P L D 1958 (W (PLP)

KAYANI, C. J.‑This petition for a writ of mandamus has been occasioned by a difference among the directors of the West Punjab Steel Corporation, Lahore.

2. The petitioners are three in number, the first two Sheikh Maqbool Elahi and Mian Muhammad Fazil‑being directors and the third, Abdul Majid Mufti, being its secretary. There are altogether seven directors, and on the relevant date the remaining five directors were Khan Abdul Rahman (Respondent No. 1), Haji Muhammad Amin (Respondent No. 5), Sardar Muhammad Umar Khan (Respondent No. 7), Mr. Abdul Aziz Malik and Seth Tahir Ali.

3. The petition stated, so far as it is relevant, that on the 16th of September 1957, at 9 a.m., there was an emergent meeting of the board of directors presided over by Khan Abdul Rahman, and the only question which was on the previously circulated agenda related to the convening of an extraordinary general meeting of the share‑holders to consider the affairs of the company and to the fixation of a date therefor. The directors present were :‑ (1) Khan Abdul Rahman, (2) Haji Muhammad Amin, (3) Mr. Muhammad Fazil, (4) Mr. Abdul Aziz Malik, and (5) Sh. Maqbool Elahi, the last‑mentioned having arrived "a few minutes later" than others. Instead of taking up the agenda, however, the chairman asked the secretary to leave the room and then declared that Sheikh Maqbool Elahi and Sardar Muhammad Umar Khan had ceased to be directors (apparently by virtue of section 86‑F, Companies Act,) because they had entered into transactions with the company without the board's permission. In their place he proposed Mr. C. M. Latif (respondent No. 2) and Mr. Fazal Muhammad (respondent No. 3). At this stage Sheikh Maqbool Elahi entered the room with the secretary. The proposal was opposed, whereupon the chairman remarked that since he and Haji Muhammad Amin were in favour of it, while Mr. Abdul Aziz Malik and Mr. Muhammad Fazil were opposed to it, he would give his casting vote in favour of the proposal. He thus ignored the presence of Sheikh Maqbool Elahi, who strongly protested. The chairman, however, called in Messrs C. M. Latif and Fazal Muhammad, who appeared to have been just outside and who brought in supporters. At this stage he proposed the suspension of the secretary. Mr. C. M. Latif meanwhile took away the minute book and other papers, directing his men to remove the chairs in which the directors were sitting, while the chairman, announcing that he was adjourning the meeting because of rowdyism, left the room.

4. As the minute book had been removed, the first two petitioners and Mr. Abdul Aziz Malik recorded the minutes later on loose sheets of paper. They now understand that the chairman claims to have declared that Mr. Muhammad Fazil also had ceased to be a director and that Khan Muhammad Safdar Khan (respondent No. 4) had been substituted for him. They have also learnt that respondent No. 6 has been appointed the new secretary.

5. The petition maintained that the secretary could be suspended only by a vote of the directors and that the directors could be removed only by an extraordinary general meeting of the share‑holders. For the application of section 86‑F, it was necessary to call upon them to explain whether they had con travened the provisions of that section. Further, by resolution No. 6 of the 29th November 1950 (of which a copy was Annexure `C') the, directors were permitted to make purchases from the company even on credit, and for that reason, even on facts, the removal was illegal. Next, the newly‑appointed directors have no locus standi, not having been elected by the majority of the directors present.

6. It was, therefore, prayed that a writ of mandamus or other appropriate writ, direction or order be issued‑ (a) directing respondents Nos. 1 to 6 not to function in the name of the corporation, (b) restraining respondents Nos. 1, 2, 3, 5 and 6 from operat ing on the bank account, (c) directing respondents Nos. I to 6 to return the keys, the safe, the account books, the minute b9pk etc. to the secretary, and, finally, (d) restraining respondents Nos. 1 to 6 from interfering with the functioning of petitioners Nos.' 1 and 2 and respon dent No. 7 as directors and petitioner No. 3 as secretary.

7. On the admission of the petition, temporary relief maintaining the previous status was granted.

8. In their reply, the respondents pleaded that the proper remedy was not mandamus but a civil suit. As to facts, they stated that the contracts into which the directors in question had entered with the company had been brought to the chairman's notice by a share‑holder a day before the meeting, and in any case there was no bar to the directors assembled at a meeting considering any matter relating to the affairs of the corporation, irrespective of whether or not it was on the agenda. At the meeting, there were present only four directors, Sheikh Maqbpo1 Elahi having arrived an hour later, and the decision to elect new directors was taken by a majority. Respondents Nos, 2 and 3 were called by the chairman by telephone and arrived only after the three new directors had been elected. After they pad joined, a resolution suspending the secretary was passed. There was no rowdyism, and minutes were recorded at the spot. A copy of these minutes was placed on the file.

9. The main contention of Mr. Brohi for the respondents was that the posts of directors occupied by Sheikh Maqbool Elahi and Sardar Muhammad Umar Khan had fallen vacant by reason of section 86‑F, Companies Act, read with section 86‑I, and that whatever further happened as regards the new elections, even if held to be irregular, was the concern of the share‑holders and was not a matter for the Courts to decide.

10. The first question for decision under section 86-F. Companies Act, is whether it is possible for the directors to give a general consent to one or all the directors to enter into contracts with the' company. To answer this question, it seems necessary to ascertain whether section 86‑F is linked in Any manner with section 91‑A, which deals with a kindred subject. The two sections are as follows :_.,_ Section 86‑F‑Except with the consent of the directors, a director of the company, or the firm of which he is a partner or any partner of such firm, or the private company of which he is a member or director, shall not enter into any contracts for the sale, purchase or supply of goods and materials With the company, provided that nothing herein contained shall affect any such contract or agreement for such sale, purchase or supply entered into before the commencement of the Indian Companies (Amendment) Act, 1936. Section 91‑A.‑(1) Every director who is directly or indirectly concerned or interested in any contract or arrangement entered into by or on behalf of the company shall .disclose the nature of his interest at the meeting of the directors at which the contractor arrangement is determined on, if his interest then exists, or in any other case at the first meeting of the directors after the acquisition of his interest or the making of the contract or arrangement ; Provided that a general notice that a director is a director or a member of any specified company or is a member of any specified firm, and is to be regarded as interested in any subsequent transaction with such firm or company, shall as regards any such transaction be sufficient disclosure within the meaning of this subsection and after such general notice, it shall not be necessary to give any special notice relating to any particular transaction with such firm or company. (2) Every director who contravenes the provisions of sub section (1) shall be liable to a fine not exceeding one thousand rupees. (3) A register shall be kept by the company in which shall be entered particulars of all contracts or arrangements to which subsection (1) applies, and which shall be open to inspection by any member of the company at the registered office of the company during business hours. (4) Every officer of the company who knowingly and wilfully acts in contravention of the provisions of subsection (3) shall be liable to fine not exceeding five hundred rupees.

11. It would be profitable to reproduce here section 86‑I also. Section 86‑L‑(1) The office of a director shall be vacated if (a) he fails to obtain within the time specified in sub section (1) of section 85, or at any time thereafter ceases to hold, the share qualification, if any, necessary for his appoint ment, or (b) he is found to be of unsound mind by a Court of com petent jurisdiction, or (c) he is adjudged an insolvent, or (d) he fails to pay calls made on him in respect of shares held by him within six months from the date of such calls being made, or (e) he or any firm of which he is a partner or any private company of which he is a director without the sanction of the company in general meeting accepts or holds any office of profit under the company other than that of a managing director or manager or a legal or technical adviser or a ,banker, or (f) he absents himself from three consecutive meetings of the directors or from all meetings of the directors for a con tinuous period of three months whichever is the longer with out leave of absence from the board of directors, or (g) he or any firm of which he is a partner or any private company of which he is a director accepts a loan, or guarantee from the company in contravention of section 86‑D, or (h) he acts in contravention of section 86‑F. (2) Nothing contained in this section shall be deemed to preclude a company from providing by its articles that the office of director shall be vacated on grounds additional to those specified in this section.

12. It will be instructive to mention that sections 91‑A to 91‑D were inserted in the Companies Act by an amendment of 1914, while sections 86‑A to 86‑1 were inserted by an amendment in 1936. Section 91‑A required a director who was "directly or indirectly" concerned or interested in any contract into which a company entered to disclose the nature of his interest, and if he did not do so, he became liable‑ to a fine up to one thousand rupees. But he could give a general notice of his being a director etc. in a specified company, and that notice was t9 be regarded as sufficient disclosure of his interest in any subsequent trans action with that company. It will be noticed that section 91‑A encompasses a wider field than section 86‑F, where, in the first instance, the transactions are confined to sale, purchase or supply of goods and materials, and in the second instance, the transactions are direct transactions between the director and the company. There is no doubt that this part of section 86‑F is covered by section 91‑A, and it was, therefore, argued, on the lines of the argument which was not accepted in Walchandnagar Industries v. Ratanchand (A I R 1953 Bom. 285), that if section 91‑A means anything, the disclosure of interest by a general notice should do away with the consequences attendant on the absence of a consent under section 86‑F. In the case before us, section 91‑A is not operative, but it paves the way for a general consent ; because if a general consent is not contemplated, then although section 91‑A makes it possible for a director, after the accrual of his interest in a contract, to disclose it at the first meeting of the directors taking place thereafter, the effect of non‑consent under section 86‑F would be immediately to vacate the office of the contracting director under section 86‑I, clause (h).

13. We have seen that sections 86‑F and 86‑I were inserted by a later amendment. The Legislature must have been conscious of the existing provisions relating to contracts by companies with one or more of its directors. For certain purposes, those provisions were perhaps not regarded as adequate. They merely imposed a fine in the event of non‑disclosure of interest. By the time of the second amendment it was obviously considered proper to visit direct transactions by the directors with a drastic penalty, such as the vacation of office. If, therefore, as we think, some part of section 86‑F is common with section 91‑A, the former will override the latter, and a general disclosure of interest under section 91‑A will not save a director from vacating office under section 86‑F in regard to the particular transactions mentioned therein, unless he has obtained the previous consent of the directors. We use the word "previous" because the effect of section 86‑I is that the moment a certain thing happens, "the office of a director shall be vacated", apparently without an further ceremony. Thus a person of unsound mind shall vacate office as soon as he is found so by a Court of competent juris diction, and an insolvent vacates office as soon as he is adjudged insolvent.

14. Having disposed of section 91‑A, we do not hesitate in holding that the "consent of the directors" spoken of in 1, section 86‑F should not mean a general consent, because, as observed by Chagla, C. J. in the Walchandnagar liulustries` case and we respectfully agree with him‑a-General consent would defeat the object of section 86‑F, which was to enable the directors in each individual case to examine the nature and implications of a contract and decide whether it would be more beneficial to the company or to the director concerned. if ,I however, the directors could consent to a future contract without knowing its nature and extent, they might consent to something' very injurious to the company.

15. We are alive to the difficulty which this interpretation creates in respect of `ordinary and petty transactions, as where a company has a selling counter for the public and one of the directors, like an ordinary purchaser, pays a small sum for a soap box or some such trifle. Mr. Mahmud Ali, therefore, argued that, in the alternative, the contracts mentioned in section 86‑F should be regarded as formal contracts, which are entered into after some procedural observance. We have thought over this aspect of the case, and were at one time inclined to place upon the section a convenient interpretation, consistent with the object thereof, which was to keep all transactions above board. But we have felt that it would be difficult to draw a line between formal and informal contracts, and that, in the garb of informality an injurious contract might be transacted. The Indian Parliament has got over this difficulty by amending section 86‑F so as to exclude contracts of the value of five thousand rupees or below. In this view of the case, the fact that the transaction rests on a permit by the Steel Controller will not make any difference.

16. We have already indicated that the office of a director becomes automatically vacant if 'he enters into a contract with the company without obtaining the consent of other directors. For the contrary view Mr. Mahmud Ali relied on Turnbull v. West Riding Athletic Club (70 Law Time 92), where it was observed that an opportunity should be given to the director to explain his position, and that he might be able to win over the directors to his view. But how can there be any question of winning over, by eloquence or sophistry, where, by law, an office has become vacant? The view expressed in Turnbull's case was distinguished in In re Bodega Company (1 Chancery Division 276) where, on admitted facts, a director was secretly concerned in a contract with the company, and there was in the 'company's articles a provision similar to ours about the office falling vacant in the event of a director being concerned in any such contract. It was there held that on the act being done, the director ipso facto vacated office : There was no distinction between this and the other events mentioned in the article, such as bankruptcy, and there was no locus poenitentiae or any means by which the directors can condone the offence "except to satisfy themselves that the fact has happened if the fact be put in issue".

17. We, therefore, hold that if a director enters into a contract with the company, his office automatically becomes vacant. We agree, however, that where a contract is not admitted, an opportunity must be given to the director concerned to clear his position. . In the present petition we have not been E asked to give that opportunity to the three directors concerned. Nor has it been alleged in the petition that the allegation made against these three directors was incorrect. The very careful position taken by them is evident from paragraph No. 21 of the petition, which is as follows :‑ " That petitioners Nos. 1 and 2 and respondent No. 7 were never called upon to explain as to whether or not they had contravened the provisions of section 86‑F of the Companies Act, or what were the circumstances under which the alleged purchase was made by them. Actually respondent No. 7 was absent and did not know that the chairman had declared that he had ceased to be a director. Moreover, by resolution No. 6, dated the 29th November 1950, the directors of the West Punjab Steel Corporation were permitted to make pur chases from the corporation even on credit. Therefore, even on facts, the removal of the petitioners Nos. 1 and 2 and respondent No. 7 is entirely illegal and uncalled for. A copy of resolution No. 6 of the 29th November 1950, is attached as annexure `C'." All that is complained of is that the three directors were not called upon to explain "whether or not they had contravened section 86‑F", which, of course, has several provisions relevant to the present case, and the petitioners might have in mind any particular provision suitable to them. Then, on facts, paragraph No. 21 relies on the consent resolution, so that it can be presumed that the petition impliedly admits the truth of the charge that contracts have been entered into without the express consent of the directors in these three particular cases. Consequently, it was unnecessary to give the directors concerned any notice of the fact that they were to be "removed" from office. There was no removal : They had ceased to be.

18. We are, therefore, unable to give the relief mentioned in clause (d) of paragraph No. 25, which prays for "restraining respondents Nos. 1 to 6 from interfering in any way with the functioning of petitioners. Nos. 1 and 2 and respondent No. 7 as directors of the Corporation * * * * * ". The relief in respect of the secretary (petitioner No. 3) will be examined later.

19. Mr. Brohi contended for the respondents that if the petitioners are not entitled to any personal relief, then, as regards the reliefs claimed in clauses (a), (b) and (c) of para graph No. 25 against the functioning of the new directors, this Court should not interfere in consonance with a distinguished line of English authorities based on Fosse v. Harbottle and Mosley v. Alston (1), which discourage interference in the internal management of a company. As most of the arguments on both sides were devoted to an examination of these authorities, it is only proper that we should mention some of the more prominent ones in some detail.

20. In Fosse v. Harbottle ((1843) 62 Revised Reports 185) a bill had been filed by two share‑holders on behalf of themselves and mil other share‑holder; against five directors, three of whom had become bankrupt, and against a share‑holder, solicitor and architect of the company, charging them with effecting ,fraudulent transactions whereby property of the company was misapplied, praying that the defendants should make up the losses. It was held that the conduct with which the defendants were charged constituted an injury not to the plaintiffs exclusively ; it was an injury to the whole corporation by individuals whom the corporation had entrusted with powers to be exercised only for the good of the corporation. Although the acts should prove void, the cestui que trusts may elect to confirm them. Whilst, therefore, the Court may be declaring the acts complained of to be void at the suit of the plaintiffs, who in fact, may be the only proprietors who disapprove of them, the governing body of the proprietors may defeat the decree by lawfully resolving upon the confirma tion of the acts which are the subject of the suit.

21. But the Court expressly observed that there was no suggestion that an attempt had been made to move the general body of shareholders. It is also noticeable that the confirma tion of the directors' acts was contemplated to have taken place in a lawful manner.

22. In Mosley v. Alston ((1847) 65 Revised Reports 520) the bill was by two shareholders in their individual characters against the corporation and twelve other members who were alleged to have usurped the offices of directors. The act of incorporation provided for twelve directors whose strength could be increased to eighteen. On a certain date, one‑third of the twelve directors should have gone out and been replaced, but although the motion was carried unanimously, each of the twelve refused to retire. Six other directors were, however, elected to"' increase the strength to eighteen. The bill by two of the shareholders prayed that the twelve previous directors be restricted from acting and ordered to deliver the common seal, and the property and books of the company to the six who had been elected. The defendants pleaded that the proper remedy was mandamus, and that as the alleged injury was to the whole corporation, a suit was individual members could not be sustained, unless it were shown that the company' could not or would not institute proceedings. The Lord Chancellor observed that it had not been said by the plaintiffs that the Court may set right what was wrong, but that what was prayed for was that the six new directors should carry on the work which would normally be carried on by eighteen. The relief sought was that in which all shareholders were interested. If they had been too numerous, one or more of them might have been allowed to represent all, but they could not be allowed to sue in an individual capacity. It was true that those whose interests were adverse should have joined as defendants; but if individual suits were permitted, then there might be as many suits as there were shareholders. This defect in the plaint, the Lord Chancellor pointed out, could be corrected by an amendment, but the more important objection was that the charge against the directors was that they were illegally exercising power and that was a matter in which the corporation was interest ed. For these reasons, it was held that the suit should be by the corporation and not by a few of the shareholders only.

23. In Bainbridge v. Smith ((1889) 41 Chancery Division 462), Bainbridge brought an action against five directors for the specific performance of an agreement by which he was to succeed his father as one of the managing directors, and for an injunction restraining them from excluding him from acting as managing director. According to an article of incorporation, the office of a director shall be vacated if he ceased to hold the required amount of shares. The question whether certain shares were held by the plaintiff in his own right or in a family arrangement was‑ before another Court, and the plaintiff had not answered the affidavit made against him by the defendants that he was not holding these shares in his own right. In the present action, therefore, the Court thought it proper to wait and meanwhile asked the defendants to call a general meeting to decide whether they would desire the plaintiff as director even if he had the necessary qualifications as regards shares. If they did not desire him, "we should not grant any injunction because it would be contrary to the principles on which this Court acts to grant specific performance of this contract by compelling this company to take this gentleman as managing director". The shareholders having resolved against him, the injunction was refused. It would appear that the proper remedy in such a case was believed to be a suit for breach of contract.

24. In Cotter v. National Union of Seaman ((1929) 2 Chancery division 58), the action was brought by certain members of a registered trade union against the union and certain officials of the union for a declaration that a certain special general meeting was invalidly convened, because, among other things, such meeting should be resolved upon as being necessary by the executive council, and in this case the notice convening the executive council was insufficient. The meeting having been invalidly convened, the further declaration sought was that certain resolutions passed in that meeting were invalid. One of these resolutions was the authorising of a loan to the Miners' Non‑Political Movement. The following passage quoted by Romer, J. from MacDougall v. Gardiner (1 Chancery Division 13) reproduces the essence of the reasoning in these cases :‑ "Looking to the nature of these companies, looking at the way in which their articles are formed, and that they are not all lawyers who attend these meetings nothing can be more likely than that there should be something more or less irregular done at them‑some directors may have been irregularly appointed, some directors as irregularly turned out, or some thing or other may have been done which ought not to have been done according to the proper construction of the articles. Now, if that gives a right to every member of the company to file a bill to have the question decided; then if there happens to be one cantankerous member, or one member who loves litiga tion, everything of this kind will be litigated ; whereas if the bill must be filed in the name of the company, then, unless there is a majority who really wish for litigation, the litigation will not go on. * * * * In my opinion, if the thing complained of is a thing which in substance the majority of the company are entitled to do, or if something has been done irregularly which the majority of the company are entitled to do regularly, or if something has been done illegally which the majority of the company are entitled to do legally, there can be no use in having a litigation about it, the ultimate end of which is only that a meeting has to be called, and then ultimately the majority gets its wishes'. Romer, J., while dismissing the action, observed, however, that "an action at the suit of individual members of an incorporated company is no doubt permissible where justice so requires, and cases in which the majority of members propose to do something that is ultra vires the corporation * * * are well‑known instances". Lawrence, L. J. dismissing the appeal observed: "There are irregu larities affecting the internal management of the union which could be regularised by the majority".

25. We shall now mention a few cases in which action by individuals was held to be permissible. In Pulbrook v. Richmond Consolidated Mining Company ((1878) 9 Chancery Division 610) the plaintiff Pulbrook brought an action in the following circumstances. He was a properly elected director holding shares of 500 in his own right. Prior to his election, he had transferred these shares to one Cuthbert by way of mortgage as security for money borrowed on his shares, but it was agreed that the transfer should not be registered. Cuthbert, allegedly through a mistake, took the transfer to the secretary of the company who replaced the plaintiff's claim by Cuthbetr's. Notice of this having been given to the directors, the plaintiff was not allowed to take his seat on the board. He took out summons in the Common Pleas Division to rectify the register, and Cuthbert's name was struck out. The plaintiff then took his seat at the board, but the directors refused to permit him to act, whereupon he brought an action against the company and other directors. It was held that the action was competent because this was a wrong to an individual; a deprivation of his legal right for which the directors were personally and individually liable. The plaintiff had a right by the constitution of the company to take part in its management. Those decisions which said that where a wrong is done to the company by the exclusion of a director from the board meeting, the company must sue for that wrong, do not apply to the case of a wrong done simply to an individual. There may be cases where, by preventing a director from exercising his functions in addition to its being a wrong done to the individual, a wrong is also done to the company, and there the company have a right to, complain, but in the case of an individual wrong, another shareholder cannot on behalf of himself and others, not being the individuals to whom the wrong is done, maintain an action for that wrong. A notice was, therefore, issued to restrain the directors from excluding Pulbrook. ,

26. In Edwards v Halliwell ((1950) 2 All England Law Reports 1064) two members of a trade union brought an action against the union and the members of the executive committee for a declaration that the increase in the con tributions of employed members effected by a delegate meeting of the union was invalid. Rule 19 of the defendant union pro vided that regular contributions of employed shall be "as per table", and no alteration was to be made until a ballot vote of the members had been taken and a two‑thirds majority obtained. A delegate meeting of the union, without taking any ballot, passed a resolution increasing the amount of the contributions. It was held that the rule in Fose v. Harbottle comes to this. Firstly, the proper person in an action in respect of a wrong alleged to be done to a company is prima facie the company itself. Secondly, where the alleged wrong is a transaction which might be made binding on the company or association by a simple majority, no individual member is allowed to maintain an action in respect of that matter for the simple reason that, if the majority is in favour of what has been done, the question drops, and if it is against, then there is no reason why the company itself should not sue. It is implicit in the rule that the matter should properly belong to the general body of the corporation, and the rule is subject to exceptions also. For instance, where the thing done is a fraud on the minority, and the wrongdoers, being themselves in control, will not let the minority reach the Court. Another exception is where a simple majority does not suffice, but the thing must be done by a special majority. The reply to the argument that all members were equally affected by the increase in the contributions was this: The right of each member to maitain himself in member ship by paying his subscription is an individual right of his own.

27. It will be profitable to reproduce an Indian case also, namely, In re The Albert Mills Company Limited v. Shivji Mankib bai ((1872) 9 Bombay High Court Reports 438). There was a casual vacancy existing on the board of directors which could be filled by the directors themselves. Several shareholders, apparently not realising that the vacancy was casual, sent a requisition to the directors to call an extraordinary general meeting of the shareholders for the following purposes (1) To increase the number of the directors from seven to 10 ; (2) to fill up the offices so created. A meeting was accordingly called and three persons were elected directors by the shareholders. Two days earlier, however, the directors themselves had filled up the casual vacancy. The three persons who had been elected by the shareholders in the extraordinary general meeting thereupon filed a mandamus. It was argued that mandamus was only for com pelling the performance of a public duty and this was a private company; but that even in mandamus the Court should not, in its discretion, interfere in the management of a private company. Further, it was always possible for the share‑holders to remove a director. It was held that mandamus can enforce the right of persons duly elected directors if such rights were interfered by the other directors and that the High Court will not refuse to interfere merely because the shareholders can remove a director.

28. These authorities, when considered collectively, will not be found to lay down any hard and fast rule. What they lay down generally is that if the matter is one in which the shareholders as a whole are interested, one which is more or less a question of internal management, the action should be by the company or the entire body of shareholders, since they can nullify the decree "by lawfully resolving upon the confirmation, of the acts which are the subject of the suit". Fosse v. Harbottle. But even in Fosse v. Harbottle it was recognized that if the general body of shareholders had been moved and found unwilling, individual shareholders could bring action, while in Mosley v. Alston, the second of the two bulwarks of the "reluctant" line of thought, the Chancellor's observation that "it was not said that the Court may set right what was wrong" may be legitimately interpreted to mean that if the Court had been asked to require one‑third of the directors to go out, it would not be so reluctant to entertain the action. That the form of the suit is a mere formality will be evident from what was done in Ducket v. Gover ((1877)6 Chancery division 82), where, in a suit by a shareholder against the company's solicitors and‑a vendor to set aside a fraudu lent transaction, the plaintiff was allowed upon a demurrer to make the company a co‑plaintiff. If the rule in Fosse v. Harbottle had been strictly followed, then, since the fraudulent contract could have been ratified by the general body of shareholders, the single shareholder's suit would have been dismissed.

29. It will be noticed that English cases have looked upon the general body of shareholders as being the ultimate resort, and they have done so in the belief that the general body will not put with the arbitrary acts of the directors: In our context, if the Court does not interfere even though some thing wrong has been done, the general body gets the impression G that what the directors have done is unexceptionable. The general body is not so alive to its responsibilities and powers also. Further, we govern ourselves by the Code of Civil Procedure. where the Courts have jurisdiction to try all suits of a civil nature. Of course, where the question is strictly one of internal management, Courts would be reluctant to interfere. Particularly in mandamus or writs of like nature there is no restraint, and as regards mandamus, even the defendants in Mosley v. Alston contended that mandamus was the proper remedy in such a case. But as regards the third petitioner, namely, Abdul Majid Mufti, he has a personal grievance that his suspension as secretary of the board was not in order, because the new directors had not been properly elected. For this reason, if for no other, we should entertain the petition.

30. Now there are seven directors, and it is admitted on both sides that at the meeting of the 16th september' 1957, four of them were present. These four were the second petitioner (Mian Muhammad Fazil) respondents Nos. 1 and 5 (Khan Abdul Rahman and Haji Amin Muhammad) and Malik Abdul Aziz, who has not been made a party. It is also admitted by both parties that the first petitioner came late ; how late is a matter in dispute. But in the view that we have taken of his automatic vacation of office under section 86‑1, the time of his arrival is not material, because he could not take part in the meeting. For the same reason, Mian Muhammad Fazil was disqualified. There were thus left‑three directors, and of these Malik Abdul Aziz was not voting with the respondents. According to the respondent's own version, the two directors filled the three vacancies by electing respondents Nos. 2, 3 and 4. and summoning the first two of them by telephone, proceeded to suspend the secretary.

31. There is nothing in the articles of association of the company to indicate whether the directors can, during their meeting, take up any matter which is not on the agenda. That the agenda for the meeting of 16th September consisted only of one item, namely, to consider the requisition of certain shareholders for the convention of an extraordinary general meeting for examining the affairs of the company, is admitted. It was not a meeting for the filling up of the vacancies on the board of directors, and the two or three absent directors had no notice of the agenda which was in the mind of the chairman. Article 120 was relied upon as empowering the directors to transact any business at a meeting, and it reads thus :‑ Article 120."A meeting of the directors for the time at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretions by or under the Articles of the company for the time being vested in or exercisable by the directors generally." Under Article 117, three directors shall be a quorum, and article 120 only means that if three directors are present, the can do all that is within the powers of the entire board of directors. But this cannot mean that if three of them meet anywhere without notice they could exercise those powers. It the object of article 120 were to dispense with the agenda, there, should have been no hesitation about the use of that word expressly. At a given time, there may be only three directors in Lahore and the remaining four, although knowing that the 'directors' meeting on a certain date is intended to decide on the convention of an extraordinary general meeting, may be at such distances from Lahore that they do not consider their presence necessary. But if they knew that a casual vacancy was to be filled, each would come post‑haste‑perhaps it would require the coining of a new word, air‑haste‑to support his candidate. "Any other business with the permission of the chairman", which decorates an agenda generally, should presume that the chairman is not looking for an opportunity to spring a surprise on absent members, and that he is a person on whom the directors can rely for allowing only routine matters to be brought in for discussion, if they are not on the agenda.

32. In Vol. IX of Halsbury, para. 94, there is cited a case in which it was held that where there is notice of a particular business for a company meeting, no other business can be transacted unless the entire body corporate is present and consents. What is the difference in principle if the meeting is a directors' meeting? The respondents relied strongly on the decision in La Compaignie de Mayville v. Whitley ((1896) J Chacery 788) where it was observed that "no honest man will draw the salary and keep away from the meeting", but in that case the directors were paid, directors and it was their duty to attend. That is more, the absent director knew what was going to happen at the meeting, but insisted that it must be on the agenda.

33. A case which is more at in the present context is In re Homer District Gold Mines,' Ex parte Smith ((1888) 39 Chancery Division 546). At a meeting of all the directors, five in number, it was resolved not to allot shares until 14000 shares had been applied for. Shortly afterwards, at a meeting of two directors, the previous resolution was cancelled, and 3000 shares, which had by then been applied for were allotted. The meeting was held at 2 p. m., on a few hours' notice, which did not disclose the business, to two of the directors who did not attend. One of them did not receive the notice till the following day, while the other, having received it, replied that he could not attend till 3 p.m. The fifth director was abroad and no notice was sent to him. In a suit by two of the allottees, the allotments were held void against them, one reason for so holding being that the matter was not on the agenda.

34. In the present case, a very unusual situation had presented itself. Three of the directors, of whom two were present, had become disqualified according to the opinion of the chairman. There were then left on the spot three directors, namely, Khan Abdul Rahman, Haji Muhammad Amin and Malik Abdul Aziz. But it is alleged by the petitioner that the first two of these three were as much disqualified as the other three, having entered into similar contracts with the company without the directors' consent. This was not stated in the petition, but in two affidavits filed by the third petitioner on the 26th September 1957, six days after the petition was admitted (pages 77 and 81 of the paper book) express allegations were made to that effect in some detail. On the very next day, an affidavit was filed in reply, not by Khan Abdul Rahman, not by Haji Muhammad Amin, but by Mr. C. M. Latif. He stated in para. 3 that he had made inquiries from Khan Abdul Rahman on the telephone and had been informed that "to the best of his recollection" he had made no purchases from the company. He stated in para. 4 that he had made inquiries from Haji Muhammad Amin and had been informed that after the last general meeting of the Corporation held in May 1957, the firm of Ahmad Bux & Brothers (of which Haji Muhammad Amin was the managing partner) had not entered into any contract with the Corporation which was hit by section 86‑F, and that there was only one transaction of pig iron for which a permit had been obtained from the appropriate authorities and the purchase was, therefore, at the controlled rate. "The said transaction is not a contract between it and the Corpora tion", being based on a permit.

35. But what is good for the goose is good for the gander also, and if a transaction at a controlled rate does not fall within section 86‑F in regard to the respondents, why does it so fall in regard to Sheikh Maqbul Ilahi petitioner? Con sequently, wither Haji Muhammad Amin has vacated office automatically‑which means that at the meeting of the 16th September 1957 there was no quorum, Khan Abdul Rahman and Malik Abdul Aziz being the only two qualified directors left‑or Sheikh Maqbul Ilahi continued to be director.

36. And as regards transactions prior to the general meet ing of May 1957, it is not claimed that they were based on permits. But the affidavit speaks of them as though the law condones such transactions if they are not noticed up to the holding of a general meeting.

37. And as regards Khan Abdul Rahman, although he had occasion to file affidavits on other matters‑the validity of allot ment of 1000 shares, for instance ‑and these were filed on the first and third October 1957 (pages 217 and 227) he did not avail of these occasions to clear the doubts cast on his quali fication as director. Mr. C. M. Latif had filed a cautious. affidavit in respect of him‑that. to the best of Khan Abdul Rahman's recollection he had made no purchase as alleged‑‑and the affidavit said that the contents of paras. 3 and 4 "are true to information received and believed to be true". We have seldom come across a more interesting affidavit, where the persons themselves concerned, although present and existing, observe a discreet silence and others, on their behalf, make telephone, inquiries and inform the High Court that what they are saying is true to information.

38. Consequently, if the matter is to be decided on affidavits, then Mr. C. M. Latif's affidavit is harmless, and Khan Abdul Rahman and Haji Muhammad Amin have automatically vacated office. There are only two persons left intact, Malik Abdul Aziz and Seth Tahir Ali, and they do not form a quorum, even if they had both been present. There was not existing on the 16th September a qualified quorum which could be the casual vacancies or suspend the secretary.

39. Objection was taken to the petitioners advancing an additional plea, which was no part of the petition, that two of the respondents had also entered into unauthorised contracts with the company and were thus disqualified. In petitions for writs' we do not stand on 'so much formality, but even in( regular suits a plea which does not take the opposite party' by surprise or alter the cause of action is permissible, and,` variation between the pleading and what is actually proved has always been held to be immaterial. See Ananda Chandar ‑ Broja Lal (A I R 1923 Cal. 142) where five Privy Council cases have been reproduced in support of this view.

40. Our conclusions, therefore, are these. (1) Relief cannot be given to the petitioners in respect of the prayer that respon dents, should be restrained from interfering with the functioning of the first two petitioners as directors, but (2) it can be given to the third petitioner in respect of his functioning as secretary.(3) On our findings based on affidavits or the absence thereof, all but two posts of directors have become vacant. This faces the company with an impasse. We, therefore, issue the following directions :‑ (1) That the respondents do not interfere with the functioning of Mr. Abdul Majid Mufti as secretary, until or unless he ‑is properly removed. (2) That respondents Nos. 2, 3 and 4 do not act as directors. (3) That the board of directors does not operate until properly constituted by election at an extraordinary general meeting. (4) That an extraordinary general meeting of the shareholders should be called by the secretary within seven days from today, with thirty days' clear notice, requiring them to fill the five vacancies on the board of directors, whether by re‑electing the old directors or by electing new directors.

41. As the petitioners have succeeded in most part, they will be allowed half their costs. A. H. Order accordingly.