2020 (5) TMI 101 - Tri - Companies Law

Oppression and Mismanagement - misappropriation of funds - Whether this CP is maintainable for it has been filed by a non-member of the company? - Whether sec.241 application is maintainable with regard to the affairs of the sec.8 Companies? - HELD THAT - Since this issue is limited to examining as to whether a non-member can file Petition u/s 241 of the Act, unless it is self-evident that petitioner is a member of the company, this petition shall not be extrapolated to say that since complexities are involved in this case, the prerequisite of being a member can be done away - As to maintainability is concerned, if requisite qualification is not there, if at all waiver is a requirement, it could be granted under the proviso to sec.244 of the Act. The star argument of the Petitioner herein is that, since this Bench has already stated that this Petition is maintainable even though he is not the member of the company, the petitioner grievance shall be considered under section 241 of the Act, instead of going into as to whether that order is right or wrong, as it has been left open to decide at the final hearing, this Bench is entitled to go into it - Qualification given one to ten cannot be read as qualification zero to ten. Here this person is a non-member; a member u/s.241 cannot be read as non-member just because an application could be allowed even a shortfall is there to the qualification u/s.244 of the Companies Act, 2013. However, this Bench ordered that the CP is maintainable owing to some complexities, therefore, it has been left open to decide this issue at the time of final hearing. Though it is not to make an observation against the interim order passed saying that this petition is maintainable, the basic standard under law is whenever a threshold is set out in the law to initiate proceeding, first that issue shall be looked into at the time of filing, if it is slipped out at the time of numbering, it has to be considered at the time of mentioning. The reason behind this doctrine is, the statute has not left any jurisdiction to the judiciary to consider petition filed by a non-member. The subject matter jurisdiction comes to this Tribunal only when the petitioner crossed the test of being a member of the company. Unless the petitioner has passed that test, the Tribunal ought not to have looked into the petition - We would not have dealt with this issue and especially prima facie view taken at the earlier point of time, but because the petitioner counsel himself vehemently argued that this Bench should not look into maintainability issue on the ground this Bench has already decided the maintainability issue. Prima facie view of consideration will come into operation when the petition under consideration is indicative of likelihood of getting a decree in favor of it unless and until that seemingly insurmountable materials are available on record is rebutted by the answering Respondent, at times courts grant an ex parte ad interim relief looking at the material shown as sufficient to pass decree, but when other side later present and show the material shown by the plaintiff/petitioner could not make out a case, may be on the ground itself, the interim order shall be vacated. The Petitioner is one of the communicant members, even if 24 Consenters are taken into consideration; they are part of 4.5 Million of the church members. The church members at the parish level elect and send delegates to Dioceses, and Synod members. Synod members will elect members of CSITA. This being the arrangement, there is no scope to assume that this Petitioner or 24 Consentors to this Petitioner or 200 members alleged to have attended the alleged General Meeting on 16-1-2016 can be equated with members of CSITA who have reached to CSITA passing through two layers of election. Therefore this Company Petition is not at all maintainable. Whether a person on his own holds meetings and elections thereafter seek an imprimatur of this Bench to the actions of him? - HELD THAT - When the action taken by this Petitioner itself is in contravention to the provision of law and flouting all the rules under Rule Book, how can he be considered as aggrieved before this Bench to seek an imprimatur of this Bench to an illegal action without any basis for such approval? The Petitioner has gone to the extent of setting up letterhead of the company to prepare a resolution showing as if a committee has been constituted to R1 Company. Basic requirement to interfere with the Indoor Management of any company is that the person shall be either shareholder or member of the company. This Petitioner is neither of them - there are no merit in the argument of the Petitioner saying that the Managing Committee elected by the so-called 250 members as valid. Whether any case has been made out u/s.241 of the Companies Act, 2013 against the Respondents herein? - HELD THAT - Every action that is falling under sec.213 or any unlawful actions falling under any of the companies Act cannot be straight away considered as an action attracting the provisions of sec.241 of the Companies, Act, 2013. The checklist and the measurement to bring it within the ambit of sec.241 are altogether different, here the Petitioner has miserably failed to establish any case u/s.241 of the Companies Act, 2013. Petition dismissed.

Summary

Issues Involved:
1. Maintainability of the Company Petition filed by a non-member.
2. Applicability of Section 241 of the Companies Act, 2013 to Section 8 Companies.
3. Legitimacy of meetings and elections held by the petitioner.
4. Allegations of mismanagement and oppression under Section 241.

Detailed Analysis:

1. Maintainability of the Company Petition filed by a non-member:
The Tribunal examined whether a non-member could file a petition under Section 241 of the Companies Act, 2013. The petitioner argued that despite not being a member of CSITA, he should be allowed to initiate proceedings as CSITA exists for the benefit of CSI members. The Tribunal highlighted that the petitioner did not meet the qualifications of a member as required under Section 241. The Tribunal emphasized that the jurisdiction to entertain such petitions is contingent upon the petitioner being a member of the company, and a non-member cannot bypass this requirement. The Tribunal concluded that the petition was not maintainable as the petitioner failed to meet the statutory threshold of being a member.

2. Applicability of Section 241 of the Companies Act, 2013 to Section 8 Companies:
The Tribunal discussed whether the provisions of Section 241, which deals with oppression and mismanagement, apply to Section 8 companies. It was noted that the doctrine of oppression and mismanagement is intended to protect members from unfair prejudice by those managing the company. However, in this case, the petitioner was not a member, and the allegations did not demonstrate specific actions causing prejudice to the company or its members. The Tribunal concluded that the petition did not establish a case under Section 241, as the petitioner failed to prove any economic interest or specific prejudicial actions by the management.

3. Legitimacy of meetings and elections held by the petitioner:
The petitioner claimed to have conducted a General Body Meeting and elected a new management committee for CSITA. The Tribunal examined the legitimacy of this meeting and election. It was found that the petitioner and the attendees were not members of CSITA and thus had no authority to hold such a meeting or election. The Tribunal emphasized that only members with the requisite voting power could call for a General Body Meeting and that the petitioner’s actions were unauthorized and invalid. Consequently, the Tribunal rejected the petitioner’s request to recognize the newly elected body.

4. Allegations of mismanagement and oppression under Section 241:
The petitioner alleged various acts of mismanagement and fraud by the current management of CSITA, including illegal amendments to the Articles of Association and improper handling of assets. The Tribunal noted that the allegations were broad and lacked specific details. The petitioner failed to provide evidence of specific actions by the management that were prejudicial to the company or its members. Additionally, the Tribunal observed that ongoing investigations and legal actions against CSITA did not automatically justify a case under Section 241. The Tribunal concluded that the petitioner did not establish a prima facie case of oppression or mismanagement.

Conclusion:
The Tribunal dismissed the Company Petition and the related applications as misconceived. The petition was found to be not maintainable due to the petitioner’s lack of membership in CSITA and the failure to establish specific acts of mismanagement or oppression. The Tribunal also took into consideration documents filed by the respondents, which further undermined the petitioner’s claims.