Case Brief: Rajahmundry Electric Supply Corporation Ltd. v. A. Nageswara Rao And Ors.
🧾 Case Title:
Rajahmundry Electric Supply Corporation Ltd. v. A. Nageswara Rao & Ors.
Citation: AIR 1956 SC 213
Court: Supreme Court of India
Bench: B.K. Mukherjea, S.R. Das, Vivian Bose
⚖️ Legal Area:
Company Law – Right to call for an Extraordinary General Meeting (EGM) under the Companies Act, 1913 (similar provisions now under the Companies Act, 2013).
🧑⚖️ Facts of the Case:
Rajahmundry Electric Supply Corporation Ltd. was a public company.
A group of shareholders led by A. Nageswara Rao, who held more than 1/10th of the voting power, issued a requisition under Section 76 of the Indian Companies Act, 1913, asking the Board of Directors to call an Extraordinary General Meeting (EGM).
The purpose of the EGM was to discuss and potentially remove some directors and appoint new ones.
The Board refused to convene the meeting.
Therefore, the requisitionists themselves called the meeting and passed resolutions for removal of certain directors and appointment of new directors.
The company (Rajahmundry Electric Supply Corporation Ltd.) challenged the validity of these resolutions and the meeting itself, arguing that:
The requisition was not valid.
The meeting was not properly convened.
The resolutions passed had no legal effect.
⚖️ Issues Before the Court:
Whether the requisition by shareholders was valid under Section 76 of the Companies Act, 1913?
Whether the shareholders were legally entitled to call and hold the meeting when the Board refused to do so?
Whether the resolutions passed at the EGM were valid and binding?
🧑⚖️ Held by the Supreme Court:
The Supreme Court ruled in favour of the shareholders and upheld the validity of the meeting and the resolutions passed.
📌 Key Observations and Rationale:
1. Statutory Right of Requisitionists:
Under Section 76 of the Indian Companies Act, 1913 (now similar to Section 100 of the Companies Act, 2013), shareholders holding not less than one-tenth of the voting power have the right to requisition a general meeting.
If the Board fails to call the meeting within the prescribed time, the requisitionists can themselves convene the meeting.
🔹 Court's View: This is a statutory right and cannot be frustrated by the directors’ refusal.
2. Board’s Non-Compliance is Not a Bar:
When the Board fails to act on a valid requisition, the shareholders are empowered by law to act.
The company's objection that the meeting was not convened by the Board is irrelevant if the legal requirements of the requisition and notice were followed.
3. Validity of Resolutions:
The Court held that the resolutions passed at the EGM were valid because:
The meeting was legally convened under the shareholders’ right.
Due notice was given.
The resolutions were within the powers of the general meeting.
🧾 Legal Principles Established:
| Legal Principle | Explanation |
|---|---|
| Shareholders’ Right to Requisition EGM | A statutory right under company law, available if minimum voting power (1/10th) is held. |
| Board’s Refusal Doesn’t Nullify Meeting | If the board does not comply, the requisitionists can legally convene the meeting. |
| Proper Procedure is Key | As long as procedural requirements (notice, quorum, agenda) are followed, the resolutions passed are valid. |
| General Meeting’s Supremacy | The general body of shareholders has power to remove directors, overriding board resistance. |
📚 Related Case Law:
1. Life Insurance Corporation v. Escorts Ltd. (1986) 1 SCC 264
Affirmed that shareholders can validly act to requisition meetings, and procedural compliance ensures legitimacy.
2. Union of India v. Allied International Products Ltd., AIR 1966 SC 1139
Discussed powers of shareholders in convening meetings and removal of directors.
✅ Conclusion:
The Rajahmundry Electric Supply Corporation Ltd. v. A. Nageswara Rao case is a cornerstone in Indian Company Law regarding shareholders’ democratic rights. It confirms that:
Shareholders holding sufficient voting power can validly requisition and convene a meeting.
Directors cannot misuse their position to block shareholder rights.
The judiciary will uphold procedural integrity and statutory rights over management control.
RELATED Blog
0 comments