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2022 (9) TMI 641 - Tri - Companies LawOppression and mismanagement - Seeking appointment of Presidential Nominee of Petitioner No. I to act as the President of FHRAI with the stipulated Term of 1 year from the date such Presidential Nominee assumes charge as President of Respondent No. 1 - seeking restraint on Respondent Nos. 2 to 15 from making any changes to the Articles of Association of Respondent No. 1 unless such changes have been made with the leave of this Hon'ble Tribunal - interpretation of Article 52 of the Constitutional document of Respondent No. 1 - HELD THAT - It is seen from the facts submitted by the Petitioners and not denied by the Respondents that many other names of candidates of HRAEI were proposed/nominated to be elected act as President, but they declined to accept the position saying that it is the Petitioner No. 11 who was nominated by the members of the EC of HRAEI. If the objective of equal representation is not given effect, it goes against the grain of AOA of Respondent 1 and its objects. It is evidently clear from the Minutes of the Executive Committee meeting, that inspite of having a nomination from die Eastern Region, few members of other regions took upon themselves the task to nominate some other member from the Eastern Region for the post of die President for the Year 2018-19. Even the Chairman highlighted that usually voting does not take place in FHRAI for the post of President . This is in complete contradiction of the established practice of election to die post of President for the Federation, as enjoined in the AoA. What is glaring in this case is that members of other regions are proposing names to the post of President without the consent of the individual and they decline. It is the rule of law that a person who is to be appointed to a post or position has to give his consent unequivocally. It cannot be thrust on him by any person. In this case, members of other region were regretfully attempting to thrust the Presidentship of Respondent Company 1 on unwilling Eastern Region's EC Members. The conduct of the outgoing President of Respondent 1 and members of EC of other regions proposing names in violation of the convention in implementing Article 52 will clearly make out a case of oppression. Conducting of EC meeting dated 30.10.2018 and Election of the President for the year 2018-2019 - HELD THAT - On perusal of the minutes of the meeting dated 30.10.2018, it is found that Election of office bearers has taken place and continued under the chairmanship of Mr. Garish Oberoi, who had ceased to be a member of EC on completion of his tenure at that time. One of the Member Mr. Ashoke Singh (Petitioner No. 9) pointed out in the meeting itself that as per the tradition, the new President in consultation with the Executive Committee appoints the office bearers but not the outgoing president. Another member of the EC also made a mention that the due process was being circumvented and suggested to take a legal opinion on the point - this event of election of office bearers of EC (Election of Mr. Dilip Datwani from western Region for the post of Honorary Secretary, Mr. DVS Somaraju from southern region as Honorary Treasurer, Mr. Pradeep Shetty from Western Region and Dr. Venkadasubbu from the southern Region for the post of Joint Honorary Secretary) was not as per the established practice of the Federation and is in violation of AOA. Election of office bearers should not have done in absence of newly appointed President. Thus, the EC meeting held on 30 Oct 2018 as null and void and contrary to the AOA. Hence, all actions in furtherance of the EC meeting dated 30 Oct 2018 are invalid except to the extent of the orders passed by this Tribunal from time to time in various interim orders for statutory compliance - EC meeting are not conducted as per AOA and no President for FHRAI functioned since 30.10.2018. It is the turn of the Eastern Region for the election of the post of the President, in the interests of justice, we hereby direct that an EC meeting will be conducted afresh. The tenure of some members in the EC has already been expired. Petition allowed.
Issues Involved:
1. Maintainability of the petition under Section 244(1)(b) of the Companies Act, 2013. 2. Interpretation and implementation of Article 52 of the Articles of Association (AOA) of FHRAI regarding the election of the President. 3. Conduct and validity of the Executive Committee (EC) meeting held on 30.10.2018. 4. Allegations of oppression, prejudice, and mismanagement by the Respondents. Detailed Analysis: 1. Maintainability of the Petition: The Respondents argued that the petition is not maintainable as the Petitioners do not meet the qualification criteria stipulated in Section 244(1)(b) of the Companies Act, 2013, which requires one-fifth of the total membership. The Petitioners, representing the interests of several hundred hotels and restaurants in East India, sought a waiver of this requirement. The Tribunal referred to the judgment in Cyrus Investments Pvt. Ltd. & Anr. vs. Tata Sons Ltd., which outlines factors for granting a waiver. The Tribunal found that the Petitioners made a fair case for waiver, considering the interest of numerous hotels and restaurants in the Eastern Region and previous litigation indicating a long-standing conflict between the Eastern Region and other regions. 2. Interpretation and Implementation of Article 52 of AOA: Article 52 of the AOA states that the President shall be elected by the Members of the Executive Committee region-wise, by rotation, for one term. The Petitioners contended that the Eastern Region had unanimously nominated Petitioner No. 11 as their Presidential candidate, and the EC cannot replace this nomination with their own choice. The Respondents argued that the President should be selected by the EC and not solely by the members of the region. The Tribunal found that the established practice was for the region whose turn it was to nominate the President. The deviation from this practice in the 2018-2019 term was unjustified and amounted to oppression. 3. Conduct and Validity of the EC Meeting on 30.10.2018: The Petitioners argued that the meeting held on 30.10.2018 was void ab initio as it was chaired by Mr. Garish Oberoi, who had retired. The Tribunal noted that the outgoing President and members of other regions arbitrarily proposed names of unwilling members from the Eastern Region, which was against the established practice and Article 52 of the AOA. The Tribunal declared the EC meeting held on 30.10.2018 as null and void and contrary to the AOA. 4. Allegations of Oppression, Prejudice, and Mismanagement: The Petitioners alleged that the Respondents' actions, including proposing random names for the President and attempting to amend the AOA, were oppressive and prejudicial. The Tribunal found that the conduct of the Respondents, including the arbitrary nomination process and the election of office bearers in the absence of a newly appointed President, amounted to oppression and mismanagement. The Tribunal directed the Ministry of Corporate Affairs to look into the affairs of FHRAI. Order: The Tribunal directed that: 1. All four regions nominate their members for the EC afresh within 7 days. 2. The AGM of FHRAI be held within 30 days, followed by an EC meeting to elect the President from the Eastern Region. 3. The newly constituted EC hold the election of the President for the term 2022-2023, as per Article 52 of the AOA. 4. Hon'ble Justice Retd. M. Sathyanarayana oversee the AGM and EC meeting, assisted by Mr. Piyush Singh and Mr. B. Karunakaran, Advocates. 5. Compensation be paid to the appointed overseers by FHRAI. The petition was allowed, and all connected applications were disposed of accordingly.
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