Firm Al. Ar. Arunachalam Chettiar versus Kaleeswarar Mills Ltd., AIR 1957 Mad 309

In this case the Madras High Court opined that the writ of mandamus should not be issued when the purpose of the suit is to have the rights of the plaintiff declared, and there stands no issue for the enforcement of any obligation of the parties involved.
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Introduction

Article 226 of the Constitution of India (hereinafter referred as ‘the Constitution’) confers a wide variety of powers in regards to the issuance of writs to the parties present before the High Court. The case of Kaleeswarar Mills was one of the cases where the Madras High Court concluded that the power to issue writs under Article 226 of the Constitution should be exercised only in accordance with the principles established by the Courts in the judicial precedents. Also, the Court arrived at the conclusion in this case that the writ of mandamus should only be issued in accordance with the principles laid down under Section 45 of the Specific Relief Act, 1963. In this case the Madras High Court opined that the writ of mandamus should not be issued when the purpose of the suit is to have the rights of the plaintiff declared, and there stands no issue for the enforcement of any obligation of the parties involved. Kaleeswarar Mills

Facts of the Case

The case arose out of the petition filed under the Article 226 of the Constitution, seeking an appropriate writ to stop the respondents from enforcing a resolution passed by the respondents on April 7th, 1956. The Kaleeswarar Mills had been incorporated as a limited liability company in the year 1903 with the object to continue the business of spinning and weaving of cotton yarn and cloth. After incorporation the petitioner firm, at the time of the promotion of the company, had played a major role. Keeping that in mind, as a way to acknowledge the role played by the firm in the promotion of the company, in the Memorandum of Association and the Articles of Association of the company, the company and the firm agreed to include that M/s. Al. AR. Arunachalam Chettiar and Deevan Bahadur P. Somasundaram Chettfar of Devakottah, their firm, their heirs and their executors shall all be the Secretaries and the Bankers of the Company, and that the same shall be continued on a hereditary basis. The succession of these rights continued for some time. However, in March 1954, some serious changes were introduced in the management of the company affairs. In a meeting, it was noted that the condition and the financial performance of the mills were becoming unsatisfactory. Moreover, a huge loss is incurred to the company because the Mills were non-functional for more than a week.  All this had brought the Mills to a position that it could not restart their work until and unless some financial help was gathered to allow the mills to jump start their functioning.

However, when in March 1954, Sri P. S. S. Somasundaram Chettiar, the adopted son of the said Sathappa Chettiar agreed to provide adequate funds for the mills to jump start the production process, the condition presented in exchange for such funding was to mortgage the assets of the mills. After this was done, Somasundaram Chettiar was appointed as the General Manager of the mills and the whole administration and the management of the company was handed over to the General Manager. At the same time, Kalairaja Chettiar withdrew from the managing agency. After the control was effectively vested into the hands of the General Manager, the new Companies Act, 1956 was passed, and likewise, the Board of Directors of the Company met and passed the impugned resolution in which the hereditary rights of the Secretaries and Bankers were ceased and the office was declared vacant from then on. Subsequent to that, the petitioners approached the court to obtain a writ wherein it is declared that the resolution which passed by the Board of Directors on April 7th, 1956 was invalid and inoperative.

Issues

The Court was faced with the question of deciding whether the rights of the petitioners were violated by the impugned resolution dated April 7th, 1956.

Held

The Court dismissed the petition filed by the petitioners seeking the issuance of a writ of mandamus in to stop the respondent company from executing the resolution passed by the Board of Directors of the Company on April 7th 1956. The Court was of the opinion that the meeting was validly held and that the passing of the resolution did not suffer from any form of infirmity of the law, such that it could be rendered inoperative by the issue of the writ of mandamus under the Article 226 of the Constitution. The Court did not issue any other directions or orders either. The Court also did not delve into the inquisitions of questions of facts which were brought to the light by the petitioners.

Analysis

The judgment was against the submissions made by the counsel appearing for the Petitioners. The submissions made by the petitioners were based on three major contentions:

Kaleeswarar Mills

  1. Majorly, the petitioners argued that the resolution was invalid, mainly because of the fact that the respondents i.e. the Board of Directors had no power to remove the petitioners form the post of Secretaries and Bankers in the first place. The Court concluded that the agreement which had been made between the Firm and the Company granting the hereditary rights was in the form of a contractual agreement. The same could not be contested by claiming a lack of jurisdiction over the same.
  • The petitioners also submitted that the petitioners could not have been removed from their positions unless they resigne themselves, or until any fraud was established against them. The court replied that no such removal had actually been forced into effect in the impugned resolution. Rather, the resolution dated April 7th, 1956 only recorded the opinion of the Board of Directors which was based on the legal opinion tendered to them subsequent to the coming into effect of the Companies Act, 1956.
  • The lack of jurisdiction was not apparent, and the same would be dependent upon the legal advice that had been tendered to them by the legal experts, the validity of which was something that the Court was entitled to delve into. The Court dismissed the contentions made by the petitioners.

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