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Foss Vs Harbottle, 1843 (Foss Vs Harbottle, 1843)

The effect of the arrangement made in Foss v. Herbottle is also that the minority

One cannot even complain to the court of irregular work, which the majority continues to do continuously. This arrangement was made in the case McDongle v Gardiner 1975. The rule laid down in Foss v. Herbottle has also been based on several Indian cases.

Judgments have been given by the courts. Rajahmundry Electric Supply Corporation Vs. Nageswara Rao (1956) gave a decision by the Supreme Court of India.

“Courts shall ordinarily not interfere in the internal affairs of the company on the application of the shareholders and shall also not interfere in the internal administration of the company carried on by the directors so long as they do their work within the powers by the Articles of the Company. If the operators have the support of the majority shareholders for the work done by them, then the minority shareholders can generally do nothing.”

In the case of Bhajekar vs. Shinkar, the Board of Directors of the company passed a resolution recommending a company to be appointed as the managing agent and got the said recommendation approved by a special resolution in the extraordinary meeting of the company. Some shareholders of the company filed a petition in the Bombay High Court to hold the offer invalid and stop the execution. Ordered by the court to convene a meeting of the shareholders and propose whether the company wants to pursue the suit. That’s what was done. But the motion of recommendation to sue in the shareholders’ meeting was rejected. The court ruled that the court would not interfere in matters relating to the internal management of the company.

In the case of Parashuram Vs Industrial Bank Ltd., the minority shareholders had challenged the appointment of directors and auditors by the company on the ground that the meeting by which these appointments were made was illegal. Illegally appointed directors and auditors should be stopped from working and appointments should be cancelled. The court ruled that it is not the function of the court to rectify the irregularities in the meetings of the company, but only the majority shareholders have this power because they are responsible for the management of the company. The Court shall intervene only when an act is done by the majority, especially with the intention of causing harm to or defrauding the minority shareholders.

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