TaxTMI 
TaxTMI 
TaxTMI 
2025 (5) TMI 1764
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.... 224/2024. By the present appeal, the appellants challenge the dismissal of the interlocutory applications filed under Order XXXIX Rules 1 and 2 of the CPC, wherein the plaintiffs/appellants had sought interim injunction and stay of operation of the notice dated 08.03.2022 and the order dated 31.03.2022. 4. Certain other individuals had also challenged their respective notices and termination orders, which took away their right to use the facilities of Respondent No. 1 Company, by filing separate suits. Their applications seeking interim relief were also dismissed by the same common impugned judgment. 5. Respondent No. 1 is incorporated under the Companies Act, 1930, and is governed by its Memorandum of Association ('MOA') and Articles of Association ('AOA'). It has established the club facility for the purpose of use and enjoyment of its members. Club members are divided into various categories-Permanent Members, Garrison Members, Temporary Members, Casual Members, Special Category Members and Corporate Members. The members enjoy the facilities of Respondent No. 1 Company, and the management at this stage is entrusted to the Joint Committee/Respondent No.4. The AOA permits child....
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....as noticed various violations, some out of them, indicated the conduct of the affairs of the company is prejudicial to the public interest therefore this case is initiated. 31. It is an ongoing process in this club that Membership is purely on selective basis, the selection basis is changing from time to time, though permanent membership is limited, under the cover of dependents, green card holders, UCP holders; number of people using the facilities of the club is increasing without any cap. But the people who applied for membership remained waiting to get into because the dependents become members through fast tracking leaving behind the persons applied for membership. This behaviour is nowhere changed by change of managements. By seeing admission process, it appears only big people in essence those who are in top position in the government and outside the Government become members. As I said above, this club has been enjoying 27 acres of the land of the State which costs around thousands of crores. All this shows imperial behaviour and insensitiveness of the Club against the tenets of democracy. It may be said I am speaking of about fundamental rights in section 241 & 242 case,....
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....'), in an appeal filed by Respondent No. 1, upheld the observations of the learned NCLT and by order dated 15.02.2021, suspended the General Committee and directed the Union of India to appoint an Administrator to manage the affairs of Respondent No. 1. Respondent No. 1 was also prohibited from accepting any new memberships. 11. Respondent No. 1 was further restrained from operating the funds received for admission of members during the investigation period. Thereafter, the MCA, appointed Respondent No. 2 as the Interim Administrator, who in turn appointed a Single Member Inquiry Committee headed by a Retired Judge of Hon'ble Bombay High Court (Naidu Committee) to give report in regard to allegations. 12. Following the receipt of the first phase report by the Naidu Committee on 27.01.2022, declaring the Green Card system void ab initio, Respondent No. 2 directed the Club Secretary/ Respondent No. 3 to issue a notice dated 08.03.2022, pursuant to which Green Cards issued to overage dependants of members were suspended and blocked. 13. Immediately upon receipt of the second phase report by the Naidu Committee on 30.03.2022, Respondent No. 2 issued the final order dated 31.03.2022,....
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.....05.2019. Respondent No. 1, in this manner, collected approximately Rs. 4.5 crores. The collection of the said fund in this manner was also part of the investigation which led to the petition being filed before the learned NCLT and the appointment of the Administrator. 21. The amount of Rs. 4.5 crores was found to have been collected in violation of the provisions of Companies Act, 2013. 22. As noted above, the Naidu Committee gave its report and found that the system of dependent members being allowed to use the facilities even after attaining the age of 21 was void ab-initio. This led to Respondent No. 1 directing Respondent No. 3, that is, the Club Secretary, to issue the impugned notice dated 08.03.2022. Thereafter, the impugned final order dated 31.03.2022 was issued terminating the Green Card facilities of the appellants, which led to the filing of the subject suit. 23. The appellants/plaintiffs claimed that the impugned notice dated 08.03.2022 and order dated 31.03.2022 terminating their membership was in contravention of the AOA. It was contended on behalf of the appellants that the appellants were granted the rights to use the facilities by issuance of Green Cards in co....
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....soning, as adopted by the learned Single Judge, has been stated in that clause and, therefore, the termination of the contract without reference to the AoA is illegal. 30. He submitted that the impugned judgment is based on misappreciation of facts, as the learned Single Judge failed to note that each of the appellants have made the requisite application and are not attempting to bypass the requirement of achieving full membership. He stated that the applications of the dependents were duly approved, and Green Cards were issued to them. 31. He submitted that the learned Single Judge travelled beyond the scope of the dispute by concluding that the Green Card system is void ab initio without properly appreciating the prima facie case. He submitted that, even otherwise, as per the provisions of the AoA, the dependent, after attaining the age of 21 years, shall apply to become members of Respondent No. 1 Company. However, no upper limit in relation to filing the application has been specified in the said provisions, and this interpretation has been adopted by over 30 elected General Committees. 32. He submitted that the long-standing usage and past practice of issuing Green Cards wa....
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....ne-sided approach. He further submitted that the reliance placed by the learned Single Judge on the judgment dated 01.04.2022 passed by the learned NCLT to hold that the issuance of Green Cards was an unauthorised method, is erroneous, in as much as the judgment dated 01.04.2022 only makes the observation that "unauthorised method devised to unjustly enrich the Club by circumventing the AoA provisions", however no reasoning to justify this finding has been made therein. 37. He further placed reliance on the judgment passed in Anil Rai v. State of Bihar : (2001) 7 SCC 318, to contend that after the arguments were heard, the judgment was reserved by the learned Single Judge on 23.07.2024, however the same was delivered belatedly on 18.10.2024 being in violation of Order XX Rule 1 of the CPC. Analysis 38. The grievance of the appellants in a nutshell is that the benefit granted to them to use the facilities of Respondent No. 1 Club was approved by the General Committee, pursuant to which notice dated 17.05.2019 was issued by the Committee asking for the penalty to be paid by the appellants, which having been paid, gave rise to enforceable rights. 39. It is the appellants' case tha....
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....nfer an independent right on the dependent children to continue using the facilities despite not being full members of Respondent No. 1. 45. It is evident that this privilege is inherently temporary, ceasing once the dependent turns 21. It neither establishes a right to permanent access nor confers any expectation of preferential treatment or entitlement to continued use. These provisions unequivocally establish that access to facilities of Respondent No. 1 Company is contingent on defined limitations, reinforcing that any child of a member who wishes to continue using the facilities beyond the stipulated age must undergo the formal membership application process. The absence of any vested rights for dependents underscores the transient nature of their entitlement, highlighting that it does not translate into an automatic or enduring claim to Club privileges. 46. As rightly observed by the learned Single Judge, the system of granting benefits to the dependents of full members through an alternative method bypasses the restrictions imposed by the AoA, making it, prima facie, a violation of Article 13 (3b) of the AoA. 47. The AoA, as rightly observed by the learned Single Judge, m....
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....se historical practices are internal club policies that confer enforceable legal rights on the appellants. The record, prima facie, indicates that such practices have been adopted over many years, and numerous persons who had attained the age of 21, and who were using the Club facilities as dependents of the full members, have been permitted to use the facilities upon being conferred Green Cards on terms as thought fit by the Committees from time to time, including payment of fees, penalties etc. 56. It is not disputed that the so-called members, such as the appellants, are not actual members of Respondent No. 1 within the meaning of the Companies Act, 2013. 57. In our opinion, the learned Single Judge rightly observed that while the Committees may have devised a scheme to grant user rights to overage dependents of full members, the same cannot be in violation of the explicit requirements of the AoA. 58. The right to use the facilities cannot be disputed to be available only to the members of Respondent No. 1 Club. The AoA are binding on the company and any deviation from the same can only be through formal amendments and not through the informal practices adopted by the Committ....
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....s of such members cannot be accorded the status of contractual rights which are enforceable under the Specific Relief Act, 1963. The privilege to use the facilities under the concept which, prima facie, appears to be in violation of AoA, is undisputedly terminable in nature and cannot be enforced in terms of Section 14 (b) of the Specific Relief Act, 1963. 67. In our opinion, the learned Single Judge rightly observed as under: 36. Furthermore, even if we assume, for the sake of argument, that a contract of grant of privilege of use of the club under the concept of 'Green card holder rights' exists between the Plaintiffs and the Club, this contract is terminable in nature and cannot be specifically enforced. According to Section 14 (d) of the Specific Relief Act contracts of a determinable nature cannot be specifically enforced. Additionally, Section 41(e) of the Specific Relief Act prohibits the granting of an injunction to prevent the termination of such contracts. This legal principle has been reaffirmed in cases like Ramswaroop Sunderlal Goyal v. North India Association, 23 where it was held that the conduct of private contracts, such as club memberships, cannot be supervised ....
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....gstanding practices), these practices must be within the with lawful obligations of the Club and cannot contravene an existing framework-here, the AoA of the Club. In this case, the continued grant of user rights to dependents over the age of 21 without requiring formal membership, as mandated by Article 13 (3b), was not merely an informal accommodation. The reliance on such practices to claim rights overlooks the fundamental legal principle that implied contracts cannot override express contracts. Where the AoA prescribes specific rules governing access and membership, no custom, however longstanding, can be invoked to defeat or bypass those terms. The Plaintiffs' argument that past practices confer enforceable legal rights fails under the Indian Contract Act. For such practices to create an implied contractual obligation, they must be lawful and consistent with the express terms of the governing contract-in this case, the AoA. 68. In regard to principles of natural justice not followed on the appellants not given a hearing, it cannot be ignored that the appellants were only given a right to use the facilities which prima facie was dehors the AoA. It is not denied by the appellan....