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TMI Blog2021 (12) TMI 1279X X X X Extracts X X X X X X X X Extracts X X X X ..... Others seeking the following reliefs: - ➢ declare that all the resolutions passed by the superseded Director Board enlisting R2 to R20 as new members of the Company are ultra vires of AOA of the Company and as null and void. ➢ declare that the enrolment of Respondent No. 2 to 20 as members of the 1st Respondent Company violates the Articles of Association of the Company hence illegal, null, and void and further that they are liable to be removed from the Register of Members of the Company. ➢ Direct the R1 Company to rectify the register of members of the Company as may be ordered by this Hon'ble Tribunal. The brief facts of the case are as under: - 2. The Appellant is a member of the 1st Respondent Company since 1986. He has served as a Director of the Company for 23 years and as a Trustee for 10 years. The 1st Respondent Company was incorporated in 1927 as a Company limited by guarantee. As per the Memorandum of Association, the main object of the Company is to promote education, industry, and charitable activities. Article 3 of the Articles of Association states that all men, above 21 years of age, who are Roman Catholic Latin Christians of the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nage the affairs of the Company and vide order dated 31.10.2018 Hon'ble Retd. Justice Shri Narayana Kurup was appointed as the Administrator superseding the Board in existence to carry out the functions of the Company until further orders. The Respondents 2 to 20 were enrolled as new members of the Company illegally and against the provisions of the Articles of Association by the then Director Board which has been superseded by the order of NCLT. It is understood that Respondent No. 2 was enrolled as a new member vide Director Board Resolution No. 5 dated 09-09-2016, The Respondent Nos. 9 and 10 were enrolled as new member vide Director Board Resolution No. 9 dated 18.05.2017, and Respondent s 11 to 20 were enrolled as new members vide Director Board Resolution No. 9 dated 05.09.2017. 5. The learned counsel for the appellant argued that the enrolment of new members to the Company is governed by Articles 1 to 5 of the Articles of Association of the Company. Article 2 lays down the conditions for the enrolment of new members. The first and foremost condition is that the General meeting should find that more members other than the existing members are necessary for the activities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nakulam in by O.S.No.6/2015. 8. The 1st Respondent Company is having less than 60 members. The Respondents 2 to 20 were enrolled as new members of the Company illegally and against the provisions of the Articles of Association of the Company by the then Director Board who has been superseded by the Administrator. This enrolment was made to create a bogus majority and win in the event of election and continue in power so that they can continue with their illegal activities. It is also averred that Respondents No. 2 to 20 have received huge sums of money from the Company through the superseded managing Director and the trustees violating the court orders and the Articles of Associations of the Company. 9. Aggrieved by the gross illegality committed by the superseded Director Board the appellant approached the Company through the Administrator with a prayer that the names of Respondent s 2 to 20 be removed from the Register of members of the Company and thus rectify the Registers of the Members. The Company has vide letter dated 23.09.2019 refused the request made by the appellant. 10. Respondent No.1 Company was represented by the Administrator appointed by the NCLT, Chennai Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Association of the Respondent No.1 Company. ➢ The Hon'ble Munsiff Court, Ernakulam in IA 3928/2015 in OS 06/2015 has specifically mentioned that policy decisions shall be taken only with the approval of the general body. Enlistment of new members is a matter of policy and as such Director Board should not have taken such a decision to admit R2 to R20 as new members of the Company. The following Respondent s have availed loans as mentioned hereunder: SL.NO. NAME AMOUNT 1 (R2) Nikhil John Joseph 5,00,000.00 2 (R3) Jose Peter 5,00,000.00 3 (R4) Sunil Thomas 5,00,000.00 4 (R5) Skhil Tom 5,00,000.00 5 (R7) K.P Sebastian 5,00,000.00 6 (R8) P P John Gregory 5,00,000.00 7 (R9) Edwin K V 5,00,000.00 8 (R10) George shine 5,00,000.00 9 (R11) Johnson K T 5,00,000.00 10 (R13) Neron Savio 5,00,000.00 11 (R14) Jose Edwin 5,00,000.00 12 (R15) Simon T J 5,00,000.00 13 (R16) Jomon Antony 1,00,000.00 14 (R17) Jomon Paul 5,00,000.00 15 (R18) Joseph Vivera 5,00,000.00 16 (R19) Rintu Antony 5,00,000.00 There is no provision in the Memorandum of Association and Articles of Association of Respondent No.1 Company enabling the Director Boar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red that no policy decision shall be taken by the then Director Board and that the enrolment of a new member is a matter of policy decision and given the aforesaid orders of the Munsiff's Court, Ernakulam, the Director Board could not have enrolled new members. The Respondents have not received any money from the Company either through the superseded Managing Director or trustees or in violation of the Court orders or violation of any provisions of the Articles of the Association. These Respondents are interfering with the affairs of the Administrator or his authority to manage the affairs of the Company. 15. The contention is that the Board of Directors has no authority to enroll members without the sanction of the General Meeting of the 1st Respondent Company and that the enrolment of these Respondents is illegal is strongly refuted by the Respondents. It is stated that there is no illegality in the enrolment of these Respondents as members of the 1st Respondent Company. 16. The learned counsel for Respondent Nos.4, 6 to 9, 11, and 13 to 18 filed their counter and stated that the appellant was removed from the Register of Members on 29.05.2015. The appellant had filed a sui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O.S. 6/2015, passed an ex-parte interim order directing the Respondent s therein not to appoint Directors to the subject Company, as per notice dated 4.12.2014. Accordingly, the Annual General Meeting proposed to be conducted on 28.12.2014 was adjourned sine-die without transacting any business. Again, another order was passed on 4.6.2015, by the Munsiff's Court, Ernakulam in lA No.3928/15 in O.S. No.6/15 restraining the Respondent s from expending any sum exceeding Rs. 2,500/- fixed by Articles of Association, till the constitution of the new Board of Directors or the disposal of the suit, whichever is earlier. Thereafter, a fresh notice dated 01.08.2015 was issued and the Annual General Meeting for Financial Year 2013-14 was conducted on 17.08.2015. Annual General Meeting for the Financial Year 2014-15 was declared to be conducted on 30.09.2015 and the same has been adjourned and held on 26.09.2016. Further, the Annual General Meeting for the Financial Year 2015-16 was also conducted on 26.09.2016. Annual General Meeting for Financial Year 2016-17 was conducted on Year 30.9.2017 and the same got concluded on 28.12.2017. Thereafter, no Annual General Meeting was conducted on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioners contended that the removal of the 1s* and 2nd petitioners (including the other members) without giving a show-cause notice and without adhering to the principles of natural justice by a Board resolution is illegal and void. Per contra, the R1 to R6 contended that the power of removal of member is vested with the Board as per the clause 48(b) of the AOA. In this place, we wish to discuss the sub-clause (b) of Clause 48 of the AOA which reads as follows: "b) Members who unnecessarily files a suit against the Company, cause damage to the Company and act in controversy to the resolution of general meetings, shall loss their membership" It could be seen that the said Clause 40(b) stipulates three conditions for losing membership: I. Members who unnecessarily file suits against the Company; II. Cause damage to the Company; and III. Act in controversy to the resolution of general meetings. A careful reading of the said conditions, it could be understood that the said three conditions are not mentioned in isolation with each other and whereas it is connected with each other. Therefore, one would lose membership when the member commits all the three and it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emoved any member, but the Company has only recognized and recorded the consequences of their acts/misdeeds. It is on record that the Company has not issued any show-cause notice and the petitioners have not been given a fair opportunity of being heard under the principles of natural justice before their removal. It is a well-settled principle of law that all private associations like clubs etc..... were enjoined to observe the principles of natural justice in dealing with its members. In our considered view, the post facto communications are patently illegal and void, therefore, we hold that the removal of the petitioners is made in contravention of Clause 40(b) of the A0A, in contravention of the order, dated 18.11.2015 by the Munsif Court and also without adhering to the principles of natural justice. Therefore, the removal of the petitioners from the membership of the Company is declared null and void and, therefore, is set aside. Though the other removed members are not before us, this order is applicable to the members removed without adhering to the principle of natural justice and also a contravention of Clause 40(b) of the AOA." 24. The appellant received a notice on 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 1000/- from others towards admission. fee. Article 5 - Those who wish to enroll themselves as members of the Company as aforesaid shall send an application to the Managing Director with the Admission fee as stated above for the membership of the Company and the Directors have the right to accept or reject such applications. The admission fee will be refunded if the application 1st applied is not accepted." 29. It appears from the aforesaid Articles of Association that the number of members can be increased only up to 500 if the general meeting is of the opinion that it is necessary to add more members for the activities of the Company. From the minutes of the meeting of all general meetings held from 01.01.2013 to 05.11.2018 that any of the general meetings of these periods found it necessary to enlist more members for the activities of the Company or authorized the Director Board to enlist new members. We are also agreeable to the contention of the Administrator appointed to carry out the functions of the Company, that the Director Board has no authority or power to enroll new members without the sanction of the General Meeting. The resolutions passed to enroll Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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