1990 (7) TMI 372 - HC - Benami Property

Summary

Issues Involved:
1. Jurisdiction of Civil Court
2. Violation of Principles of Natural Justice and Fair Play
3. Amendment of Pleadings
4. Legality of Rejection of Nomination Paper
5. Waiver of Right to Challenge
6. Applicability of Benami Transactions (Prohibition) Act
7. Grant of Injunctive Reliefs

Detailed Analysis:

1. Jurisdiction of Civil Court:
The Court examined whether the Civil Court had jurisdiction to entertain the suit in light of the Companies Act, 1956. The Court referenced various precedents, concluding that the jurisdiction of the Civil Court is not barred by the Companies Act. The Court held that the Civil Court has jurisdiction to entertain the suit, especially when the act complained of is illegal or ultra vires the company, or when voting rights and other personal rights of a shareholder are infringed.

2. Violation of Principles of Natural Justice and Fair Play:
The plaintiff argued that the principles of natural justice were violated as he was not given a personal hearing before the rejection of his nomination paper. The Court found that there is no provision in the Articles of Association requiring a personal hearing before accepting or rejecting a nomination paper. The Court held that the Managing Committee of the Club had considered the plaintiff's written representations and other relevant aspects before rejecting his nomination paper, thus complying with the principles of natural justice.

3. Amendment of Pleadings:
The plaintiff sought to amend the plaint to change the word "undivided" to "divided" concerning his relationship with his brother. The Court found that this amendment was sought at a belated stage and was an afterthought to overcome the effect of a material admission. The Court held that allowing the amendment would materially affect the case of the defendants and result in great prejudice. Therefore, the amendment applications were dismissed.

4. Legality of Rejection of Nomination Paper:
The Court examined whether the rejection of the plaintiff's nomination paper was valid under Article 32(c)(i) of the Articles of Association. The Court interpreted Article 32(c)(i) to mean that a person is disqualified if they or their relatives, as enumerated in Schedule-I 'A' of the Companies Act, own a racehorse. The Court held that the rejection of the plaintiff's nomination paper was not unjust, illegal, or improper, as his brother owned a racehorse.

5. Waiver of Right to Challenge:
The defendants argued that the plaintiff had waived his right to challenge the rejection of his nomination paper by not protesting or voting at the Annual General Meeting. The Court found that the plaintiff was not present at the emergent meeting where the decision to reject his nomination was made and left the Annual General Meeting in shock after the announcement. Therefore, the Court held that the plaintiff had not waived his right to challenge the decision.

6. Applicability of Benami Transactions (Prohibition) Act:
The trial Court had applied the Benami Transactions (Prohibition) Act to conclude that the plaintiff's nomination paper was improperly rejected. The appellate Court held that the Benami Prohibition Act does not apply to the facts of the case, as the Act is intended to prohibit benami transactions and does not affect the interpretation of the Articles of Association concerning the eligibility to contest for Stewardship.

7. Grant of Injunctive Reliefs:
The trial Court's order setting aside the election of defendants 2 to 4 and directing them not to function as Stewards was challenged. The appellate Court found that the trial Court had erred in granting injunctive reliefs based on the improper application of the Benami Prohibition Act. The appellate Court held that the rejection of the plaintiff's nomination paper was valid, and therefore, the injunctive reliefs were not warranted.

Conclusion:
The appeals were allowed, the judgment and decree of the trial Court were set aside, and the plaintiff's suit was dismissed. Each party was directed to bear its own costs.