Home Information Cases Choudhary v Bhattar (2009)

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Choudhary v Bhattar (2009)

Summary

Regulation 44/2001 provided a basis of jurisdiction regardless of domicile in proceedings concerning the constitution or internal management of a company; injunctive relief was granted to maintain the status quo pending a final hearing where directors claimed that they had been removed and shares forfeited in contravention of the company's rules.

Facts

The claimants (C and R) sought declaratory and injunctive relief in respect of resolutions made at general meetings of the company, which was the third defendant in the proceedings. C and R were the company's directors. The only other director was the first defendant (B). The company had its registered office in England but was situated in India. Up to December 2008, the company's rules stipulated that the convening of a general meeting and the passing of a resolution at such a meeting required the approval of two directors. In a series of company meetings held in that month, C and R were removed as directors and replaced with five others. The company's rules were also altered to require that all further resolutions and decisions be approved by five members of the board. In addition, certain company shareholdings were forfeited and its secretary was replaced. B had conducted the meetings at which each of those resolutions were passed. C and R, who were not present at any of them, sought declarations that the resolutions were void on the grounds that they had approved neither the convening of the meetings nor the resolutions purportedly passed at them. Instead, they maintained that B had forged their signatures on the convening notices and the resolutions in order to move majority ownership and control of the board to the second defendant. B's position was that C and R were well aware of what had happened and had participated in the events up to and including their resignation from the Board. B argued that (1) the proceedings were misconceived because many of C and R's complaints were no more than defects in internal management, which could be rectified at a general meeting; (2) the court lacked jurisdiction on the ground that India was the forum conveniens.

Held

(1) As the composition of the body of shareholders was a central issue in the case, a general meeting would resolve nothing, MacDougall v Gardiner (1875-76) LR 1 Ch D 13 CA distinguished. Even if there were not dispute as to shareholdings, the court would have jurisdiction to make an appropriate order regulating the conduct of the company's affairs until such time as a general meeting could be convened. Moreover, a director could sustain an action in his own name against the other directors if he was wrongfully excluded from acting as a director, including a claim for an injunction to restrain that exclusion, Pulbrook v Richmond Consolidated Mining Co (1878) LR 9 Ch D 610 Ch D applied. (2) B had overlooked the impact of Regulation 44/2001 art.22, which provided a basis of jurisdiction regardless of domicile in proceedings concerning the constitution or internal management of the company, Speed Investments Ltd v Formula One Holdings Ltd (No2) (2004) EWCA Civ 1512, (2005) 1 WLR 1936, considered. Where jurisdiction existed under the Regulation, the court on which it was conferred was obliged to hear and determine the claim even where the potential alternative court was not that of a Member State, Owusu v Jackson (t/a Villa Holidays Bal Inn Villas) (C-281/02) (2005) QB 801 ECJ applied, Harrods (Buenos Aires) Ltd (No2), Re (1992) Ch 72 CA (Civ Div) superseded. (3) The substantial disputes of fact in the instant case could not be determined on an interlocutory application or without a trial. In the interim, it was necessary to make orders which preserved the status quo. More specifically, it was necessary to restrain the parties from doing anything detrimental to the interests of any other party. Accordingly, B was ordered to act in relation to the management of the company's business only as directed or authorised by C and R, or as ordered by the courts of India. In addition, B was restrained from taking any step to convene a general meeting or to procure a decision of directors to alter the composition of the board or the shareholding in the company. C and R were to give an undertaking to the same effect.

Declaration granted in favour of claimants

Chancery Division
David Donaldson QC
Judgment date
11 February 2009
References

​LTL 18/3/2009

Practice areas