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
