1977 (1) TMI 102 - HC - Companies Law

Summary

Issues Involved:
1. Continuation of the company's membership in the Association.
2. Effect of the winding-up order on the company's membership.
3. Eligibility for export quota based on past performance and membership status.
4. Interpretation of the relevant rules and guidelines issued by the Government.

Detailed Analysis:

1. Continuation of the Company's Membership in the Association:
The learned single judge held that the company's membership continued based on the true interpretation of rules 8(c) and 8(e) and the conduct of the Association. Rule 8(e) provides that a member ceases to be a member if they fail to pay the subscription within one month of it becoming due, unless the managing committee decides otherwise. The Association had sent reminders to the company to pay the dues and did not treat the non-payment as an automatic cessation of membership. The liquidator paid the dues with a bank draft, and the Association did not take any action to terminate the membership. Thus, the judge concluded that the company's membership continued, entitling it to the quota based on past performance.

2. Effect of the Winding-Up Order on the Company's Membership:
The judge found that the winding-up order did not automatically terminate the company's membership. The winding-up order was under appeal, and a reconstruction scheme under section 391 was pending. The company law aims to keep a company as a going concern, and the membership carried valuable quota rights. The managing committee of the Association did not take any action to terminate the membership due to the winding-up order. Therefore, the company's membership remained unaffected, and it retained its quota rights.

3. Eligibility for Export Quota Based on Past Performance and Membership Status:
The Government notifications and guidelines specified that the export quota was to be distributed among the members of the Association based on past performance. The Association was the canalising agency responsible for monitoring and distributing the quota. The judge found that the Association could not change the eligibility conditions set by the Government, which included membership in the Association. The Association's rules and the Government's guidelines required that only members could receive the quota. The Association's conduct and the rules indicated that the membership conditions were not intended to be penal but directory, allowing for flexibility in maintaining membership.

4. Interpretation of the Relevant Rules and Guidelines Issued by the Government:
The relevant rules and Government notifications were interpreted to ensure that the Association distributed the quota to its members based on past performance. The guidelines issued by the Chief Controller and Joint Controller, as per the Cabinet decision, mandated that the quota be distributed to members of the Association. The judge emphasized that the Association was selected as the canalising agency because of the Government's confidence in it to achieve the foreign exchange target. The Association's rules allowed for the enrolment of members even at the last minute to ensure they did not lose their quota rights due to non-payment of dues. The court held that the Association could not distribute the quota to non-members, as it would contradict the Government's guidelines and the established canalisation scheme.

Conclusion:
The appeal was dismissed, with the court upholding the learned single judge's order that the company's membership continued, entitling it to the export quota based on past performance. The Association agreed to release the quota as per the conditions mentioned by the learned single judge, and the time limit for compliance was extended. The court emphasized the importance of adhering to the Government's guidelines and the Association's rules in distributing the export quota.