2018 (1) TMI 1619 - HC - Companies Law

Court dismisses Club's plea, grants injunction, finds practices in conflict with Articles, rules on limitation, and non-joinder.

Jaya Mann & Ors. Versus Delhi Gymkhana Club Limited & Ors. And Delhi Gymkhana Club Limited Versus Alok Mehndiratta & Ors.

Jaya Mann & Ors. Versus Delhi Gymkhana Club Limited & Ors. And Delhi Gymkhana Club Limited Versus Alok Mehndiratta & Ors. - TMI Issues Involved:1. Rejection of application under Order VII Rule 11 CPC.2. Grant of application under Order XXXIX Rules 1 & 2 CPC.3. Alleged violation of Articles of Association (AOA) by granting permanent membership to UCPs/Green Card Holders.4. Limitation and cause of action.5. Non-joinder of necessary parties.Detailed Analysis:1. Rejection of Application under Order VII Rule 11 CPC:The Club filed an application under Order VII Rule 11 CPC seeking rejection of the plaint on grounds that it did not disclose any cause of action, was barred by limitation, and suffered from non-joinder of necessary parties. The Court dismissed this application, stating that the plaint, when read as a whole, disclosed facts necessary to establish a cause of action. The Court emphasized that the veracity of the averments or the strength of the plaintiff's case is not to be tested at this stage. The Court held that the issue of limitation is a mixed question of fact and law, requiring evidence, and thus could not be resolved at this preliminary stage.2. Grant of Application under Order XXXIX Rules 1 & 2 CPC:The Plaintiffs sought an injunction to restrain the Club from granting permanent membership to UCPs/Green Card Holders out of turn. The Court granted this application, noting that the Articles of Association did not provide for any separate class of members or reservation for UCPs/Green Card Holders. The Court found that granting permanent membership to UCPs/Green Card Holders out of turn would cause irreparable loss to general applicants in the NG category, and thus, the balance of convenience favored the Plaintiffs.3. Alleged Violation of Articles of Association (AOA):The Plaintiffs contended that the Club was granting permanent membership to UCPs/Green Card Holders in violation of the AOA, which did not provide for such a preference. The Court noted that the Articles of Association did not create a separate class of members or accord priority to UCPs/Green Card Holders. The Court found that the practice of granting out-of-turn membership to UCPs/Green Card Holders was evolved through decisions and by-laws made in General Committee meetings, which prima facie conflicted with the AOA.4. Limitation and Cause of Action:The Plaintiffs argued that they became aware of the alleged illegal practices in 2012 and filed the suit within the limitation period. The Court held that the question of limitation was a mixed question of fact and law, requiring evidence. The Court found that the Plaintiffs had averred sufficient facts to show that the cause of action arose within the limitation period, and thus, the suit was not ex-facie barred by limitation.5. Non-Joinder of Necessary Parties:The Club argued that the suit was liable to be rejected for non-joinder of necessary parties, i.e., UCPs/Green Card Holders whose memberships were under challenge. The Court held that non-joinder of necessary parties is not a ground for rejection of a plaint under Order VII Rule 11 CPC. The Court stated that whether the UCPs/Green Card Holders were necessary parties would be examined at the appropriate stage, and the consequences of their non-impleadment would follow.Conclusion:The Appeals (FAO 90/2017 and FAO 103/2017) and the Petition under Article 227 (CM(M) 603/2017) were disposed of, upholding the impugned order dated 30.11.2016. The Court restrained the Club from granting out-of-turn permanent membership to UCPs/Green Card Holders and directed that any permanent membership granted after the institution of the suit would be subject to the outcome of the suit. The interim order was modified to direct that pending disposal of the suit, the Club shall not consider applications of general applicants in the NG category for permanent membership in excess of 25% of the total permanent membership. The Court also requested the trial court to expedite the trial and dispose of the suit within nine months.