2021 (12) TMI 1279 - Tri - Companies Law

Seeking rectification of register of members of the Company - Seeking to declare that all the resolutions passed by the superseded Director Board enlisting R2 to R20 as new members of the Company are ultra vires of AOA of the Company - seeking to declare that the enrolment of Respondent No. 2 to 20 as members of the 1st Respondent Company violates the Articles of Association of the Company hence illegal - seeking to rectify the register of members of the Company - HELD THAT - It appears from the Articles of Association that the number of members can be increased only up to 500 if the general meeting is of the opinion that it is necessary to add more members for the activities of the Company. From the minutes of the meeting of all general meetings held from 01.01.2013 to 05.11.2018 that any of the general meetings of these periods found it necessary to enlist more members for the activities of the Company or authorized the Director Board to enlist new members. We are also agreeable to the contention of the Administrator appointed to carry out the functions of the Company, that the Director Board has no authority or power to enroll new members without the sanction of the General Meeting. The resolutions passed to enroll Respondent Nos.2 to 20 as members, it is not stated that the General Meeting had been held and authorized the Director Board to enlist new members. Even though the Respondents stated that they have inducted the new members with the approval of the Board, they have not produced any record to show that this was approved by any General Body of the Respondent Company, which is mandated under the Rules/Articles of Association of the Company. It is declared that enrolment of R2 to R20 as members of 1st Respondent Company was done in clear violation of the Articles of Association of the Company. As such they are directed to be removed from the Register of Members of the 1st Respondent Company and rectify the Register of Members accordingly and file appropriate documents before the Registrar of Companies, Kerala without delay, at any rate within a period of one month from the date of receipt of this order - The appellant has a strong case in the instant appeal - appeal allowed.

Issues Involved:
1. Legality of the resolutions passed by the superseded Director Board enlisting new members.
2. Compliance with the Articles of Association (AOA) in the enrolment of new members.
3. Authority of the Director Board to enroll new members without the sanction of the General Meeting.
4. The validity of the Appellant's membership status.
5. Loans granted to new members and their compliance with the AOA.
6. Limitation and maintainability of the appeal.

Issue-wise Detailed Analysis:

1. Legality of the Resolutions Passed by the Superseded Director Board Enlisting New Members:
The Appellant argued that the enrolment of Respondent Nos. 2 to 20 as new members was illegal and violated the Articles of Association (AOA) of the Company. The Tribunal found that the resolutions passed to enroll these new members did not indicate any authorization from a General Meeting, which is a mandatory requirement under the AOA. The Tribunal declared the enrolment of Respondent Nos. 2 to 20 as null and void.

2. Compliance with the Articles of Association (AOA) in the Enrolment of New Members:
The Tribunal examined Articles 1 to 5 of the AOA, which outline the conditions for the enrolment of new members. Article 2 specifically states that the General Meeting must find it necessary to enlist more members and authorize the Director Board to do so. The Tribunal found no evidence that any General Meeting had authorized the enrolment of Respondent Nos. 2 to 20, thus violating the AOA.

3. Authority of the Director Board to Enroll New Members Without the Sanction of the General Meeting:
The Tribunal agreed with the Appellant and the Administrator that the Director Board had no authority to enroll new members without the sanction of the General Meeting. This was supported by the absence of any General Meeting minutes authorizing such enrolment and the order of the Munsiff Court, which stated that policy decisions, including the enrolment of new members, should be taken only with the approval of the General Body.

4. The Validity of the Appellant's Membership Status:
The Tribunal noted that the Appellant had been a member of the Company since 1986 and had served in various capacities. Despite receiving a notice of removal from membership, the NCLT had previously declared this removal as null and void. Thus, the Tribunal recognized the Appellant as a valid member of the Company, qualified to file the application.

5. Loans Granted to New Members and Their Compliance with the AOA:
The Tribunal found that several Respondents had received loans from the Company without any application, security, or agreements, which violated the AOA. The AOA did not provide any provision for the Director Board to sanction loans to members, further highlighting the irregularities committed by the superseded Director Board.

6. Limitation and Maintainability of the Appeal:
During the course of arguments, the Respondents raised an issue regarding the limitation and maintainability of the appeal. However, the Tribunal noted that this issue was not part of the original pleadings or counter filed by the Respondents and therefore could not be considered at this late stage without giving the opposite party an opportunity to counter the same.

Conclusion:
After thorough examination and consideration of the arguments and records, the Tribunal concluded that the enrolment of Respondent Nos. 2 to 20 was done in clear violation of the Articles of Association of the Company. The Tribunal ordered the removal of these Respondents from the Register of Members and directed the Company to rectify the Register of Members accordingly and file the necessary documents with the Registrar of Companies, Kerala, within one month from the date of the order.

Dated this the 21st day of December 2021.

← Previous Next →