Ozg Sarfaesi / DRT Lawyer
Ahmedabad | Pune |
Kolkata | Bangalore | Delhi | Mumbai
VoIP Text / Phone
# 09811415837-61-72-84-92-94
Website: http://sarfaesi.ozg.in
Email: debt@liaisoning.com
Section 195 of Companies Act,
1956 says that where minutes of the proceedings of any general meeting of the
company or of any meeting of its Board of directors or of a committee of the
Board have been kept in accordance with the provisions of section 193, then,
until the contrary is proved, the meeting shall be deemed to have been duly
called and held, and all proceedings thereat to have duly taken place, and in
particular, all appointments of directors or liquidators made at the meeting
shall be deemed to be valid. While looking at the section the following issues
deserve consideration.
(1) How to construe the wording
“kept in accordance with the provisions of section 193”?
(2) Significance of reference to
“the meeting shall be deemed to have been duly called and held”?
(3) How to construe the wording
“all appointments of directors or liquidators made at the meeting shall be
deemed to be valid.
(4) Whether the conclusiveness
can be attributed to the minutes?
(5) How to see the difference
between the presumption under the section and the conclusiveness to the
chairman’s finding?
(6) How to construe the
presumptive nature of the minutes etc. under the section?
How to construe the wording “kept
in accordance with the provisions of section 193”?
Though the section refers to
section 193 with regard to the manner in which minutes are to be recorded,
section 193 is to be carefully understood under the section. Because, section
193 not only deals with the time limit, signatures, page numbers, separate books
etc. but, also refers to fairness. There may be cases wherein the minutes are
disputed immediate to the knowledge. In such cases, is it correct to hold that
the presumption under section 195 is available even when the correctness of
minutes is questioned immediately? The answer can be ‘yes’. The reference to
section 193 to be looked from procedural point of view and technicalities
should not be placed. If it is proved that the minutes are prima facie
recorded, signed, maintained in separate books without any pasting and
overwriting and consecutively numbered, then, that’s enough for applying the
rule of presumption under section 195. Irrespective of the nature of challenge
and time thereon, if it is prima facie proved that the minutes are recorded in
accordance with section 193, then, presumption under section 195 is available.
The challenge to the recording of minutes in accordance with section 193 should
not be viewed technically. It is all about the procedure. Dealing the reference
to section 193 under the section, the Madras High Court, in V.G.Balasundaram
and others Vs. New Theatres Carnatic Talkies Private Limited and others (1993)
77 Comp Cas 324, was pleased to refer/observe that “section 193 of the
Companies Act, 1956, provides that every company shall cause minutes of all
proceedings of every general meeting of its board of directors or of every
committee of the board to be kept by making within thirty days of the
conclusion of every such meeting concerned, entries thereof in books kept for
that purpose with their pages consecutively numbered. If the presumption is not
available under section 193, presumption under section 195 is also not
available”.
Significance of reference to “the
meeting shall be deemed to have been duly called and held”?
The reference to the wording ‘the
meeting shall be deemed to have been duly called and held’ is really
significant and based on the sound logic. Because, unless there is a due call
or calling in accordance with the provisions of the Act, it can not be held that
the meeting is validly held. The question of validity of minutes etc. will
normally arise only when the meeting is called in accordance with the
provisions of the Act. If we see the issue of presumption of minutes under the
section and calling of meeting on two different footings, then, there is chance
of recording the meetings without any due call. As such, the calling, holding,
conducting and the recording of minutes etc., can not be separated and it is a
process with the ultimate object of transacting the business at the meeting. As
such, it is to be understood that the reference to the wording that ‘the
meeting shall be deemed to have been duly called and held’ is on sound logical
footing.
How to construe the wording “all
appointments of directors or liquidators made at the meeting shall be deemed to
be valid?
With the reference to the wording
presumption in the title to the section and with the usage of the word ‘valid’
with regard to the appointments under the section, it appears to be that the
same is some what ambiguous. Does the section convey that once the director is
appointed as recorded in the minutes, then, such an appointment should not be
questioned? The answer is ‘No’. On any ground whatsoever, the conclusiveness
should not be attributed to the appointments. If the appointment of directors
etc. is not correct or is not in accordance with provisions of the Act, then,
certainly such an appointment is invalid and liable to questioned and set
aside. As such, the usage of the word ‘valid’ under the section to be
understood and construed with due reference to the dominant rule of presumption
under the section. As such, the reference to the wording “all appointments of
directors or liquidators made at the meeting shall be deemed to be valid” to be
understood as all appointments of directors or liquidators made at the meeting
shall be presumed to be valid until contrary is proved.
Whether the conclusiveness can be
attributed to the minutes?
Conclusiveness can not be
attributed to the minutes prima facie on any ground what so ever. While
referring to the evidentiary value, often the words like ‘prima facie
evidence’, ‘rebuttable presumption’, ‘irrebuttable presumption’ and
‘conclusiveness’ are heard. While the words ‘prima facie evidence’ and ‘rebuttbale
presumption’ stands some what on the same footing, the ‘irrebuttabel
presumption’ and the ‘conclusiveness’ stands on similar footing. Under company
law, generally, there is no place for ‘rule of conclusiveness’. Many issues
under the Act will have only presumptive value and subject to rebuttal.
How to see the difference between
the presumption under the section and the conclusiveness to the chairman’s
findings?
The conclusiveness attributed to
the chairman’s finding to be viewed very carefully while dealing with the
presumption available to the minutes of the company under the section. There
exists an apparent overlapping of principles as referred. The chairman’s
findings too will have only presumptive value subject to rebuttal though the
provision expressly confers conclusiveness to the minutes of the company or the
Board. The issues need to be carefully understood.
How to construe the presumptive
nature of the minutes etc. under the section?
Referring to the issue of
construed to be placed on the section, the Madras High Court, in Yamuna Reddy
Vs. B.Sivaraman and others, (1992) 75 Comp Case 199, was pleased to observe
that “under section 195 of the Companies Act, 1956, where the minutes of the
proceedings of the company are duly recorded and signed, a presumption is drawn
that the meeting has been duly called, held and all proceedings thereat have
duly taken place and the consequent appointments of directors have been validly
made. This presumption is rebuttable, but the onus of proof to dislodge the
presumption is cast on the person who challenges the resolution or the entering
of the minutes on the ground of malpractice or misdeed”. The Supreme Court of
India, in M.S.Madhusoodhanan and another Vs. Kerala Kaumudi (P) Ltd. And others
(2003) 4 Comp LJ 185 (SC), was pleased to observe that “furthermore, under
section 194 of the Companies Act, 1956, minutes of meeting kept in accordance
with the provisions of section 193 shall be evidence of the proceedings
recorded therein and, unless the contrary is proved, it shall be presumed under
section 195 that the meeting of the Board of directors was duly called and held
that all proceedings thereat to have duly taken place. The onus was on Mani to
disprove that the transfers had not taken place as recorded in the minutes of
the Board meeting held on 21 May, 1985, on onus that he has singularly failed
to discharge”.
Ozg Sarfaesi / DRT Lawyer
Ahmedabad | Pune |
Kolkata | Bangalore | Delhi | Mumbai
VoIP Text / Phone
# 09811415837-61-72-84-92-94
Website: http://sarfaesi.ozg.in
Email: debt@liaisoning.com
