TaxTMI 
TaxTMI 
2021 (1) TMI 869
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....hip of the Club is classified in five categories, i.e., Permanent, Garrison, Temporary, Casual and Special Category. The waiting list of permanent members has been subclassified into two categories, Government and Non-Government which is in the ratio of 50:50. The total approved Permanent membership is 5600. Besides the membership, the facilities of the Club can be enjoyed by the spouse and dependent members wherein children of the member below the age of 21 years are considered as dependent members. Children of the member up to the age of 13 years can utilize the facilities of the Club when accompanied by the parents and between 13 to 21 years, can utilize the facilities independently. Children of the member attaining the age of 21 years may continue to use the facilities of the defendant Club after applying for permanent membership in which case they are issued a Green Card despite the fact that no concept of Green Card is provided in the Articles of Association of the defendant nor does the same appear from the White Paper issued in October, 2014. Defendant No.1 extends the facility of issuing Green Card only to those children who enjoy the facilities of Club while being minors,....
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....ust be strictly interpreted. Analysing the reliefs sought in the present suit, it cannot be held that the suit is barred and the reliefs sought can be availed only by filing a petition under the Companies Act. 6. Relying upon the decision of the Division Bench of Calcutta High Court in 2019 Law Suit (Cal.) 1314, Vikram Jairath & Ors. vs. Middleton Hotels Pvt. Ltd.; it has been contended that before determining as to the remedy available, the real cause of action in the plaint has to be ascertained. Referring to the decision in 2015 SCC OnLine Cal. 7078 Royal Calcutta Golf Club vs. Lalit Kumar Jhalaria; it is contended that individual members of a company can sue in a civil court to protect their individual rights. Further, decisions taken by majority members/shareholders though are not ordinarily amenable to be challenged in court however since the actions of the defendant are fundamentally against the Memorandum and Articles of Association, a civil suit would lie. 7. It is stated that a member of a company has two kinds of right i.e. the individual membership rights and the corporate membership rights. The plaintiffs in the present suit have asserted their individual members....
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.... Act, not only is there a provision of the winding up of the company but other issues also can be considered and decided by the NCLT. 10. It is contended that the decision of the Division Bench of this court in Jai Kumar Arya (supra) is on peculiar facts for the reason three suits were filed out of which in one suit, the proceedings went up to the Hon'ble Supreme Court wherein the court held that clause (m) cannot be used to do what is prohibited under the earlier clauses. Thus, clause (m) which is a residuary clause cannot be used to perform the activity which is otherwise prohibited. In Vijay Chhibber & Ors. Vs. Delhi Gymkhana Club Ltd., as the suit was based against a show cause notice issued to the member after he had filed complaints against the defendant No.1 company, hence on the facts the court held that the remedy does not lie before the NCLT but in a civil suit. Plaintiffs are members of the defendant No.1 Club and the dispute in a company need not necessarily be of shareholders. Other disputes by the members can also be decided by the NCLT. Though the suit prays for a declaration contrary to the Articles of Association of the defendant No.1 company, there is no averme....
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....een or are being conducted in a manner prejudicial to public interest or in a manner prejudicial or oppressive to him or any other member or members or in a manner prejudicial to the interests of the company; or (b) the material change, not being a change brought about by, or in the interests of, any creditors, including debenture holders or any class of shareholders of the company, has taken place in the management or control of the company, whether by an alteration in the Board of Directors, or manager, or in the ownership of the company's shares, or if it has no share capital, in its membership, or in any other manner whatsoever, and that by reason of such change, it is likely that the affairs of the company will be conducted in a manner prejudicial to its interests or its members or any class of members, may apply to the Tribunal, provided such member has a right to apply under section 244, for an order under this Chapter. (2) The Central Government, if it is of the opinion that the affairs of the company are being conducted in a manner prejudicial to public interest, it may itself apply to the Tribunal for an order under this Chapter." xxxxxxxxxxxx ....
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.... manager or director during the period of his appointment as such and the manner of utilisation of the recovery including transfer to Investor Education and Protection Fund or repayment to identifiable victims; (j) the manner in which the managing director or manager of the company may be appointed subsequent to an order removing the existing managing director or manager of the company made under clause (h); (k) appointment of such number of persons as directors, who may be required by the Tribunal to report to the Tribunal on such matters as the Tribunal may direct; (l) imposition of costs as may be deemed fit by the Tribunal; (m) any other matter for which, in the opinion of the Tribunal, it is just and equitable that provision should be made. (3) A certified copy of the order of the Tribunal under sub-section (1) shall be filed by the company with the Registrar within thirty days of the order of the Tribunal. (4) The Tribunal may, on the application of any party to the proceeding, make any interim order which it thinks fit for regulating the conduct of the company's affairs upon such terms and conditions as appear to it to be....
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....he plaintiffs have filed the present suit as a representative suit raising certain issues in the interest of the members of defendant No.1 company. The suit does not allege any oppression, misbehavior, falsification of accounts of defendant No.1 nor seeks winding up of defendant No.1 nor rectification of record. In the suit plaintiffs seek equal treatment for all members after membership is granted and permanent injunction against those who are not members but enjoying facilities which are meant only for permanent members. 16. Grievance of the plaintiffs is the manner in which Article 13 (3) (b) of the Articles of Association of the defendant No.1 is to be interpreted resulting in a situation where children of members who use the Club below the age of 21 years not only become dependent members but are given Green Cards as well, and on the basis of the said Green Cards not only they but their spouses and dependents are also permitted to enjoy the facilities of defendant No.1 Club barring category of permanent members whose children did not enjoy the facilities of the Club before the age of 21 years as dependent members. According to the plaintiffs, this interpretation creates an ....
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....ssly empowered the NCLT to exercise a particular jurisdiction. He contends that it is only such jurisdiction, which stands specifically conferred on the NCLT, by some provision of the Act, which has been excluded from the jurisdiction of the Civil Court. He has drawn our attention to various provisions of the Act, which contain such express statutory empowerment. 98. Mr. Chandhiok, who does not seriously join issue, on principle, with Mr. Sapra's submission, would seek, instead, to point out that such statutory empowerment of the NCLT is, indeed, to be found in the proviso to Section 169(4) of the Act. Section 169(4), may for ready reference, be reproduced as under: "(4) Where notice has been given of a resolution to remove a director under this section and the director concerned makes with respect thereto representation in writing to the company and requests its notification to members of the company, the company shall, if the time permits it to do so, - (a) in any notice of the resolution given to the members of the company, state the fact of the representation having been made; and (b) send a copy of the representation to every member of t....
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.... considered opinion, no. 116. Section 242(1) is clearly inapplicable, as it applies only in a case where the Tribunal is of the opinion that "the winding of the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding up order on the ground that it was just and equitable that the company should be wound up". Even if the notice, dated 8th August 2017, or the Board meeting of 26th August 2017 proposed therein, were illegal, it cannot be said that any case for winding up of the Company, even prima facie, was made out. 117. Adverting, now, to Section 242, clauses (a) to (g) and (i) to (l) thereof are obviously inapplicable. Clause (h) would, in fact, indicate that the reliefs prayed for in CS (OS) 285/2017 were outside the jurisdiction of the Tribunal, as the said clause empowers the NCLT to pass an order providing for removal of the managing director, manager or any of the directors of the Company. If one were to apply the expression unius est exclusion alterius principle, by inference, it would not be open to the NCLT to adjudicate on the validity of a notice calling for a meeting, of the Board, to d....
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....he facts are such that normally the company could be sought to be wound up under the "just and equitable" clause but such winding up would unfairly prejudice the members. Therefore, I am of the view that section 397 is not an effective forum to grant any relief of an individual member under all circumstances. Similar is the situation under section 398 also. Being a constituent of the company a shareholder has several individual rights and those rights could be enforced by invoking the civil jurisdiction of the courts. Further, the Act nowhere specifically excludes the jurisdiction of the civil courts." (Emphasis supplied) 122. Panipat Woollen and General Mills Co. v. R.L. Kaushik, 1969 (39) Comp Cas 249 (P&H) is another case in point. The memorandum and articles of Association of the petitioner Company before the High Court, in that case, provided for retirement of one third of the directors of the company every year. The directors so slated to retire would be those who had held office for the longest period since the last election. The controversy, before the High Court, pertained to the annual general meeting of the company, scheduled to be held on 30th December 1967. Th....
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....pat Woollen and General Mills Co. (supra), it was held that the petition was competent. Similarly, a suit for declaration that the Annual General Meeting of the Company was illegal, was held to be competent, by the Kerala High Court, in R. Prakasam v. Sree Narayana Dharma Paripalana Yogam, (1980) 50 Comp Cas 611 CS (OS) 51/2018 & Ors. Page 18 of 45 (Ker), which went to the extent of holding that the Company Court could not grant relief in such matters. 125. The inevitable outcome of the above discussion is that the invocation, by Mr. Chandhiok, of Section 430 the Act, to nonsuit the plaintiffs, is misplaced. Per sequitur, CS (OS) 285/2017 has to be held to be competent." 19. The Calcutta High Court in Royal Calcutta Golf Club (supra) held:- "23. The reference in this regard can be made to a Division Bench judgment of this Court in case of Asansol Electric Supply Co. (supra) wherein it is held: "12. The law on the point has been clearly laid down in a recent decision of the court of appeal in (4) Edwards v. Halliwell, 1950 2 All. Er 1064. In that case, it has been held by Jenkins, L.J. that the cases falling within the general ambit of the rule in....
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....y shareholders against the company for individual wrong done to them. Apart from individual wrong there may be suits to restrain acts ultra vires. There is no question of ultra vires in this case and I propose to confine the discussion to suits other than those based upon complaints of acts ultra vires, although I am not suggesting that there is any fundamental difference in principle. Suit to restrain acts ultra vires and suits to restrain certain acts about to be discussed notwithstanding that the acts have the support of the majority of shareholders, are both exceptions to the rule that the Court will not interfere in the affairs of the company or with the decision of the majority. The Court interferes in cases of an ultra vires act, because it is not an act within the constitution. In the other class of cases the Court interferes upon a different basis." 25. The suit at the instance of an individual shareholder, alleging the infringement of a right for an action and the majority shareholders being opposed to the memorandum and article of association, cannot be said to be an imperfect suit liable to fail on the parameters of Order 7 Rule 11 of the Code. Mere reference of more....
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....has to apply the principles of natural justice. Under Section 242(2)(d) of the 2013 Act, the Tribunal can impose restrictions on the transfer or allotment of the shares of the company. It can also pass an interim order under Section 242(4) of the 2013 Act. Consequences for non-compliance have also been provided under Section 242(4) of the 2013 Act. The Plaintiffs have a right to apply Section 242 of the 2013 Act as they own 99.96% shareholding which has been diluted to 21.44%. Any member with more than 1/10 of the issued share capital can approach the Tribunal. Thus, even as per Jai Kumar Arya (supra), the order being one, which can be passed under Section 242 of the 2013 Act, the NCLT has the jurisdiction. In Jai Kumar Arya (supra), the Court was concerned with the power of removal of directors, which is distinct from the disputes involved in the present case. However, by applying the tests laid down therein, it is clear in the facts of this case that involving issues relating to allotment of share capital, alteration and rectification of the register of members, the NCLT is 'empowered to decide' -leading to the conclusion that this Court has no jurisdiction." 21. This Court in....
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....on to such unilateral opinion so formed. The formality of show cause notice, and it's related aspects, therefore, required to be tested and can be tested in court of law when it takes away and/or affects the civil rights." 22. In Dinesh Gupta vs. Rajesh Gupta (supra) this Court held as under:- 14. The first submission that was vehemently urged before this court was that this court does not have jurisdiction to adjudicate the present suit. Reliance was placed upon section 430 of the Companies Act, 2013. The plea was that, as the notices have been sent for mismanagement and oppression under section 100(2) of the Companies Act, 2013 this court does not have jurisdiction to adjudicate the present suit. 15. Reference may be had to Section 430 of the Companies Act, 2013. The said section 430 of the Companies Act, 2013 reads as follows: "Section 430: Civil Court not to have jurisdiction No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine by or under this Act or any other law for the time being in force and no injunction shall be granted b....
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....the Directors or the Company Secretary at the relevant time, be and are hereby directed and authorised singly and severally to file the requisite Form DlR12 with the office of the Registrar of Companies in respect of the aforesaid appointment and to do all such other acts, deeds and things as may be considered necessary or incidental thereto." 2. "RESOLVED THAT in pursuance to Section 152(2) of the Companies Act, 2013, Mr. Shashank Gupta be and is hereby appointed as director of the Company. "RESOLVED FURTHER THAT Ms. Uma Sharma, the present Company Secretary or any of the Directors or the Company Secretary at the relevant time, be and are hereby directed and authorised singly and severally to file the requisite Form DlR12 with the office of the Registrar of Companies in respect of the aforesaid appointment and to do all such other acts, deeds and things as may be considered necessary or incidental thereto." 3. "RESOLVED THAT in pursuance of Section 169 of the Companies Act, 2013, Mr.Dinesh Gupta be and is hereby removed as the Director of the Company with immediate effect. "RESOLVED FURTHER THAT Ms. Uma Sharma, the present Company Secretary or any of the....