TaxTMI 
TaxTMI 
2020 (5) TMI 101
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....s Trustee for The Church of South India (herein after called as "CSI" or "Church") to deal with movable and immovable properties and to use the income and proceeds of sale or mortgage of any of the assets of the church covering Andhra Pradesh, Karnataka, Kerala, Tamil Nadu and Telangana. 3. CSI is the largest congregation of Protestant Churches in Asia spread over 5 states aforementioned, governed by its constitution consisting of 24 dioceses. Again each diocese is governed by its own constitution. Since CSI being an unregistered body owning extensive properties and has been controlling several institutions such as schools, colleges, hospitals and orphanages, CSITA was long before floated as a non-profit company to act as Trustee to manage all movable and immovable assets of CSI. 4. As per Articles of Association of this Trust, it discloses the names of first Members of the Association and they shall remain members until replaced by members selected by the Synod of the Church and its Moderator, Deputy Moderator, General Secretary and the Treasurer shall act as ex-officio members of CSITA. 5. Before knowing about the affairs of CSITA and merits of the case, it is essential to und....
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....to the Synod and keep submitting accurate statement of accounts to Synod or to such other bodies as the Synod may direct. Synod is the supreme governing and legislative body of CSI and final authority in all matters pertaining to Church. It has power to make rules and pass resolutions and take executive actions as maybe necessary. The Company being charitable trust association to work as an Agent to all the properties of the church, Synod has power to elect the members of CSITA. The officers of Synod i.e. the Moderator, the Deputy Moderator, the General Secretary and the Treasurer shall be ex officio members of CSITA. 6. Though it is complex to understand about the election of members of CSITA, it is evident that the structure of it is dependent upon Synod electing the members of CSITA. For main purpose and object of CSITA being to work as Trust/Agent to deal with the assets of CSI, it is obvious that every time CSITA electing its members and officers follows the election of Synod officers because electorate to CSITA are members and officers of Synod. 7. As to the grievance of this Petitioner, he says CSI has 45,00,000 worshippers spread all over South India and CSITA has been in....
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....that only 10 members are managing the affairs of CSITA without giving equal representation to 23 Units for several decades while more than 13,00,000 stakeholders are entitled to become members of CSITA. 12. The petitioner says that in the month of August, 2014, more than 40 members, who are entitled to become members of CSITA, had sent applications showing their willingness to become members of the Trust but whereas no response came from CSITA. 13. For there being no response, the Petitioner says, the beneficiaries conducted a General Meeting of members by sending 40 days' notice dated 7th December, 2015 to the management stating that if no election to CSITA was conducted on the due date, the stakeholders would be constrained to hold a meeting and elect body members to CSITA. As no reply came from CSITA, a meeting was conducted on 16-1-2016 constituting of all the stakeholders including the Respondents through various means of communication. To that meeting, 200 stakeholders attended from all five Southern States of India and ultimately, these stakeholders appointed 53 general members with a provision to increase the number for giving representation to all dioceses/units i.e.....
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....nagement siphoning the funds of CSITA for their luxurious tours and Management Committee tenure of two years being over in the month Jan' 2016, whatever actions of the Management Committee after expiry of the tenure shall be declared as null and void and then new Committee got elected after giving notice to the Management shall be allowed to continue as the new Management committee to discharge the functions of CSITA by simultaneously suspending the Management Committee whose tenure was complete by Jan' 2016 or in the alternative, an Administrator be appointed in the place of ex-managing committee. 17. Looking at these averments, on filing this Company Petition, though Respondent Company has challenged the maintainability of the Company Petition, this Bench in the order dated 18-11-2016 made various observations saying as follows as to the Petitions maintainability.- "If we look to the language used in the above mentioned definition of the term "member", then the membership of R1 company is not falling within the purview of the definition of Section 2(55) of the Companies Act, 2013 in any manner. Because, in the Articles of Association of R1 company, it has been provided....
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....ected members elected 15 Directors, two Officer Bearers Viz. The Chairman and Treasures will carry out the management of the company. It has been further held that the Petition is in representative character therefore the Petitioner having represented a large number of persons common interest, the company being a Charitable Institution, this Bench felt that it is a fit case where all requirements are laid down u/s.244(1)(b) of the Companies Act, 2013 for filing a Petition under Sec.241 need to be waived off. It has been further said that to give justice u/s.244, it must be liberally interpreted by following a well established maxim, ut res magis valeat quam pereat (it is better for a thing to have effect than to be void). It has been further stated that the amendment extending the tenure of members for three years has already been declared that the members so elected by the Synod are continuing without any legal authority, by declaring that the Secretary and the Treasurer have no locus standi to file C.A.12 of 2016 questioning the maintainability is dismissed in limine on the ground that they have no locus to file that. With the said reasoning, this Bench in the order aforesaid hel....
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....n'ble High Courts and the newly elected members are not of the same members cited in this petition. When appeals were filed by another person called Dr. Jayakaran over the orders passed in Company Suits decided by learned Single Bench with regard to validity of extension of tenure and holding election to Synod, Learned Division Bench of the Hon'ble High Court of Madras on 15-12-2016 passed common judgent in between Dr. R. Jayakaran Isaac v. Church of South India Synod [2017] 1 MLJ 385, holding in Para 27 as below: "We are thus of the view that prima facie the bye-laws cannot be said to be in derogation of the Constitution and thus for the coming election process both the amended constitution and the bye-laws as framed would apply". 21. For the Special Leave Petition in Appeal CC 531 to 532 before the Hon'ble Supreme Court of India was withdrawn on 13-1-2017 and reading subsequent events in alignment with order dated 15-12-2016 passed by the Division Bench of the Hon'ble High Court of Madras, the subject matter saying that Management Committee constituted upon election shall be treated as valid and a new management having come in the place against which this CP ha....
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....39;ble Tribunal maybe pleased to order that the affairs of the 1st Respondent Company ought to be investigated by appointment of an Inspector under section 213(b) of Companies Act, 2013". 25. The Petitioner says for the Respondents having indulged in various acts of mismanagement, misappropriation of CSITA funds by meddling with the properties of it, in the manner beneficial to their personal interests by amending the Articles of the Association of the Company to suit their convenience, those acts shall be investigated by taking cognisance under section 213 of the Act. 26. The Petitioner/Applicant says that this Bench itself passed an order dated 18-11-2016 (in C.A.12 of 2016) holding that this Company Petition is maintainable therefore for there being an urgent need to interfere with the affairs of CSITA, this Bench passed an order for removal of all the Directors and the Managing Committee by appointing late Hon'ble Justice Shri. K. Sampath (Retd.) as Chairman authorizing him to nominate four suitable persons to be chosen from the sub-units/Dioceses of Churches and three office bearers. 27. As against this order, when CSITA moved Civil Revision Petition (CRP) before the Ho....
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....al cases against the company, anybody and everybody cannot be seen as entitled to initiate proceedings under section 241 of the Companies Act 2013. 30. The Applicant has further submitted that one Mr. K. Thomas Oommen (R8) claims to be the present ex-officio Chairman and another person Mr. Rathnakar Sadananda claims to be the Director, the ex-officio Hon'ble Secretary of CSITA are restrained from acting as officers of the Synod by the Civil Court of Khammam. The Applicant alleges that CSITA properties are mortgaged when it does not require funds for its day-to-day affairs, especially when they are getting funds much more than sufficient for running Church. The Applicant has further stated that the Respondent Company has not submitted its Balance Sheet to the RoC and to the Income tax Department for more than three years. The Applicant has further stated that this Bench instead of permitting the alleged elected members to discharge their functions, this Bench should have nominated another Rtd. Judge as new administrator as a sequel to the order dated 18-11-2016 earlier passed by this Bench. 31. The Applicant has further submitted that RoC Chennai by their report dated 12-1-201....
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....by the Petitioner and his men. 35. As to IA252 referred above, the Petitioner submits that he has not denied the transactions mentioned in the Application, but his only argument is, the person filed the above application has not been authorized to file the IA and all these alienations were done so as to pay Mysore Municipalities Tax and as to the Lease Deed directly executed by Mr. Thyagarajan, the Petitioner says he need not rebut the allegations against Mr Thyagarajan because he is not a Respondent in this Application. As to other Lease Deeds executed by the Power of Attorney of the Petitioner to Mr. Thyagarajan, he has stated that it was leased out so as to meet the urgent needs, out of Rs. 24,00,000 received as advance at a monthly rent of Rs. 15,000 he says, a sum of Rs. 20,65,706 was paid on behalf of CSITA towards the defaulted dues and remaining income was deposited in the Bank account of the company. 36. As to the Lease Deeds executed by Mr. Thyagarajan on 20-12-2017 and 29-11-2018, the Petitioner says he has not authorized Mr. Thyagarajan to execute those Lease Deeds, except to the extent of Power of Attorney dated 22-10-2018 for execution of Lease Deed dated 13-11-2018....
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.... the company's administration shall go into the hands of an Administrator pending disposal of this case and thereafter to allow this so-called body to take over the company is void ab initio in the eye of law. As there is a provision that Synod Officers will function until next meeting is closed, the petitioner's argument that Synod officers' continuation shall be declared void has no merit, moreover for the Honrable High Court having considered amendment as valid, it cannot be construed as tenure is over by the completion of two years. 41. Since this issue is limited to examining as to whether a non-member can file Petition u/s 241 of the Act, unless it is self-evident that petitioner is "a member" of the company, this petition shall not be extrapolated to say that since complexities are involved in this case, the prerequisite of being a member can be done away. 42. As to maintainability is concerned, if requisite qualification is not there, if at all waiver is a requirement, it could be granted under the proviso to sec.244 of the Act. 43. The doctrine in Oppression and Mismanagement is, the persons managing the affairs of the company shall not act unfairly so as to....
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....application showing an election held with some 250 members out of millions of members and take over the functioning of the Body which has been running with the acceptance of these 4.5 Million of people through direct and indirect elections. An action which is not directly permitted cannot be indirectly considered as valid with an excuse that the petitioner being one of the Church members along with the support of 250 members. 47. The origin of this remedy has come into existence about 80 years, before advent of this remedy, whenever an aggrieved shareholder filed a case stating that the action of the management is either fraudulent or oppressive against a member or members, wherever such action was considered as just and equitable, companies were wound up. To get over this difficulty of winding up of companies on this just and equitable ground, this concept was developed to ensure that the company continue with its functions by arresting or removing the wrongful action which is considered as prejudicial to the economic interest of the members. With this being the objective, how a non-member could file application u/s.241, if a non-member is aggrieved, when there are other reliefs ....
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....y argued that this Bench should not look into maintainability issue on the ground this Bench has already decided the maintainability issue. 53. As per Wharton Law Lexicon, "prima facie evidence" means which is not being inconsistent with the falsity of hypothesis, nevertheless raises such a degree of probability in its favour that it must prevail if it be credited by the jury, unless it be rebutted, or the contrary proved; conclusive evidence, or at least tends to exclude, the possibility of the truth of any other hypothesis than the one attempted to be established. 54. Before further elaborating this concept, we must also state that there are three steps/Rules to cross before passing any relief based on prima facie to the party asking, 55. Rule:l - the party shall satisfy that this Tribunal has jurisdiction to entertain the petition, under Companies Act, the jurisdiction conferred upon NCLT is section based jurisdiction, it must always be in the back of everybody's mind that NCLT has no omnibus jurisdiction to deal with the entire Act, therefore when right of initiating action under section 241 is qualified, unless that threshold is met, petition numbering itself shall not ....
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....ikely that the affairs of the company will be conducted in a manner prejudicial to its interest or its members or any class of members. 59. About Rule-3, if Rule-1 and Rule-2 compliance is present in the Company Petition then it could be said that the company petition has cause of action to proceed against the answering Respondents. After this cause of action is ascertained from the Company Petition, then a situation will arise to see as to whether prima facie evidence is there to pass an interim relief or to proceed further with regard to the Company Petition filed. 60. We must also make it clear that this Rule compliance will come step-wise; if step-1 is complied, then compliance of step-2 will arise. If Step-1 and 2 are complied with, then step 3 compliance will arise. If step-2 compliance is seemingly present, without compliance of step-1 i.e. Rule-1, that Petition shall be dismissed for the reason the complaining party is not a member of a company. When Rule-1 and Rule-2 are accomplished, then case will pass on from jurisdictional point to cause of action point. 61. If jurisdictional point as well as cause of action points are complied with, then question will arise as to w....
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....as sufficient to pass decree, but when other side later present and show the material shown by the plaintiff/petitioner could not make out a case, may be on the ground itself, the interim order shall be vacated. 64. We must also feel it is relevant to refer a case in between Mohanratn Sastri v. Swadharma Swarajya Sangha [1995] 83 Comp CAS 272 (Mad.), it has been held that the right of the Petitioners u/s.25 of the Act (1956) is only to ensure that the charitable objects of the company are carried out and certainly the personal benefits of the Petitioner do not at all come into the picture, the scope of sec.397 of the Act 1956 is rather curtailed in the case of sec.25 Company. 65. In view of the aforesaid elucidation, to some extent it could be said that the profit concept not being present, at least to the extent of academic interest of member is concerned actions with regard to the affairs of Section 8 Company; it cannot be called as prejudicial at least to the members. As to prejudice against the company, if such allegation is made, there must be a material specifying each action and the effect thereof. In this case, except general and omnibus allegations, no specific allegatio....
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.... than 45 days from the date of receipt of such requisition. 71. In this case, it is not the case of the Petitioner that either he himself or the consenters are the members of R1 company, his case is only that they are Church Members (Parish members) therefore since they have been seeing that the company properties are being alienated for the personal gain by committing fraud, they should be allowed to hold meeting. Another point is, since the election was not being held even after completion of two years, the Petitioner and his consenters gave a notice for holding a meeting. Whenever such notice is given, as per the procedure, even it is not mentioned a notice u/s.100, it is imperative to construe that notice falls within the ambit of sec. 100. in this case, these people are not even entitled to give such requisition notice. 72. To consider that notice u/s.100, the persons giving notice must be the members of the company and there shall not be less than one tenth of number in members shall be there for giving requisition notice u/s.100. Even if worse is taken into consideration that all Church members are eligible to be members of R1 company, for the Church members being 4.5 mill....
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....itioner's duty to explain independently that such and such action falls within the jurisdiction section 241 of the Companies Act, which the petitioner has not done. 75. He has stated that 49 Criminal cases are slapped against R1 Company but has not mentioned anywhere which case is prejudicial to him or his consenters whether any unfair play is there, any lack of probity is there causing prejudice to the interest of them or the company. 76. Whether the properties set to have been alienated or mortgaged or any of the persons of the management of R1 Company and that has also not been said. It is a fact that properties of CSI are spread all over India, the said properties are in fact are under the control of respective Dioceses. If any fraud or siphoning has taken place at the level of Dioceses, it cannot be straight away said that it is an unfair play against these members or against R1 Company. First it has to be ascertained how much control R1 company has over the respective assets, and whether the persons managing the R1 company are really involved in such an action, if at all involved, whether such action is a action committed with a fraudulent intention and whether such act....