Attention was drawn by the plaintiff's counsel to Section 118(10) of the New Act which states that every company shall observe secretarial standards with respect to general and Board Meetings specified by the Institute of Company Secretaries of India constitutedS.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 under Section 3 of Company Secretaries Act, 1980 and approved as such by the Central Government. During the course of arguments, the plaintiff's counsel produced copy of draft secretarial standards, production of which was objected to by the defendants on the ground that the same has not been notified.
However, during the further course of arguments, the plaintiff produced 'SS-5 SECRETARIAL STANDARD ON MINUTES' published by the Institute of Companies secretary of India in September 2007 which has come into effect from 20.9.2007. Further more, these are the same standards as are reflected in Section 119(10) of the Old Act. Thus, the objection of the defendants on its filing can not be sustained. It was pointed out that clause 6 at internal page 12 of the said standards prescribes practice to be followed in signing and dating of the Minutes. As per Clause 6.1 "Minutes of the meeting of the Board or Committee should be signed and dated by the Chairman of the Meeting or the Chairman of the next Meeting".
On the strength of this, it is argued that bare perusal of the Minutes of the meeting dt. 9.12.14 or for that matter even of the other meetings, it would be revealed that though the Minutes are signed by the S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 Chairman at the last page and initialed by him on all the pages but the date column at the last page as well as the signatures and the initials have been left undated. For this reason also, the Minutes are said to be not in conformity with secretarial practice making it an offence punishable under Section 118 (11) of the New Act. On the same strength, the said Minutes are said to be fabricated. As stated earlier, the defendants have not responded to this argument of plaintiff thereby literally affirming the same.
Minutes of Proceedings of General Meeting, Meeting of Board of Directors and Other Meeting and Resolutions Passed by Postal Ballot
Notified Date of Section: 01/04/2014
1 ,2&4[118. (1) Every company shall cause minutes of the proceedings of every general meeting of any class of shareholders or creditors, and every resolution passed by postal ballot and every meeting of its Board of Directors or of every committee of the Board, to be prepared and signed in such manner as may be prescribed and kept within thirty days of the conclusion of every such meeting concerned, or passing of resolution by postal ballot in books kept for that purpose with their pages consecutively numbered.]
(2) The minutes of each meeting shall contain a fair and correct summary of the proceedings thereat.
(3) All appointments made at any of the meetings aforesaid shall be included in the minutes of the meeting.
(4) In the case of a meeting of the Board of Directors or of a committee of the Board, the minutes shall also contain—
(a) the names of the directors present at the meeting; and
(b) in the case of each resolution passed at the meeting, the names of the directors, if any, dissenting from, or not concurring with the resolution.
(5) There shall not be included in the minutes, any matter which, in the opinion of the Chairman of the meeting,—
(a) is or could reasonably be regarded as defamatory of any person; or
(b) is irrelevant or immaterial to the proceedings; or
(c) is detrimental to the interests of the company.
(6) The Chairman shall exercise absolute discretion in regard to the inclusion or non-inclusion of any matter in the minutes on the grounds specified in sub-section (5).
(7) The minutes kept in accordance with the provisions of this section shall be evidence of the proceedings recorded therein.
(8) Where the minutes have been kept in accordance with sub-section (1) then, until the contrary is proved, the meeting shall be deemed to have been duly called and held, and all proceedings thereat to have duly taken place, and the resolutions passed by postal ballot to have been duly passed and in particular, all appointments of directors, key managerial personnel, auditors or company secretary in practice, shall be deemed to be valid.
(9) No document purporting to be a report of the proceedings of any general meeting of a company shall be circulated or advertised at the expense of the company, unless it includes the matters required by this section to be contained in the minutes of the proceedings of such meeting.
3&5[(10) Every company shall observe secretarial standards with respect to general and Board meetings specified by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act, 1980 (56 of 1980), and approved as such by the Central Government.]
(11) If any default is made in complying with the provisions of this section in respect of any meeting, the company shall be liable to a penalty of twenty-five thousand rupees and every officer of the company who is in default shall be liable to a penalty of five thousand rupees.
(12) If a person is found guilty of tampering with the minutes of the proceedings of meeting, he shall be punishable with imprisonment for a term which may extend to two years and with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees.]
Exceptions/ Modifications/ Adaptations
1. In case of Section 8 company - the section shall not apply as a whole except that minutes may be recorded within thirty days of the conclusion of every meeting in case of companies where the articles of association provide for confirmation of minutes by circulation - Notification dated 5th june, 2015.
“Provided that in case of a Specified IFSC public company, the minutes of every meeting of its Board of Directors or of every committee of the Board, to be prepared and signed in the manner as may be prescribed under sub section (1) at or before the next Board or committee meeting, as the case may be and kept in books kept for that purpose.”.- Notification Date 4th January, 2017.
“Provided that in case of a Specified IFSC private company, the minutes of every meeting of its Board of Directors or of every committee of the Board, to be prepared and signed in the manner as may be prescribed under sub section (1) at or before the next Board or committee meeting, as the case may be and kept in books kept for that purpose.”.- Notification Date 4th January, 2017.
Minutes of Proceedings of General Meeting, Meeting of Board of Directors and Other Meetings and Resolutions Passed by Postal Ballot
(1) (a) A distinct minute book shall be maintained for each type of meeting namely:-
(i) general meetings of the members;
(ii) meetings of the creditors
(iii) meetings of the Board; and
(iv) meetings of each of the committees of the Board.
Explanation.- For the proposes of this sub-rule, resolutions passed by postal ballot shall be recorded in the minute book of general meetings as if it has been deemed to be passed in the general meeting.
(b) (i) The minutes of proceedings of each meeting shall be entered in the books maintained for that purpose along with the date of such entry within thirty days of the conclusion of the meeting.
(ii) In case of every resolution passed by postal ballot, a brief report on the postal ballot conducted including the resolution proposed, the result of the voting thereon and the summary of the scrutinizer’s report shall be entered in the minutes book of general meetings along with the date of such entry within thirty days from the date of passing of resolution.
(d) Each page of every such book shall be initialed or signed and the last page of the record of proceedings of each meeting or each report in such books shall be dated and signed –
(i) in the case of minutes of proceedings of a meeting of the Board or of a committee thereof, by the chairman of the said meeting or the chairman of the next succeeding meeting;
(ii) in the case of minutes of proceedings of a general meeting, by the chairman of the same meeting within the aforesaid period of thirty days or in the event of the death or inability of that chairman within that period, by a director duly authorised by the Board for the purpose;
(iii) In case of every resolution passed by postal ballot, by the chairman of the Board within the aforesaid period of thirty days or in the event of there being no chairman of the Board or the death or inability of that chairman within that period, by a director duly authorized by the Board for the purpose.
(e) The minute books of general meetings, shall be kept at the registered office of the company and shall be preserved permanently and kept in the custody of the company secretary or any director duly authorised by the board 1[Omitted].
(f) The minutes books of the Board and committee meetings shall be preserved permanently and kept in the custody of the company secretary of the company or any director duly authorized by the Board for the purpose and shall be kept in the registered office or such place as Board may decide.
Original Omitted Content - or such other place as may be approved by the Board
READ CASE HERE:
S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15
IN THE COURT OF SHRI MANISH YADUVANSHI ADDITIONAL DISTRICT JUDGE 06: CENTRAL : DELHI. CS No. 11/15 S.P Bansal ..... Plaintiff Versus Ravinder Manchanda & Ors. ..... Defendants.
Appearance : Sh Gautam Dutta and Sh Sanjay Dhawan, ld. Counsel for plaintiff. Sh Sameer Diwan, ld. Counsel for defendants no. 1 & 2. Sh Sanjeev Sindhwani ld. Sr.Advocate alongwith Sh Ramesh Kr, ld. Counsel for defendant no. 3. ORDER
1. This order shall dispose of the plaintiff's application under Order 39 Rules 1 & 2 r/w section 151 CPC dated nil supported with plaintiff's affidavit dt. 5.1.2015 filed by him in his suit by virtue of which he seeks various reliefs of declaration as well as injunctions, permanent and mandatory.
2. Here under is brief reference of facts that arise from completed pleadings.
S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 2.1. The third defendant, herein after called as 'DDCA' is admittedly a company duly incorporated under Section 25 of the Old Companies Act 1956, herein after, "Old Act". It has thus power to dispense with the term "Limited" and is hence called as an "Association". It is governed accordingly with its Memorandum and Articles of Association. It is constituted to promote the game of Cricket. It has 4300 members of which the first defendant is Treasurer while the second is Vice President. 2.2. Plaintiff, also a member of DDCA was admittedly elected as a President of DDCA by 4300 members in an AGM of the company held on 30.12.2013 and by virtue of Clause 32 of the Articles, the President is the Chairman of the Executive Committee of DDCA.
2.3. As per Clause 38 of the Memorandum and Articles, the Executive Committee comprises of a President, three Vice Presidents, one Hony. General Secretary, one Hony. Sports Secretary, one Hony. Club Secretary, one Hony. Treasurer, 8 Joint Secretaries and 11 more members out of whom three can be the nominees of Government of India.
2.4. The plaintiff also claims to be the incumbent Vice President of the Board of Control for Cricket in India. He claims to be associated with S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 DDCA in various capacities since more than 20 years and has served DDCA as its elected General Secretary for more than 12 years. On 30.12.2013, he was elected as president DDCA for a term of three years ending 2016 alongwith 16 other office bearers. Defendants no. 1 & 2 were also elected as Treasurer and Vice President respectively in the same AGM.
2.5. The E.C had held a meeting on 3.12.2014 after notice dated 27.11.2014 in which minutes of previous meetings were passed and accounts of DDCA were to be discussed, confirmed and ratified. Since the auditor's report was not served upon some of the members, the meeting was adjourned for 5.12.2014. The defendants have stated it as a matter of record.
2.6. In meeting dated 5.12.2014, the accounts and internal auditors' report were discussed but the meeting was to be adjourned for 9.12.2014 as a Court order dated 5.12.2014 was served therein that had stayed the proposed AGM.
2.7. On 9.12.2014, the internal auditors of DDCA attended the meeting and clarified that their report was observations seeking clarifications from the DDCA management qua comments and queries raised therein. S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 This meeting was stated to have been interrupted by umpires, managers, coaches etc who were protesting on non payment of their pending dues. It is averred that D1 and D2 ensured that the auditors report could not be discussed on that occasion and thus forced the Chairman/plaintiff to have the meeting adjourned. However, it is alleged that later in the same night the defendants and two other members convened a clandestine and parallel Board meeting wherein they passed an illegal resolution against the President/plaintiff and General Secretary, DDCA assuming and usurping the powers of the elected President and Genl. Secretary and declared them as interim President and interim Genl. Secretary in violation of Memorandum and Articles. It is averred that copy of alleged resolution by way of circulation dated 6.12.2014 was purposely served on the plaintiff only on 10.12.2014 i.e after the parallel meeting dated 9.12.2014 was over. This resolution, amongst several resolves also resolved that in supersession of resolution dated 13.1.2014, the defendants no. 1 & 2 will be authorized to sign, file any applications, petitions, documents etc in Courts, Tribunals including government departments. It also contained resolution regarding change in authorization for the operation of bank accounts of DDCA. Amongst the S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 four officials empowered in supersession of resolution dt. 13.1.2014, two of them are D1 and D2. The plaintiff relies on copy of courier receipt issued by Sterling Express Pvt Ltd which shows that copy of resolution was delivered to him on 10.12.14 in an envelope dispatched to his official address by defendant no.1 from his own official address. The plaintiff also relies on internet generated courier tracking report which is on record. It is also averred that the said resolution was not circulated to members as evident from the fact that signatures of all members were proposed to be obtained on a single paper thereby making the members biased. The copy of resolution is at page 31 to page 38 of the paper book filed by the plaintiff. The copy of courier receipt and copy of envelope are at pages 39 & 40 of said paper book while the internet tracking report is at page 1 filed with list of documents dt. 25.2.15. The said meeting is said to be illegal as minutes of previous meetings could not have been circulated and ratified by the Board members for want of service of notice for the meeting. It is further said to be illegal as the official meeting of the E.C held earlier on 9.12.14 at 6.30 p.m was duly adjourned. The attendance record of meeting held at 6.30 p.m is at page 130 of the paper book which reveals S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 that 30 members including the plaintiff as President attended the meeting. Further, the draft Minutes of meeting convened on 5.12.14 and 9.12.14 at 6.30 p.m under Chairmanship of plaintiff are available for reference at pages 1 to 9 of the paper book.
2.8. It is further averred that defendants illegally called an emergent meeting of E.C on 12.12.14 without serving any notice. It is averred that defendants had made illegal communication with bankers of DDCA and have also forced, intimated and threatened the official staff into handing over the official cheque books of DDCA to them and it is thus apprehended that they have illegally signed cheques in violation of the mandate and trust reposed by 4300 members of DDCA.
2. Previous to this suit, the plaintiff had filed a similar suit bearing no. 472/14 against these defendants which he had withdrawn later on 5.1.2015 with liberty to file the same afresh. He intimated the defendants through his counsel on 24.12.14 vide a letter of even date (page 155 of paper book) about listing of the said suit on 2.1.2015. However, he alleges that defendants in order to circumvent due process of law, convened a hurriedly called 'emergent meeting' on 2.1.2015 without serving due notice and its agenda. In the said meeting, they S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 passed illegal resolution suspending the President of plaintiff and Genl. Secretary without following due process and proceedings. The meetings are said to have been convened in luxurious five star hotel in New Delhi. It is submitted that the internal auditors report has made 70 indictments but only the plaintiff and Genl. Secretary have been targeted. Accordingly, following reliefs are prayed in the main suit.
(A) Pass a Decree of Declaration, declaring that the "parallel meeting of the Executive Committee of the Delhi & District Cricket Association (DDCA) held on dt. 09th December 2014 not chaired by the elected President of the DDCA but by the Defendant no. 2 or any body else, is ultravires, illegal & an abuse of the due process of law hence unenforceable.
(B) Pass a Decree of Declaration, declaring that the "parallel meeting of the Executive Committee of the Delhi & District Cricket Association (DDCA) held on dt. 09th December 2014 not chaired by the elected President of the DDCA but by the Defendant No. 2 or any body else whereby assuming all powers of the elected President & the General Secretary, onto themselves i.e defendants no. 1 & 2 is unlawful and contrary to the provisions of the Memorandum & Articles of Association of the DDCA and also prejudicial to the interest of the company (DDCA), thus rendering any decisions and further decisions by the said Interim President & Interim General Secretary, if any, as ultravires, illegal, inoperative & unenforceable.
S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 (C) Pass a Decree of Mandatory Injunction in favour of the plaintiff and against the defendants whereby directing the Executive Committee of the DDCA/defendant no. 3 specifically to "recognize" the powers of the duly elected President & General Secretary, forthwith and not to recognize the powers & posts of Interim President & Interim General Secretary illegally created. (D) Pass a Decree of Permanent & Mandatory Injunction in favour of the plaintiff and against the defendants whereby directing and permanently restraining the defendants no. 1 & 2 and also the Executive Committee of the defendant no. 3, DDCA from assuming the powers of the elected President & General Secretary, and restraining them further from assuming such powers in the name of "interim President & interim General Secretary" respectively and finally restraining them permanently from assuming the powers of the Elected President & General Secretary of the DDCA without the mandate of the members of the DDCA, in any manner whatsoever.
(E) Pass a Decree of Declaration in favour of the plaintiff and against the defendants whereby declaring that the action of the defendants in suspending the plaintiff as without the due process of law and hence illegal and unenforceable.
(F) Pass such other order(s) or direction(s) or relief(s) which this Hon'ble Court may deem fit and proper, just and equitable in favour of the plaintiff in the facts and circumstances of the case. S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15
4. The following are the reliefs that the plaintiff prays in the application in hand viz:
(A) Restrain & direct the defendants not to interfere in exercise of the powers of the duly elected President & General Secretary of the company, and further restrain & direct them from recognizing the powers & posts of alleged Interim President & Interim General Secretary.
(B) Restrain & direct the defendants no. 1 & 2 and also the Executive Committee of the defendant no. 3, DDCA from assuming the powers of the elected President & General Secretary, and restrain them further from assuming the powers in the name of "interim President & interim General Secretary" respectively and finally restrain them from assuming the powers of the Elected President & Elected General Secretary of the DDCA without the mandate of the members of the DDCA, in any manner whatsoever.
(C) Restrain the defendant to act upon and carrying out the orders passed so far by the alleged interim President and the interim General Secretary.
(D) Restrain & direct the defendant no. 3, to cancel and terminate all orders passed by the defendants including the "alleged illegal suspension" of the plaintiff i.e the President & General Secretary, or such orders, decision(s) being illegal inoperative and ultravires.
S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 (E) Pass such other order(s) or direction(s) or relief(s) which this Hon'ble Court may deem fit and proper, just and equitable in favour of the plaintiff in the facts and circumstances of the case.
5. The Court upon discharging the caveats and securing service of defendants passed an interim order on 16.1.2015. Broadly speaking, the executive committee meetings were stayed on the said date till the next date of hearing i.e 24.1.15 pending reply and written statement. Further, on 2.2.15 although no directions were issued, however, both the said orders were taken up by the defendants herein in FAO no. 21/15 which was disposed of by a consent order dt. 22.1.15 passed by the Hon'ble High Court of Delhi. Hon'ble Justice R. V. Easwar, Former Judge, Hon'ble High Court of Delhi was appointed as Chairman of meetings of DDCA with a rider that agenda relating to respondents/plaintiffs herein shall not be taken up for the time being and the financial transactions of DDCA shall be carried out with approval of the Chairman during the meetings. This arrangement is to continue till this Court decides the application in hand. The plaintiff and Sh Anil Khanna, Genl. Secretary of DDCA were permitted to attend the meetings as members of E.C till then. S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 The Hon'ble High Court also directed this Court to expedite the hearing in this matter.
6. In between, several applications were filed and disposed of by the Court from time to time. The record pertaining to the meetings was also called by the Court from its Court appointed custodian. The parties obtained certified copies thereof and the third defendant filed interim reply to the application in hand on 21.2.2015 which the other defendants propose to adopt as per statement made at Bar by their counsels during arguments. The defendants have also filed joint Written Statement on 25.2.2015. The application in hand has been argued on two days i.e. on 25.2.2015 & 26.2.2015 in accordance of the time consumed that has been recorded in separate order sheets of the said days.
7. In the Written Statement, the defendants have made preliminary submissions to the effect that plaintiff has not placed true and correct facts. According to the defendants, the real controversy is regarding heavy financial embezzlement caused by the plaintiff and Sh Anil Khanna by siphoning off huge funds in misuse of their positions in DDCA. It is submitted that plaintiff was elected as President in S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 AGM held on 30.12.13 and in the E.C meeting dt. 13.1.14 resolution for change of authorized signatory for operation of bank account was passed in favour of several members including the plaintiff herein. It is averred that on gaining financial control, the plaintiff in connivance with Sh Anil Khanna illegally transferred Rs. 1,55,50,000/ in favour of three companies through RTGS on 30.1.14 without any such power. It is said that as per clause 46(g) of Articles, office of Director would be treated as vacant if he is removed in pursuance to Section 284 of the Companies Act, 1956 (now Section 169 of the Companies Act, 2013). Herein after called as "New Act". As per Article 46(i), if any Directors acts in contravention of Section 299 of Old Act (Section 184 of new), by virtue of that contravention such Director is deemed to have vacated his office. It is averred that in the meeting held in June, 14 the plaintiff did not disclose about said financial transactions. In the mean time, Sh V.K Bajaj of M/s V.K Bajaj & Associates, the internal auditors of DDCA raised objections in their report regarding various financial transactions carried out by the plaintiff including the one above and thus the plaintiff as well as Sh Anil Khanna were S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 confronted and their explanation was sought in subsequent meetings of DDCA dt. 3.12.14 and 5.12.14. It is stated that Sh Anil Khanna informed that he signed the papers for disbursement of amount aforestated on instructions of plaintiff who stated that the said amount is being disbursed on instructions of BCCI. The plaintiff stated that the said amount was disbursed as investment on behalf of D3. He thereafter abruptedly adjourned the meeting for 9.12.14. 7.1. On 9.12.14, it is alleged that the plaintiff was instrumental in disturbing the house proceedings as a group of 4050 persons barged in the meeting room and started agitating about their outstanding payments. The plaintiff tried to adjourn the said meeting also. However, majority members of E.C insisted to proceed further. On this, the plaintiff abruptly left the meeting room. The E.C members felt seriously aggrieved and decided to proceed further with the same meeting. A resolution was then passed withdrawing the financial as well as related power of both of them. Another resolution was passed appointing a new set of signatories for operation of bank account of D3.
7.2. In meeting dt. 13.12.14, 14 members of E.C discussed and S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 deliberated upon the misdeeds of the President and the Genl. Secretary and resolved to constitute a Fact Finding Committee comprising of four directors of D3.
7.3. The E.C of D3 again met on 22.12.14 when it was informed that as per the internal auditors report, more financial irregularities were found which were attributable to the plaintiff alone. It was found that the plaintiff had also executed some oral agreement with an agency "Book my show" for sale of tickets of an international cricket match at Delhi and despite huge collections, no amount was deposited with D3.
7.4. On 2.1.2015, the FFC submitted its report to the E.C revealing of more financial irregularities. The house decided to suspend the plaintiff as well as Sh Anil Khanna forthwith pending inquiry. 7.5. It is submitted that one such company in which part funds of D3 were transferred namely M/s Rattan Industries Limited has plaintiff and his other family members as Directors on its Board. It is averred that the plaintiff, on the basis of false bills, had released huge amounts in favour of various individuals/firms towards professional and illegal charges, although they were never engaged for any legal S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 work on behalf of D3. Similar was found to be the position with respect to various job works. A show cause notice dt. 12.1.15 was issued to the plaintiff which has not been replied to by him till date. The defendants provide the break up of the amounts invested by the plaintiff in the three companies. It is averred that plaintiff has not placed on record Minutes of meetings dt. 3.12.14, 5.12.14 and 9.12.14. It is averred that a sum of Rs. 50 lacs has been shown as advance/loan to the plaintiff in the financial statement of one of the company namely M/s Shri Ram Tradecom Pvt Ltd. The said statement is available at pages 44 and 45 of the paper book furnished by the defendants with their written statement. It is further submitted that as per the provisions of Companies Act as well as under the Memorandum and articles of Association, the plaintiff is liable to be removed as a Director and such removal order can be passed by any ordinary resolution of the company. Such powers are said to be inherently invested in the E.C.
7.6. Preliminary objection is raised that the suit as framed is not maintainable for want of concealment of material facts and also for want of jurisdiction which in this case is vested in an appropriate S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 forum like Company Law Board or the Company Court. It is averred that the plaintiff has not assailed the suspension order or the Minutes /resolution of meeting dt. 2.1.15. It is informed that a police complaint has been filed against him at P.S I.P Estate. It is averred that suit has not been duly verified, it is bad for non joinder of necessary parties, deficient in Court fees and not valued properly.
8. The reply on merits is amplification of the facts constituting part of preliminary submissions and preliminary objections. Additionally it is said that as per clause 47 of the Memorandum and Articles, E.C of D3 is supreme in which management and control of D3 vests. The defendants have denied that they had acted in violation of either the Companies Act or the Memorandum and Articles of Association of D3. The allegations made by the plaintiff are said to be false and scandalous in response to the averments of the defendants holding cheque books of D3 and issuing cheques. It is again reiterated that the plaintiff is directly involved with M/s Shri Ram Tradecom Pvt Ltd and the other two companies namely M/s Mapple Infra Reality and M/s Vidhan Infra Pvt Ltd have interse financial dealings.
9. In response to the application in hand, the third defendant has taken S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 similar ground of contest that is forming part of the defence of defendants as set out by them in the written statement. Dismissal of the application as well as the suit itself is accordingly prayed.
10. Since rejoinder has not been filed so far, the plaintiff's counsel has chosen to present arguments on averments that are yet to be replied and of which this court has taken note of during arguments and shall incorporate in rest of the order.
11. Sh Gautam Dutta, Advocate has argued for the plaintiff. Sh Sanjeev Sindhwani, ld. Sr. Advocate has argued on behalf of all the defendants. I shall be recording the gist of arguments of respective counsels whilst placing them against each other where ever such an argument is respectively met. As a matter of record, some of the submissions of the plaintiff's counsel were not responded to by the defendants. They shall be specified accordingly.
12. In order to show strong presence of all the three essential tenets i.e the tristars essential for grant of temporary injunction which are a prima facie case, balance of convenience and irreparable loss not worth being compensated in money, the ld. Counsel for plaintiff having regard to the fact that the Court has heard the parties on S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 several occasions and is well conversant with the facts, has started straightway with the E.C meeting dt. 9.12.14 that was convened under the Chairmanship of the plaintiff at 6.30 p.m on the said day. Here I must clarify that against the stand of the defendants, the plaintiff has placed on record the draft Minutes of E.C meeting dt. 3.12.14, 5.12.14 as well as 9.12.14. The plaintiff, in his compilation of documents has placed on record copy of Resolution by way of circulation of the members of the E.C, DDCA dt. 6.12.14 at pages 31 to 38 of plaintiff's paper book. Interestingly, the same resolution is not available in the set of documents filed on record of this case on 6.2.15, by the defendants' counsel in compliance of the directions as contained in order dt. 3.2.2015. These are the same documents which were in the custody of Sh Vikas Katyal, Executive member/Director of D3 pursuant to order of the Court dt. 16.1.15. The plaintiff has filed his own draft Minutes of meeting dt. 9.12.14 which was scheduled at 6.30 p.m on 9.12.14 which are at pages 9 & 10 of the documents filed by him with list of documents dated 25.2.15. According to ld counsel, the said Minutes including the others could not be approved as the plaintiff was restrained by the defendants by S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 passing various resolutions in the parallel meeting dt. 9.12.14 convened in another corner of the DDCA office i.e club room at 10.45 p.m. The compilation of the documents filed by custodian reveals that there is another set of details of the meeting dt. 9.12.14 which are actually the Minutes duly signed by the Chairman at each page. The same are available at pages 138 to 145 of the compilation. Thus, the Court is faced with two different Minutes of the meeting scheduled at 6.30 p.m on 9.12.14. The draft Minutes of the same meeting filed by the plaintiff reveal that it was adjourned by him as it was disrupted. It does show presence of 27 members. The signed Minutes of the same meeting goes on to show presence of 24 members and five special invitees who were present at 6.30 p.m and thereafter 13 members and a special invitee at 10.45 p.m. The plaintiff has also filed photocopy of attendance sheet of the meeting that was convened at 6.30 p.m. As many as 30 persons had signed on it. This document is not found available in the documents of the defendants. It is apparent that in the Minutes of the meeting filed by the plaintiff names of all special invitees are not shown whereas that is not the case with the Minutes filed by the defendants. However, S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 facts remains that there are two Minutes of the same meeting before this Court. The defendants have also filed the original attendance sheet of the 13 members and one special invitee who attended the meeting at 10.45 p.m. Same is at page 162. It is therefore, apparent that the remaining members who were present at 6.30 p.m were not part of the meeting scheduled in the night time. According to the defendants, there was majority as 14 members were present out of total 27. According to the plaintiff, the same was meeting of minority members as the special invitee is not member of the E.C. Although none of the counsels addressed on quorum however, clause 44 of the Memorandum and Articles provide that 7 members of E.C shall form the quorum for the meeting of E.C. Thus, the arguments in respect of majority or minority can be dispensed with. 12.1. This Court has two versions. First, that the meeting at 6.30 p.m was adjourned by the President/plaintiff. Second, that the disrupted meeting continued again at 10.45 p.m on the same day. It is apparent from the comparison of Minutes of both the meetings that they have been differently drawn so far as the first meeting is concerned. It is also evident on a comparative analysis of Resolution by way of S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 circulation dt. 6.12.14 and the Resolutions made after 10.45 p.m on 9.12.14 that in effect the points already circulated by Resolution dt. 6.12.14 were brought into effect after 10.45 p.m on 6.12.14. The plaintiff has prima facie shown that the Resolution dt. 6.12.14 was received by him only on 10.12.14 which fact therefore, vitiates the meeting that was convened at 10.45 p.m, be it a continuation of the meeting from the evening or a parallel meeting. More over, the Minutes filed by the defendants do not throw any light on the fact as to why, if it was a continued meeting, majority of the members earlier present were not party to the subsequent meeting.
13. The attention of the Court was drawn to a letter of one Sh. Dinesh Saini, Joint Secretary (Corporate Affairs) DDCA, which was duly receipted at the office of D3 and written to D1 and 2 in particular and all other Directors for information and necessary action on 21.1.15, copy of which is available at page 63 of the documents filed alongwith the plaintiff's application under Order 39 Rule 2A CPC dt.2.2.15 that was otherwise dismissed. It has been made a point for the Court to know that the said Sh Dinesh Saini is one of the members who attended the late night meeting dt. 9.12.14 as well as S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 at 6.30 p.m. This fact is confirmed from the original attendance sheet. Sh Saini has written this letter stating therein that the proceedings of the Board of Meetings held on 9.12.14 and 13.12.14 have been wrongly drawn and the Resolutions which were not passed in the meetings have been wrongly shown as passed by the majority, whereas the same is not true. The letter points out that one such resolution is Resolution no. 6 dt. 9.12.14 wherein Sh C.K Khanna was authorized to attend the meetings of BCCI as representative of DDCA. He states that the minutes have not recorded his nonconcurrence like on the issue of pointing Mr. Chetan Chauhan/D2 as Chairman of all the meetings. He also complains that he has not been allowed inspection of books as well as provided copies of video CD of the meetings. Here I am mindful of the fact that the notices issued from time to time by the defendants regarding holding of meetings specify that the proceedings of the meetings shall be videographed. The Court had also directed the defendants to file video CDs of the meetings. Video CD of meeting dt. 9.12.14 was not filed. On directions of the Court with respect to clarification on the issue, the official Sh Vikas Katyal filed an S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 affidavit that no DVD in respect of the meeting dt. 9.12.14 was recorded and made. No clarification has come as to whether there was no arrangement on 9.12.14 for video graphing the proceedings or if it was made then why no such DVD was recorded. This fact assumes importance in view of the fact that the DVDs of three other meetings dt. 13.12.14, 22.12.14 and 2.1.15 have been filed on record.
14. Capitalizing on the above, the plaintiff's counsel filed his own affidavit sworn by him on 25.2.15 solemnly declaring therein that he has personally viewed the DVDs that were supplied to him. It is sworn on oath that contents of the DVD for meeting dt. 13.12.14 and the Minutes of the said meeting filed in this Court differ and hence tampered. He swore that dissent recorded by Sh Dinesh Saini regarding accounts of company and also regarding compounding applications before CLB do not form part of the Minutes. Interestingly, no response to the above has come during arguments from the defendants. No counter affidavit was filed rather it was stated that the plaintiff's counsel must not step in the shoes of his client.
15. The matter does not end here. There is another aspect left unattended S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 to by the defendants. According to the plaintiff, the defendants on 10.12.14 despatched extract of the Resolutions passed in the Committee meeting of DDCA to the ROC, NCT of Delhi & Haryana, Nehru Place, New Delhi, copy of which document is available on pages 164 to 167 of the defendants compilation. It is pointed out that Resolution no. 6 as resolved in late night meeting dt. 9.12.14 is missing from the said document which is infact missing. It is pointed out that thus the Minutes relied upon are fabricated. It is argued that non recording of the Minutes properly or tampering of the same are offences punishable under Section 118 (11) and (12) of the New Act which has been notified w.e.f 1.4.14. The combind effect of the above is that prima facie there appears to be some discrepancies in recording of the minutes of the dissent etc which in turn raises question mark on their genuinity. Nothing was argued against the same by the defendants.
16. My attention was drawn by the plaintiff's counsel to Section 118(10) of the New Act which states that every company shall observe secretarial standards with respect to general and Board Meetings specified by the Institute of Company Secretaries of India constituted S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 under Section 3 of Company Secretaries Act, 1980 and approved as such by the Central Government. During the course of arguments, the plaintiff's counsel produced copy of draft secretarial standards, production of which was objected to by the defendants on the ground that the same has not been notified. However, during the further course of arguments, the plaintiff produced 'SS5 SECRETARIAL STANDARD ON MINUTES' published by the Institute of Companies secretary of India in September 2007 which has come into effect from 20.9.2007. Further more, these are the same standards as are reflected in Section 119(10) of the Old Act. Thus, the objection of the defendants on its filing can not be sustained. It was pointed out that clause 6 at internal page 12 of the said standards prescribes practice to be followed in signing and dating of the Minutes. As per Clause 6.1 "Minutes of the meeting of the Board or Committee should be signed and dated by the Chairman of the Meeting or the Chairman of the next Meeting". On the strength of this, it is argued that bare perusal of the Minutes of the meeting dt. 9.12.14 or for that matter even of the other meetings, it would be revealed that though the Minutes are signed by the S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 Chairman at the last page and initialed by him on all the pages but the date column at the last page as well as the signatures and the initials have been left undated. For this reason also, the Minutes are said to be not in conformity with secretarial practice making it an offence punishable under Section 118 (11) of the New Act. On the same strength, the said Minutes are said to be fabricated. As stated earlier, the defendants have not responded to this argument of plaintiff thereby literally affirming the same.
17. The plaintiff's counsel thereafter referred to the second meeting dated 13.12.14 in order to point out the irregularities, which according to him, are evident from the bare perusal of record. The Minutes of the said meeting are at pages 152 to 155 of the compilation of documents filed by the defendants. Reference was made in this context to Resolution no. 1 of meeting dated 9.12.14. According to the same, Sh Chetan Chauhan (Vice President)/defendant no. 2 was elected as the Chairman to preside all meetings of the members of the E.C of the association. It was also resolved that the plaintiff, the President shall not preside as Chairman of any meeting of the E.C and he can not form/be a part of S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 any committee/sub committee in DDCA till the time his legal and financial powers have been set aside. It was urged that the said resolution could not have been passed as against the Articles of Association. Perusal of the same reveal that according to Article 45 it is the President who shall be the Chairman of all meetings of the E.C at which he is present. In the absence of President, the E.C shall elect one of their members to be the Chairman of the meeting. Likewise, as per Article 32, the President shall preside as Chairman of every general meeting of the Association, but if at any meeting the President is not present at the time of holding the same or he is not willing to preside, the members present shall choose one of their member to be the Chairman of that meeting. It is therefore, amply clear that only the President can be the Chairman of an E.C meeting unless he is absent from the same. It is an admitted case that the plaintiff has been elected as President of E.C. His term is yet to expire. It is also apparent that no other official has been replaced as President. Thus, forceful suspension of the President appears to be improper particularly when the Articles do not provide for same specifically although the same does provide for termination of S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 membership. It is a case where the E.C of D3 minus its President as well as Genl. Secretary has decided to revoke the powers inherently vested in them and have assumed the same powers thereby vesting it with defendant no. 2.
18. It was argued that the meeting dated 13.12.14 was termed as "emergent meeting". It is submitted that there is no such provision for calling emergent meetings and in any case if such a meeting is called, it is imperative to disclose the grounds of emergency. It is further argued that being a company incorporated under Section 25 of the Old Companies Act, the D3 can not call any such emergent meeting. It is also urged that as per Section 173(3) of the New Act a meeting of the Board shall be called by giving not less than 7 days notice in writing to every Director at his address registered with the company and such notice shall be sent by hand delivery or by post or by electronic means. The same is subject to provision that a meeting of the Board may be called at a shorter notice to transact urgent business subject to condition that at least one independent Director, if any, shall be present at the meeting. It is further provided that in case of absence of independent Directors from such a meeting of the S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 Board, decisions taken at such a meeting shall be circulated to all the Directors and shall be final only on ratification thereof by atleast one independent Director, if any. The term 'independent Director' is defined in Section 2(47) of the New Act which means an independent Director referred to in Section 149 (6) of the New Act. According to Section 149(6), a Director in order to qualify as an independent Director has to fit into clauses (a) to (f). According to the plaintiff, there is no independent Director of DDCA and hence, the DDCA can not call a meeting at shorter notice. It is also submitted that the defendants have not filed any proof in support of the issuance of notices for meetings scheduled on 13.12.14, 22.12.14 and 2.1.15. The notices of these three meetings are at pages 135 to 137 of the documents filed by the defendants. With the same compilation photocopies of some postal receipts dt. 19.12.14 are annexed. It is not explained as to in what connection the said receipts have been filed but appears to be qua meeting dt. 22.12.14. Conversely, it is a stand of the counsel for defendants that Section 173(3) of the New Act specifies that the condition of presence of one independent Director is subject to there being any in the S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 company. It is submitted that since there is no independent Director the said condition is not attracted herein. I am in agreement with the ld. Counsel for defendants. It is clear from perusal of Section 173(3) of the New Act that the Board can call a meeting at shorter notice. It is also a matter of record that ld. Counsel for defendants filed photocopies of several speed post receipts dt. 11.12.14 and 30.12.14 today in the morning with an undertaking that copies of said documents shall be supplied to the plaintiff's counsel. These receipts are said to be in support of proof of despatch of notices for meetings dated 13.12.14 and 2.1.15. In both these cases, it is observed that the notices have been despatched only two days prior to the date of scheduled meeting. The defendants are required to produce prima facie proof that the said notices have been despatched to every Director at his address registered with the company. There is nothing before me to form an opinion that the postal receipts dt. 11.12.14, 19.12.14 and 30.12.14 have been sent to all the Directors at their registered addresses. Further, there is no proof of actual delivery of the notices. In the absence of the same, on a prima facie view, it can not be said that there is actual compliance of Section 173(3) of the S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 New Act in respect of the emergent meetings.
19. It is further observed that the meeting called for 22.12.14 was also an emergent meeting. Same is the case with meeting dated 2.1.15. Although, the agenda that solely pertains to the plaintiff herein is provided in all the three notices however, the notice dt. 30.12.14 is absolutely silent regarding any ground of emergency. Thus, to this extent, the contention of the plaintiff is worth appreciation.
20. Sh Sanjeev Sindhwani, ld. Sr. Advocate argued that the plaintiff is guilty of suppression of facts and has come up only with half truth. It is pointed out that the entire plaint is silent about the averments of financial embezzlement as raised by the defendants. It is also averred that the plaintiff has not filed Minutes of previous meetings. I have considered the said submission in the light of pleadings and documents. The documents form part of pleadings. It is noted that not only the plaintiff has filed Minutes of previous Board meetings but he has also filed copy of internal audit report. Going by that, it can not be said that the plaintiff intended to conceal material facts from this court. I find no force in this submission.
21. The defence also submitted that the valuation of the suit for purpose S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 of relief of jurisdiction i.e Rs.3,00,100/ is defective in as much as no basis for such valuation is provided in the plaint. According to the plaintiff, this is an unclass suit wherein he seeks relief of declaration and injunctions. The Ld. Counsel for plaintiff submitted at Bar that a random valuation has been given in the plaint for relief of jurisdiction and the plaintiff being dominos litus, can provide any valuation that he may prefer. I find myself in agreement with ld. counsel for the plaintiff. It is true that as per Section 15 of the Code of Civil Procedure, 1908, every suit shall be instituted in the Court of lowest grade competent to try it, however, it is also true that the same is subject to valuation of the suit which in this case is as stated above.
22. The ld. Counsel for the defendants emphasized upon a reading of the entire plaint as well as reliefs prayed that the plaintiff is primarily complaining of acts of oppression and mismanagement on the part of defendant no. 3. He therefore, urges that the appropriate forum for the plaintiff to seek redressal is either the CLB or a Company Court. It is submitted that Sections 397 and Section 398 of the Old Act (Section 241 & Section 242 of the New Act) expressly bar S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 jurisdiction of this Court in the cases of oppression and mis management. Reliance is placed on case title H.B Stock Holdings Ltd v DCM Shri Ram Industries Ltd., 2009 (163) DLT 443 to the effect that jurisdiction of the Civil Court is impliedly barred in relation to question of oppression or mismanagement. 22.1. On the contrary, ld. Counsel for plaintiff has argued that the plaintiff is not complaining of oppression or mismanagement but has made out a case where his civil rights have been violated at behest of some members of the Association/D3. It is urged that the plaintiff is entitled to a legal character to the effect that he is the elected President of E.C of D3 and the defendants being the persons denying it he has a right to seek a declaration qua his legal character. It is also urged that the defendants are under an obligation existing in his favour arising out of the fact that he is the duly elected President and he has every right to seek an injunction to prevent the breach of such obligation. The ld. Counsel for plaintiff cites the judgment of Hon'ble High Court of Delhi in Greenline Transit System Pvt Ltd v The Secy. Cum Commissioner Transport & Anr.
MANU/D.E/6132/2012 which is a judgment later in point of time S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 then the judgment in H.B Stock Holdings Ltd (Supra). The judgment has considered scope and ambit of Section 9 CPC, Section 80 CPC as well as Section 379 and 398 of the Companies Act 1956. It was held that "object of Section 391 in the proposed Companies Act is to exclude the Civil Courts in entertaining company disputes and to avoid the jurisdictional ambiguity. This clearly means that under the existing Companies Act, 1956, shareholders who are qualified to approach the Company Law Board under Section 397/398 and may choose to approach the Civil Court rather the Company Law Board. Therefore, it is settled that there is no express bar on the jurisdiction of the Civil Courts in matters pertaining intracompany disputes". 22.2. Reading of the above judgment leaves no doubt that plaintiff can approach Civil Court. More over, the right to apply under Sections 397 and 398 emanates from Section 399 of the Old Act. It provides as to which member of the company shall have such right. In the case of a company having a share capital, not less than 100 members of the company or not less than 1/10th of the total number of its members, which ever is less or any members or members holding not less than 1/10th of the issued share capital of the S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 company, provided that the applicant or applicants have paid all calls and other sums due on their shares can apply. Further, in the case of a company not having a share capital, not less than 1/5th of the total number of its members can apply. Thus, I am of the considered view that the plaintiff can approach the Civil Court and the plaint can not be interpreted to read averments of oppression and mis management when not so pleaded.
23. The next argument before me is pertaining to the fact that the parties in the present lis are fighting for control over the affairs of defendant no. 3. It is urged that the same pertains to internal affairs of the company and the Courts are not to interfere in such affairs. The defendants relied on case titled T.P. Daver v Lodge Victoria (1964) 1 SCR 1. It has been held that the jurisdiction of a Civil Court is rather limited; it can not obviously sit as a Court of Appeal from decisions of such a body; it can set aside the order of such a body, if the said body acts without jurisdiction or does not act in good faith or acts in violation of the principles of natural justice. This judgment was cited earlier also and dealt with in order dt. 16.1.15. I will have no hesitation in saying that judgment pertains to internal affairs of S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 society, clubs, associations. Admittedly, the D3 is a company incorporated under the Companies Act, 1956. The judgment was passed regarding an internal dispute of the member of a Mosnic Lodge called the 'Lodge Victoria No. 363 S.C.' It was not a company.
23.1. Likewise, the defendants again cited the judgment in case title Balraj Singh Malik v Govt. of NCT of Delhi MANU/D.E/3478/2014. This judgment was also considered in earlier order of the Court dt. 16.1.15. It is again on the point that the Courts are not to interfere in internal affairs of societies, clubs/such other Associations which should be allowed to decide their own affairs and the Courts in so far as such decision is reached by following the prescribed rules and procedure will not interfere therein. Need less to say, the judgment again pertains to societies, clubs, associations and infact dealing with Delhi Cooperative Societies Act 2003 and not the Companies Act. More over, in both the judgments, the Hon'ble Courts have impliedly held that such decisions may be set aside if made without following the rules and prescribed procedure.
S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15
24. It was then argued that otherwise also the facts in the pleadings make the plaintiff's case as that of "misfeasance" and in such a case the plaintiff should apply to the Hon'ble Delhi High Court for relief in accordance of Section 463(2) of the New Act. I will be unable to agree with this argument as the defence as set up in the written statement as well as in reply to the application in hand pertains to averments of financial irregularities on the part of the plaintiff. As to how such alleged irregularities will fit into a case of misfeasance has not been explained.
25. It is further argued that granting the interim reliefs as prayed to the plaintiff will tentamount to decreeing the suit itself as the prayers in the suit and the application in hand are more or less the same. I have already extracted the prayers made by the plaintiff in the suit and the application in hand in earlier part of this order. In support of this contention, the defendants relied on cases titled Delhi Cloth & General Mills Company Ltd v Shri Rameshwar Dayal & Anr. (1961) 2SCR 590 and State of U.P & Ors v Ram Sukhi Devi (2005) 9 SCC 733. In the former case, it was observed that when a tribunal is considering a complaint under Section 33(A) of the S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 Industrial Disputes Act, 1947 and it has finally to decide whether an employee should be reinstated or not, it is not open to the tribunal to order reinstatement as an interim relief, for that would be giving the workman the very relief which he could get only if on a trial of the complaint the employer failed to justify the order of dismissal. In the latter case, the Hon'ble Apex Court in the context of grant of final relief in the form of interim order has held that the same should not be granted at an interim stage. At the same time, the Hon'ble Apex Court has also held that such relief should not be granted merely because a prima facie case is made out ignoring about the balance of convenience, public interest and a host of other considerations. In the said case, while granting interim relief, a government order dt. 26.10.98 was ignored. It is therefore, clear that such a relief can only be granted having regard to all the circumstances of a case. In the case before me, the plaintiff is facing suspension and is unable to discharge his duties as elected President. His term is only of three years beginning from 30.12.13. This is not a case where he can be reinstated as a President of the E.C of D3 after a protracted trial. His tenure is for fixed term and therefore, the Court can not ignore that if S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 he does make a prima facie case and has balance of convenience in his favour and if still he is without any interim protection, he shall suffer irreparable loss not being able to be compensated in terms of money as grant of such relief, if any, after trial would be an absurdity as by then his term as elected President would otherwise come to an end by efflux of time.
26. This now brings me to the most important aspect of this case which shall clinch the issue. It is regarding the powers vesting in the E.C of defendant no. 3 to take such actions as have been taken against the present plaintiff. In this context, it was an argument of the defence that the plaintiff has not challenged the minutes of meeting dt. 2.1.15 and has also not prayed for revocation of his suspension. Infact the prayer in respect of suspension is duly incorporated in prayer clause D of the application in hand. Further, the plaintiff has expressed grievance in respect of meeting dt. 2.1.15 and therefore, this argument holds no water. Qua the powers vested in the E.C of D3, the ld. Counsel for defendants has primarily relied on Article 47 of the Articles of Association. Citing the same, it is argued that powers to order suspension of the President of E.C is inherently vested in the S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 executive committee. In this context, reliance is also placed on Section 291 of the Old Act. The same pertains to general powers of Board. It provides that the Board of Directors of a company shall be entitled to exercise all such powers, and to do all such acts and things, as the company is authorized to exercise and do. 26.1. Infact, this Court has in its earlier order dt. 16.1.15 put a specific query to the ld counsel for defendants as to from where the E.C derives powers to pass such resolutions as are being impugned herein upon which some time was sought. Even at this stage, no specific provision either in the Memorandum or Articles of Association or in the Companies Act is shown to the court in the above context. Perusal of Article 47 reveal that it is a general provision that does nto specify anything about removal/suspension of a Director. Same is the case under Section 291 of the Old Act. The argument to the effect that it was the E.C that had vested financial powers in the President vide its resolution dt. 13.1.14 and therefore, it has the power to suppress the said resolution is not at all impressive. It is so as the E.C is not the authority that elected the plaintiff as its President but it is the members of the Association who S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 had him so elected.
27. The next argument on the issue is that by virtue of financial irregularities the office of the Director has fallen vacant as per Article 46 (h) of the Articles. Same is as under:
"Article 46 - Subject to the provisions of Section 283(2) of the Act, the office of a director shall become vacant if;
(h) he (whether by himself or by any person for his benefit or on his account) or any firm in which he is a partner or any private company of which he is a director, accepts a loan or any guarantee or security for a loan from the companies in contravention of section 295 of the Act."
27.1. This argument is taken on the basis of avements of the alleged financial transactions on the part of the plaintiff. The same are provided in para 12 of Preliminary Submissions in the written statement. One such averment is that a sum of Rs.53,50,000/ was transferred to M/s Shri Ram Tradecom Pvt Ltd from the account of D3 by way of RTGS at the instance of the plaintiff. It is further in the WS that financial S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 statement of the said company pertaining to the year 201011 shows that the plaintiff already had financial dealings with the said company as a sum of Rs. 50 lacs has been shown as advance/loan to the plaintiff. The document is available at page 44 and 45 of the documents filed by the defendants with the WS. It is a schedule annexed to and forming part of the balance sheet as on 31.3.2011 and profit and loss account for the year ending on that day. In the column of 'loans and advances' a sum of Rs. 50 lacs is shown as been advanced to the plaintiff herein. This document is not certified by the accounts branch of Shri Ram Tradecom Pvt Ltd. Whether such transaction took place or not is a matter of trial. More over, the RTGS is stated to have been made on 30.1.14 whereas the transaction as shown in the copy of above balance sheet pertains to period much prior to it i.e the year 2011. Further more, no nexus is shown between the RTGS transaction and the fact that the said amount transferred by way of RTGS was used by the plaintiff for his personal gain. Why I say so becomes important by virtue of Section 283 of the old Act which pertains to vacation of office by the directors and is to be read in confirmity with Article 46(h) of the Articles of Association. 27.2. According to Section 283 (1) (h), the office of Director shall S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 become vacant if (whether by himself or by any person for his benefit or on his account), or any firm in which he is a partner or any private company of which he is a director, accepts a loan, or any guarantee or security for a loan, from the company in contravention of Section 295. 27.3. Section 295 of the Act provides as to how and in what manner loans can be given to a Director etc. A conjoint reading of all the three provisions would imply that if the plaintiff whether being director or not of any other company accepted a loan from the account of D3 in contravention of Section 295 of the Act, his office shall become vacant. I have already pointed out that such nexus has not been established between the said transaction as recorded herein above. It being so, it can not be said on prima facie perspective of facts that the office of the plaintiff has become vacant in the manner alleged.
27. On the contrary, Section 284 of the Companies Act provides procedure for removal of Directors. It has been a contention of the defendants that a Director may be removed by an ordinary resolution. In the case in hand, the plaintiff, at present, stands suspended and not removed. However, till now no powers vesting in E.C to suspend an elected President have been shown to this Court. Section 284 of the Act is very S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 specific. It does not speak of suspension but ultimate removal of a Director. Needless to say that the issuance of show cause notice to the present plaintiff herein is an act towards his contemplated removal as a Director. The question is whether such suspension/removal has or would be upon following the rules and procedure. It is correct that only an ordinary resolution is required to remove a Director, who has not been appointed by the central Government in pursuance of Section 408 before the expiry of his period of office. However, it has to be specifically noted as to who shall pass such resolution as to removal of a Director. Is it the executive committee or the Company itself would be the issue to ponder over. Section 284(1) of the Act uses the term "company". A company can not be the executive committee but it is inclusive of all its members. Thus, to pass such resolution, in my considered view, it would be imperative upon the defendants to call a general body meeting whether ordinary or extra ordinary, to be able to be empowered to pass the resolution within the meaning of Section 284(1). More over, Section 284(2) provides that a special notice shall be required of any resolution to remove a Director under this Section, or to appoint somebody instead of a Director so removed at the meeting at which he is removed. This is S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 not the case here. It is further provided that on receipt of a notice of resolution to remove a Director, the company shall forthwith send a copy thereof to the Director concerned, and the director shall be entitled to be heard on the resolution at the meeting. To my mind, the resolution by circulation dt. 6.12.14 has the same effect. Similar is the position with respect to the resolution in regard to suspension of the plaintiff by virtue of meeting dt. 2.1.15. Not only this, it is further provided that if the director concerned makes representation in writing to the company and requests their notification to members of the company, the company shall, unless the representation are received by it too late for it to do so, inform by resolution to members regarding such representation and also send a copy of representations to every member of the company. Thus, the Act safeguards the interest of a Director who sought to be removed. It nowhere talks of putting an elected President/Director of a company under suspension pending an internal inquiry that too, on the basis of a fact finding committee whose members are stated to be amongst the officials who attended the late night meeting on 9.12.14. In result, I find that the defendants have not been able to so far establish the genuinity of the actions alleged upon them. At this juncture, I shall also express my S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 prima facie opinion about the main genesis of defence which is stated to be financial irregularities.
28. The only reason that surfaces for passing of the impugned resolutions is post the internal auditors reports. Perusal of it reveals that the auditors had indeed asked for comments of D3 regarding the points raised by them. According to the defendants the plaintiff diverted the association's money. It is not on record that the plaintiff indeed benefitted financially in terms of the alleged transactions that are yet to be proved in trial. On the contrary, it is the case before the Court that the money in question was squared up in the same financial year as it came back to the account of D3 before the close of financial year. It was stated at Bar by the plaintiff's counsel that as per his instructions the amount was invested as lying ideal and it earned an interest at the rate of 18% p.a. Although it was argued in response that the defendant is a non profit generating company but no response was given to the submission that the money earned 18% interest. Be that as it may, the question is whether the averment of financial irregularity will be a fact in issue in determining whether the resolutions passed were with necessary authority to do so. The answer is not complex. The defendants are to justify that authority S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 flows to them by virtue of either the statute or by virtue of its memorandum/articles of association and that the averments of financial irregularity therefore justify such resolutions. On the contrary, the plaintiff has to make a prima facie case in his favour. He has denied that any such authority exists either in statute or in memorandum/articles. Conversely, the defendants have not shown, against their arguments, that such authority exists. If it is not shown to be existing any resolution passed may not be sustainable. For this reason, the averment of financial irregularity alone can not, ipsofacto, justify the action of the defendants. The plaintiff therefore, has made out a prima facie case.
29. The plaintiff has been elected to the post of President of DDCA. By virtue of this post, he has to be the Chairman of all E.C meetings, if available on the day of such a meeting. Whether or not he is guilty of financial irregularities is a matter of investigation. A criminal complaint has been already lodged against him. This is not the forum to decide whether the plaintiff has been engaged in such irregularity. It is not the case where the defendants have presented any counter claim qua the above. On the contrary, the plaintiff stands divested of his powers as President of the DDCA and also stands restrained from chairing the E.C S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 meetings although he has been permitted to attend the same as a member. I may also say that the defendants are not without remedy and they can approach appropriate forum for redressal. Need less to say that Section 284 of the Companies Act is always available to them. Instead of availing such remedies as are provided in the statute, they seem to have proceeded on an assumption that the requisite powers flows to the remaining E.C minus its President by virtue of Article 47 of the Articles of Association which, in my view is an incorrect proposition. The President is not the only official of E.C. There are 26 others and it takes seven of them to complete a quorum for the E.C meeting. The resolutions therein are passed by majority opinion. Thus, it can not be said that if the plaintiff succeeds, he shall be the sole person managing the affairs of D3. For this strong reason, the balance of convenience is definitely in plaintiff's favour.
30. In the earlier part of the order I have made passing reference on the aspect of "irreparable loss". As of now the plaintiff is under suspension from post of President. He has not been removed as a Director of D3. He has been elected by virtue of voting amongst 4300 members. He is further associated with the company since last more than 20 years and S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 has been its office bearer for more than 12 years. These facts have not been disputed. As stated earlier, this is not a case of reinstatement. The Association will naturally reelect its President after the term of the present President expires or he is removed in pursuance of section 284 or indulges into an act that deems vacation of office as Director. Until then, he has a right to discharge his functions as elected President of DDCA and for this reason, it creates an obligation on the part of the defendants to acknowledge plaintiff's such right/legal character. Non grant of any interim relief to the plaintiff shall therefore necessarily tentamount to infliction of such irreparable loss or injury to his reputation that definitely can not be compensated in terms of money. RESULT
31. The plaintiff therefore, shows a strong presence of all the three necessary elements required for grant of a temporary injunction. However, the prayers in the application in hand are found to be all intermingled. They are however aimed at urging the Court to grant a relief to him to be able to discharge his functions as duly elected President of the DDCA and by virtue of such authority, to be able to chair the E.C meetings. This relief is of course subject to him ultimately S.P. Bansal v Ravinder Manchanda & Ors. CS No.11/15 proving his case however, as of now a status quo ante is what is actually required. In the result, clubbing the prayers A to D as made in the interim application, this Court orders that the resolutions under challenge being prima facie failing the test of requisite authority are liable to be put to stay till disposal of the suit. It is ordered accordingly. The parties to the suit shall observe status quo ante as it existed at the time of the adjournment of E.C meeting dt. 9.12.14 that was scheduled at 6.30 p.m.
32. It is specifically clarified that all the observations as contained in this order are strictly on a prima facie view of the matter and that nothing expressed in this order shall be taken by any of the parties to be an expression on the merits of this case.
Announced in open Court. (Manish Yaduvanshi)
Dated: 28.02.2015. ADJ06(Central)Delhi
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