2018 (2) TMI 2008 - AT - Companies Law

Whether a non-member can seek waiver under Section 244 of the Companies Act, 2013? HELD THAT - In spite of adding words relating to public interest on 01.01.1964 in the old Act, even when Act of 2013 was enforced Section 241, 242 and 244 continue to refer to Members of the Company to deal with question of oppression and mismanagement. Thus there is no scope to make alleged purposive interpretation as claimed. We have perused Section 241 and read it with Section 244, and kept in view the old provisions of Section 398 and 399. We find that not much is required to be stated as Section 244 of the Act, to us, appears to be quite clear. A mere glance at the Section shows that the Proviso which has been added below Clauses (a) and (b) gives power to waive all or any of the requirements specified in Clauses (a) or (b) so as to enable the members to apply . There are no substance in the arguments which are being raised by the learned counsel for the Appellant. The learned counsel for the Respondents submitted that busy bodies in the name of public interest cannot be allowed to resort to Section 241 and 244 otherwise the companies would not be able to function. There is substance in the submission. There are remedies available to the non-members or public, in case the company was functioning against public interest for which there are provisions in Chapter XIV of the Act, and Section 242(2) of the Act is also there. The appeal is dismissed with costs quantified at ₹ 2 lakhs to be paid by the Appellant to the Respondent No.1.

Summary

Issues:
1. Whether a non-member can seek waiver under Section 244 of the Companies Act, 2013.

Analysis:

Issue 1: Whether a non-member can seek waiver under Section 244 of the Companies Act, 2013.

The appeal raised the question of law regarding the eligibility of a non-member to seek waiver under Section 244 of the Companies Act, 2013. The Appellant, a non-member, filed an application before the National Company Law Tribunal for waiver under Section 241 read with Section 244 of the Act, claiming to act in public interest due to alleged mismanagement and oppression by the Respondent Companies. The NCLT rejected the petition, stating that a non-member cannot seek waiver under Section 244. The Appellant argued that the proviso in Section 244 allows for the waiver of requirements, including membership, and cited the introduction of the term "public interest" in Section 241(1)(a) as a ground for non-members to file petitions. However, the Respondents contended that the provisions clearly refer to members only and suggested alternative remedies for non-members to address public interest concerns.

Upon examination, the Tribunal found that despite the inclusion of "public interest" in the Act, Sections 241, 242, and 244 continued to emphasize members' rights in cases of oppression and mismanagement. The Tribunal interpreted Section 244 as explicitly granting the power to waive requirements to "enable the members to apply," emphasizing that the proviso did not extend to non-members. The Tribunal highlighted that Section 241 also specified that any "member of the company" could lodge complaints, reinforcing the requirement for membership. The Tribunal dismissed the Appellant's arguments, emphasizing that allowing non-members to access Sections 241 and 244 under the guise of public interest could disrupt company operations. The Tribunal affirmed the availability of remedies under Chapter XIV of the Act and Section 242(2) for cases where companies acted against public interest, underscoring the need for membership to utilize Sections 241 and 244.

In conclusion, the Tribunal ruled against the Appellant, holding that non-members cannot seek waiver under Section 244 of the Companies Act, 2013. The appeal was dismissed, with costs awarded to the Respondent, emphasizing the importance of membership in utilizing provisions related to oppression and mismanagement in company affairs.