AI Drafter 
TaxTMI 
TaxTMI 
2023 (2) TMI 1099
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.... the Respondent : Mr. P Nagesh, Sr. Adv. with Mr. Mahesh Agarwal, Ms. Shubham Kulshreshtha, Mr. Kaustubh Singh, Mr. Akshay Sharma, Advocates for R1 to 11 Mr. Sumit Goel, Ms. Swati Bhardwaj, Advocates for R12 JUDGMENT [ Per. Dr. Alok Srivastava , Member ( Technical ) ] The two appeals viz. CA(AT) No. 162 of 2022 and CA (AT) No. 166 of 2022 have been filed under section 421 of the Companies Act, 2013 (in short "Companies Act") by the respective Appellants assailing the order dated 30.8.2022 (hereinafter called "Impugned Order") passed by the National Company Law Tribunal, New Delhi (in short "NCLT") in Company Petition No. 437/241-242/PB/2018. Both the above-mentioned appeals are being disposed of through this judgment. 2. The facts of the case, common to both appeals, in brief are that a petition namely CP No. 437/241-242/PB/2018 was filed by the Hotel and Restaurant Association of Eastern India which is Respondent No. 1 in both the appeals. This company petition alleged oppression and mis-management on the part of Federation of Hotel & Restaurant Associations of India (in short "FHRAI") regarding the appointment of the nominee of Respondent No. 1 as the President of FHR....
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....nder the chairmanship of Mr. Garish Oberoi, the sitting President, and went on to elect the Vice Presidents and other office bearers of FHRAI. The Appellants have stated that HRAEI filed CP No. 437/241-242/2018 on this single instance of dispute claiming it to be an act of oppression and mis-management, seeking the relief of appointment of their nominee Mr. Sudesh Kumar Poddar as President of FHRAI for a term of one year and also restraining the Northern and Western regions members, and also FHRAI from making any changes in the AoA without the leave of NCLT. 4. The Appellants have alleged that even though the CP No. 437/241-242/2018 was filed alleging oppression and mis-management of FHRAI, the only relief sought in the company petition is regarding appointment of a pre-decided and nominated person as President of FHRAI, which is not a matter of oppression and mis-management. The Appellants have further alleged that the Impugned Order directs for holding of Annual General Meeting and election of the President of FHRAI in accordance with the past established practices and as per the AoA even though no such relief was sought in CP No. 437/241-242/2018. 5. We heard the arguments....
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.... grant of waiver. The Learned Senior Counsel has further clarified that the grievance of the petitioners was only a 'directorial complaint' regarding Mr. Sudesh Kumar Poddar's election as President of FHRAI and an application relating to 'directorial complaint' does not constitute act/s of "oppression and mis-management" under sections 241-242 as has been held in the matter of Assam Chemical & Pharmaceutical v. Deba Kumar Hazarika, [2019 SCC Online NCLAT 864]. 7. The Learned Senior Counsel for Appellant HRANI has referred to the judgment of Hon'ble Supreme Court in the matter of Chatterjee Petrochem (India) Private Limited versus Haldia Petrochemicals Limited & Ors. [(2011) 10 Supreme Court Cases 466] to contend that the issue raised by the Eastern Region Association relates to an isolated instance and does not constitute oppressive conduct as a series of continuing acts and argued that the minority members have to raise the issue with events as part of continuing acts of oppression and mismanagement. 8. The Learned Senior Counsel for hrawi has also cited the judgment of this Tribunal in the matter of Cyrus Investments Pvt. Ltd. & Anr. Versus Tata Sons Ltd. & Ors. [Company Ap....
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....ess of nomination is defined, which is entirely different from the process of election, and in the present case, HRAEI is conflating the term 'nomination' with 'election', which is against the intent of corporate democracy. Further, expanding on this argument, the Learned Senior Counsel for Appellant HRANI have said that by insisting on appointment of their 'nominated' person as President without going through the election, the HRAEI is going against the letter and spirit of Article 52 of AoA. 11. The Learned Counsel for Appellant HRANI has also refuted the argument put forth by the Respondents that the nomination of Mr. Sudesh Kumar Poddar is being opposed for election out of vindictiveness, as in the past he had supported the plea of Casino Hotels, who had approached NCLT against the attempts of the Executive Committee to amend the AoA to remove the 8 one-year terms bar of being a Executive Committee member and increase it to 12 one-year terms and claimed that the Respondents have not made any pleadings regarding malice, which should have been pleaded specifically. He has claimed that the election of Mr. Sudesh Kumar Poddar was vehemently opposed for genuine and bonafide reaso....
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....t allowed to become President due to a unholy collusion among the Executive Committee members of the Eastern Region and the conduct of Mr. Poddar, that would be not correct for the corporate democracy. The Learned Senior Counsel has also argued that the Impugned Order goes beyond the prayers made in CP 437/241-242/2018 by giving a detailed methodology for holding election of President including allowing the members of the Eastern Region to give their nomination for the post of President of FHRAI for election which is totally against article 52 of the AoA. 16. The Learned Counsel for Appellant HRAWI (in CA No. 162/2022) has endorsed the arguments put forth by the Learned Senior Counsel for HRANI. He has strongly argued that there is no question of any ulterior motive of the members of Western and Northern Regions in opposing the appointment of Mr. Sudesh Kumar Poddar as President of FHRAI but their insistence is that the AoA should be followed while holding the election. He has also stressed that the 'waiver' granted by NCLT is not correct and further the alleged acts of oppression and mismanagement are merely dispute in interpreting the provision of Article 52 of the AoA. 17.....
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....Article IV(b) and (c) in Appendix A of the AoA, regarding which an application being CP/CA No. 273(ND)/2017 was filed by M/s. Casino Hotel before the NCLT, New Delhi in which by an order dated 22.9.2017, NCLT had stayed proceedings of the agenda item No. 4, which pertained to approving the said amendment in Article IV(b)(c) in Appendix A of AoA. He has further pointed out that after the NCLT order dated 22.9.2017 staying proceedings of this additional item in the ensuing AGM, the Executive Committee of FHRAI passed a circular resolution dated 17.4.2018, whereby it was resolved that the Executive Committee shall not proceed or otherwise take up in any manner whatsoever, in the proposed alteration and amendment to AoA of FHRAI in relation to provision of maximum period/duration of office bearers and the Executive Committee of FHRAI. He has, further argued that since Mr. Sudesh Kumar Poddar supported the action of the petitioner Casino Hotels in CP No. 273(ND)2017, the members of Western and Northern Regions were not happy with him and decided to put obstacles in his election and appointment as President of FHRAI. He has added that the appellants continue to make efforts to amend the ....
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....r 2018-19 was taken up. He has elucidated that while considering this agenda item, the sitting President Mr. Garish Oberoi (from Northern Region) first proposed the name of Mr. Nitin Kothari from the Eastern Region, which was seconded by Mr. Pradeep Shetty leading to unopposed election of Mr. Kothari, but Mr. Kothari expressed his inability to take up the post of President. He has added that, thereafter the name of Mr. Ashoke Singh was proposed, who was also elected unopposed, but he also declined to take over the post of President due to personal reasons and he (Mr. Ashoke Singh) informed that the Executive Committee members from Eastern Region has nominated Mr. Sudesh Kumar Poddar for the post of President of FHRAI for the year 2018-19 and simultaneously proposed the name of Mr. Suresh Kumar Poddar as President. Another member Shri P.S. Ghai proposed the name of Mr. Vijay Dewan and in the voting that ensued Mr. Dewan obtained 13 votes in his favour against 5 votes in favour of Mr. Poddar, and even though Mr. Dewan was elected by majority vote, he declined to take over Presidency and stated the tradition that the name finalised by Eastern Region for the post of President should be....
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....n Region, who was elected unopposed. In the same way, for the year 2017-18, the sole name of Mr. Garish Oberoi was proposed from the Northern Region, who was elected unopposed. He has thus claimed that the proposal of a single name by the members of the region whose turns falls for Presidentship is in the interest of harmonious functioning and unity within FHRAI, and this tradition is honoured by members from the other regions in the Executive Committee. He has contended that in the same tradition and manner Mr. Sudesh Kumar Poddar's name was unanimously decided for Presidentship by the Executive Committee members from the Eastern Region, and there is no reason why he should not be elected unopposed and unanimously following the past tradition in the interest of preserving unity and harmony in FHRAI. He has also claimed that it was in this spirit that Mr. Nitin Kothari, Mr. Ashoke Singh and Mr. Vijay Dewan declined to take up the post of President of FHRAI as they have themselves decided that Mr. Sudesh Kumar Poddar shall be their preferred candidate. It is also clear that when their names were proposed by members from the other regions, they had not been consulted, and therefore t....
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....cle 52 of the AoA of FHRAI wherein the use of word 'election' does not necessarily mean there has to be more than one candidate in the fray and even a sole contesting candidate can be elected unopposed. 25. The three issues that arise for consideration in the instant appeals are as follows:- (i) Whether petitioners in the original CP No. 473/241-242/2018 were entitled to maintain the said Company Petition under sections 241-242 of the Companies Act and whether the waiver granted to them under section 244 to prefer such a petition is correct; (ii) Whether the alleged acts of oppression and mis-management as claimed by the petitioners in original CP No. 473/241-242/2018 actually amount to oppression and mis-management as claimed by the petitioners in original company petition and as are required for a section 241-242 petition; and (iii) Whether the AoA regarding election of President of FHRAI have been followed properly in letter and spirit in the election of President of FHRAI for the year 2018-19, as was required by law? 26. On the first issue of whether the 'waiver' granted by NCLT to the petitioners if CP No.473-241-242/2018 is correct as per law ....
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....apply under section 241. We also look at the factors, which though not exhaustive, have been enumerated by this Tribunal in its judgment in the matter of Cyrus Investments Pvt. Ltd. (supra). This Tribunal has held therein that if the Appellants are members of the company in question and have alleged oppression and mis-management, which is not a frivolous complaint, the Tribunal should examine whether similar allegation of oppression and mis-management was earlier made by any other member or there is exceptional circumstance made out to grant waiver. 28. A perusal of the Impugned Order, wherein the issue of grant of waiver has been dealt by the NCLT shows that the NCLT has considered the matter of Casino Hotels, where the proposed action of the Executive Committee to amend clauses IV(1)(a) and (b) of Appendix-A of the AoA of FHRAI was under challenge, and in which the Eastern Region members had opposed the stand of Northern and Western Regions members. The NCLT has found that the issue which was raised in the Casino Hotels case has found reflection in the process of election of President of FHRAI for the year 2018-19. Looking to the facts and circumstances pleaded by the Responde....
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.... IV(b) and (c) of Appendix A of the AoA. This case was decided vide final order dated 23.4.2018, in the light of the following resolution dated 17.4.2018 adopted by the Executive Committee:- "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". 31. The issue in the company petition in the Casino Hotels case regarding proposed amendment to the AoA was being opposed by members of Eastern Region against the proposal of the members of Northern and Western Regions. Thus while, overtly, there may not appear to be any direct relation between the matter in consideration in the Casino Hotels case and the issue in instant petition CP No. 473/341-242/2018, it is clear that there is certainly an under-current of feeling against the Eastern Region members, and Mr. Sudesh Kumar Poddar among the Western and Northern Regions members which arose from the time of the Casino Hotels case. ....
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....to a justify the passing of a winding-up order on the ground that it was just and equitable that the Company should be wound up, but that to wind up the Company would prejudice such member or members. 139. In Shanti Prasad Jain case', referred to hereinabove, in a similar situation, it was observed by this Court as follows: (AIR p. 1543, para 19) "19. ..... it is not enough to show that there is just and equitable cause for winding up the company, though that must be shown as preliminary to the application of Section 397. It must further be shown that the conduct of the majority shareholders was oppressive to the minority as members and this requires that events have to be considered not in isolation but as part of a consecutive story. There must be continuous acts on the part of the majority shareholders, continuing up to the date of petition, showing that the affairs of the company were being conducted in a manner oppressive to some part of the members. The conduct must be burdensome, harsh and wrongful and mere lack of confidence between the majority shareholders and the minority shareholders would not be enough unless the lack of confidence springs from op....
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....in consistent with the act or these articles. Xx xx xx xx 49. Questions before the Executive Committee shall be decided by a majority of votes of the members present. Xx xx xx xx 52. The Federation President shall be elected by the Members of the Executive Committee region-wise, by rotation, for the term, in the following order: Hotel & Restaurant Association of Eastern India Hotel & Restaurant Association (Western India) South India Hotels & Restaurants Association Hotel & Restaurant Association of Northern India For the purpose of these Articles, one term shall mean the period commencing from the date and time of election of the President until his/her successor is elected by the incoming Executive Committee. It is made clear that no person shall be entitled to a tenure exceeding two terms as President of the Federation during his lifetime. Provided further that the second term is approved by the 3/4th members of the Executive Committee present in the meeting. 53. Under the general superintendence and control of the Executive Committee, the President shall be Executive Head of the Federation....
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....ume that any EC member could propose and second the nomination of a candidate as there is no specific provision regarding the same. Such an inference would be in consonance with democratic functioning of FHRAI and keeping in mind the rights of the EC members. 38. We now look at how the process of 'election' of President of FHRAI was carried out for the term 2018-19. In this regard, the minutes of the Executive Committee's meeting dated 30.10.2018 (attached at pp. 220-229 of appeal paperbook Vol.II in CA(AT) 166 of 2022) are worth reproducing. The proceedings as recorded for agenda item No. 5 and item No. 7 which are relevant, are extracted hereunder :- "The Federation of Hotel & Restaurant Associations of India Minutes of The Federation of Hotel & Restaurant Associations India Executive Committee Meeting held at 2.00 p.m. on 30th October 2018 at Pride Plaza Hotel, Aerocity, New Delhi Item No.5: Election of President for the year 2018-19 as per Articles of Association of FHRAI The Chairman stated that he would like to step down after handing over the Chair to the incoming President. The Chairman, proposed the name of Mr. Nitin Kotha....
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....neral Body, all the said members / persons lose their regional colour and act as a Board member of FHRAI. Mr. Pranav Singh pointed out that the EC Members should adhere to the constitution of FHRAI. He further stated that as per the constitution, the President nominee has to be from Eastern India and the Region has only one name of Mr Sudesh Poddar for this position and if the EC does not want him as the President, there will not be any President during the year. The Chairman pointed out that since the EC could not resolve the issue of election of the President, he would proceed with the election of other office bearers and would come back once again and request to the Eastern Region to nominate another Member io the post of the President. xx xx xx xx Item No. 7: Election of Office Bearers as per Articles of Association of FHRAI. xx xx xx xx The Chairman, again requested the Eastern region members to propose a name for the President that is acceptable to the EC. However, the members insisted on the name of Mr. Poddar. xx xx xx xx Mr. Poddar and Mr. Walia insisted on a reason for not accepting Mr. Poddar's name ....
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....ntinue to hold office until the new office bearers are elected by the incoming Executive Committee. Therefore, it is clear that once the new Executive Committee members were elected in the Annual General Meeting held on 30.10.2018, they were to have taken office. Also, the other office bearers which would certainly include the President also continued to hold office until the new office bearers are elected by the incoming Executive Committee. By not completing the process of election of President for the year 2018-19, and presiding over the Executive Committee as sitting President and also electing the office bearers including the .Vice Presidents and others, Mr. Garish Oberoi not only exhibited a blatant and high-handed oppressive behaviour nefariously assisted by some other members who were acting like a 'clique', he also disregarded provisions of the AoA and acted in an oppressive manner. 41. Thus, a detailed perusal of the minutes of the Executive Committee meeting dated 30.10.2018, particularly in item No. 5 and Item No. 7 make it abundantly clear that the members of the Western and Northern regions in the Executive Committee had formed a clique and were relentlessly pursui....
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....ed to injure in any manner the rights of any person whatsoever. In this connexion may allude to the argument of Mr. N. Chandrasekara Iyer for the petitioners that a right of franchise included a right to canvass for or against a candidate and that the provision as to three days' notice should be regarded as material even in the case of an uncontested election, because it would enable the voters to go about and see that no one voted for some particular candidate." (Emphasis Supplied) 43. The judgment of Hon'ble Supreme Court in the matter of Saraswati Devi (supra) is also cited by the Ld. Senior Counsel for Respondent in this regard, which holds that even when there is a sole candidate on a seat reserved for Scheduled Caste, who is eligible, such a sole candidate gets elected as per Haryana Municipal Election Rules, 1978. The relevant portion of the judgment is reproduced below:- 3. ...........After the said elections were over question arose about the election of President of the said Municipal Committee. As per Section 10 sub-section (5) of the Act the offices of the President in the municipalities shall be filled up from amongst the members belonging to G....
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....o declare the respondent No. 1 as elected on that day as on the date fixed for withdrawal of nominations, he was the only one candidate in the field and therefore, in view of Rule 30, he was obliged to declare him as elected which in fact, the Returning Officer has done." (Emphasis supplies) 45. We also take note of the judgment of this Tribunal in the matter of The Hamlin Trust & Ors vs. LSFIO rose Investments s.a.r.I & Ors. (CA(AT) No. 77 of 2022) cited by the Learned Counsel for Respondent HRAEI wherein the following is held:- "31. The import of article 140 of the AoA is certainly not that the first two suggestions could be of ineligible candidates so that the Appellants have to then accept the name of the third candidate as Hobson's choice. Thus the effect of first two suggestions being of ineligible candidates could also mean that the Appellants would be forced to accept the name of the third candidate who may be, for some reason, not acceptable to them." 46. The judgment in the Hamlin Trust (supra) case only points to the fact that if a candidate is eligible, only then the nomination would be considered valid. In the present case, the candidature o....
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.... elected unopposed without going through the process of voting. Further, if such candidate is a sole candidate, she can obviously be elected unopposed, but the fact is that she will still be elected in accordance with the provisions of AoA and in the manner which is correct in the eyes of law. 49. A perusal of pleadings submitted by the parties makes it clear that the election of President was carried out for the year 2014-15 (at pg.367 of appeal paperbook Vol.II in CA(AT) 166 of 2022), for the year 2015-16 (attached at pg.371 of appeal paperbook Vol.II in CA(AT) 166 of 2022), for the year 2016-17 attached at pg.379 of appeal paperbook Vol.II in CA(AT) 166 of 2022) and for the year 2017-18 (attached at pg.388 of appeal paperbook Vol.II in CA(AT) 166 of 2022) when only one name was proposed in the election of President for the relevant term, who was then elected unopposed. It thus appears correct, as was argued by the Ld. Senior Counsel for Respondent HRAEI, that in the interest of harmonious working of FHRAI, there is an established tradition that one name is decided by the Executive Committee members from the particular region as their 'preferred' or 'nominated' candidate for t....