TaxTMI 
TaxTMI 
2022 (9) TMI 641
X X X X Extracts X X X X
X X X X Extracts X X X X
.... appointment of President and are manifestly illegal being contrary to the Articles of Association of the said company. Petitioner has prayed for the following reliefs: A. Appoint the Presidential Nominee of Petitioner No. I to act as the President of FHRAI with the stipulated Term of 1 year from the date such Presidential Nominee assumes charge as President of Respondent No. 1; B. Restrain Respondent Nos. 2 to 15 from making any changes to the Articles of Association of Respondent No. 1 unless such changes have been made with the leave of this Hon'ble Tribunal; C. Pass such further orders that this Hon'ble Tribunal may, in the interest of justice, deem necessary for bringing an end to the acts of oppression, prejudice and mismanagement in the running of Respondent No. 1. 2. Petitioner No. 1 is a company limited by guarantee and incorporated under Companies Act, 1956. Petitioner No. 1 was originally incorporated as the Hotel and Restaurant Association of Calcutta Region on 18 July 1961 and subsequently renamed as the Hotel and Restaurant Association of Eastern India ("HRAEI" or "Eastern Region") on 6 Jan 1984, pursuant to which a fresh certific....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... FHRAI and out of such members, nominated Petitioner No. 11- Mr. Sudesh Kumar Poddar, as its Presidential Nominee for the forthcoming year. This nomination was pursuant to the meeting of HRAEI's managing committee held on 06.09.2018. It is further submitted by the Petitioners that it was legitimately expected that such nomination would be confirmed at the ensuing first meeting of the EC, which was to take place immediately after the AGM on the same date. The nomination of Petitioner No. 11 as the President of FHRAI had also been conveyed by the Petitioner No. 1 to FHRAI vide email dated 19 Sept 2018. * Petitioners further submit that the meeting of FHRAI held on 30.10.2018 at 2.00 P.M. is void ab initio and so are the decisions taken therein. It is further submitted that erstwhile President Mr. Garish Oberoi (Respondent 2) retired and the said 2.00 P.M. meeting held on 30.10.2018 was also chaired by Mr. Garish Oberoi impersonating himself as the President notwithstanding the fact that he had retired as the member of the EC in the earlier held AGM and had ceased to be the member of EC itself. It is further submitted by the Petitioners that instead of proposing the name ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ointment of Federation President. According to the same, each Regional Association is vested with the right to elect the Federation President from its own members on a rotational basis in the following order: Eastern region Western region Southern region Northern region * Petitioners further submit that for the year 2018-2019, it was admittedly the turn of HRAEI (petitioner No. 1) to elect the President and the Eastern Region had unanimously voted/nominated petitioner No. 11 i.e. Mr. Sudesh Kumar Poddar as the President. * It is the submission of the petitioner that Mr. Garish Oberoi along-with some members resorted to illegal and high handed behavior as stated above and took upon themselves to propose random names of members of Eastern Region other than petitioner No. 11. It is pertinent to mention that AOA do not provide any power to any of the respondents of other region or Respondent 1 or any other person to propose for appointment of any candidate to be nominated for HRAEI other than what is proposed by Petitioner No. 1 for the year 2018-2019. * Petitioners submit that by disregarding the presidential nomination of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) terms making a total of 12 terms in his lifetime. (c) An Executive Committee Member who has been a member of the Committee for a period of 8 terms continuously shall automatically cease to be member and shall not be eligible for re-nomination to the Executive committee for a period of 2 terms thereafter Provided that upon expiry of the said period of 2 terms a person may once again be re-nominated to the executive committee for an additional maximum period of 4 terms only. * Subsequently, without any meaningful participation and due deliberation between the members of the Executive Committee, the Respondent published the Notice dated 29.08.2017, for the 61st AGM of the members of FHRAI scheduled to be held on 23 September 2017. This Notice contained a special agenda item No. 4 to "approve alteration in Articles of Association of Company (FHRAI)" so as to amend Article IV of Appendix A to the Articles by deleting clauses IV(b) and IV(c) and proviso to Clause IV(c) of Appendix A. * Aggrieved by the aforesaid highhanded actions of the then existing members of the Executive Committee, one of the members of FHRAI-Casino Hotels (a unit of M/s. CGH Ea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or an additional maximum period of 4 terms only" * Petitioners submit that the aforesaid resolution of the Administrative Committee was in teeth of this Hon'ble Tribunal's interim order dated 22 September 2017. Petitioners further submit that in its next meeting held on 21 November 2017, the Executive Committee under the Chairmanship of Mr. Garish Oberoi, approved the minutes of the Administrative Committee meeting dated 11 October 2017 in toto, even though the members of the Eastern Region had dissented. Subsequently, the Administrative Committee in its next meeting held on 18 January 2018 inter alia noted in item No. 2 that it had "already suggested in the last meeting and further ratified in this meeting that the tenure of the executive committee Member should be changed to 12 years in continuation with a 1 year break and further maximum of 4 years, if elected from the Region and sent to the FHRAI's board'. It is the submission of the Petitioners that the then members of the EC apprehended that the members of the Eastern Region would not support them as it is in flagrant disregard to the orders and directions of this Hon'ble Tribunal, the Administrat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt Petition), for discussing, deliberating and passing resolution on the amendment of clause (b) and (c) of Article IV of Appendix A to the Articles of FHRAI, in violation of this Hon'ble Tribunal's interim order dated 22 September 2017. However, before this Hon'ble Tribunal could take any action against the contemptuous respondents, FHRAI filed an affidavit dated 18 April 2018 before this Hon'ble Tribunal stating that a circular resolution was passed by the Executive Committee on 17 April 2018 to the effect that the Executive Committee do not wish to proceed with the alteration of any clause of the Articles. The said circular resolution dated 17 April 2018 read as follows: "RESOLVED THAT the Executive Committee be and hereby resolves not to proceed or otherwise take up in any manner whatsoever, any proposed alteration or amendment to Articles of Association of the Federation of Hotels and Restaurant Association of India in relation to the provisions of maximum period/tenure of office bearers and Executive Committee of FHRAI" * In view of the aforesaid circular resolution, this Hon'ble Tribunal vide order dated 23 April 2018 while closing the p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that this was again a mala fide attempt on part of the then existing members of the EC, including Respondent Nos. 2, 4, 5 and 8 to illegally prevent the holding of the AGM so that they could extend their tenures in the Executive Committee and continue to mismanage the affairs of the Company, HRAEI filed Company Petition being C.P. No. 378/241-242/N03/2018 dated 27 September 2018 under sections 241, 242 of the Companies Act, 2013 before this Hon'ble Tribunal inter alia seeking restraint against the Respondents from adjourning the 62nd AGM scheduled to be held on 29 September 2018 in pursuance of the Notice of AGM dated 10 September 2018, and to set aside the decision taken in the Emergent Meeting of the Executive Committee dated 27 September 2018 to adjourn the 62nd AGM. In the proceedings before this Hon'ble Tribunal on 28 September 2018, Petitioner No. 1 pointed out that Mr. K. Syama Raju, Mr. K. Murali Rao and Mr. T. Nataraajan have already completed the tenure of 8 years and would not be eligible for re-appointment as members of Executive Committee. Accordingly, this Hon'ble Tribunal restrained Mr. K. Syama Raju, Mr. K. Murali Rao, and Mr. T. Nataraajan from function....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 11 should be the President of FHRAI. * Respondent No. 1 relied on the judgment of Hon'ble NCLAT in Cyrus Investments Pvt. Ltd. & Anr. vs. Tata Sons Ltd. & Ors. 2017 SCC online NCLAT 261 (para 151 & 152) for the factors required to be noticed by the Tribunal before forming its opinion as to whether the application merits waiver or not. In the abovementioned judgment it was held that: 151. Normally, the following factors are required to be noticed by the Tribunal before forming its opinion as to whether the application merits 'waiver' of all or one or other requirement as specified in clauses (a) and (b) of sub-section (1) Section 244:- (i) Whether the applicants are member(s) of the company in question? If the answer is in negative i.e. the applicant(s) are not members), the application is to be rejected outright. Otherwise, the Tribunal will look into the next factor. (ii) Whether (proposed) application under Section 241 pertains to 'oppression and mismanagement'? If the Tribunal on perusal of proposed application under Section 241 forms opinion that the application does not relate to 'oppression and mismanagement' o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed by the 3/4th members of the Executive Committee present in the meeting" * It is submitted that Article 52 provides that President shall be elected by the members of Executive Committee which would mean a democratic manner of electing the President and not that the regional association can impose its nominee to be the President of FHRAI even if he does not enjoy the support of majority of EC members. The word "region wise" only denotes that a candidate from that particular region has to be elected as the President. It does not in any manner suggest that the President ought to be person nominated by the concerned region. * Another important clause of AoA which is referred by Respondent No. 1 is: "If the President be absent from India or notified to the Vice-President as well as to the Honorary Secretary that he will be unable to perform, the Vice Presidents in the order of their precedence shall perform the functions and duties of the President." * Respondent No. 1 submits that the same procedure was followed for electing president as was followed in the past since amendment in 2010. The EC members from Eastern region who were elected by the maj....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ceive and examine suggestion from members for subjects to be considered at meetings of the General Body and to determine the agenda for such meetings, also to fix the date and place of the meetings of the General Body. f) To decide any question relative to the interpretation of these articles. g) To determine its own procedure in so far as such procedure may not be in consistent with the Act or these articles. h) To take such steps as they may consider necessary or expedient for giving effect to the resolutions passed at General Meeting of the Federation and generally to exercise all powers and functions of the Federation not, by Act or hereby, exclusively conferred upon the General meetings of the Federation. i) To present a report of their proceedings and a statement of accounts of the Federation duly certified by the auditors at the Annual General Meeting of the Federation. j) To appoint Sub-Committees of the Members of Committee or of the members of the Federation and such Sub-Committees may be permanent or temporary or for such special purposes as the Committee may determine. k) To delegate, subject to such conditions as th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... provided that the same is not specifically reserved by the Act or these presents for the General meeting. * Respondent No. 1 submits that a regional association forcing a particular individual to be elected as President is not good for democratic function of FHRAI. Further, the EC members have lot of complaints against petitioner No. 11 which have been detailed in individual affidavits filed by respondents before this Hon'ble Tribunal. One of them is pointed out by Respondent No. 1 is that the Petitioner No. 11 without consent of FHRAI took over the work of organization of annual convention for 2015-2016 and declined to furnish the accounts of the said convention. * Respondent No. 1 further submits that the next AGM of FHRAI is statutorily required to be held on or before 30.09.2022. Thus, the next term will also begin from the conclusion of said AGM. It is further submitted that as per Article IV(c) of Appendix A to the AOA, a person who has been EC Member for 8 terms continuously shall automatically cease to be a member and shall not be eligible for renomination to the EC for a period of 2 terms thereafter. It is submitted that Petitioner No. 11 would be co....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Region had nominated one of the member of their Region i.e. Petitioner No. 11 unanimously then EC cannot have any objection with respect to the same and they cannot replace the Eastern Region's nomination with their own choice of member. It is the legitimate expectation of the Petitioner that their nominated member shall be confirmed as the President for the upcoming term. In contrast, Respondent No. 1 contended that President has to be selected by the EC and this does not mean that President of FHRAI has to be solely selected by the members of that region only. It can be seen from the previous AGMs and EC meetings that as regards appointment of the President, it has always been the practice in Federation (Respondent 1) that one candidate for the President post is nominated by the 6 members of that particular Regional Association, whose turn falls for appointment of President as mandated in Article 52. That is how Article 52 has been implemented by all AGM in the past. There is no justification for its departure this term. 7. It is also seen from the facts submitted by the Petitioners and not denied by the Respondents that many other names of candidates of HRAEI were propos....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er 5) as President of FHRAI. This was seconded by Mr. Pradeep Shetty (Respondent 13, Member of the EC from Western Region in the year 2018-2019. Further it is mentioned that Mr. Nitin Kothari though elected as President by majority vote, Mr. Kothari however stated that "he is unable to accept the presidency and declined to take the chair of President." Afterwards, Mr. P.S. Ghai (Respondent 14) proposed the name of Mr. Ashoke Singh (Petitioner 9) from the Eastern region. Mr. Ashoke Singh also declined due to personal reasons. However Mr. Ashoke Singh further informed that Mr. Sudesh Kumar Poddar (Petitioner 11) has been nominated by the Eastern Region for the post of President of FHRAI for the year 2018-2019. Mr. P.S. Ghai then proposed the name of Mr. Vijay Dewan of Eastern Region as the President. Below is the relevant para from the minutes of the meeting: "The Chairman highlighted that usually voting does not take place in FHRAI for the post of the President, but since two names have been proposed by members i.e. Mr. Sudesh Poddar and Mr. Vijay Dewan for the Presidents' position of FHRAI, he requested the members to give their opinion & vote on this. Thirteen members....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... abovementioned established practice in common courts of equity, facts of the case and interpreting the article 52 from the AOA of Respondent Company, it seems that Respondent Company as a matter of convention and understanding followed the practice of choosing a President for each year region wise as per nomination of that region. In the backdrop of the formation of FHRAI, situation like this had never occurred. Further, Respondents have not shown any reason to justify its deviation from the convention and practice of electing the President region wise for the Respondent 1 as per the mandate of AOA. The only ground that Respondents are relying on is the organization of annual convention 2015-16 for which Petitioner No. 11 declined to furnish accounts due to which they were not in favour of Petitioner 11. However, if that be so, then Petitioner No. 11 was an EC Member in 2015-16 and the EC chose not to take any action against him despite having the authority to do so as per AOA Article 7(1)(d) extracted below: 7(1) The rights and privileges of a member shall not be transferable and shall cease: (a)..... (b)..... . . (d) Upon the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is to be held as decided in the executive committee meeting held on 30.10.2018. There are many other agenda items which are likely to prejudice the petitioner. Mr. Kathpalia has further argued that one Mr. Ourbaksh Singh who is the Vice President is acting as President and performing the duties of the office of the president who belongs to Western Region. Notice of the petition. Mr. Parekh, Ld. Counsel for the respondent accepts notice. A copy of the paper book has already been furnished to Mr. Parekh. Mr. Parekh attempted to submit that election has already taken place. We confronted him with proceedings of the meeting to show that various names like Mr. Kothari and Mr. Divan were proposed by the outgoing President but the nominee refused accept the offer. It is thus accepted that for election of the President item No. 5 has been prepared and the election is to be held today at 12 Noon. Mr. Parekh could not dispel our impression that the meeting fixed today would not prejudice the rights of the petitioner. Reply be filed within two weeks with a copy in advance to the counsel for the petitioner. Rejoinder if any be filed within three days with a copy in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ances of oppression like choosing the office bearers of EC like Honorary Secretary, Treasurer etc. in absence of newly elected President and in violation of AOA of Federation, attempting to elect a President for a Region in violation of the convention and practice followed in Federation etc. Keeping in view the order dated 20.12.2018 by this Hon'ble Tribunal and the judgment by Hon'ble NCLAT in the judgment of Cyrus Investments Pvt. Ltd. (supra) and, we are inclined to grant waiver in filing the petition under section 244 of the Companies Act, 2013. 16. The next pertinent issue which is raised in the instant Company petition is with respect to the conducting of EC meeting dated 30.10.2018 and Election of the President for the year 2018-2019. Respondents submit that this Hon'ble Tribunal vide Order dated 20.12.2018 directed that the EC meeting which was to be held on 20.12.2018 shall not be held and was stayed. Respondents further submit that no EC meeting has taken place after 30.10.2018 and the Vice President continues to discharge the functions and duties of the President. On perusal of the minutes of the meeting dated 30.10.2018, it is found that Election of offic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....A prima facie doubt has also been raised against the bona fides of Respondent No. 1 and the EC members of the other region when the election of office bearers of the EC had taken place by EC under the presidency of the outgoing President unlike the past established convention of the Federation. Even the three Vice Presidents (Mr. Surendra Kumar Jaiswal, Mr. Gurbaksh Singh Kohli, Mr. K. Nagaraju) were elected under the chairmanship of outgoing President (Mr. Garish Oberoi). The outgoing President proposed the name of Mr. Surendra Kumar Jaiswal (Respondent 5) for the post of Vice President. It is clear that due to the oppressive conduct of the Respondent No. 1 and EC members of the other regions towards the Eastern Region, election of the Petitioner No. 11 as President could not take place. They have collectively ensued that the Article 52 of AOA is breached in letter & spirit. It is therefore clear that few of the EC members of the period in question who are Respondents acted in a manner prejudicial to the interests of Respondent No. 1 by proposing names of unwilling members of Eastern Region resulting in stalemate. 20. The object of Respondent 1 to promote the interest of Hotels....