Mahmudul Amin Chowdhury J and Bijan Kumar Das J

HIGH COURT DIVISION

(Civil Appellate Jurisdiction)

Ittefaq Group of Publications Limited and others (Appellants) VS Arab Bangladesh Bank Limited and
others (Respondents) May 5th, 1998

Section 95

For holding a valid meeting of the Board of Directors written notice must be given to all the members of
the board of directors. If anyone is left out the resolution taken in that meeting becomes invalid.

Code of Civil Procedure (V of 1908) Or. XXXIX rr.I & 2

Companies Act (IV of 1994) Section 95

In all companies either private or public for holding a board meeting a written notice shall be may not
give to every director and civil Court m interfere when there is a valid meeting. When there is prima facie
and invalid resolution the civil Court can interfere. The respondents are restrained by an order of
temporary injunction from acting on the alleged resolution of the Board of Directors.

Cases discussed: Parmeshwari Prasad Gupta vs Union of India AIR 1973 (Vol. 60), Supreme Court 2389;
Karnal Distillery Co Ltd and others vs Ladli Ladil Parshad Jaiswal and another, AIR 1958, (Punjab) 190;
Karmal Distillery Company Ltd vs LP Jaiswal, PLD 1956 (Lahore) 731; H M Ebrahim Sait vs South India
Industries. Ltd AJR 1938 (Madras) 962 ref.

Judgment
Mahmudul Amin Choudhury J: This first Miscellaneous Appeal is directed against the judgment and
order dated 19-1-98 passed by the learned Subordinate Judge, 1st Court, Dhaka in Title Suit No.29 of
1997. The learned Subordinate Judge by the said order rejected the appellants' prayer for injunction
under Order 39 rules 1 and 2 of the Code of Civil Procedure.

2. The short fact leading to this appeal is that, the appellants as plaintiffs instituted Title Suit No.29 of
1997 before the learned Subordinate Judge, 1st Court, Dhaka alleging that defendants 2 and 3 who are
respondents 2 and 3 in this appeal in collusion with each other have manufactured a fraudulent and/or
illegal resolution dated 7-1-85 without calling a valid Board Meeting and or without giving any notice to
the other Directors including plaintiffs 2-4 in order to carry on secretly the banking transaction in respect
of plaintiff appellant No.1 company's accounts with defendant respondent No.1 without active help and
collaboration of defendant No.4 with an ulterior motive and/or malafide intention of subverting the
company's finance and/or for making illegal gains for themselves and for others. It is also the case of the
plaintiff appellants that the defendants acted in violation of the company's resolution dated 30-9-90
wherein all banking transactions were to be carried out under the joint signatures of the Executive
Directors, that is plaintiff No.2 and defendant No.3. It is also the case of the appellants that one of the
directors Sultana Hossain categorically denied her participation in any board meeting which was
allegedly held on 7-1-95 and she ws misled in signing certain papers sent to her residence taking
advantage of her lonely existence. It is the further case of the plaintiffs that plaintiff Nos.2 and 4 were
neither notified nor present in any such board, meeting and were deliberately kept in dark about any
such Board Meeting or any resolution with mala fide intention. This illegal and fraudulent resolution was
initially kept secret from the plaintiff’s appellants as part of the well-designed plan to take over control of
the plaintiff No.1 company both over its finance and management. It is the further case of the plaintiffs
that as soon as they came to know of the above factsthey protested by sending several letters including
one on 18-3-95 addressed to defendant opposite party No.4 demanding defendant No.1 Bank to resist or
refrain from acting on such illegal resolution in gross violation of the Articles of Association, and previous
resolution of the company. Defendant No.1 Bank was also specifically asked not to allow the accounts of
plaintiff appellant No. 1 company to be operated on the basis of the said illegal resolution but without
any result. The plaintiff filed the suit with a prayer for declaration that resolution dated 7-1-95 is illegal,
ultra vires and void ab initio and also for permanent injunction restraining the defendant from acting on
the aforesaid resolution dated 7-1-95 and/or allowing the operation of the bank accounts of the
company maintained with the defendant No.1 bank at BCIC Bhaban, 30/31, Dilkusha Commercial Area,
Dhaka. After the filing of this suit the plaintiffs filed an application under Order 39, rules I and 2 of the
Code of Civil Procedure with a prayer for restraining the defendants from acting in any manner on the
aforesaid illegal resolution dated 7-1-95 till the disposal of the suit.

3. Defendants 1-3 entered appearance before the Subordinate Judge and contested the plaintiffs' prayer
for injunction. Defendants 2 and 3 filed separate objection and so also defendant No.1. They denied all
the allegations made by the plaintiffs in their petition for injunction and they asserted that resolution
dated 7-1-1995 taken in the board meeting was taken for opening letters of credit in the defendant No.1
bank for importing newsprint for smooth publication of daily Ittefaq, their case is that as plaintiff No.2
who is Executive Director I of the company was found regularly absenting from the board meeting and
attending the affairs of the company and was trying to create problems for the compnay in its
publication the Board of Directors felt the necessity of taking resolution on notifying all the Directors of
the company. Their further case is that by the resolution dated 7-1-95 Executive Director Il has not been
empowered to issue any cheque in respect of the accounts maintained, with the defendant No.1 bank.
The only authority that was given to him was for dealing with the opening of letters of credit for
importing newsprint. Their further contention is that the civil Court cannot interfere in the internal
management of private companies by issuing any injunction as prayed for. Their further case is that as is,
the custom of the company the notice of board meeting was served by hand. But plaintiff No.2 and his
wife deliberately absented themselves from the meeting as they are not in confidence of the other
directors and by absenting themselves in the board, meeting they created impediment in the smooth
running of the company. It is also the case of the contesting defendants that resolution dated 7-1-95 was
legally taken and it has not violated any of the Articles of the Memorandum and Articles of Association
and if injunction is granted this will create problems in the publication of Daily Ittefaq. er st

The case of contesting defendant No.1 is that they in pursuance to the resolution dated 7-1-95 of the
company allowed the operation of the bank accounts of the persons authorized in the resolution are
bound to do that. Their of the company and the against the resolution dated further case is that as 7-1-
95 no further resolution was taken by the company in their Board meeting and, as such, this resolution
stands, Defendant respondent No.1 is bound to follow this. It has been contended that the problem is in
the family of the directors wherein the Bank has nothing to do. The parties in litigation produced certain
papers before the trial Court at the time of hearing of the partition filed under Order 39, rules I and 2 of
the Code of Civil Procedure. The learned Subordinate Judge on hearing the learned Advocates of both
the sides by judgment dated 19-1-1998. rejected the plaintiffs' prayer for temporary injunction.

5. The plaintiffs on being aggrieved by and dissatisfied with the order dated 19-1-1998 passed by the
learned Subordinate Judge in the aforesaid suit preferred this appeal.

6. Mr Akhtar Imam, the learned Advocate appearing on behalf of the appellants, submits that without
issuing any notice and serving the same upon the two directors who are plaintiff Nos. 2 and 4 meeing of
the Board was allegedly held on 7-1-95 and a resolution was taken by which Executive Director I who is
plaintiff No.2 was ousted from all the responsibilities in the company which is against resolution dated
30-9-90. Mr Aktar Imam submits that resolution dated 7-1-95 is against the spirit of the Memorandum
and Articles of Association of the company and when that is against the provisions of the Memorandum
and Articles of Association this resolution prima facie is illegal. He further contends that the law enjoins
that all Borad meetings whether of public or private companies should be held with due notice to all the
Directors and that is mandatory and if no notice is issued and served upon the Directors the resolution of
the Board meeting becomes invalid. He argued that resolution dated 7-1-95 was taken behind the back
of appellant Nos! 2 and 4 who are sitting directors of the company. The learned Advocate further
submits that the moment these two appellants came to know of the illegal resolution they asked
defendant No.1 bank not to abide by the resolution as it was taken illegally but disregarding the notice
the bank sided with the defendants and allowed Executive Director II who is defendant No.3 to separate
the bank accounts.

7. Mr Moudud Ahmed, the learned Counsel appeaing on behalf of the respondent No.4, on the other
hand, submits that the resolution was taken legally without violating any of the provisions of the
Memorandum and Articles of Association and also the law. It is further argued that as is customary with
the company notice of the Board meeting was served upon plaintiffs 2 and 4 by hand. He submits that
the service of notice is a matter of evidence which cannot be decided while disposing of the injunction
petition. He also submits that the plaintiffs failed to produce any paper to show that defendant No.3 has
misused the power given to h by resolution dated 7-1-95. The learned Advocate contends that while
disposing of a petition for injunction the court has to look into the prima facie case of the plaintiff and
the balance of convenience and inconvenience. He argued that if at this stage the court interferes with
the resolution dated 7-1-95 this will create bottleneck in the smooth functioning of the company of
which the defendant No.3 is also an Executive Director. It is submitted that by this resolution defendant
No.3 is operating only one account maintained with the defendant No.1 bank which is only in respect of
importing newsprint by opening LCs. This account is being maintained not for any other purpose.

8. The learned Advocate appearing on behalf of responent No.1 bank submits that there is no problem
with the accounts maintained by the plaintiff company with the bank and the bank is following the
resolution as it is customary and as long as resolution dated 7-1-95 is there the bank is bound to allow
defendant No.3 to operate the account.

9. The main contention of the plaintiff appellants is that, the resolution dated 7-1-95 of the plaintiff No.1
company was taken behind the back of two directors who are plaintiffs 2 and 4 and by taking this
resolution Executive Director I who is plaintiff No.2 has been stripped off all his responsibilities as regard
management of accounts of the company for which he was empowered by a unanimous resolution of
the company taken on 30-9-90 and he was acting as such till 7-1-95: For proper appreciation of the
whole matter let us look into the resolution dated 7-1-95 which runs as follows:
The meeting discussed various problems relating to the operation of the bank accounts of the company
particularly held with Arab Bangladesh Bank Limited, in order to remove these difficulties and to enable
the company to function smoothly and continue with the publication of the Daily Ittefaq without any
hindrance, the meeting in the greater interest of the Company adopts the following resolutions.

I. Resolved that the resolution of the Board of Directors of the company dated 30-9-1990 relating to the
operation of the company Accounts, held with Arab Bangladesh Bank Limited is hereby cancelled.

2. Resolved that in view of the resolution No.1 above, the operation of the company’s bank Accounts
including borrowing, adjustment of accounts, etc. with Arab Bangladesh Bank Limited be operated
henceforth jointly by Mr Anwar Hossain and Mr. Mohibul Ahsan in their absence by such Directors to be
nominated by them.

3. Resolved further that all matters relating to letters of credit be operated singly by Mr Anwar Hossain
Executive Director II in charge Accounts or in his absence by any other director to be nominated by him
and the Executive Director II is hereby authorized to seal, sign and deliver any paper, document or
instrument pertaining to such letters of credit on behalf of the company as and when required by the
banks. The meeting further ratifies all the action already taken by the Executive Director II in the matters
relating to opening of any letters of Credit on behalf of the company.

10. It appears from the resolution No.I that the Board of Directors of the company cancelled the earlier
resolution dated 30-9-90 which was relating to the operation of the company's Accounts held with
defendant No.1 bank and by resolution No. 2 Mr Anwar Hossain and Mr Mohibul Ahsan or in their
absence by such directors to be nominated by them were empowered to operate company's Bank
Accounts including borrowing, adjustment of accounts, etc. maintained with Arab Bangladeshi Bank
Limited. It was also resolved that all matters relating to letters of credit be operated singly by Mr Anwar
Hossain, Executive Director II in charge of accounts or in his absence by any other director to be
nominated by him and this Executive Director II was authorized to seal, sign and deliver any paper,
document or instrument pertaining to such letters of credit on behalf of the company. By this resolution
all actions earlier taken by Executive Director-II in the matter relating to opening of LC on behalf of the
company were ratified.

11. It appears from this resolution that respondent No. 3 who is Executive Director II has been given full
authority in the operation of the company's bank Accounts including borrowing, adjustment of accounts,
etc., maintained with the defendant bank. Though it has been argued by Mr Moudud Ahmed that by this
resolution Executive Director II of the company has been authorized only to operate the bank accounts
relating to opening of letters of credit for the purpose of import but resolution No. 2 prima facie
indicates that all Accounts maintained with the defendant bank are authorized to be operated by
Executive Director II and in addition by resolution No.3 account operation relating to opening of LCS has
also been given to Executive Director-II.

12. It appears that by this resolution the earlier resolution dated 30-9-90 taken by the Board of Directors
was cancelled. Now what is that resolution for proper appreciation of the whole matter let us look into
that resolution. By this resolution dated 30-9-90 Mr Mainul Hosein, Executive Director I and Mr Anwar
Hossain, Executive Director II of the company were authorised to sign and execute all necessary papers
for the purpose of opening and for operating such accounts. So, from this resolution it appears that
these two directors were jointly authorized to open and operate the bank accounts, but by resolution
dated 7-1-95 only Executive Director-II has been authorized to open and operate all bank Accounts which
is against the provisions of Article 52 of the Memorandum and Articles of Association of the plaintiff No.I
company.

13. Now the main question is, whether this resolution dated 7-1-95 was taken validly or legally. We will
only look into the prima facie nature of the case and the allegations made against the defendants by the
plaintiffs.

14. Mr Akthar Imam, the learned Advocate appearing on behalf of the plaintiff’s appellants, submitted
that all the members of the Board of Directors should be previously notified before holding any Board
meeting and if no such notice is issued and received by any member of the Board the resolution adopted
in that meeting becomes invalid. He submits that this is the mandatory provision of law which cannot be
compromised either in a public or in a private company. Section 95 of the Companies Act, 1994, provides
that notice of every meeting of the Board of Directors of company shall be given in writing to every
director for the time being in Bangladesh and at his address in Bangladesh. This section provides that for
holding a meeting of the board of directors of a company prior written notices are to be given to all the
members of the Board of Directors. Mr Moudud Ahmed submits that in a private company a notice may
be given by sending a messenger or by telephone. But section 95 of the Companies Act provides that
such nouces shall be given in writing. When the law is as such there cannot be any compromise over this
law. In India, the similar provision is there in the Indian Companies Act. Section 286 provides that notice
of every meeting of the Board of Directors of the Companies shall be given in writing to every director,
for the time being in India and at his usual address in India to every other director. The Indian provision is
exactly same as in our Companies Act. So, from section 95 of the Companies Act 1994, it appears that it
is mandatory to give a written notice to every director before holding a Board meeting and similar is the
case with India.

15. In the case of Parmeshwari Prasad Gupta vs Union of India reported in AIR 1973 (Vol. 60), Supreme
Court 2389 it has been held that notice to all the directors of a meeting of the Board of Directors is
essential for the validity of any resolution passed at the meeting and where admittedly no notice was
given to one of the Directors of the company, the resolution passed at the meeting of the Board of
Directors is invalid. In the case of Karnal Distillery Co Ltd and others vs Ladli Ladil Parshad Jaiswal and
another, reported in AIR 1958, (Punjab) 190 it has been held that the statutory rights cannot be taken
away or modified by any provision of the memorandum of articles which applies to both classes of
companies public or private. It has also been held in the case of Karrnal Distillery Company Ltd vs LP
Jaiswal, reported in PLD 1956 (Lahore) 731 that notice to Directors at a Directors' meeting is necessary
and every director is to be informed beforehand of the time and place and agenda of the meeting and a
provision in the Articles of Association that a meeting would be held on first Sunday of every month does
not dispense with the notice. A meeting held in pursuance to a decision taken at an invalid meeting itself
becomes automatically invalid. It has also been held in the case of H M Ebrahim Sait vs South India
Industries. Ltd reported in AIR 1938 (Madras) 962, that in law, a meeting of directors is not duly
convened unless due notice has been given to all Directors.

16. From those aforesaid decisions it appears that the consistent view is that for holding a valid meeting
of the Board of Directors, written notice must be given to all the member of the board of directors. If
anyone is left out the resolution taken in that meeting becomes invalid and section 95 of the Companies
Act 1994 clearly provides that such notice shall be given in writing.

17. More in the present case before us it is the definite case of the plaintiffs that notice of the meeting to
be held on 7-1-95 was never served upon at least two of the directors. It is contended on behalf of the
respondents that notices of the aforesaid meeting was served upon all the directors. Mr Moudud Ahmed
submitted that they have all the records with them to substantiate their contention that notices were
served upon plaintiffs 2 and 4. but not a scrap of paper has been produced by them either before the
trial Court or before this court to prima facie prove that notices were issued and served. Not only that in
their written objection they have stated that those notices were served by hand but no copy of the
notice along with the agenda was produced before the trial Court or before this court to prima facie
show that there was full compliance of section 95 of the Companies Act, 1994, and also of the
Memorandum and Articles of Association. Excepting the verbal submission and averments made in the
written objection there is nothing on record to prima facie hold that actually there was service of notice
in writing upon all the directors. There are decisions of the higher courts of the sub-continent that even
a notice sent by registered post is not sufficient to show that there was actually service of notice. The
onus lies on such persons to prove that. Here though it has been alleged that service was affected by
hand but prima facie nothing has been produced in support of the submissions.

18. Mr Moudud Ahmed contended that this is an internal affair of a private limited company and the civil
Court may not interfere with the management of such a company. It is true that this is an internal affair
of a company but the law provides that in all companies either of private or public for holding a board
meeting a written notice shall be given to every director and civil Court may not interfere when there is a
valid meeting. The prima facie non issuance of notice of the meeting to be held on 7-1-95 made this
resolution an invalid resolution and when there is prima facie an invalid resolution the civil Court can
interfere.

19. Mr Moudud Ahmed contended that the balance of convenience and inconvenience is in favour of the
defendants and if injunction is granted this will stop the publication of daily Ittefaq and the company will
not be able to import newsprints. But it appears that on 30-9-90 another resolution was taken by the
company authorizing both the directors to open bank accounts for the proper maintenance of the
company including the publication. Now if both the directors jointly act in pursuance to resolution dated
30-9-90 there cannot be any deadlock in the company or in the publication of Daily Iffefaq. Mr. Moudud
Ahmed frankly submitted that excepting this dispute the company is running smoothly and all the
directors work conjointly and if that be the case in pursuance to the earlier resolution which was
cancelled by a prima facie invalid resolution dated 7-1-95 there cannot be any deadlock in running the
company. By this resolution dated 7-1-95 it appears that Executive Director II was given all the powers of
operating any bank account, though the Articles of Association has not provided him with such powers.
So, if an injunction is granted this will not in any way create problem in the running of the business of the
company particularly the publication of the newspaper the daily Ittefaq. It appears that by this resolution
Executive Director II has been given the authority to open letters of credit on behalf of the company and
also to operate the company's bank accounts including borrowing, adjustiment of account, etc.
maintained with defendant No.1 Bank, now if all these are done conjointly as was being done prior to 7-
1-95 there will not be any problem in running the company and publication of the newspaper the Daily
Ittefaq. Mr Moudud Ahmed admitted that the company is running smoothly as before. It has been
argued by Mr Ahmed that if any injunction is granted this will stop the running of the company and the
publication of the newspaper but when it is submitted by Mr Ahmed that the company is running
smoothly and all the directors are working as before performing their function as is provided for in
Articles of Association, prima facie there cannot be any problem in running the affairs of the company. If
this is as such as submitted by Mr Ahmed then the Board of Directors in a fresh legally constituted
meeting can now, ratify, the resolution dated 7-1-95. The Indian Supreme Court has propounded in the
case of Parmeshwari Prasad Gupta vs Union of India reported in AIR 1973 (VI 60) 2389 that it was open
to a regularly constituted meeting of the board of directors to ratify the action. which, though
unauthorized, was taken by the chairman on behalf of the company. The ratification would always relate
back to the date of the act ratified. So, if everything is going on smoothly the Board of Directors, if
necessary, may again meet in a properly constituted meeting and ratify the resolution which is prima
facie found to be invalid.

20. Furthermore on the operation of Bank accounts and for other activities the Board of Directors in a
properly constituted meeting held on 30-9-90 took certain resolution but by a prima facie invalid
resolution taken on 7-1-95, the earlier valid resolution has been cancelled. For cancellation of the earlier
resolution a valid resolution taken on a valid meeting is required. As the meeting dated 7-1-95 is prima
facie invalid the Board of Directors may follow the follow the resolution dated 30-9-90 and in that view
of the matter we find no force in the argument of Mr Ahmed that if injunction is granted the company
will suffer.

21. Thus after consideration of the material on record and after hearing the learned Advocates of both
the sides it appears to us that the board meeting held on 7-1-95 is prima facie invalid in the eye of law
and as this resolution is an invalid resolution the plaintiffs are entitled to injunction as prayed for.

22. The learned Subordinate Judge it appears failed to appreciate the case from a correct angle and
without looking into the provisions of section 95 of the Companies Act, 1994 and also the aforesaid
decisions rejected the plaintiffs' prayer for injunction and, as such, it requires interference.

23. In view of the aforesaid the appellants are entitled to the relief as prayed for.

24. Court fees paid are correct. The appeal is accordingly allowed with costs. The impugned judgment
and order dated. 19-1-1998 passed by the learned Subordinate Judge, 1st Court, Dhaka in Title Suit No.
29 of 1997 is hereby set aside and the respondents are hereby restrained by an order of temporary
injunction from acting on the alleged resolution of the Board of Directors taken on 7-1-95 and they are
also restrained from operating the Bank account of the plaintiff appellant No. 1 company, the ittefaq
group of publications limited maintained with the defendants respondent no.1 Arab Bangladesh Bank
Limited on the basis of the resolution of the aforesaid court for smooth running of the company and the
publication of the newspaper the daily ittefaq and the parties in litigation may act in pursuance to
resolution.