2001 (4) TMI 832 - SC - Companies Law

Challenging the action of the Respondent No. 1 declaring the appellants as defaulters by its resolution/notice dated 25-3-1987 and to re-admit them as member - Held that - Appeal dismissed.The High Court having referred to the relevant bye-laws and rules noticed that after the appellants were declared as defaulters, their membership vested in the Respondent No. 1 and the respondent No. 1 had every right to sell the same. The High Court also noticed that the appellants did not make application for re-admission within the time and that in the meanwhile the rights were created in the third party. In these circumstances, the High Court has dismissed the writ petition on the ground of delay and laches and we find justification for such dismissal of the writ petition on the ground of delay and laches in the light of facts stated above. Hence, we do not think it necessary to go into the merits of other contentions raised, that too at this length of time.

Summary

Issues:
Validity of order declaring appellants as defaulters, violation of rules of natural justice, legality of decision to declare defaulters, rejection of application for readmission, delay and laches in filing writ petition.

Analysis:
1. The appellants challenged the order declaring them as defaulters by the Respondent No. 1, arguing that it violated the rules of natural justice as they were not given an opportunity to explain or provided with reasons. They also contended that the decision was arbitrary and unjustified, with malice on the part of the Executive Director. The High Court dismissed the writ petition based on delay and laches. The Respondent No. 1 defended the decision, stating that the appellants were not in compliance with the rules and bye-laws of the stock exchange.

2. The background leading to the action against the appellants included fraudulent withdrawal of funds, financial difficulties, suspension from the stock exchange, and subsequent investigation by a committee. The Governing Board authorized the declaration of the appellants as defaulters based on the committee's report. Despite several representations and correspondence, the appellants filed the writ petition after a significant delay, during which third-party rights were created through the sale of membership.

3. The Court noted that the appellants were aware of their defaulter status since March 1987 but filed the writ petition only in October 1990. The High Court's decision to dismiss the petition on grounds of delay and laches was deemed justified, especially considering the creation of third-party rights. The Court rejected the appellants' claims of malice and the decision being void ab initio, emphasizing the lack of justification for the delay in seeking legal recourse.

4. Ultimately, the appeal was dismissed for lacking merit, with no order as to costs. The Court upheld the High Court's decision based on the delay and laches in filing the writ petition, highlighting the importance of timely legal action in such matters. The judgment emphasized the need for parties to act promptly to protect their rights and interests in legal proceedings.