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2018 (1) TMI 1619 - HC - Companies LawEx-parte/ad interim order restraining the Defendant Club from conferring permanent membership status on any UCP/Green Card Holder, till pendency of the Suit - ex-parte/ad interim/interim order that till the disposal of the present Suit, the Defendant Club should accord UCP/Green Card status on the children of the Plaintiffs. Whether the Plaintiffs have made out a prima facie case for grant of an ad interim injunction and whether the balance of convenience is in favour of grant of injunction to restraint the Club from granting permanent membership to the UCPs/Green Card Holders? - HELD THAT - The case of the Plaintiff inter alia is that, contrary to the Articles of Association, the Club is granting permanent membership in the NG category to the UCPs/Green Card Holders out of turn by considering their applications on a priority basis and not on the basis of the date of application in the NG category at par with the general applicants in the NG category. The stand of the Club inter alia is that NG category comprises of 50% of the permanent membership and out of this 50% half (i.e. 25% of the entire permanent membership) has been reserved for the UCPs/Green Card Holders and the UCPs/Green Card Holders are considered for this 25% membership on the basis of date of their application. Article 4, lists out the five classes of members, one of which is Permanent members, with which the parties are concerned. Article 7 requires every application for membership to be entered in a Candidate's Book. As per the Club, initially there was only on Candidates Book. Subsequently a separate Candidate's Book was maintained for general applicants in NG category and the UCPs/Green Card Holder applicants. On an objection by some members, once again, a common Candidate's Book is being maintained but a different colour ink is used for entering the details of a general applicant and the UCPs/Green Card Holders (reference drawn to Minutes of meeting dated 17.10.2013) - Article 8 (7) stipulates that the General Committee shall maintain the distinctive character of the Club and regulate the balloting in a manner that the proportion of the members in the Government Category continues to be about half - Articles 12 and 13 provide for permitting inter alia Candidates whose names are up for election, dependents of members and son of a member who has applied for permanent membership, the use of facilities of the Club - Article 16 restricts the right of voting, on any matter affecting the interests or management of the Club, to only permanent members. In terms of the Articles of Association, UCPs/Green Card Holders virtually have all rights and enjoy nearly all facilities of the Club except voting rights. Articles of Association do not provide for any separate class of members or reservation for UCPs/Green Card Holders. The Club contends that such a reservation has been accorded by the General Committee through its various meetings - In the meeting held on 15.03.1978, automatic UCP status was granted to an applicant (member's son) who on attaining the age of 21 made an application, provided he satisfied the conditions of a dependent member. Minutes of meeting dated 15.11.1983 stipulated that for grant of UCP status, an application for permanent membership would be required to be made. However, he would be granted permanent membership in due course. A circular is stated to have been issued on 22.05.1984, reserving 20% permanent membership for UCPs, which was subsequently increased to 25%. The learned Trial Court, in the impugned order after noticing the Articles of Association has prima facie held that the concept of grant of membership out of turn to Green Card Holders / UCPs has been evolved only through, decisions / bye-laws made in General Committee Meeting - By creating a category of members under Green Card Holder / UCPs meant for dependents of members, another elitist class has been created which have got membership by way of fastest method only because they happen to be the legal heirs of a member. This provision has acted against the interests of the members of waiting lists who themselves are eligible for membership by virtue of their individual eligibility. These bye-laws and decisions in General Committee meetings which bestows special status to the dependents of existing members in conflict with eligible category of a person of waiting list cannot be prima facie held to be in accordance with the spirit of AOA which do not recognize the categories of Green Card Holder / UCPs. Further, grant of permanent membership on priority basis to Green Card Holder/ UCPs has its own cascading effect because these members would attain permanency at a very young age, therefore, their off-springs would also in-turn get similar benefits. This kind of bye-law/rule will one day turn AOA otiose and are against the interest of public at large as well as Plaintiffs. Admittedly, the Articles do not create a separate class of members or accord priority to any special class of individuals in getting membership, the same has been done only through various meetings - the Green Card Holders / UCPs enjoy virtually all facilities of the Club, except voting rights on any matter affecting the interests or management of the Club. No irreparable loss and injury would be caused to the Green Card Holders / UCPs in case their permanent membership is deferred pending disposal of the Suit. On the other hand, if permanent membership is granted to Green Card Holders / UCPs out of turn then irreparable loss is likely to be caused to the general applicants in the NG category. Balance of convenience is also in favour of the Plaintiffs and in favour of grant of ad-interim injunction. There are no infirmity, in the impugned order dated 30.11.2016, in so far as it relates to the application under Order XXXIX rules 1 2, and restrains the Club from granting out of turn permanent membership to Green Card Holders / UCPs and directs that the permanent membership already granted to any Green Card Holders / UCPs, after the institution of Suit, would be subject to the outcome of this Suit. However, as the case of the Club is that 25% reservation has been lawfully carved out for Green Card Holders / UCPs, it would be expedient to direct that pending disposal of the Suit, the Club shall not consider the applications of General applicants in the NG category, for grant of permanent membership, in excess of 25% of the total permanent membership - petition are disposed of upholding the impugned order dated 30.11.2016 dismissing the application of the Club under Order VII rule 11 and allowing the application of the Plaintiffs, under Order XXXIX rules 1 2, restraining the Club from granting out of turn permanent membership to Green Card Holders / UCPs and directing that the permanent membership already granted to any Green Card Holders / UCPs, after the institution of Suit, would be subject to the outcome of the subject Suit. The interim order is, however, modified directing that pending disposal of the Suit, the Club shall not consider the applications of General applicants in the NG category, for grant of permanent membership in excess of 25% of the total permanent membership. There shall be no orders as to costs. It is clarified that the observations in the impugned order dated 30.11.2016 and the present order are prima facie and nothing stated therein shall come in the way of the consideration, by the Trial Court, of the merits of the respective contentions after trial - In view of the facts and circumstances of the case, the learned Court is requested to expedite the trial of the Suit and endeavour to dispose of the Suit within a period of nine months from today.
Issues Involved:
1. Rejection of application under Order VII Rule 11 CPC. 2. Grant of application under Order XXXIX Rules 1 & 2 CPC. 3. Alleged violation of Articles of Association (AOA) by granting permanent membership to UCPs/Green Card Holders. 4. Limitation and cause of action. 5. Non-joinder of necessary parties. Detailed Analysis: 1. Rejection of Application under Order VII Rule 11 CPC: The Club filed an application under Order VII Rule 11 CPC seeking rejection of the plaint on grounds that it did not disclose any cause of action, was barred by limitation, and suffered from non-joinder of necessary parties. The Court dismissed this application, stating that the plaint, when read as a whole, disclosed facts necessary to establish a cause of action. The Court emphasized that the veracity of the averments or the strength of the plaintiff's case is not to be tested at this stage. The Court held that the issue of limitation is a mixed question of fact and law, requiring evidence, and thus could not be resolved at this preliminary stage. 2. Grant of Application under Order XXXIX Rules 1 & 2 CPC: The Plaintiffs sought an injunction to restrain the Club from granting permanent membership to UCPs/Green Card Holders out of turn. The Court granted this application, noting that the Articles of Association did not provide for any separate class of members or reservation for UCPs/Green Card Holders. The Court found that granting permanent membership to UCPs/Green Card Holders out of turn would cause irreparable loss to general applicants in the NG category, and thus, the balance of convenience favored the Plaintiffs. 3. Alleged Violation of Articles of Association (AOA): The Plaintiffs contended that the Club was granting permanent membership to UCPs/Green Card Holders in violation of the AOA, which did not provide for such a preference. The Court noted that the Articles of Association did not create a separate class of members or accord priority to UCPs/Green Card Holders. The Court found that the practice of granting out-of-turn membership to UCPs/Green Card Holders was evolved through decisions and by-laws made in General Committee meetings, which prima facie conflicted with the AOA. 4. Limitation and Cause of Action: The Plaintiffs argued that they became aware of the alleged illegal practices in 2012 and filed the suit within the limitation period. The Court held that the question of limitation was a mixed question of fact and law, requiring evidence. The Court found that the Plaintiffs had averred sufficient facts to show that the cause of action arose within the limitation period, and thus, the suit was not ex-facie barred by limitation. 5. Non-Joinder of Necessary Parties: The Club argued that the suit was liable to be rejected for non-joinder of necessary parties, i.e., UCPs/Green Card Holders whose memberships were under challenge. The Court held that non-joinder of necessary parties is not a ground for rejection of a plaint under Order VII Rule 11 CPC. The Court stated that whether the UCPs/Green Card Holders were necessary parties would be examined at the appropriate stage, and the consequences of their non-impleadment would follow. Conclusion: The Appeals (FAO 90/2017 and FAO 103/2017) and the Petition under Article 227 (CM(M) 603/2017) were disposed of, upholding the impugned order dated 30.11.2016. The Court restrained the Club from granting out-of-turn permanent membership to UCPs/Green Card Holders and directed that any permanent membership granted after the institution of the suit would be subject to the outcome of the suit. The interim order was modified to direct that pending disposal of the suit, the Club shall not consider applications of general applicants in the NG category for permanent membership in excess of 25% of the total permanent membership. The Court also requested the trial court to expedite the trial and dispose of the suit within nine months.
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