9911796707
TMI Blog2024 (11) TMI 1083X X X X Extracts X X X X X X X X Extracts X X X X ..... instituting a judicial proceeding. In that eventuality, the concept of waiver under the proviso to Section 244, has to be strictly and rigidly followed, as it is a waiver by implication of law, which is carving out an exception, to the general provision to litigate, for the reason being that, if the said waiver is not granted, it would amount to that, the apparent legal disabilities to initiate the proceedings, were declined to be granted, due to non-satisfaction of the mandatory pre-conditions contained under Section 244 for initiating proceedings under Section 241 and 242. In this eventuality in the instant case, where the appellant has sought a waiver, by placing his case under Section 244 of the Companies Act, there has had to be an incidental consideration of, as to what would be the elements which would be required to be satisfied to permit the appellant to initiate proceedings under Section 241 of the Companies Act, against the respondents. In the instant case, since the waiver is a concept, added by the proviso to Sub-Clause (b) of Sub-Section (1) of Section 244, the philosophy of waiver shall not be read in exception to the principle provision, but it should be read as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the same subject matter, as it has been pleaded in his application under Section 244(1) and therefore the waiver has rightly been rejected. There are no merit in the appeal - appeal dismissed. - JUSTICE SHARAD KUMAR SHARMA MEMBER (JUDICIAL) AND JATINDRANATH SWAIN MEMBER (TECHNICAL) For the Appellants : Mr. Sandeep Dewan (Party in person) For Respondents : Mr. P.H. Arvindh Pandian, Senior Advocate For Mr. C.V. Shailendran, Advocate, For R1 Mr. R. Parthasarathy, Senior Advocate For Mr. Suhrith Parthasarathy, Advocate for R2-R14 JUDGMENT [Per: Justice Sharad Kumar Sharma, Member (Judicial)] The genesis, of the controversy at hand, that engages our consideration in the instant Company Appeal (AT) (CH) No.38/2024, Lieutenant Colonel Sandeep Dewan (Retd) Vs. Ootacamund Club 13 Ors., is the Company Petition CP No.113(CHE)/2022 that stood instituted before the Ld. Adjudicating Authority, as the consequence of the registration of an application preferred under the proviso to Section 244(1), seeking a waiver from Section 244(1)(b) of the Companies Act, 2013. 2. The appellant had instituted an application under proviso to Section 244(1) on 08.08.2022, seeking an exemption from Section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation under Section 241 of the Companies Act. Accordingly, the relief which was sought for, in his application preferred by the appellant read as: - 13. In light of the aforesaid, it is humbly prayed that this Hon'ble Tribunal may be pleased to: i. Waive the requirement of Section 244(1)(b) of the Act in exercise of its powers under the proviso to Section 244(1) thereof so as to enable the Petitioner-Applicant to maintain the present Petition under Section 241 of the Act for the reliefs claimed therein; and ii. Pass such further and other reliefs as this Hon'ble Tribunal may deem fit in the facts and circumstances of the present case . 5. At this juncture, it would be pertinent to point out that, if the contents of the said application preferred under section 244(1), is taken into consideration in its totality, there have been no specific plea taken by the appellant, to bring any act of Respondent No. 1, within an ambit of Sections 241 and 242 of the Companies Act, which could have necessitated the initiation of proceedings under Section 241/242. He answers this point by stating that, for the purposes of grant of a waiver under Section 244(1), no specific pleading, which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extracted here under. The proviso to section 244 has to be interpreted liberally so as to advance the cause of justice. For liberal interpretation of the said proviso, we get strength from a well-established maxim, ut res magis valeat quom-pereat. This Latin maxim of interpretation when translated into English means that it is better for a thing to have effect than to be void . In other words, to avoid patent injustice, anomaly or absurdity or to avoid invalidation of a law, it would be justified in giving ordinary and natural meaning to the language used in the provision to give effect to the object and purpose of the enactment as envisaged by the Legislature. This has been laid down by the apex court in Girdhari Lal and Sons v. Balbir Nath Mathur, (1986) 2 SCC 237 AIR 1986 SC 1499 . 7. The aforesaid ruling lays down as to how the proviso to section 244, has to be rationally interpreted so as to avoid closing the doors of the court for redressal of grievance, has been derived from the ratio which has been settled by the Hon ble Apex Court in its the judgment reported in AIR 1986 Supreme Court Page 1499. The subject matter of the said Judgment pertains to Rent Control matter arisin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under section 241 or 242, can simultaneously be initiated for the same cause of action, as agitated by the appellant, for the reason being that, the subject matter, directly or indirectly, under consideration in the suit is akin to the subject matter of the instant application as preferred under Section 244(1), and that as they engage consideration of almost an identical set of facts and evidence, no permission/waiver as such could have been granted to the appellant under Section 244(1) to initiate the proceedings under Section 241/242 of Companies Act. The respondents have further argued that if the relief which was prayed for by the appellant in O.S. No. 68 of 2022, is taken into consideration, where a show cause notice as against the act of suspension dated 26.04.2022, has been put to challenge, the same, with the passage of time and owing to certain further developments have been rendered infructuous. But at this stage, we are not required to go into the aspect as to what implication the subsequent developments will have on the suit itself, because that is yet to be decided by the competent Civil Court on its own merit. 10. Elaborating their argument, the Respondents have sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee of the Club in its 132nd Annual General Meeting held on 30.09.2021, was a tainted election, and was not in adherence to the provisions contained under Section 105 of Companies Act, 2013. Further, the club being a company limited by guarantee, the appointment of the proxies was in violation of the covenants of the Articles of Association of the club. Owing to the fact that, Article 53 of the Articles of Association, which allows the members of the club to appoint proxies, is required to comply with the provisions contained under Rule 19 of Management and Administration Rules 2014, which stipulates that a person can act as a proxy on behalf of members not exceeding 50 in case of Section 8 Companies. 12. He submits that the club and its office bearers have been functioning and managing the affairs of the club in a manner, prejudicial to the democratic setup of the company, that for the purposes of voting, elections and general meetings, only a mere formality has been adhered to by the respondents and there has been apparent non -compliance of the provisions of the act and the rules, which defeats the purpose of the act, and that this in itself will amount to be mismanagement and op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incipal Bench of NCLAT in Cyrus Investments Private Limited and Ors. versus Tata Sons and Limited and others, was dealing with an issue, with regards to the grant of waiver under section 244, for the purposes of continuing the proceedings of oppression and mismanagement. The factual backdrop of the said case has been, dealt with in Para 2 and 3, but the ultimate conclusion, on which the reliance has been placed by the appellant in person, is that, the a right to apply under Section 241 of the Act for an act of mismanagement and oppression, is an aspect which has been provided under section 244, which reads as under:- 244. Right to apply under section 241. (1) The following members of a company shall have the right to apply under section 241, namely: (a) in the case of a company having a share capital, not less than one hundred members of the company or not less than one- tenth of the total number of its members, whichever is less, or any member or members holding not less than one-tenth of the issued share capital of the company, subject to the condition that the applicant or applicants has or have paid all calls and other sums due on his or their shares; (b) in the case of a compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n incidental consideration of, as to what would be the elements which would be required to be satisfied to permit the appellant to initiate proceedings under Section 241 of the Companies Act, against the respondents. 18. The term waiver , normally will denote a voluntary relinquishment of a known legal right. But, the said interpretation would not be attracted in the instant case, for the reason being that, here it is a waiver of law which has to be eradicated by waiver in order to make a person eligible who is otherwise ineligible to agitate a cause. So, it is not a renouncement or an abandonment of a right, rather it is, by grant of waiver, a creation of a right to institute a proceedings. If a waiver carves an exception and confers a legal right which is otherwise barred by law, it has to be given a limited meaning, so that, the very purpose of the embargo created by the principal provisions may not be overridden. In the instant case, since the waiver is a concept, added by the proviso to Sub-Clause (b) of Sub-Section (1) of Section 244, the philosophy of waiver shall not be read in exception to the principle provision, but it should be read as to be in addition to qualifying th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n individual allegation and that is why the law has provided that for invoking Section 241, the strength of 1/5th of the members is required. And aforesaid principle was dealt by the NCLAT in the Judgment as reported in 2018 SCC Online page 632, particularly reference may be had to Para 12 which is extracted hereunder: - 12. Counsel for the original applicant/respondent no. 1 in appeal in his argument referred to the various acts of oppression and mismanagement, which original applicant made out in the application. According to the counsel the judgment in the matter of Cyber Investment came after the arguments were completed in the NCLT but still the same was brought to the notice of NCLT and it has considered the same. According to the counsel it is admitted fact that capital and original applicant/respondent no. 1 is having 6.62 per cent of the paid up equity capital. According to the counsel the present appellants made various efforts to oppress the original applicant and even made efforts at demerger of the company and when the original applicant objected to such acts, they withdrew from those acts but by a subsequent act whole business of the company by an agreement dated 27.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of the civil court is going to be final and conclusive and binding on parties. The decision of such a question has to be eschewed in instant proceedings. It would not be appropriate, in the facts and circumstances of the case, to grant a waiver to the respondent of the requirement under the proviso to Section 244 of the Act, as ordered by NCLAT. 22. The Hon ble Apex Court, as back as in 1965 in a matter reported in AIR 1965 Supreme Court Page 1535, S. P. Jain versus Kalinga Tubes Limited, had an occasion to deal with the precepts of oppression and in the said matter the Hon ble Apex Court was dealing with Section 153C in relation to The Indian Companies Act, 1913 and Section 397 in relation to the Companies Act of 1956. The Hon ble Apex Court had elaborately dealt with as to what would the term oppression would actually mean. And the same has been observed in Para 13, 14, and 17. The same are extracted here under: - 13. We shall first take up the case under Section 397 of the Act and proceed on the assumption that a case has been made out to wind-up the Company on just and equitable grounds. This is a new provision which came for the first time in the Indian Companies Act, 1913 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a manner oppressive to any member or members including any one or more of those applying. The court then has power to make such orders under Section 397 read with Section 402 as it thinks fit, if it comes to the conclusion that the affairs of the company are being conducted in a manner oppressive to any member or members and that wind up the company would unfairly prejudice such member or members, but that otherwise the facts might justify the making of a winding up order on the ground that it was just and equitable that the company should be wound up. The law however has not defined what is oppression for purposes of this section, and it is left to courts to decide on the facts of each case whether there is such oppression as calls for action under this section. 14. We may in this connection refer to four cases where the new Section 210 of the English Act came up for consideration, namely, (1) Elder v. Elder and Watson (2) George Meyer v. Scottish Cooperative Wholesale Society Ltd.2 (3) Scottish Cooperative Wholesale Society Ltd. v. Meyer which was an appeal from Meyer case and (4) Re. H.R. Harmer Limited. Among the important considerations which have to be kept in view in deter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... infinitely various that it is impossible to define them with precision . The circumstances must be such as to warrant the inference that there had been, at least, an unfair abuse of powers and an impairment of confidence in the probity with which the company's affairs are being conducted, as distinguished from mere resentment on the part of a minority at being outvoted on some issue of domestic policy . The phrase oppressive to some part of the members suggests that the conduct complained of should at the lowest involve a visible departure from the standards of fair dealing, and a violation of the conditions of fair play on which every shareholder who entrusts his money to a company is entitled to rely.... But, apart from this, the question of absence of mutual confidence per se between partners or between two sets of shareholders, however relevant to a winding up seems to have no direct relevance to the remedy granted by Section 210. It is oppression of some part of the shareholders by the manner in which the affairs of the company are being conducted that must be averred and proved. Mere loss of confidence or pure deadlock does not come within Section 210. It is not lack of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s derived from the judgment of the Hon ble Apex Court in the matters of M/s. Girdhari Lal Sons Versus Balbir Nath Mathur Others. The relaxation thus granted therein was on the principle that it is better for a thing to have an effect than to be a void. 24. Contextually, grant of such waiver will mean that, an injustice should be prohibited to be committed where a person is being deprived of his rights to litigate for enforcement of his apparent justifiable rights or from bringing up the issue of mismanagement or oppression, even if there is only one person agitating his grievances but it should not be by way of vengeance or personal vendetta, thus to overcome the embargo of Section 244(1)(b), which can be permitted to be carried under the aforesaid Latin maxim. 25. The ratio which has been extracted to be applied was emanating from proceedings of a rent-control eviction matter, under consideration before the Hon ble Apex Court in the matter of M/s. Girdhari Lal s (Supra), where the aspect of the interplay of rent eviction and subletting was subject matter of consideration. Principally the ratio extracted to be applied from the rent control law for the purposes of Section 244 may no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... individual hardship or injustice have no bearing for enacting the natural construction. The relevant discussion at pp. 132-33 and 140-42 is extracted hereunder: (a) Hardship, inconvenience, injustice, absurdity and anomaly to be avoided In selecting out of different interpretations 'the court will adopt that which is just, reasonable and sensible rather than that which is none of those things (Holmes v. Bradfield Rural District Council [(1949) 2 KB 1: (1949) 1 All ER 381 (DC)], All ER p. 384) as it may be presumed 'that the legislature should have used the word in that interpretation which least offends our sense of justice . (Simms v. Registrar of Probates [1900 AC 323 (PC)], AC p. 335.) If the grammatical construction leads to some absurdity or some repugnance or inconsistency with the rest of the instrument, it may be departed from so as to avoid that absurdity and inconsistency. (Grey v. Pearson [(1857) LR 6 HL Cas 61: (1843-60) All ER Rep 21), HLC p. 106.) Similarly, a construction giving rise to anomalies should be avoided........ xxx . 26. That since Respondent No. 1, being a social club of 900 members, proceeding under Section 241/242 couldn't have been initiate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which he has relied upon by him based upon the guiding factor laid down on the Latin maxim as dealt in M/s. Girdhari Lal and Sons (supra), where the issue in question was entirely different than the one which is involved in the case at hand. e. Owing to the fact, that after the suspension of the appellant, now he has been expelled from the membership of the club, the question here would be whether at all he has the Locus, at all to continue with the proceedings under Section 241. Since, he has sought to put a challenge to the order of expulsion, by way of an amendment in the suit, the orders on which are reserved, until and unless that is answered by the Ld. Civil Court, there would be no right as such for the appellant to initiate a proceeding under Section 244, 241 242, until and unless he continues to be the member of the, club that is the Respondent herein. f. Since, the proceedings under Section 244, 241 242, were instituted subsequently after the filing of the two civil suits which stood instituted on 18.05.2022 24.06.2022 and the filing of Section 244 application was on 08.08.2022 was done after failing to get an injunction in two suits, it creates cloud over the bonafides o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
