Respondent ordered to rectify membership register, hold AGMs, appoint auditors for compliance

The Tribunal directed the respondent-company to rectify the register of members by removing names of non-compliant individuals and convene AGMs for specified years within two months. The appointment of independent observers and auditors was mandated to ensure compliance with membership requirements. The Tribunal stressed adherence to legal provisions and transparency in membership procedures, emphasizing the significance of holding AGMs and following proper procedures.

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Issues Involved:
1. Non-convening of Annual General Meetings (AGMs).
2. Validity of club membership and compliance with membership procedures.
3. Rectification of the register of members.
4. Legal consequences of non-compliance with Companies Act provisions.
5. Appointment of an independent observer and auditor.
6. Directions for holding AGMs and related procedures.

Detailed Analysis:

1. Non-convening of Annual General Meetings (AGMs):
The petitioner, a member of the respondent-company since 1998, filed Company Petition No. 31 of 2017 under Section 97 of the Companies Act, 2013, alleging that the respondent-company failed to convene AGMs as required by law. The last AGM was held on September 22, 2015, and the AGM for the financial year 2015-16 was due by September 30, 2016. Despite an extension granted by the Registrar of Companies until December 31, 2016, the AGM was not convened.

2. Validity of Club Membership and Compliance with Membership Procedures:
The respondent-company discovered irregularities in its membership database and engaged M/s. Brahmayya and Co. for a special audit. The audit revealed significant non-compliance with membership procedures, including the payment of entrance fees (EF). Out of 924 purported members, only 285 complied with all procedures. The Tribunal appointed Hon'ble Justice (Retd.) Mr. K. P. Sivasubramaniam to further investigate, confirming that 635 members did not meet membership requirements.

3. Rectification of the Register of Members:
The Tribunal noted that the respondent-company could rectify its register of members if entries were made "without sufficient cause." The Tribunal directed the respondent-company to remove the names of 635 persons from the register of members, as these individuals failed to provide evidence of compliance with membership requirements, including the payment of EF.

4. Legal Consequences of Non-compliance with Companies Act Provisions:
The respondent-company argued that non-holding of AGMs was due to the ongoing audit to determine genuine members. The Tribunal acknowledged this but emphasized the need to comply with legal requirements. The Tribunal invoked Section 59 of the Companies Act, 2013, to rectify the register of members and directed the respondent-company to hold AGMs for the years 2015-16, 2016-17, 2017-18, and 2018-19 within two months.

5. Appointment of an Independent Observer and Auditor:
The Tribunal appointed Hon'ble Justice (Retd.) Mr. K. P. Sivasubramaniam to determine the genuineness of membership claims. The audit and subsequent investigation confirmed that many individuals did not meet the membership criteria. The Tribunal also appointed Hon'ble Justice (Retd.) Mr. R. S. Ramanathan as the Chairman for conducting the AGMs.

6. Directions for Holding AGMs and Related Procedures:
The Tribunal directed the respondent-company to issue notices for AGMs, including individual notices to members and publication in newspapers. The agenda for the AGMs was specified, including the adoption of accounts, appointment/reappointment of auditors, and election of committee members. The Tribunal set a quorum of 200 members and outlined procedures for voting and other AGM-related activities.

Conclusion:
The Tribunal allowed the petitions, directing the respondent-company to rectify the register of members and convene AGMs within a specified period. The Tribunal emphasized the importance of compliance with legal provisions and the need for transparency in membership procedures.

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