 28th June 1957 a letter was rightly addressed by the company to the plaintiff stating that he had ceased to be a director of the company.

41. It is urged by Mr. Manekshaw that even if the contention of the plaintiff was correct that the second defendant had not been validly appointed as a managing director of the company, the second defendant was admittedly a director of the company and had a right as such director to call a meeting of the Board of Directors of the company and that the meetings that had been convened by the second defendant were validly convened meetings of the Board of Directors and that the plaintiff having absented himself therefrom had ceased to be a director. He strongly relies upon a passage in Palmer’s Company Precedents, 17th Edn., appearing at page 581 where it has been stated that in the absence of any article otherwise providing or a contrary practice established by the directors it would seem that any director may summon a meeting. It is not anyone’s case that there was any contrary practice established by the directors as regards the calling of the meeting of the Board of Directors. Apart from Article 94, there is no other article dealing with the calling of a meeting of the Board of Directors and if in fact there had not been a validly appointed managing director, a director would have the right to call a meeting of the Board of Directors of the company. It is, however, urged on behalf of the respondents that the meetings other than the meeting called by the notice, dated 19th March 1957, were meetings convened by the second defendant in his capacity as the managing director of the company in the exercise of the powers conferred upon him under Article 94 of the Articles of Association and not in the exercise of his right as a director to call a meeting of the Board of Directors in the absence of the Managing Director and that the plaintiff was under no obligation to attend any meeting convened by the second defendant purporting to act as a Managing Director of the company. Mr. Maneksha urged that if the second defendant had a right as a director to call a meeting, a mere false description of his as a managing director would not render the notices convening the meetings bad. The plaintiff could very well have attended the meetings without prejudice to his contention that the second defendant was not a managing director. There is considerable force in Mr. Maneksha’s argument. However, in the view which I take of the matter that the second defendant was a validly appointed Managing Director of the company, it is not necessary to determine whether if he had not been so appointed the meetings convened by the second defendant as a managing director could be said to be validly convened.

42. The last point that arises for consideration is as regards the validity of the appointment of the third defendant. As the plaintiff ceased to be a director of the company, the second defendant had a right to appoint a director in the place and stead of the plaintiff and the appointment of the third defendant is valid in law.

43. In the view which I take of the matter, the decree would be that the appeal be allowed with costs, and that the suit be dismissed with costs.

44. S.T. Desai, J.

Since we are equally divided on certain points stated below by us, this appeal will have to be heard by one or more of the other Judges of this Court as the Hon’ble the Chief Justice may be pleased to direct. The points on which we are equally divided are:-

(1) Whether the second appellant was validly appointed Managing Director of the first appellant company,

(2) Whether the first respondent (Plaintiff) ceased to be a Director of the company; and

(3) Whether the third appellant has been validly appointed a Director of the company.

45. Mudholkar, J.

This matter has come before me under clause 36 of the Letters Patent on a difference between Mr. Justice S. T. Desai and Mr. Justice K. T. Desai. I have to answer the points on which they have differed, and I shall presently state these points.

46. The appellants before me are original defendants 1 to 3. The suit was instituted by the plaintiff respondent No. 1 for obtaining three declarations: that he is and continues to be a director of the 1st defendant company; that the second defendant’s appointment as the Managing Director of the 1st defendant company was void and that the appointment of the third defendant as a Director of the company is invalid, illegal and inoperative. The plaintiff has also asked for grant of injunctions restraining the defendants from preventing the plaintiff from acting as a director of the company and for restraining defendants 2 and 3 from acting respectively as Managing Director and director of the company. The suit was decreed by the City Civil Court which held that the second defendant was not validly appointed as Managing Director for the first defendant; that the plaintiff has not ceased to be a Director of the company, and that the appointment of the third defendant as a director of the company was illegal and ineffective.

47. The first defendant is a private limited company incorporated under the Indian Companies Act. Prior to the incorporation of the company, the business carried on by it was being carried on by Dadoba, the father of the 2nd and the 4th defendant and the brother of the plaintiff, and this business was sold by Dadoba to the company. That was On 21st May 1955. On 7th July 1955 an agreement was entered into between Dadoba and the company, whereunder Dadoba was appointed Managing Director of the company. Clause 7 of that agreement which is relevant runs as follows:-

“Mr. Thakoor shall be entitled by deed inter vivos or by will or codicil to appoint any person to be a Managing Director in his place and stead and in default of such appointment the legal representatives of Mr. Thakoor shall be entitled to exercise the said power. Any appointee as aforesaid shall whilst holding office also be designated as a Managing Director and shall be entitled to be paid by the company the same remuneration and to exercise the same powers and authorities as are vested in Mr. Thakoor and the appointee as aforesaid shall have a power of appointing any person to be Managing Director as his successor on the remuneration of not less than Rs. 1,000 (Rupees One thousand) per month and upon the same other terms and conditions as are herein contained”.

Under the agreement, Dadoba was to be allotted a certain number of fully paid up shares of the company. The terms of the agreement are embodied in Article 109 of the Articles of Association of the company. The relevant part of the Article is clause (b), and it runs as follows :-

“The said Shri Dadoba Kashinath Thakoor may by deed inter vivos or by will or codicil appoint any person to be a Managing Director in his place and stead and in default of such appointment, the legal representative of the said Shri Dadoba Kashinath Thakoor shall be entitled to exercise the power.”

Dadoba died on 14th January 1957. Prior to his death, he had executed a will whereunder he appointed one of his sons, the second defendant, to be the Managing Director of the company from the date of his demise. It may be mentioned that Dadoba has left three sons: the second defendant Govind, the 4th defendant Harish, and one Deepak, who is a minor and is not party to this suit. Dadoba held 971 shares in the company, while the second and the fourth defendants held 844 and 843 shares respectively. The present plaintiff was also a Director of the company and holds 845 shares. The shares held by Dadoba have devolved, according to the plaintiff, on his three sons.

8. By virtue of his appointment as Managing Director under Dadoba’s will, the second defendant assumed Managing Directorship of the company and commenced to draw a sum of Rs. 3,500 per month as his salary, as provided for under the Articles of Association. The plaintiff challenged the validity of his appointment as a Managing Director and also of his right to convene meetings of the Board of Directors. The plaintiff refused to attend these meetings on the ground that the second defendant was not validly appointed Managing Director and had no right to convene a meeting. Eventually the second defendant informed the plaintiff that he ceased to be a Director of the company because of his failure to attend three consecutive meetings of the Board of Directors and also because of his refusal to attend any meeting for three months. In his place the third defendant Harish was appointed as Director by the 2nd defendant.

9. According to defendants Nos. 1 to 3 the appointment of the second defendant is valid, because Dadoba who made the appointment was given a power to make that appointment both under the agreement entered into between him and the company and the Articles of Association of the company. They also asserted that the meetings of the Board of Directors were lawfully convened by the second defendant and that the plaintiff, by his failure to attend three consecutive meetings as well as to attend any meeting for three months, had incurred a forfeiture of his rights to hold the office of the Director under the Articles of Association. They further contended that because of the vacancy caused by the cessation of the plaintiff as Director, the third defendant was appointed a Director by the second defendant under the powers conferred on him by the Articles of Association and that his appointment is valid.

50. The learned Judge of the City Civil Court upheld the plaintiff’s contentions and negatived those of defendants Nos. 1 to 3 on all these points and decreed the plaintiff’s suit. At this stage, I may mention that the fourth defendant not only did not contest the plaintiff’s claim but actually supported it. That is also his stand in this appeal.

51. It is quite clear from clause 7 of the agreement, as also from clause (b) of Article 109, that Dadoba was empowered to appoint another person as Managing Director in his place. The fact that such power was conferred on Dadoba by the agreement and the Articles of Association is not disputed. It is, however, contended by the plaintiff that subsequent to the coming into force of the Indian Companies Act, 1956, the assignment of the office of Managing Director is prohibited, and that consequently the assignment made by Dadoba of that office which is alleged to have become effective upon Dadoba’s death on 14th January 1957 in favour of the second defendant in his will is void. In the second place the plaintiff contends that the will executed by Dadoba has not been proved; that caveats have actually been entered, and that until the executor of the will obtains the probate thereof, the second defendant cannot be permitted to assert in this suit the right which he claims to have obtained under the will.

52. As regards the second point, it is sufficient to observe that though it was raised before the City Civil Court, it does not appear to have been raised before the Division Bench of this Court, which heard the appeal from the decision of the City Civil Court. The learned Judges of the Division Bench have differed on three points, which are, as follows :-

(1) Whether the second appellant was validly appointed Managing Director of the first appellant company,

(2) Whether the first respondent (plaintiff) ceased to be a Director of the company, and

(3) Whether the third appellant has been validly appointed a Director of the company.

They have not set out any other points of difference. Under clause 36 of the Letters Patent, I have to confine my opinion to these three points, and I do not think that it is open to me to consider any point other than these three points. If the plaintiff thinks it fit so to do, he can raise the point before the Division Bench after my judgment containing the opinion on the points of difference goes back to it.

53. Coming to the main point in the case, the argument of the plaintiff is that Sec. 312 is very widely worded, and it has enacted a prohibition on the assignment of his office by a director, including that by a Managing Director, to any persons, not only by a deed inter vivos but also by a will. Sec. 312 reads thus :-

“Prohibition of assignment of office by director- Any assignment ot his office made after the commencement of this Act by any director of a company shall be void.”

Mr. Maneckshaw, who appears for the contesting defendants, (who hereafter will be referred as defendants), says that what is prohibited by this section is an assignment, that is, a transfer made inter vivos and that the appointment or nomination of a person to an office by a will is not prohibited by it. Further, according to him, the prohibition enacted by this section relates only to the transfer of the office of a director, and not to that of a Managing Director. Also according to him, what the section forbids is the transfer of an office to a person who is not a director, and that consequently it cannot apply to the appointment by a Managing Director of a director to the office of the Managing Director.

54. The first question which falls for consideration is whether the word ‘assignment’ as used in section 312 is to be construed widely, so as to include a transmission of an office of a managing director by will, as contended for by Mr. Khambata on behalf of the plaintiff, or narrowly, so as to mean only transfer inter vivos, as contended for by Mr, Manekshaw. It was contended by Mr. Khambata that the Courts must bear in mind the object which the legislature had in view in enacting the section, and accord to the word ‘assignment’ an appropriate meaning so that that object would be carried out and not frustrated. According to Mr. Manekshaw, every statute which takes away the rights of a citizen must be strictly construed, and that the words used by it should not be construed unduly widely. It is no doubt true that a statute which curtails the liberty of the subject, or which takes away or restricts the rights of a citizen, has to be construed strictly. But it does not follow from that that the Courts are free to ignore the object which the legislature had in view in enacting the statute. It is the primary duty of the Court to give effect to a law made by the legislature, and when the language used by the legislature is not clear it is open to the Court to look into the history of the legislation that led up to the enactment of that law or the particular provision which it has to interpret and to construe the language used by the legislature keeping in view the historical background. In this connection, I would point out that in the Indian Companies Act of 1913 as originally enacted there was no prohibition against transfer of an office by a director. It was for the first time that the legislature by enacting the Amending Act of 1936 added section 86-B, which places a restriction on the assignment of office by a director. The relevant portion of that section is as follows: –

“If in the case of any company provision is made by the articles or by any agreement entered into between any person and the company for empowering a director or manager of the company to assign his office as such to another person, any assignment of office made in pursuance of the said provision shall, notwithstanding anything to the contrary contained in the said provision, be of no effect unless and until it is approved by a special resolution of the company :

Provided that the exercise by a director of a power to appoint an alternate or substitute director to act for him during an absence of not less than three months from the district in which meetings of the director are ordinarily held, if done with the approval of the board of directors, shall not be deemed to be an assignment of office within the meaning of this section.”

This provision was the predecessor of section 312 of the present Act, whereunder the transfer of office by a director is completely prohibited. From the fact that the legislature thought it fit to go further and to engraft an entirely new provision in the existing Act, it is clear that the legislature had decided upon a certain policy, and that policy was to prevent wholly the transfer of an office of a director. It is this policy which the Courts must bear in mind and effectuate while construing the new provision.

55. It has, however, argued by Mr. Manekshaw that though the legislature may have thought it fit to prohibit the transfer of the office of a director, it may not have wanted to do likewise with respect to the office of a managing director. No doubt, the argument proceeded, the managing director enjoys much higher powers than an ordinary director, but so does a managing agent, and transfer of a managing agent’s interest is not forbidden. Therefore, according to him, it would not be proper to place wide construction on the word ‘director’ as well as ‘assignment’. Sec. 343 of the Act does show that a managing agent’s office is capable of being transferred, but that section clearly provides that the transfer of that office cannot take effect, unless it is approved both by the company in general meeting and by the Central Government. Thus, though a transfer of this office is not prohibited, it is expressly subjected to certain restrictions. The object of these restrictions is to safeguard the interest of the company. Then again the managing agents have an interest in the company which is in the nature of property. Therefore, the right to transfer it, which is an ordinary incident of property, is attached to it. No one can be said to have property in an office, and ordinarily an office is not transferable. It has been observed by K. T. Desai J. that there are various provisions in the Act dealing with the assignment of office by the holder thereof, but this fact shows that the transferability of the office had to be provided for. No doubt this could be done by Statute or by a contract which is not repugnant to the provisions of a Statute or is not contrary to public policy. Here, the legislature in its wisdom has enacted a total prohibition in respect of the transfer of the office of a director and has not made any exception with respect to the office of a managing director.

56. Then it was contended by Mr. Manekshaw that since third parties are often given a right to nominate directors and managing directors, the Courts need not look askance at a provision made in an agreement or in the articles of association of a company which permits an existing managing director to transfer his office to another. It is true that financiers, managing agents, Government, etc. are ordinarily given such power to safeguard their interest, but the object underlying the prohibition with respect to directors and managing directors is, apparently, to prevent the establishment of perpetual succession at the will of successive directors or managing directors. There is no danger of this being done where the power to nominate is exercised by a third party from time to time. Apart from that, even if the conferral of power in third parties to make such nominations is open to objection, it cannot be disputed that the legislature, which is aware of the existence of several evils, has the right to select any of them and provide for their suppression though not of others.

57. Since it is the policy of the legislature to prohibit the transfer of an office of a director, it follows that it will not be proper to construe the language of Sec. 312 in such a way as to give only a partial effect to the policy by holding that all that was prohibited by the section was a transfer inter vivos and that it did not apply to a transfer by a will. If we look at the proviso to Sec. 86-B, we find therein a reference to the ‘power to appoint’ a director. The main section, however, refers to the power “to assign the office of a director” and the ‘assignment’ of the office of a director. Reading the section and the proviso together, it is clear that the legislature, when it spoke of such assignment or power to assign, understood each of the expressions to include the ‘power to appoint’. It did not use the words ‘assign’ or ‘assignment’ in this provision in the sense they are used in the law of property. The argument advanced on behalf of the defendant before the Division Bench that the power of assignment of an office must always be distinguished from the power of appointment or for nomination of another to an office, does not therefore appear to be sound.

8. A reference to Murray’s Dictionary as well as to Wharton’s Law Lexicon indeed shows, as was pointed out by Mr. S. T. Desai, J., that one of the meanings of the word ‘assign’ is to ‘appoint, designate, ordain, depute’. One of the meanings of the word ‘assignment’ is ‘appointment to office, nomination, designation.’ The word ‘assign’ therefore is not of a narrow connotation at all.

9. As I have already stated, the legislature, when it used in section 86-B the expressions ‘assign his office’ and ‘assignment of office’, was fully conscious of the fact that the words ‘assign’ and ‘assignment’ include ‘appointment’ or ‘power to appoint’. The legislature consolidated the law relating to companies and amended certain provisions of the preexisting law and enacted the Companies Act of 1956, and it used the same words ‘assign’ and ‘assignment’ in S. 312. It would therefore be reasonable to conclude that by repeating these words, the legislature intended that they should be accorded the same meaning which was ascribable to them under the old law, viz. section 86-B of the Act of 1913. Upon this view, the word ‘assignment’ used in section 312 must not be construed in the narrow sense in which it is used in connection with the law of property, but in a wider sense.

60. It is however strenuously argued by Mr. Manekshaw that the assignment by a director of his office by a will does not fall within the provisions of section 312, because assignment must necessarily be of an existing interest only, and the interest of a director would automatically cease upon his death, and there is thus nothing left for him to transfer or assign. This argument, if accepted, would lead to further difficulties for the second defendant, because on that basis it could be held that even in the absence of a provision such as sec. 312 of the Companies Act a director would not be able to appoint his successor by a will to take his place. With this part of the matter I shall deal presently. At the moment, however, it would be sufficient to say that the words ‘assign’ and ‘assignment’ would include appointment by any mode, whether by deed inter vivos or by a will. If the words are so construed, the question whether the appointer’s interest subsisted when the appointment could take effect becomes immaterial.

61. I may mention that Mr. Manekshaw referred me to Sec. 345 of the Companies Act and section 31-A of the Insurance Act of 1938 for the purpose of showing that wherever the legislature intended to prohibit something from being done by a will it has said so expressly, and that since the legislature has not said expressly that the assignment prohibited by section 312 includes also one made by will, it must be held that the appointment to an office made by a will is permissible though one made inter vivos may not be. In the first place, the legislature has not referred in this section to the modes of transmission of office prohibited by this section. It is only upon the construction sought to be placed on the word ‘assignment’ that the argument is founded, and, as already stated, that construction is not correct. It may further be pointed out that even Mr. Manekshaw conceded that the expression ‘assignment of office’ would also include appointment to the office, provided it was made inter vivos and was not to one who is a director. Once the concession is made as to the scope of the expression, the controversy must be deemed to have ended, because, as already pointed out, the mode of exercising the power is not in any way limited by section 312, and therefore any mode permitted by law can be resorted to. As regards the person in whose favour the exercise of the power is prohibited, section 312 makes no exceptions in favour of a director. It is true that the appointment of a person who is already a director as a director will be meaningless, but such an appointment, if purported ‘to be made, will fail not only because it is meaningless, but also because of Sec. 812, which enacts a total prohibition of transmission of a director’s office. Thus the two limitations attached to the concession made by Mr. Manekshaw must be left out of account. Finally, if this argument is accepted, it would lead to the curious result that what a person cannot do during his life he can, in a sense, do so after his death. I have no doubt that the legislature could not have intended to bring about such a curious result.

62. Apart from these considerations, I may refer to the observations of Lord Goddard, C. J. in Lines v. Hersom, (1951) 2 K. B. 682 at page 686 :-

“A statute, as we know, has to pass through committee in both Houses of Parliament and amendments are moved from time to time, and it is quite possible to find that an amendment which is moved to an early section in the statute may be worded in one way, while an amendment which is moved to a later section having exactly the same idea is worded in another way; but it does not at all follow that the legislature intends something different because the language of the two sections is not exactly the same.’ I may also refer to the following statement of law in Maxwell’s Interpretation of Statutes, 10th Edition, at page 326 :-

“But, just as the presumption that the same meaning is intended for the same expression in every part of an Act is, as we have seen not of much weight, so the presumption of a change of intention from a change of language (of no great weight in the construction of any documents) seems entitled to less weight in the construction of a statute than in any other case, for the variation is sometimes to be accounted for by a mere desire to avoid the repeated use of the same words, sometimes by the circumstance that the Act has been compiled from different sources, and sometimes by the alterations and additions from various hands which Acts undergo in their progress through Parliament. Though the statute is the language of the three estates of the realm, it seems legitimate in construing it, to take into consideration that it may have been the production of many minds and that this may better account for any variety of style and phraseology which is found than a desire to convey a different intention. Even where the variation occurs in different statutes, the change is often not indicative of a change of intention, though, where the variation occurs in two different statutes, the presumption of a change of meaning is rather stronger.”

From these observations it would be clear that the omission to use the words ‘by a will’ in Sec. 312 does not indicate that assignment or transmission of office by will is not prohibited by Sec. 312. Had the words ‘inter vivos’ been mentioned in the section the matter would have stood differently. But the legislature, as already stated, has contented itself by merely stating that “any assignment” is prohibited. These words are comprehensive enough to include every assignment or transfer of the office of a director or of the appointment by a director of a person to the office of a director in his place, whether by a deed inter vivos or by a will.

63. I will make a brief reference here to the opinions of tex-book writers on the company law in England upon which reliance was placed before me by Mr. Manekshaw, though he was at pains to explain, he had cited them before the Division Bench only upon the suggestion of the Judges constituting it. It may be mentioned that the provisions of S. 204 of the English Companies Act, 1948, to some extent correspond to S. 312 of the Indian Companies Act. In that section also the word ‘assignment’ has been used. While commenting on that section, Gore-Browne in his hand-book on Joint Stock Companies observes at pages 341 and 342 as follows :

“That section (S. 204) renders the assignment of the office of director as such to another person of no effect, unless and until it is approved by a special resolution of the company. It is difficult to see how a deceased person or his legal personal representative could assign an office, and possibly in no case would the exercise of a power to appoint a successor under such an Article constitute an “assignment” of the office, unless the appointment is made by the governing director during his life.”

After making these observations, the editor of the book expressed the opinion that the question was a doubtful one and that it would be advisable for any person appointed as successor under such a power to obtain the support of a special resolution.

64. In Palmer’s Company Precedents, 17th Edition, at p. 874, the editors of that work observe while commenting on S. 204 as follows:

“The precise connotation of a power “to assign office” as mentioned in the section is not clear. It is not thought that it would refer to a provision for the appointment of a successor.” The editors of Buckley on the Companies Acts, 13th Edition, have, while commenting on S. 204, stated as follows :

“Quaere, what is meant by the expression assignment of office” used in this section, which reproduces S. 151 of the 1929 Act.”

As pointed out by Mr. Justice K. T. Desai, the Editors of Palmer’s Company Precedents and Gore-Browne’s Hand-book on Joint Stock Companies prefer to express their individual opinions on the subject, The editors of Buckley on Companies Acts have chosen to remain silent.

65. In my opinion, the fact that a doubt is entertained by some of the authors as to the precise scope and meaning of the word ‘assignment’ and the fact that according to the editors of one of the books the word ‘assignment’ must be given a narrow meaning is not very relevant for the purpose of interpreting that word occurring in S. 312 of the Indian Companies Act. It may be mentioned that S. 204 of the English Companies Act does not enact a complete prohibition on a transfer of the office of a director. It merely places a restriction on such a transfer.

66. A reference was also made by Mr. Manekshaw to Form No. 255 in Palmer’s Company Precedents, 17th Edition, at pages 734 to 736, the relevant portion to which runs thus :

“If the said A B dies whilst he holds the office of Governing Director he may by his will or any codicil thereto appoint any person to be Governing Director in his place, and direct and determine within the limit of this article what shall be the powers; authorities and discretions of such Governing Director, and his remuneration and qualification, and how long he shall be entitled to hold office, and in default of such direction and determination such appointee shall only have the powers of an ordinary Director.”

It is no doubt true that in England the practice still prevails of conferring on a “Governing Director” (who corresponds to a managing director in India) power to appoint any person to be Governing Director in his place by a will. It is not possible to ascertain whether this form, which has no statutory authority, was evolved before the provisions of S. 204 were enacted or afterwards.

67. In these cicumstances, I do not think that much assistance can be gained by reference to these opinions and this form.

8. The next question to be considered is whether the prohibition enacted in S. 312 is limited to the assignment of an office of a director only, or whether it also extends to the office of a Managing Director. Now, there is no doubt that a Managing Director enjoys greater powers than a mere director of a company. It would stand to reason that what is prohibited in the case of a director should also be prohibited in respect of a Managing Director. Indeed there may be greater reasons and stronger grounds for prohibiting the assignment of an office which carries with it greater powers than one which does not carry with it such powers.

9. The word “director” has been defined in S. 2(13) of the Act as follows :

“‘Director’ includes any person occupying the position of director, by whatever name called.”

It is not disputed that Managing Directors are a species of directors. Therefore, the expression “Managing Director” would clearly fall within the definition of “director”. It is no doubt true that the expression “Managing Director” has also been defined in the Act. The definition in S. 2(26) is as follows:

“Managing Director” means a director who, by virtue of an agreement with the company or of a resolution passed by the company in general meeting or by its Board of Directors or, by virtue of its memorandum of articles of association, is entrusted with any powers of management which would not otherwise be exercisable by him, and includes a director occupying the position of a managing director, by whatever name called.”

But as this expression falls within the more general expression ‘director’, it is to be accorded its special meaning only when the context in which it is used so requires. From the fact, therefore, that the expression “Managing Director” is defined in the Act, it cannot be concluded that the definition of the word “director” is in any way curtailed and that it cannot be deemed to include a ‘managing director’.It was contended by Mr. Manekshaw that if it was intended that S. 312 should apply to Managing Directors also, the legislature would have said so expressly. He also said that wherever the legislature wanted to do so, it has mentioned both directors as well as managing directors in certain sections of the Act, and that the failure of the legislature to mention expressly ‘managing director’ in S. 312 must be deemed to indicate that that section was not intended to apply to his case. In support of his argument, he has referred to sections 269, 303, 305, 311 and 316. Section 269 deals with the appointment of managing or whole-time director. That section is clearly intended to apply only to that particular kind of directors and is not one which is intended to apply to directors in general. S. 303 deals with register of directors, managing agents, secretaries and treasurers etc. It provides that a body corporate shall maintain a register of its directors, managing director, managing agents, secretaries and treasurers etc. Here the provision requires that a managing director should also be shown as such (and not merely in his capacity of director), in the register, and that is why the legislature did not limit itself to using the word ‘directors’ for including the word ‘managing director’.’ S. 305 deals with the duty of directors etc. to make certain disclosures. Every director, managing director etc. must disclose certain particulars to the public relating to the office of any other body corporate which such person owns. But the reason why the legislature uses the expression ‘managing director’ also in this section is that the disclosure has to be made by a person within 20 days of his appointment. In order to cover the case of a director who subsequently become managing director and has in the mean while acquired an interest in any other body corporate, it was necessary to make a special mention of ‘managing director’ also. As regards Ss. 311 and 316, a mention is made of managing directors, only and the word ‘director’ is not used in those sections, because those sections are intended to apply only to managing directors and not to non-managing directors. On the other hand, it would be clear that the legislature has in a number of sections contented itself by using the word ‘director’ only. It cannot be disputed that those sections are intended to apply to all directors including managing directors. In this connection, I may refer to Ss. 253, 283, 290, 297, 300 and 312. Mr. Manekshaw indeed conceded that in all these sections the word ‘director’ has to be construed so as to include the managing director also. Now, S. 2, the defining section states: “unless the context otherwise requires”, every word or expression defined therein shall have the meaning given to it in the definition. In S. 312 the word ‘director’ alone appears, and therefore unless the context shows that it is to be given a narrower or different meaning, it must be given the meaning which is contained in the definition. Mr. Manekshaw has not been able to show from the context any reason why the word ‘director’ used in S. 312 should be accorded a meaning narrower than or different from the one given in the definition. He has on the other hand contended that the word ‘director’ should not be deemed to include managing director, unless there were good reasons for doing so. I am afraid there is no warrant for that proposition. It is not supported by any canon of construction. The rule of construction that a general provision must, when inconsistent with a special one, yeild to the latter cannot be pressed in aid when the question is whether an expression defined in one Act is to be given its full meaning or not. I therefore hold that the prohibition enacted in S. 312 applies not merely to the assignment or transmission of the office of a director, but also to that of a Managing Director. I therefore come to the conclusion that S. 312 not only applies to managing directors but also prohibits the transmission of the office of a director as well as a managing director whether inter vivos or by will.

70. The next question which falls for consideration is whether it prohibits the transfer of the office by a managing director to a director. As already pointed out, Mr. Manekshaw has argued that a managing director being merely a director with some additional powers the transfer by him of his office to a person, who is already a director, cannot be regarded as transfer of the office of the director, which would be meaningless but that it is only a transfer of the rights of a managing director of his right of management. He, therefore, contended that such a transfer would not be hit by S. 312, inasmuch as that section does not expressly prohibit the transfer of the right of management. It is no doubt true that a managing director is a director who has the right of management and who is charged with certain responsibilities. It is conceivable that a managing director purports to effect a transfer only of his right of management and nothing more, or he transfers all his rights. Whether he has done one or the other would depend upon the construction of the document by which he makes the transfer. Therefore, what we must ascertain here is whether Dadoba, when he assigned his office to the second defendant, merely assigned his right of management, or the totality of his rights as a managing director.

71. Before doing so, I would, however, like to make one observation, and it is this. S. 312 speaks merely of the assignor or the appointer, and not the assignee or the appointee. What it says in terms is that a director cannot assign his office. It does not say that a director cannot assign the office to persons belonging to a particular class and that it is open to him to assign his office to persons belonging to another class. What is, therefore, to be considered is, what is it that the director is prohibited from doing? That is to say, what is the kind of assignment which a director is precluded from making, and not what is the class of persons in whose favour he cannot make an assignment.

72. What has thus to be ascertained is the power which Dadoba was entitled to exercise under the agreement and under cl. (b) of Art. 109, and what Dadoba did in the exercise of that power. The relevant words of cl. 7 of the agreement and cl. (b) of Art. 109 are conferring the identical power, and therefore it is not necessary to consider these two clauses separately. I will, therefore, content myself by keeping in view cl. (b) of Art. 10

9. Now, that clause, says that Dadoba may, by deed inter vivos or by will or codicil, appoint any person to be a Managing Director in his place and stead. Now, the words “appoint any person” are very important. By using these words an unrestricted or unlimited power was conferred on Dadoba in the matter of making an appointment to the office of Managing Director. This clause did not confine Dadoba’s power to appoint only a director to the office of managing director. Now, if S. 312 is construed to prohibit the appointment of a person as managing director, who is not already a director, as contended for by Mr. Manekshaw, even then the source of Dadoba’s power to make an appointment must be held to be repugnant to the provisions of S.312. If, on the other hand, S. 312 is interpreted as prohibiting the appointment by a managing director of a director as a managing director in his place, then no further question arises.

73. S. 9 of the Act expressly provides that the provisions of the Act shall have effect notwithstanding anything to the contrary contained in the articles of a company, or in any agreement executed by it, and that any provision contained in the articles of the company, to the extent to which it is repugnant to the provisions of the Act, becomes void. Now, in order to consider whether a particular provision in an agreement or articles of association is saved or is rendered void because of any repugnancy to a provision of the Act, what the Court must examine is the provision itself. This provision, as I have already pointed out, is wide in its terms, and is, therefore, even on the argument of Mr. Manekshaw, repugnant to the provisions of S. 312. Mr. Manekshaw, however, argued that the provision would be rendered void only to the extent of the repugnancy, and that that part of he provision which is not repugnant to any of the provisions of the Act would be saved. He further said that though the conferral of any wide power to appoint any person as managing director may be repugnant to the provisions of S. 312, the power to appoint a director to the office of the managing director, which would fall within the power conferred on Dadoba under cl. (b) of Art. 109, will not be repugnant to that section, and will therefore be saved. I am afraid this argument cannot be accepted, because it would involve reading in the clause some words which are not there. It would have been a different matter, if cl. (b) of Art. 109 had read “appoint a director or any other person” to the office of a managing director. No doubt, the power to appoint any person conferred by this clause would include power to appoint a person, who happens to be a director. But that is not the consideration to be borne in mind, while deciding the question as to whether the power conferred by that cl. is saved by S. 9, or is rendered void by it. We must read the clause as it is, and we must give the ful lest meaning to what is said there, and then consider whether the clause as it exists is repugnant to any provision of the Act. Looking at the clause that way, it is clear that the unqualified or unlimited power conferred on Dadoba to appoint any person to be a managing director is wholly repugnant to the provisions of S. 312, and is therefore void. From this it would follow that on the date on which the new Companies Act came into force, the source of Dadoba’s power to make an appointment dried up, inasmuch as the conferral of the power to appoint a person as managing director was rendered void. According to the defendants Dadoba exercised this power in appointing the second defendant as a managing director in his place by will. As the source of the power had dried up Dadoba possessed no power which he could effectively exercise by his will.

74. At this place, it would be convenient to mention another argument advanced by Mr. Manekshaw. He contended that cl. (b) confers two kinds of powers on Dadoba; one is to make an appointment by a deed, and the other, to make one under will or codicil, and that even though the power to make an appointment inter vivos is affected by S. 9 of the Act, that to make an appointment by will or codicil is not so affected. It would be mere repetition to state that S. 312 applies both to appointment inter vivos as well as to any one by will or codicil. Apart from that, I am of opinion that cl. (b) does not confer two powers, but only one, and that is the power to make appointment. No doubt, it prescribes two modes in which that power can be exercised, that is , by deed inter vivos, or by will or codicil. But there is a difference between the conferral of a power to do a thing and prescribing ways or modes in which that thing could be done. Merely because a thing could be done in two Or more different ways, it cannot be said that two or more different powers to do that thing were conferred.

75. One more argument advanced by Mr. Manekshaw must be considered. He says that while interpreting cl. (b) of Art. 109 we must also bear in mind the provisions of Articles 105 and 106 and that if these provisions are considered, it would be clear that only a director can be appointed as a managing director, and therefore the words “any person” used in cl. (b) must be interpreted to mean only a director. Art. 105 deals with the power of the directors to appoint a managing director. It no doubt says that the directors’ power will be confined to appoint only one of them as a managing director. This Article deals with the powers of directors only, and not those of Dadoba, which are separately dealt with in cl. (b) of Art. 10

9. There is nothing in the latter clause to indicate that the provisions thereof are in any way controlled by Art. 105. This article, if I may say so, embodies the relevant terms of the agreement. The agreement makes no reference to the powers of the directors to appoint a managing director, and therefore it would not be correct to hold that what was not in the contemplation of the parties at the time of the agreement ought to be borne in mind while construing cl. (b) of Art. 10

9. Art. 106 specifies the provisions to which a Managing Director will be subject, and says that a Managing Director shall not be reckoned as a Director for the purpose of determining the rotation of retirement of the Directors, or in fixing the number of Directors to retire. Here again, the Article deals with the matter which is independent of Art. 109, and there is no reason why the language used in cl. (b) of Art. 109 should be deemed to be controlled by anything said in Art. 106.

76. Earlier in my judgment I have said that I shall deal with Mr. Manekshaw’s argument to the effect that where a managing director makes the appointment of another as managing director in his place or stead after his death, there can be no effective transmission of office by assignment, because whatever interest Dadoba had had ceased to exist at his death. In connection with this argument, Mr. Khambatta referred to a Madras case, which says that the law knows no vacuum, and that as soon as the managing director, who makes the assignment or appointment of another managing director, died, the assignee or the appointee takes his place and that there is no hiatus. Mr. Manekshaw rightly pointed out that the maxim that law knows no vacuum applies to succession to property, and not to succession to office. I will, therefore, proceed on the basis that Dadoba’s interest as a managing director ceased at the moment of his death, and that in a narrower sense he could not assign that interest to any one by will. But, as already stated, the word “assignment” must be understood in a wide sense, so as to include the power to appoint another in one’s place.

77. However, even if one proceeds on the basis of the argument of Mr. Manekshaw, the result would be almost the same. Now, a will speaks from the death of the testator. The exercise by a person of a power to appoint by will becomes irrevocable only from the moment of death inasmuch as the will is liable to be revoked till death. A power to make appointment by will cannot, therefore, be deemed to have been exercised effectively, until it has been so exercised irrevocably. We have seen that the agreement and the articles of association empowered Dadoba to appoint another person “in his place and stead” as a managing director. The term in this regard, therefore, contemplates Dadoba’s continuing to be a managing director, till he exercised the power to make the appointment. Dadoba was to be a managing director for life, and therefore he ceased to be one upon his death. Since, as already observed, the will operates from death, the power is deemed to have been exercised effectively by Dadoba at the moment of his death. It is true, as contended by the defendants, that Dadoba had no interest left and held no office which he could transfer after the moment of his death. The term in Art. 109, cl. (b), it must be remembered, allowed him to appoint another as managing director only in his place and stead”. This means that he was entitled to substitute another person for himself. Such a substitution is possible only when at the point of time the substitution came into effect Dadoba continued to be a managing director. It was not within the competence of Dadoba to so make an appointment as to bring substitution into effect after he ceased to be a managing director. In my opinion, if the exercise of the power became effective Only after Dadoba’s death, there was nothing existing at the time of his death upon which that power could operate, because at the moment of death he ceased to be a managing director. The conclusion to be drawn from this, therefore, is that the substitution permitted by cl. 7 of the agreement and in Art. 109, cl. (b) of !he articles could be made only during the lifetime of Dadoba and while he continued to be a managing director. No doubt, the agreement does refer to the exercise of the powers to make an appointment by will or codicil; but by reason of the use of the words “in his place and stead”, effect cannot be given to those words which gave him power to make an appointment by will or codicil. I therefore hold that though Dadoba has exercised his power by will; but no effect can be given to the exercise by him of the power, for the reason that at the moment the exercise of the power could become effective Dadoba had ceased to have any interest left.

8. For all these reasons, therefore, agreeing with S. T. Desai, J., I hold that the appointment of the second defendant by will as the managing director was invalid. Accordingly I answer the first question in the negative.

9. Now, coming to the second question on which the learned Judges of the Division Bench have differed, my answer is also in the negative.

80. The contention on behalf of the defendants is that the plaintiff, by his failure to attend certain number of meetings, has forfeited his office of director. Now, if the meetings are validly convened by someone who is empowered to convene them, a director by failing to attend them, may incur a forfeiture of the office of the director. But here the person who convened the meetings as managing director had no right as such to convene them. It is, however, contended by Mr. Manekshaw that meetings of the Board of Directors could be convened by any director, and that since all the meetings during the period in question were convened by the second defendant, who was at least a director then, the plaintiff, by his failure to attend those meetings, has incurred forfeiture. There is no provision in the Act or in the articles which entitles any director to call a meeting. Article 94 of the articles runs thus :

“The Managing Director may at any time and shall upon request of any Director convene a meeting of the. Directors. It shall not be necessary to give notice of a meeting of the Directors to a Director who is not in Bombay. Questions arising at any meeting shall be decided by a majority of votes, and in case of an equality of votes, the Chairman shall have a second or casting vote”.

It is implicit in this article that a meeting can be convened only by a managing director, and that when a director wants a meeting to be convened, he must request the managing director to convene it. This article thus negatives the right of a director to convene a meeting. Mr. Manekshaw has said that if there is no managing director in existence, it would create an impasse if the Court were to hold that no meetings could be convened by a director. Perhaps, such a result would ensue; but even so there is no ground for holding that despite the provisions of Art. 94, any director has a right to convene a meeting. Where there is no managing director, the remaining directors can, by acting jointly, convene a meeting. It may of course happen that there is a disagreement among the directors about this matter; but if there is such disagreement, the parties must necessarily have recourse to the Courts of law. This is what always happens where there is a conflict of rights and disagreement among the parties about any matter.

81. Since, in my opinion, the plaintiff has not forfeited his office of a director, it follows that no question arose for appointing another in his place. Furthermore, a vacancy in the office of the director could be filled either by a managing director making an appointment, or by the directors doing so. Here, as already stated, the second defendant, who purported to make the appointment of a director, had no right to make the appointment. Accordingly, my answer to the third question is also in the negative.

82. The papers may now be sent back to the Division Bench with my answers. The matter wilt be dealt with further by the learned Judges constituting the Bench, including the question of costs.

Final Judgment (24-2-1959) of the Court consisting of S. T. Desai and K. T. Desai JJ. was delivered by

83. S.T. Desai, J.

In this appeal from the judgment of Judge Chitale of the City Civil Court, my brother K. T. Desai and I disagreed on three points. As we were equally divided, the points were referred by the directions given by My Lord the Chief Justice to our brother Mudholkar for his decision. He has now delivered his judgment and he agrees with me on those points. Those three points must, therefore, be decided according to the opinion of the majority of the Judges.

84. In the result, the appeal fails and will be dismissed with costs.

Appeal dismissed.