9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (1) TMI 869 - HC - Companies LawJurisdiction - power to entertain the present suit - approval of dependent cards and Green Cards to the children of UCPs as also upgrading of Green Cards to UCP - interpretation of Article 13 (3) (b) of the Articles of Association - petitioners claim that the way the said article is interpreted gives rise to inequitable classification - HELD THAT - The suit at the instance of an individual shareholder, alleging the infringement of a right for an action and the majority shareholders being opposed to the memorandum and article of association, cannot be said to be an imperfect suit liable to fail on the parameters of Order 7 Rule 11 of the Code. Mere reference of more than 3100 members does not, ipso facto, raise a presumption that the suit is not maintainable in absence of any leave under Order 1 Rule 8 of the Code. Section 9 of the Code of Civil Procedure postulates that the Civil Courts have jurisdiction to try all suits of civil nature unless there is an express or implied bar. It is no longer res integra that such exclusion should not be readily inferred and the rule of construction being that every presumption should be made in favour of his existence rather than exclusion of the jurisdiction of the Civil Court - Section 397 398 of the Companies Act provides a remedy which is of preventive in nature so as to bring an end to oppression and mismanagement on the part of the controlling shareholders but does not in express terms take away the power of the Civil Court to declare a resolution to be ultra vires to the memorandum and article of association. The subsequent events can be taken note of if the original proceeding has become infructuous as it would be a futile exercise to allow such suit to continue. It is based on the legal maxim ex debito justitiae i.e. it is a duty of the Court to take such action which is necessary in the interest of Justice. Every facts germinated after the litigation having a substantial nexus and/or bearing on the relief claimed in the suit may be taken into consideration for ends of Justice. Section 242 of the Companies Act which provides for the power of the Tribunal contemplates an action relating to the affairs of the company which is being conducted in a manner prejudicial or oppressive to any member or members and that to wind up the company would unfairly prejudice such member or members, but the facts justify the makings of a winding up order, the power of the NCLT can be invoked. However, in the present suit the plaintiffs do not claim winding up of the defendant No.1 Club which is a company by guarantee - the cause of action pleaded by the plaintiff in this suit is the manner in which Article 13(3)(b) of the Articles of Association of the defendant company is being interpreted thereby creating irrational and illegal classification. NCLT not being empowered to determine the said cause of action, this Court is of the opinion that the plea of the defendant that the present suit is not maintainable and only a petition before the NCLT is maintainable, is liable to be rejected. The plea of defendant is to be rejected - issue decided in favour of the plaintiffs and against the defendant No.1.
Issues Involved:
1. Jurisdiction of the High Court vs. National Company Law Tribunal (NCLT) in interpreting the Articles of Association. 2. Interpretation of Article 13(3)(b) of the Articles of Association of the defendant Club. 3. Equitable treatment of members and issuance of Green Cards. 4. Validity of resolutions passed by the General Committee (GC) of the defendant Club. Issue-wise Detailed Analysis: Jurisdiction of the High Court vs. NCLT: The primary issue was whether the High Court had jurisdiction to entertain the suit or if it should be adjudicated by the NCLT under the Companies Act, 2013. The plaintiffs argued that their suit was based on civil rights relating to the interpretation of the Articles of Association, which falls under the jurisdiction of civil courts. They cited various case laws to support their claim, including the decision in Jai Kumar Arya & Ors. vs. Chhaya Devi & Anr., where the High Court upheld the jurisdiction of civil courts in matters not explicitly covered by the NCLT's powers under the Companies Act. The defendants contended that the NCLT had the jurisdiction to address the issues raised by the plaintiffs, as per Sections 241 and 242 of the Companies Act, which provide remedies for oppression and mismanagement. They argued that the term "member" under Section 2(55) of the Companies Act is broad and includes the plaintiffs, thereby making the NCLT the appropriate forum. The court analyzed the relevant sections of the Companies Act and previous judgments, concluding that the suit did not allege oppression, mismanagement, or financial irregularities, nor did it seek winding up or rectification of records. The court determined that the NCLT was not empowered to decide the specific cause of action related to the interpretation of Article 13(3)(b), thus affirming the High Court's jurisdiction. Interpretation of Article 13(3)(b) of the Articles of Association: The plaintiffs challenged the interpretation of Article 13(3)(b) by the defendant Club, which allowed only children of members who used the Club's facilities before the age of 21 to receive Green Cards. They argued that this created an inequitable classification, as it excluded children who did not use the facilities before turning 21. The court noted that the plaintiffs sought a declaration to extend Green Card privileges to all children of permanent members, regardless of their age or prior use of the Club's facilities. The court found that the plaintiffs' grievance was based on the manner of interpreting the Articles of Association, which fell within the purview of civil rights and could be adjudicated by the High Court. Equitable Treatment of Members and Issuance of Green Cards: The plaintiffs claimed that denying Green Cards to certain children of permanent members was inequitable and sought a consequential relief to issue Green Cards to all children of permanent members. They also sought an injunction to prevent spouses and children of Green Card holders from accessing the Club's facilities. The court acknowledged the plaintiffs' concerns about equitable treatment and the interpretation of the Articles of Association. It held that the plaintiffs had a right to seek equal treatment for all members after membership is granted and that the High Court had the jurisdiction to address this issue. Validity of Resolutions Passed by the General Committee (GC) of the Defendant Club: The plaintiffs sought to declare the resolutions passed by the GC on November 4, 2015, which approved the issuance of dependent cards and Green Cards to children of UCPs and the upgrading of Green Cards to UCP, as illegal and void. The court reviewed the resolutions and the plaintiffs' claims, finding that the suit did not involve allegations of financial misconduct or mismanagement that would fall under the NCLT's jurisdiction. Instead, the suit focused on the interpretation of the Articles of Association and the equitable treatment of members, which the High Court could adjudicate. Conclusion: The High Court concluded that it had jurisdiction to entertain the suit, as the issues raised by the plaintiffs were related to the interpretation of the Articles of Association and the equitable treatment of members, which are civil rights. The court rejected the defendants' plea that the suit should be adjudicated by the NCLT and decided the preliminary issue in favor of the plaintiffs. The case was listed for further proceedings before the Roster Bench.
|
