2005 (4) TMI 306 - HC - Companies Law

Summary

Issues Involved:
1. Jurisdiction of the court.
2. Validity of the cancellation of nominations by the Election Officer.
3. Requirement of filing statutory declaration in Form DD-A.
4. Correctness of the auditor's report and subsequent erratum.

Detailed Analysis:

1. Jurisdiction of the Court:
The court examined whether it had the jurisdiction to entertain the suit. It was argued that the entire cause of action arose outside the court's territorial jurisdiction. However, the court noted that the auditor's report, which was part of the cause of action, was prepared and furnished within its jurisdiction. Therefore, the court held that it had jurisdiction to try the suit as leave under clause 12 of the letters patent had been granted and not revoked.

2. Validity of the Cancellation of Nominations by the Election Officer:
The plaintiffs challenged the decision of the Election Officer to cancel all nominations on the grounds of non-filing of the statutory declaration in Form DD-A. The court examined the election rules of the club and found that the rules did not require the filing of such a declaration for the validity of nominations. The court held that the decision to cancel the nominations was not in accordance with the club rules and was invalid.

3. Requirement of Filing Statutory Declaration in Form DD-A:
The court addressed whether filing the statutory declaration in Form DD-A was necessary. It was acknowledged that the club was a limited company and that members of the Executive Committee were akin to directors. The court held that while the declaration was not required at the time of filing nominations, it must be filed immediately after being elected. Failure to do so would render the election illegal.

4. Correctness of the Auditor's Report and Subsequent Erratum:
The plaintiffs contended that the auditor's report was manipulated. The court noted that the auditor had a statutory duty to report disqualifications under section 227(3)(f) of the Companies Act, 1956. However, the court found that the auditor had not followed the proper procedure, such as collecting materials or seeking views from the affected directors. The court held that the auditor's report should have been more thorough and that the subsequent erratum was not conclusively based on proper materials.

Conclusion:
The court directed the club to proceed with the annual general meeting and elections based on the already filed nominations. It mandated that immediately after the election, the elected candidates must furnish the required statutory declarations. To ensure fairness, the court appointed a Special Officer to supervise the election and annual general meeting. The Special Officer was tasked with ensuring compliance with the club rules and the court's observations, with a report to be submitted to the court post-election. Costs were reserved to be decided later.