Powers of Company Law Board/ Tribunal :

Guidance of Judicial Rulings: The main principles that should guide the Tribunal as regards ordering meeting to be called were indicated in re, Ruttonjee & Co. Ltd.(1968) 2 Comp. LJ 155 (1970) 40 Com. Cases 491 (Cal.):

(i) The CLB/Tribunal would not ordinarily interfere with the domestic management of a company which should be conducted in accordance with the Articles.

(ii) The discretion granted under Section 186 should be used sparingly with caution so that the CLB/Tribunal does not become either a shareholder or director of the company trying to participate in the internal squabbles of the company.

(iii) The word ‘impracticable’ means impracticable from a reasonable point of view.

(iv) The CLB/Tribunal should take a common sense view of the matter and must act as a prudent man of business.

(v) A prudent man of business has not a sensitive officious view of intervention in case of every rivalry between two groups of directors; prudence demands that the CLB/Tribunal should ordinarily keep itself aloof from participating in quarrels of rival groups of directors or shareholders.

(vi) But where the meeting can be called only by the directors and there are serious doubts and controversy as to who are directors or where there is a possibility that one or other or both the meetings called by the rival groups of directors may be invalid, the CLB/Tribunal ought not to expose the shareholders to uncertainties and should hold a position that has arisen which makes it “impracticable: to convene a meeting in any manner in which meeting of the company may be called.

(vii) Before the CLB/Tribunal exercise its discretion under Section 186, the CLB/Tribunal must be satisfied when a director or a member moves an application, that it has been made bona fide in the larger interests of the company for removing a deadlock otherwise irremovable”.

In Smt. Jain Vs. Delhi Flour Mills Company Ltd. and others (1974) 44 Comp. Cas. 228 (Delhi), it was held that an application under Section 186 need not to on behalf of the company for the very language of that Section even permits the Company Law Board suo moto to call meeting of the company if it has become impracticable to call a meeting other than an annual general meeting. An action need not be in the name of the company for actions concerning injuries personal to the petitioner.

Where a meeting can be called by recourse to Section 169 or 167, the Company Law Board will not grant an application under Section 186; for the petitioner would at least have to show that there is no other option but to apply under Section 186.

In a petition under Section 186 for an order directing the holding of general meeting the CLB/Tribunal will not go to the extent of rectifying the register of members for the purpose of giving directions as to who should vote at such a meeting.

In B.R. Kundra Vs. Mohan Pictures Association (1976) 46 Comp. Cas. 339 (Delhi) it was held that: Directors can not continue in office by failing to call annual general meeting at which they are to retire; where directors no longer continued to hold office as such, the court (now CLB/Tribunal) can call a meeting to elect directors.

In re. Motion Pictures Association (1979) 46 Comp. Cas.298 (Delhi), it was held that: A meeting which is not conducted in accordance with the directions of the Company Law Board is not a meeting of a company under sub-section (2) of Section 186 and any business conducted in that meeting must fail.

In Indian Hardware Industries Ltd. Vs. S.K. Gupta (1981) 51 Comp. Cas. (Delhi), it was held that: There is nothing is Section 186 which lays down that a Company Court which is supervising the scheme under Section 392 cannot call a meeting of the company if it feels that it is necessary to do so for the proper supervision and implementation of the scheme. So long as the meeting is to be called, because the Court feels it necessary for the proper working of the scheme, the power must be found to be implicit in the Court by virtue of Section 392(1) and it is not necessary to invoke Section 186 for this purpose. In other words, Section 186 is not applicable to cases covered by Section 392.

In Bengal & Assam Inventors Ltd. Vs. J.K. Eastern Industries (P) Ltd. (1957) 27 Comp. Cas 86 (Cal), it was held that:

The Company Law Board’s power under Section 186 is discretionary. It is not a power which it must exercise. It is not a mandatory obligation upon the Company Law Board. It is an alternative remedy to be applied only when the normal machinery of company management fails and the Company Law Board must find firstly that it is impracticable to call a meeting and secondly that to leave the parties to follow their own remedies and rights will put the company in jeopardy.

[Note: Corresponding section to 186 of the Companies Act, 1956 is section 98 of the Companies Act, 2013 which is not yet notified. For reference of section 98 see the annexure]