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PETITIONER: PARMESHWARI PRASAD GUPTA

       Vs.

RESPONDENT: THE UNION OF INDIA

DATE OF JUDGMENT02/08/1973

BENCH: MATHEW, KUTTYIL KURIEN BENCH: MATHEW, KUTTYIL KURIEN BEG, M. HAMEEDULLAH

CITATION:  1973 AIR 2389            1974 SCR  (1) 304  1973 SCC  (2) 543  CITATOR INFO :  E&D        1989 SC1582  (27)

ACT: Termination  of  service-Resolution of  Board  of  Directors terminating service of employee invalid because meeting  not properly called-Ratification of termination at a  subsequent properly  convened  meeting  relates back  to  date  of  act ratified   and   makes   termination   effective-Notice   of termination-One month’s notice, sufficiency of.

HEADNOTE: The  appellant  was appointed Secretary  of  the  respondent company in 1942. Later he was promoted as General  Manager. By  a  resolution  dated  December 16,  1953  the  Board  of Directors  of the company decided to terminate the  services ,of  the  appellant.   By  a telegram  and  a  letter  dated December 17, 1953 addressed to the appellant the Chairman of the  Board  of  Directors terminated  the  services  of  the appellant.   Subsequently at a meeting held on December  23, 1953  the  Board of Directors confirmed the minutes  of  the meeting  held  on December 16, 1953 and the  action  of  the Chairman  in terminating the services of the  appellant by his  letter  and  telegram dated  December  17,  1953.   The appellant  filed a suit challenging his dismissal  and  also claimed  that  he was entitled to 18 months’  notice  before termination  of his services.  The trial Court and the  High Court   ,decided  against  the  appellant.   In  appeal   by certificate  to this Court the questions  for  consideration were  :  (i)  whether the  termination  of  the  appellant’s service  was valid and (ii) whether the appellant was  bound by  the company’s rules which ,provided for  termination  of the service of employees after one month’s notice. Dismissing the appeal, HELD  : (i) Notice to all the Directors of a meeting of  the Board  of  Directors was essential for the validity  of  any resolution  passed at the meeting.  As admittedly no  notice was given of the meeting on December 16, 1953 to one of  the Directors, the resolution passed terminating the services of the appellant was ’invalid. [307 D-E] But the resolution of the Board of Directors to confirm  the action  of  the Chairman to terminate the, services  of  the appellant  by  his telegram and letter  dated  December  17,

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1953,  would show that the Board ratified the action of  the Chairman.   Even if it be assumed that the telegram and  the letter  terminating  the services of the  appellant  by  the Chairman  was in pursuance to the invalid resolution of  the Board of Directors passed on December 16, 1953 to  terminate his  services,  it would not follow that the action  of  the Chairman  could  not  be ratified in  a  regularly  convened meeting  of the Board of Directors.  Even assuming that  the Chairman  was  not  legally  authorised  to  terminate   the services  of the appellant, he was acting on behalf  of  the Company  in  doing  so,  because  he  purported  to  act  in pursuance of the invalid resolution.  Therefore it was  open to a regularly constituted meeting of the Board of Directors to  ratify that action which, though unauthorised, was  done on behalf of the company.  Ratification would always  relate back to the date of the act ratified and so it must be  held that the services ’of the appellant were validly  terminated on December 17. 1953, [307 G-308 C] (ii) The rules which provided for one month’s notice in case of  termination of services of all employees would apply  to the  appellant  as well.  The rules expressly  purported  to bind all the employees of the respondent-company.  There was no reason to hold that the appellant was not an employee  of the respondent company.  The appellant had himself relied on the rules.  It was therefore idle to contend that the  rules did  not bind him.  The contention of the appellant that  he was entitled to 18 months’ notice must be rejected. [308  D- E]

JUDGMENT: CIVIL  APPELLATE JURISDICTION: Civil Appeal No. 1333 (N)  of 1967. 3 05 From  the Judgment and Decree dated the 25th November,  1966 of  the Delhi High Court in Regular First Appeals Nos.  89-D and 104-D of 1956. V.   S. Desai, Ravinder Bana, O. P. Rana and Uma Mehta,  for the appellants. B.   Sen,   Suresh  Sethi,  R.  K.  Maheshwari  and  B.   P. Maheshwari, for the respondent. The Judgment of the Court was delivered by- MATHEW,  J.-This appeal by certificate is  directed  against the  Decree  of the High Court of Delhi dated  November  25, 1966,  passed in Regular First Appeals No 89-D of  1956  and No.  104-D of 1956, both arising from Suit No. 282  of  1954 instituted by the plaintiff appellant for a declaration that he continued to be the General Manager of the Fire Insurance Company  in question and that the purported  termination  of his  services  was inoperative, and claiming a  sum  of  Rs. 37,352.30  from the defendant on account of his  arrears  of pay,  etc.,  or  in  the  alternative,  for  a  sum  of  Rs. 1,63,820/-  as money due to him by way of  bonus,  gratuity, etc., as detailed in the plaint. The  respondent  Company  had  filed  a  suit  against   the appellant for the recovery of Rs. 1,10,000/- being Suit  NO. 306  of 1954 in which the Company was granted a  decree  for Rs.  5,759/9/6 with proportionate costs.  First  Appeal  No. 88-D  of  1956 before the High Court was the appeal  by  the Company  against the rejection of the rest of its  claim  in Suit  No.  306  of 1954.  We are  not  concerned  with  that appeal.   Regular  First  Appeal No. 89-D of  1956  was  the Company’s  appeal  against  the  award  of  decree  for  Rs. 73,936/15/9  passed  in favour of  the  appellant.   Regular

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First  Appeal No. 104-D of 1956 was the  appellant’s  appeal against the rejection of his other claims in his suit.   The High Court dismissed First Appeals No. 88-D of 1956 and 104- D,  of 1956 but partially allowed First Appeal No.  89-D  of 1956. The  appellant  was  appointed  as  the  Secretary  of   the respondentCompany on October 16, 1942.  His pay was fixed at Rs.  1,000/p.m.  free  of  income tax.   Later  on,  he  was promoted as the General Manager of the Company.  On November 21, 1953, the appellant sent an application for leave to the Chairman  of  the  Board  of Directors  but  no  reply’  was received by him.  He thereafter sent another application for 8 months’ leave on the 16th of December, 1953.  On  December 17, 1953, the appellant received a telegram from the  Chair- man  of the Board of Directors stating-that the services  of the appellant had been terminated by the Company and that he should-stop  attending the office.  A registered  letter  to the same effect from the Chairman was also received by him. The  allegation of the appellant in the plaint was that  his services had not been validly terminated by the  respondent- Company and that he still continued. as the General  Manager of the Company and was 30 6 entitled  to  recover  the sum already  mentioned  from  the respondent.   In  the alternative,  the  appellant  claimed, among  other things, 18 months’ salary as due to him on  the basis  that  he  was entitled to 18  months’  notice  before terminating his services. In  the written statement, the respondent-Company  contended that  the  Chairman validly terminated the services  of  the appellant on December 17, 1953 in pursuance to a  resolution passed  by  the  Board of Directors on the  16th,  and  that subsequently, that resolution and the action of the Chairman terminating the services had been confirmed by a meeting  of the  Board  of  Directors held on December  23,  1953,  and, therefore, the services of the appellant were validly termi- nated.   The  respondent-Company  also  contended  that  the appellant  was in no event etitled to 18 months’  notice  as claimed  by  him  but  only  to  one  month’s  notice   and, therefore, he was entitled to get only one month’s salary in lieu of notice under that. head. The  trial  court  found that the meeting of  the  Board  of Directors  held  on December 16, 1953 was  valid,  that  the services  of  the  appellant  were  validly  terminated   by telegram and letter of the Chairman dated December 17,  1953 addressed to the appellant, that even if it be assumed  that the  meeting of the Board of Directors held on December  16, 1953 was irregular, the resolution of the Board of Directors terminating  the services of the appellant on the  16th  and the  action  of  the Chairman in  actually  terminating  the services  were  ratified by the Board of Directors_  by  its resolution  of  December  23,  1953,  and,  therefore,   the services  of the appellant were legally and  validly  termi- nated. it further held that the rules framed by the Company, namely, exhibits D-3 and D-4 would govern the appellant  and that  he was entitled, under clause (6) of exhibit D-3  only to one month’s notice for terminating his services  although the  Court found that if the appellant was not bound by  the rules,  he  would have been entitled to  12  months’  notice before the termination of his services. The  findings  of  the trial court in  these  respects  were confirmed in appeal by the High Court. In  this appeal only two points were argued by  counsel  for the appellant : (1) that the services of the appellant  were not validly terminated and, therefore, he was entitled to  a

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declaration  that be continued to be the General Manager  of the Company and to claim the amount specified in the plaint; and (2) that, in any event, the appellant was entitled to 12 months’  notice before his services were terminated  and  as only  one  month’s notice was given, he was entitled  to  11 months’ pay in addition to what was awarded under this head. As regards the first point, it was said that the meeting  of the  Board  of  Directors dated December 16,  1953  was  not properly convened for the reason that notice of the  meeting was  not given to all the Directors.  The trial court  found that one of the Directors, viz., Mr. B. P. Khaitan, was  not given  notice of the meeting of the Board of Directors  held on  December  16, 1953, and that he was not present  at  the meeting when the resolution to terminate the services of the appellant was passed. 307 Now, it cannot be disputed that notice to all the  Directors of a meeting of the Board of Directors was essential for the validity  of any resolution passed at the meeting  and  that as,  admittedly, no notice was given to Mr. Khaitan, one  of the   Directors  of  the  Company,  the  resolution   passed terminating the services of the appellant was invalid. Article  109 of the Articles of Association of  the  Company provides as follows :---               "109.  When meeting to be convened-A  Director               may   at  any  time  summon  meeting  of   the               Directors  by serving every Director  with  at               least 72 hours’ notice in writing, through the               officer  of the Company authorized to  receive               such  notice who shall arrange to convene  the               meeting". In  Hasbury’s  Laws of England, Vol. 9, p. 46, it  has  been stated  that it is essential that notice of the meeting  and of  the  business to be transacted should be  given  to  all persons entitled to participate and that if a member whom it is  reasonably  possible  to summon  is  not  summoned,  the meeting will not be duly convened, even though the  omission is  accidental  or  due  to the fact  that  the  member  has informed  the officer whose duty it is to serve notice  that he  need  not serve notice on him.  In Volume 6  at  p.  315 article 626, it is stated that a meeting of the directors is not  duly convened unless due notice has been given  to  all the directors, and the business put through at a meeting not duly convened is invalid. To  put  it in other words, as the meeting of the  Board  of Directors  held  on December 16, 1953, was invalid,  so  the resolution  to terminate the services of the  plaintiff  was inoperative. Then, the question for consideration is, what is the  effect of  the  confirmation of the minutes of the meeting  of  the Board of Directors held on December 16, 1953 and the  action of the Chairman in terminating the services of the appellant by  his  telegram  and letter dated December  17,  1953,  in pursuance  to  the  invalid  resolution  of  the  Board   of Directors  to terminate his services, in the meeting of  the Board of Directors held on December 23, 1953 ? The agenda of the meeting of the Board of Directors held  on December  23, 1953 shows that one item of business  was  the confirmation of the minutes of the meeting of the  Directors held on December 16, 1953.  The confirmation of the  minutes of  the meeting of the Directors held on December 16,  1953, would  not  in  any way show that  the  Board  of  Directors adopted  the  resolution to terminate the  services  of  the appellant  passed on December 16, 1953.  It only shows  that the  Board  passed  the minutes of the  proceedings  of  the

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meeting  held on December 16, 1953.  But the  resolution  of the Board of Directors to confirm the action of the Chairman to  terminate the services of the appellant by his  telegram and  letter  dated December 17, 1953, would  show  that  the Board  ratified the action of the Chairman.  Even if  it  be assumed  that the, telegram and the letter  terminating  the services  of the appellant by the Chairman was in  pursuance to  the invalid resolution of the Board of Directors  passed on December 308 16, 1953 to terminate his services, it would not follow that the  action  of  the Chairman could not  be  ratified  in  a regularly  convened meeting of the Board of Directors.   The point  is  that  even assuming that  the  Chairman  was  not legally   authorised  to  terminate  the  services  of   the appellant,  he was acting on behalf of the Company in  doing so, because, he purported to act in pursuance of the invalid resolution.    Therefore,  it  was  open  to   a   regularly constituted meeting of the Board of Directors to ratify that action which, though unauthorised, was done on behalf of the Company.  Ratification would always relate back to the  date of the act ratified and so it must be held that the services of  the  appellant were validly terminated on  December  17, 1953.   The  appellant was not entitled to  the  declaration prayed  for by him and the trial court as well as  the  High Court was right in dismissing the claim. The second point for consideration is whether the  appellant was  entitled to 18 months’ notice before his services  were terminated  as claimed by him.  The trial Court  found  that the  rules of the Company, viz., exhibits D-3 and  D-4  were binding  on  the appellant and that rule 6  of  exhibit  D-3 which provides for one month’s notice in case of termination of services of all employees would apply to the appellant as well.   The  High Court confirmed that finding.   The  rules expressly   purport  to  bind  all  the  employees  of   the respondent-Company.   There, is no reason to hold  that  the appellant  was  not an employee of  the  respondent-Company. Besides,  the appellant himself has relied upon these  rules for  the purpose of computation of the amount due to him  on account   of   bonus,  provident  fund,   etc.    In   these circumstances  it is idle to contend that the rules did  not bind him.  In this view, it is quite unnecessary to consider the  question  whether, apart from the  rules,  one  month’s notice was reasonable in the circumstances of the case. There is no merit in this appeal.  We dismiss it but in  the circumstances we make no order as to costs. G.C.             Appeal dismissed. 309