TaxTMI 
TaxTMI 
2019 (7) TMI 1600
X X X X Extracts X X X X
X X X X Extracts X X X X
.... DDCA pending the adjudication before the learned Ombudsman in terms of Article 62 of the Articles of Association (AOA) of the DDCA, apropos his alleged indiscipline and misconduct. 2. The reference to the learned Ombudsman was made apropos certain allegations of misdemeanour by respondent no.1. In his decision dated 05.12.2018, the learned Ombudsman (a distinguished former Judge of this Court as well as former Chief Justice of Jammu & Kashmir High Court) held the said respondent guilty of indiscipline and misconduct which was detrimental to the interest of DDCA. He has observed as under: "17. On going through the said circular, it is clear that Mr.Tihara has stated that the appointment of CEO, CFO, COO and GM was done without following transparent recruitment norms. According to him, the apprehensions were that:- (i) No information was shared with the Secretary, DDCA Office or the fellow Directors regarding the list of total applicants for the posts invited. (ii) No panel disclosed or appointed to shortlist the applicants. (iii) No interview Board appointment or disclosed. (iv) No venue for interview disclosed. (v) Eligibility criteria compromised.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Executive Committee (which has also been referred to as the "Board of Directors"). Neither Article 47 nor Article 48, which also deals with certain specific powers of the Executive Committee (Board of Directors) confers any specific power on the Secretary, DDCA. All powers of the Secretary are therefore in terms of the Resolutions of the Executive Committee / Board of Directors. No powers to issue the directions of the nature contained in the Circular dated 12.08.2018 have been conferred by the Executive Committee /Board of Directors on the Secretary, DDCA. 20. On the other hand, it will be seen that Resolution No.3 of the Board Meeting held on 02.07.2018 specifically authorize /empower the President, DDCA, to form various Committees / sub-Committees for the proper functioning of the Association and also directed that he shall be ex-officio member of all the Committees so formed. According to the Complainant, the appointments reflected in the Resolution of 29.07.2018 were made pursuant to Committees constituted for the purpose by the President, DDCA and as such the appointment process cannot be faulted. However, as already pointed out above, I am not going into the issue o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....one member of the Board cannot take law in his own hands and trying to bring the functioning of the company to a standstill. This would be completely against the principle of corporate democracy under which all companies function, where decisions are taken by majority, which cannot be annulled by a lone member or a minority of members. The only recourse would be by the Board itself altering its decision or the same being set aside or annulled by a court of law / Company Law Tribunal. 24. Fourthly specific direction given by Mr.Tihara scrapping the Cricket Committees / Selection Committees was designed to cause disruption in the cricketing affairs of the DDCA. This would clearly be detrimental to the game of cricket. The fact that the circular sought the annulment of all the appointments of CEO etc., amounted to disruption of the Administration of the DDCA. The direction given to the employees of the DDCA would tend to create indiscipline amongst the employees and result in a state of anarchy. 25. In view of the foregoing, even though there is no specific regulation defining "misconduct", it is clear that the conduct of a person may yet amount to misconduct in the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erest of Association, such member shall be liable to be expelled, subject to the provisions of Article 42, on the vote of two third of the members present at special meeting of the Apex Council summoned for the purpose, provided that at least one week before meeting, such member(s) shall have had notice thereof, and of the intended resolution for his expulsion and that he shall at such meeting and before the passing of such resolution have had an opportunity of giving orally or in writing any explanation he may think fit." 6. The appellant contends that in view of the learned Ombudsman‟s conclusion, that respondent no.1 was guilty of indiscipline and misconduct, which was detrimental to the interests of the DDCA, requisite measures have been initiated in terms of the Article 5(c) by the Apex Council, which is empowered to remove any Member from the appellant Association. Therefore, the restraint ordered by the impugned order is erroneous and needs to be set aside. 7. The appellant submits that (i) since it is an incorporated company, its Secretary, i.e. respondent no. 1 could be treated as a Director of the company, his removal from that post would, to a large extent, b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....moval of a director of a company by ordinary resolution at a meeting of the shareholders of the company. But the selection is not exhaustive. A director may cease to hold office by retirement, dismissal, removal, or by vacating his office voluntarily. He may be removed, by the Board of Directors or share holders at a meeting of the company. Section 284 merely provides for removal of a director by share holders and prescribed procedure for the same, it does not prohibit removal of a director otherwise than in accordance with Section 284. Sub-section 7(b) of Section 284 lays down that nothing in the section shall be taken as derogating from any power to remove a director which may exist apart from this section. The section itself thereforee contemplates removal of a director in addition to the provisions contained in the Section. Thus where the Articles of Association confer powers on the Board of Directors to remove the Managing Director or other directors, such power is not affected by the provisions of Section 284. Article 84 of the Memorandum and Articles of Association of National Textile Corporation (Uttar Pradesh) Limited provides for constitution of Directors. Article 85 m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aintiff is a rotational director. Article 112(h) provides that both UPSIDC and co-promoters shall have the right to remove or withdraw their nominees from the Board of Directors and further have a right to provide substitutes thereof. It is in furtherance of this power that the co-promoters have exercised their rights in the present case and sought to withdraw the plaintiff as a director nominated by them. I am thus of the considered view that the co promotors were well within their rights to have issued the letter dated 11.06.1993 whereby they sought to withdraw the nomination of the plaintiff as director of the co promoters. Such nomination is not in the realm of nomination by the Central Government under Section 408 of the said Act but the exception to Section 284 of the said Act would also arise where articles provide to the contrary. The present case is one where there is such provision in the Articles. I am thus of the considered view that the discussion resulting in the decision taken on 29.06.1993 whereby the plaintiff was removed from Board of Directors cannot be faulted. The issue is answered against the plaintiff." 8. The appellant contends, that likewise, all that is....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... mentioned in the circular indicate and it does not deal with a case of suspension for a short period. (d) The Circular cannot at any rate be applicable to Clubs, Associations, etc., incorporated under Section 25 of the Companies Act. He further contends that the suspension of a member of a social club on the ground that he has acted in a manner injurious to the prestige, interest and character of the Club, is not opposed to public policy and is also not opposed to law." 20. The above submissions of Mr. A.S. Chandrasekaran merit acceptance. The provisions of the Memorandum and Articles of Association of the 3rd respondent Club are perfectly legal and they are not void ab initio, as contended by the learned counsel for the appellants. In any event, the validity of the proceedings of the impugned meeting is not in issue in the writ petitions. It is a matter of record that the 3rd respondent sent a letter dated 3-1-1989 calling upon the appellants to show cause as to why appropriate actions should not be taken against them for their prejudicial conduct. Since the appellants did not give any explanation, the 3rd respondent, after due consideration of the facts and c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....associations, etc., incorporated under Section 25 of the Act. It is settled by cateina of decisions of this Court and also of the Supreme Court, that the petition for issue of a writ of mandamus will not lie to enforce administrative instructions. The Circular in question, which contains clarifications issued by the 1st respondent, which are administrative in character, cannot confer any enforceable fights on third parties like the appellants. As already mentioned, the Circular in question is not a statutory order passed in exercise of any statutory power and therefore, it has no legal effect or sanction." 11. Mr. Sandeep Sethi, the learned Senior Advocate for the appellant refers to this Court‟s order dated 20.09.2018 passed in FAO No. 413/2018 wherein the earlier orders of the learned Trial Court dated 28th & 30th August, 2018 had been modified to the extent that the operation of suspension of respondent no.1 purportedly dated 14.08.2018 issued by the Apex Council of DDCA had been stayed till a decision on the interim applications under Order 39 Rule 1 & 2 CPC was made on merits and the DDCA was further restrained from obstructing respondent no.1 in discharging his dutie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....imental to the DDCA but also to the game of cricket. The appellant refers to various orders passed by this Court as well as by the Supreme Court, directing that the constitution of DDCA be brought in consonance with the structure of the BCCI, as proposed by the Justice Lodha Committee Report and approved by the Supreme Court. The amendments to the constitution of DDCA would be duly carried out both in terms of the orders of the Supreme Court as well as those suggested by the Committee of Administrators of the BCCI. 13. In the context of the above, the appellant contends that the administrative structure of DDCA as of today is legitimate. It comprises elected members and persons appointed by the three nominees of the Government of India (as mentioned in the appeal paper book at page 792). 14. Lastly, the appellant reiterates that insofar as Article 5(c) of the Constitution of the DDCA remains unaltered, the Apex Council has absolute powers to remove any member of the DDCA, whom it finds working against the interests of the DDCA as well as the interests of the game of cricket. The appellant contends that the only issue at hand is: whether the suspension against R-1 should conti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nder Act. However, under the 2013 Companies Act, alternate schemes are drastically curbed and circumscribed; the removal of a Director has only to be in terms of what is specified under the Act. It is argued that section 169(c) mentions that the Director can be removed only by the Company and not by the Board of Directors, which in turn is appointed by the company i.e. its shareholders. 19. He further contends that section 6(a) of the 2013 Act is of wide ambit. It, in effect, renders redundant all alternate schemes for removal of directors of a company whether by way of memorandum, or articles of a company or resolutions, which are not in consonance with the statutory scheme, irrespective of whether the said scheme was registered, executed or passed either prior to or after coming into effect the Act of 2013. It is contended that insofar as Article 5(c) of the DDCA is repugnant to the scheme of the Act, it becomes void under Section 6(a) of the 2013 Act. It is argued that therefore, the impugned order does not suffer from any deficiency or error and this petition, being without merit, should be dismissed. 20. It is the respondent‟s case that the correct body for taking ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion of the Act. That being the clear language of the statute, the only method in which a director could be removed is the one prescribed under section 169 of the 2013 Act, which stipulates that a director may be removed by ordinary resolution by a company. Section 6 (a) confers a paramount status to the provisions of the Act, overriding all other memorandum or articles, agreements or resolutions passed by the company. Section 169 (8) (b) ensures that the power to remove a director under other provisions of the Act are not affected by what is stipulated under the said section itself. 6. Act to override memorandum, articles, etc.-- Save as otherwise expressly provided in this Act-- (a) the provisions of this Act shall have effect notwithstanding anything to the contrary contained in the memorandum or articles of a company, or in any agreement executed by it, or in any resolution passed by the company1 in general meeting or by its Board of Directors, whether the same be registered, executed or 1 company means a company incorporated under this Act or under any previous company law; passed, as the case may be, before or after the commencement of this Act; and ....