2016 (11) TMI 1452 - Tri - Companies Law

Company Petition Under Companies Act 2013: Waiver of Requirements, Appointment of Chairman & Independent Directors

Church of South India Trust Association Versus John S. Dorai Vimal Sukumar

The Tribunal found the company petition maintainable under Section 241 of the Companies Act, 2013, waiving the requirements of Section 244(1)(b). It ... Requirements laid down under section 244 to file the company petition under Companies Act 2013 - petitioner as religious and charitable institution - Held that:- The petition, in essence, is a representative petition which falls within the purview of order 1, rule 8 of the Code of Civil Procedure, 1908. The petitioner represents a large number of persons who have a common interest in R1-company which is a religious and charitable institution and admittedly, a public trust. Once, it is established that R1-company is a charitable institution which caters the needs of the beneficiaries/stakeholders, the properties of such religious and charitable trust must be protected jealously. In view of the factual and legal position stated above, it is of the view that it is a fit case where all the requirements laid down under section 244(1)(b) of the Act, 2013 for filing company petition under section 241 of the Act, 2013 need to be waived off. The proviso to section 244 must be interpreted liberally so as to advance the cause of justice. Under the attending circumstances, the company petition cannot be dismissed at the threshold because it requires a detailed enquiry into the matter complained of and, thus, in exercise of the powers conferred under proviso to section 244 of the Act, 2013, I waive all the requirements of section 244(1)(b) of the Act, 2013 by treating the company petition under order 1, rule 8 of the Code of Civil Procedure, as a representative petition read with section 241 of the Act, 2013 for the purpose of proceeding to enquire into the matter complained of. Thus, the company petition is held maintainable. Any of the observations made above shall have no bearing on the merits of the case. Since the company petition is held maintainable and in the given circumstances there is an urgent need to regulate the affairs of R1-company. Thus, proceed to remove all the directors and managing committee including office bearers by appointing hon'ble Justice Shri K. Samanth (Retd.) as the chairman who is authorised to nominate four suitable persons to be chosen from the sub-units/Dioceses of Churches and three office bearers. The chairman will recommend the names of the persons to this Tribunal for appointment as director and as office bearers, respectively. The remunerations of directors and office bearers shall be fixed by the chairman Issues Involved:1. Maintainability of the company petition under Section 241 of the Companies Act, 2013.2. Authority of the honorary secretary and honorary treasurer to file the interlocutory application (IA).3. Compliance with Section 244 of the Companies Act, 2013 regarding the filing of the company petition.Issue-wise Detailed Analysis:1. Maintainability of the Company Petition:The company petition was filed under Section 241 of the Companies Act, 2013, alleging various irregularities and misconduct by the management committee of a public religious and charitable trust ('the company'). The petition highlighted several issues, including criminal cases against the respondents, unauthorized borrowing and selling of the company's properties, misuse of office, and irregularities in financial audits. The petitioner sought interim reliefs to suspend the current management committee and appoint a new committee to manage the company's affairs.The main contention was whether the petitioner fulfilled the requirements under Section 244 to file the petition. The Tribunal noted that the company, being a religious and charitable trust without share capital, falls under clause (b) of Section 244(1), which requires 1/5th of the total members to apply for relief under Section 241. The petitioner argued for a waiver of these requirements, which the Tribunal can grant under the proviso to Section 244(1). The Tribunal emphasized that the petition involves complex questions of fact and law, necessitating a detailed inquiry. Consequently, the Tribunal held that the petition is maintainable and waived the requirements of Section 244(1)(b), treating the petition as a representative petition under Order 1, Rule 8 of the Code of Civil Procedure, 1908.2. Authority of the Honorary Secretary and Honorary Treasurer:The respondents objected to the IA filed by the honorary secretary and honorary treasurer, arguing that they lacked authority to represent the company. The Tribunal found that the affidavit supporting the IA did not provide documentary evidence of authorization from the company. The honorary secretary and treasurer mentioned a circular resolution dated 15th September 2016, but failed to prove their authority to file the IA. The Tribunal concluded that the honorary secretary and treasurer had no locus standi to file the IA, leading to its dismissal.3. Compliance with Section 244 of the Companies Act, 2013:The Tribunal examined whether the petitioner met the requirements of Section 244 for filing the company petition. The petitioner sought leave to waive these requirements, which the Tribunal can grant under the proviso to Section 244(1). The Tribunal noted that the term 'member' under Section 2(55) of the Act does not apply to the company's members as per its articles of association. The membership is elected by the Synod of the church, with a tenure that has been allegedly extended illegally. Given the complex factual and legal issues, the Tribunal decided that the petition should not be dismissed at the threshold. Instead, the Tribunal waived the requirements of Section 244(1)(b) to advance the cause of justice, allowing the petition to proceed.Conclusion:The Tribunal held the company petition maintainable and waived the requirements of Section 244(1)(b) of the Companies Act, 2013. It appointed a retired judge as the chairman to oversee the company's affairs and nominated independent directors and office bearers. The current management committee was directed to hand over all documents and records to the Tribunal. The case was posted for further proceedings on 7th December 2016.