2013 (2) TMI 393 - HC - Companies Law

Alteration in Articles of Association - Respondent No. 3-association was granted license under section 25 and as per license condition, no alteration could be made in Articles of Association unless alteration had been approved by Central Government - Alteration made to Articles of Association of respondent had been approved but according to petitioner-members their representation was not considered - Petitioner sought for quashing of approval and mandamus to grant fair hearing to petitioner - petitioners were called upon to explain the delay and laches in approaching the Court - Held that - Even if the petitioners have accepted by participating in elections prior to filing of the writ petition, still, the delay and laches of ten months will not stand in their way to legitimately question the altered AOA being in contravention of provisions of the Companies Act, 1956, as section 9 mandates that the Act overrides the Memorandum, Articles, etc. to the extent they being repugnant to the provisions of the Act. So, respondent s plea of delay, laches and acquiescence is repelled. As Petitioners representation was not considered while granting impugned approval it is deemed appropriate to direct second respondent to provide a post decisional hearing to petitioners or their authorized representative on their representation within a period of six to eight weeks and to pass a speaking order on the aforesaid representation while returning a positive finding as to whether the alterations in Articles of Association impugned are repugnant to sections 255 and 256 and as to whether reliance upon section 263A and section 265 by the third respondent, justifies the impugned approval or not. Such a course is adopted as principles of natural justice mandate hearing and disposal of objection prior to grant of approval in question. A writ Court would refrain to dwell upon the soundness of impugned alterations in Articles of Association by requiring the competent authority to certify compliance of section 9 by effectively meeting the objections of petitioners. If the second respondent comes to a conclusion that the impugned approval is in violation of any provision of the Companies Act, 1956 then the second respondent would be well within its rights to withdraw the impugned approval but only after affording an opportunity of hearing to the third respondent.

Summary

Issues:
Quashing of Approval under Section 25(8) of Companies Act, 1956 for alteration of Articles of Association of respondent No. 3 - Cricket Association and mandamus to grant fair hearing to petitioners.

Analysis:
The petitioners, claiming to be members of respondent No. 3 - Cricket Association, sought the quashing of the Approval under Section 25(8) of the Companies Act, 1956 for altering the Articles of Association. They alleged that the alteration was contrary to the provisions of the Companies Act, 1956. The petitioners contended that the Approval was granted without considering their detailed Representation. The petitioners highlighted discrepancies in the information obtained under the Right to Information Act, revealing that the application for alteration had not been received or was pending. The delay in approaching the court was questioned, but the petitioners argued that the delay should not hinder their right to challenge the alterations, considering it a continuing wrong.

The petitioners relied on legal precedents to support their argument against the alterations made in the Articles of Association. On the other hand, the respondents argued that the alterations were in accordance with the Companies Act, 1956, and suggested that the petitioners could seek remedies through the Company Law Board or civil courts. The respondents also raised the issue of acquiescence by the petitioners due to their participation in elections held under the altered Articles of Association.

The court analyzed the contentions of both parties and emphasized the importance of ensuring compliance with the Companies Act, 1956. The court held that even if the petitioners participated in elections before filing the petition, the delay and acquiescence would not bar them from challenging the alterations. The court also addressed the issue of the pending Representation (Annexure-E) and directed the second respondent to provide a post decisional hearing to the petitioners to consider their objections regarding the alterations in the Articles of Association. The court stressed the principles of natural justice and mandated a speaking order on the Representation to determine the compliance with the Companies Act. The court left the decision on the impugned Approval to the Competent Authority, emphasizing the need for a fair hearing and disposal of objections before granting Approval.

In conclusion, the court disposed of the writ petition and pending applications, directing the Competent Authority to review the impugned Approval in light of the petitioners' objections and compliance with the Companies Act, 1956. The court emphasized the importance of hearing the petitioners and ensuring procedural fairness in such matters, leaving the final decision on the Approval to the Competent Authority.