2024 (2) TMI 775 - HC - Companies Law

Manipulation of voters list for the tenure of office bearers of the association from 2021 to 2023 by the named appellant defendants - inclusion of members whose membership had expired but renewed illegally - Order 7 Rule 11 of the Civil Procedure Code - HELD THAT - It is not necessary to go into the issue whether the dispute between the parties was covered by Section 241 of the said Act. The reason given by the learned judge that the remedy sought by the plaintiffs could not be availed of by them because of their lack in number is in my opinion a plausible one. I also agree with the learned judge that availing of this remedy was conditional upon grant of an application by the tribunal to waive the eligibility requirement which would result in unnecessary consumption of time. It is added that if the plaintiffs approached the tribunal for dispensing with the eligibility criteria, there was no guarantee that the tribunal would allow the application. In the event the tribunal rejected the application the plaintiffs would have to approach the civil court. The plaintiffs were justified in availing of a certain remedy rather than one which did not exist but could come into existence on fulfillment of an uncertain condition. The plaintiffs decision to directly approach this court to file the civil suit was a proper step. Hence there are no reason to interfere with the impugned judgment and order dated 8th February, 2023 - impugned judgement upheld. Appointment of independent officer or court appointed officer to act as an Administrator of the Association - appointment of independent officer or court appointed officer for smooth running of the day to day work of the Association and also only to meet the expenses of the Association to the extent to pay the salary of the employees of the AssociationInjuncting the present executive committee from taking any decision related to any financial matter on behalf of the Association or to spend any money - HELD THAT - The election procedure of the association conducted in the year 2021 for election of the elected executive committee of the association from 2021- 2023 was challenged in this suit. It was said that the electoral roll was manipulated and fabricated showing membership of members whose membership had expired or wrongfully renewed. With this untrue voters list, the election was conducted by the defendants so as to elect executive committee members who were not eligible to be elected. During argument it was conceded by both learned counsel that even after extension by the Registrar of companies, the term of the executive committee had come to an end and could not be continued to run the association. The interest of the members of the association would be best subserved if an election of the executive members of the association was conducted under the aegis of the court through an administrator. The administrator would be first responsible for preparation of a true and correct voters list of eligible members and then convene and hold an Annual General Meeting of the appellant association. The appeal is disposed of by holding that the suit is maintainable before this court.

Summary

Issues Involved:
1. Jurisdiction of Civil Court vs. Tribunal
2. Validity of the Election of the Executive Committee
3. Appointment of an Administrator for the Association

Summary of Judgment:

1. Jurisdiction of Civil Court vs. Tribunal:
The appellants argued that the suit should be dismissed under Order 7 Rule 11 of the Civil Procedure Code due to lack of jurisdiction, citing Section 430 and Section 241(1)(a) of the Companies Act, 2013. They contended that the dispute fell within the exclusive jurisdiction of the tribunal. The respondents/plaintiffs argued that Section 244(1)(b) allowed them to approach the civil court as they did not meet the one-fifth membership requirement to apply to the tribunal. The court upheld the plaintiffs' right to file the suit in civil court, emphasizing that the tribunal's waiver process would consume unnecessary time and might not guarantee relief.

2. Validity of the Election of the Executive Committee:
The plaintiffs challenged the election of the executive committee for the tenure 2021-2023, alleging manipulation of the voters' list and violations of the Articles of Association and Election Conduct Rules. The court noted that the election procedure and the electoral roll were allegedly manipulated to include ineligible members, which justified the plaintiffs' claims. The court affirmed that the suit was maintainable and that the plaintiffs were competent to file it.

3. Appointment of an Administrator for the Association:
The plaintiffs sought the appointment of an administrator to manage the association's affairs, arguing that the executive committee's term had expired. The court acknowledged that the Registrar of Companies had extended the executive committee's term, but it had still expired. The court appointed Joint Administrators to oversee the preparation of a true voters' list and conduct a new election. The administrators were tasked with finalizing the voters' list, inviting candidatures, and conducting the Annual General Meeting by 20th March 2024. The new executive committee would assume office immediately after the election results were declared.

Conclusion:
The appeals were disposed of by affirming the maintainability of the suit in civil court and appointing Joint Administrators to conduct a new election for the association's executive committee. The court emphasized the need for a fair and transparent election process and provided a detailed timeline for the administrators to follow. No order as to costs was made.