Mr. Garish Oberoi & Ors vs Hotel And Restaurant Federation ...

IN THE MATTER OF: Hotel and Restaurant Association of (Western India) & Anr. ...Appellants

Versus

Hotel and Restaurant Federation Association of Eastern India & Ors. ...Respondents

Present: For Appellant: Mr. Abhijeet Sinha, Ms. Ranjeeta Rohatgi, Mr. Sourabh Tandon, Ms. Samten Doma, Advocates For Respondent: Mr. P Nagesh, Sr. Adv. with Mr. Mahesh Agarwal, Mr. Shubham Kulshreshtha, Kaustubh Singh, Mr. Akshay Sharma, Advocates for R1 to 11 Mr. Sumit Goel, Ms. Swati Bhardwaj, Advocates for R12

with Company Appeal (AT) No. 166 of 2022

IN THE MATTER OF:

Hotel and Restaurant Association of Northern India & Anr. ...Appellants

Versus

Hotel and Restaurant Association of Eastern India & Ors. ...Respondents

Page 1 of 50 Present:

For Appellant: Mr. Krishnendu Datta, Sr. Adv. with Mr. Talha Abdul Rahman, Lzafeer Ahmad, Mohd. Shaz Khan & Palash Singhai, Advocates For 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

(Date: 21.02.2023)

[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

Page 2 of 50 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 FHRAI. The Appellants

have stated that the appointment of President of FHRAI is done

in accordance with Article 52 of Articles of Association (in short

'AoA') of FHRAI, according to which the President of FHRAI shall

be elected by the members of the Executive Committee region-

wise by rotation, for one term in the order of Eastern Region,

Western Region, Southern Region and Northern Region, and in

the year 2018-19 it was the turn of Hotel & Restaurant

Association of Eastern India (in short 'HRAEI') to get its

candidate elected as the President of FHRAI. The Appellants

have further stated that the election of the President is carried

out by members of the Executive Committee of FHRAI and the

Executive Committee comprises of six members each from each

of the four regional associations. They have stated that the

regional associations elect six members each to represent them

in the Executive Committee of FHRAI, and thus, 24 members

who constitute the Executive Committee elect the President of

FHRAI for a term of one year from the date of election of the

President.

Page 3 of 50

3. The Appellants have further stated that the election of

President for the year 2018-19 was taken up in the EC meeting

held on 30.10.2018, when the three candidates who were

elected in three rounds of election, namely M/s Nitin Kothari,

Ashoke Singh and Vijay Dewan each declined to accept the

position of President, and thereafter the issue of election of the

President became a contentious one and could not be resolved

as some Executive Committee members from HRAEI insisted on

the nomination of Mr. Sudesh Kumar Poddar as President,

whereas the majority of members of Executive Committee were

not in favour of the proposal of the name of Mr. Sudesh Kumar

Poddar. The Appellants have claimed that Article 52 of the AoA

stipulates that the Federation's President shall be elected by the

members of the Executive Committee, and therefore, the

insistence of members of HRAEI for the appointment of their

sole chosen nominee Mr. Sudesh Kumar Poddar was not in

accordance with the provision of AoA, and therefore, the said

election of the President could not be conducted successfully as

per the provision of AoA. They have further stated that, in such

a situation, the matter of election of President of FHRAI was

kept pending and the Executive Committee in the same meeting

which was taking place on 30.10.2018 continued under 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.

Page 4 of 50 437/241-242/2018 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 of Learned Senior Counsel of

Hotel and Restaurant Association of Northern India & Ors. in

CA (AT) No. 166 of 2022, Learned Senior Counsel of Hotel and

Restaurant Association of Western India in CA(AT) No. 162 of

Page 5 of 50 2022 and the Learned Senior Counsel of Respondent HRAEI

and perused the record of both the appeals.

6. The Learned Senior Counsel/Counsel for both Hotel and

Restaurant Association of Northern India and Hotel and

Restaurant Association of Western India ("Appellants") have

claimed in their arguments that the CP No. 437/241-242/2018

was filed by HRAEI and some other petitioners, but they do not

satisfy the conditions stipulated in section 244 of the

Companies Act to act as petitioners. The company petition has

been filed by only 11 members (all from HRAEI) out of more

than 3890 members of FHRAI which does not satisfy the

requirement under section 244 (1) (b) and thus the waiver

application is a clear proof that the petitioners, who are only

eleven number, do not enjoy the support of the requisite

number of members of their own region, as there is no letter of

support from other members of the Eastern Region or any

General Body resolution of the Eastern Region expressing

support to the original petitioners or consent for filing the

company petition. They have claimed that Shri Vijay Dewan,

who is a member of the Executive Committee from the Eastern

Region has not joined the petitioners in preferring Company

Petition No. 437/241-242/2018, and moreover Eastern Region

has the status of a single member as per the AoA, being a

member under the 'Organisation Member' category and being a

Page 6 of 50 sole organisation member, it cannot dictate terms which are

contrary to the provisions of AoA of FHRAI. He has further

claimed that the company petition filed under sections 241-242

does not relate to any act/s of oppression and mis-management

of the company. In support, the Learned Senior Counsel for

Northern Region Association has cited the judgment of this

Tribunal in the matter of Cyrus Investments Pvt. Ltd. & Anr.

Vs. Tata Sons Ltd. & Ors. [2017 SCC Online NCLAT 261],

where in para 151 this Tribunal has elucidated on the factors

that are required to be noticed before forming its opinion as to

whether the application merits "waiver". Moreover, neither any

oppression or mismanagement is made out nor any exceptional

circumstances have been mentioned by the petitioners for 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

Page 7 of 50 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

Appeals (AT) No. 133 and 139 of 2017] to point out that while

granting waiver, the Tribunal has to see whether the application

under section 241 pertains to 'oppression and mis-management'

but before that see whether the appellants are members of the

company in question and whether similar allegation of

oppression and mis-management was earlier made by any other

member, which was decided and concluded and also whether

there is any exceptional circumstance made out for grant of

waiver. The Learned Senior Counsel has claimed that if the

grant of waiver to the petitioners in original CA No. 473/241-

242/2018 is seen from this lens, there is no case made out by

the petitioners in their favour, and therefore, the appeal should

be dismissed on account of non-maintainability at the

threshold.

Page 8 of 50

9. On the point of the HRAEI being an "aggrieved person",

the Learned Senior Counsel for Appellant HRANI has claimed

that legal mandate, as held by Hon'ble Supreme Court in the

matter of Bar Council of Maharashtra v. M.V. Dabholkar

(1975) 2 SCC 702 is that any one, who has been denied or

deprived of something to which he is legally entitled and if a

legal burden imposed on her, shall fall in the ambit of '"person

aggrieved", whereas in the present case, HRAEI which has not

been able to install its candidate as nominee President of

FHRAI, cannot be labelled as 'aggrieved person' since no legal

right of HRAEI was infringed. The Learned Senior Counsel has

contended that therefore, the issue of maintainability on the

ground of waiver and also the petitioner HRAEI being "person

aggrieved" should have been decided at the threshold before

going into the merits of the petition, but the Impugned Order

has considered the case on merits without first adjudicating on

the issues of maintainability and waiver.

10. The Learned Senior Counsel for Appellant HRANI has

further alluded to Article 52 of AoA of the FHRAI to explain that

the said article stipulates that the Federation President shall be

'elected' by the members of the Executive Committee, whereas

in the instant case the Executive Committee members from the

Eastern Region have decided and 'nominated' Mr. Sudesh

Page 9 of 50 Kumar Poddar as their sole choice for appointment as

President, thereby making light of the condition of election laid

down in the AoA. He has further referred to The

Representation of the People Act, 1951, wherein the process 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 reasons,

Page 10 of 50 which have been enumerated in the replies filed before NCLT,

and as there are serious allegations against him, the Executive

Committee members have no confidence in Mr. Poddar.

12. The Learned Senior Counsel for Appellant HRANI has also

argued that Mr. Garish Oberoi continued to chair the Executive

Committee meeting held on 30.10.2018 when no President for

year 2018-19 could be elected, as Article 52 of AoA stipulates

that the term of President is one term which ends only when the

successor is elected and in the present case, since the President

could not be elected, Mr. Oberoi was correct to chair the

meeting, though he chose to step down when important agenda

items came up for deliberation and adjourned the meeting till

election of the new incoming President. He has also refuted the

argument that the appointment of Mr. Sudesh Kumar Poddar as

President of FHRAI is a legitimate expectation of HRAEI by

contending that any legitimate expectation cannot be contrary

to the provision of AoA and that of corporate democracy.

13. The Learned Senior Counsel for Appellant HRANI has

argued regarding the arguments of the Respondents that the

past practice in the appointment of the President of FHRAI,

when one candidate for the post of President was the 'chosen

nominee' of the six members of that particular regional

association whose turn fell for appointment of the President, is

Page 11 of 50 correct, since the provision for 'election' by the Executive

Committee has been brought in by an amendment in the AoA in

the year 2010 to specifically enjoin the Executive Committee to

'elect' a President, and not install a previously decided nominee

as President.

14. The Learned Senior Counsel for Appellant HRANI has also

referred to clause 4 of the Memorandum of Association to point

out that it is an objective of the Federation to unite the regional

associations of hotels and restaurants functioning in the

country rather than give a right to a regional association thrust

its decision in installing a particular person as of President of

FHRAI.

15. Lastly, the Learned Senior Counsel for Appellant HRANI

has argued that it is not correct that there is no other candidate

for the post of President as in the instant case, Mr. Vijay

Dewan, who was elected as President, decided to step down,

after being communicated to do so by Mr. Poddar and if Mr.

Vijay Dewan or some such person is not 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

Page 12 of 50 437/241-242/2018 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. The Learned Senior Counsel for HRAEI-Respondent in

both the appeals has initiated his arguments by arguing about

the maintainability of the petition on account of waiver by

claiming that the petitioners of CP 437/241-242/2018, who

though are eleven in number, actually represent a large body of

members of the Eastern Region and the six members, who

represent the Eastern Region in the Executive Committee of

Page 13 of 50 FHRAI represent the legitimate interest of its members. The

original company petition CP 437/241-242/2018 was filed by

eleven petitioners including a majority of Executive Committee

members from the Eastern Region and therefore, the petition

under sections 241-242 is entitled for waiver under section 244

and is maintainable. He has expanded on his argument to

point out that the members in the Executive Committee from

the Eastern region are duly elected by the General Body of the

Eastern Region and, therefore, they represent the interests and

aspirations of the General Body of HRAEI. He has contended

that, therefore, even though the stipulation of section 244 (1)(b)

i.e. that one-fifth of the total number of members of FHRAI

should prefer an application under section 241 is not strictly

applicable in the present case and this is a fit case for providing

waiver as per the requirements of clause (b) of section 244 (1) to

enable its members to prefer a petition under section 241. He

has claimed that even though HRAEI is a single member, it is a

member in the 'Organisation Member' category of FHRAI, and it

actually represents the voice and interests of the entire General

Body of the Eastern Region which is articulated by the members

of the Eastern Region in the Executive Committee, and therefore

the waiver granted on this ground by NCLT is in order. He has

also argued that even though the question of waiver has been

dealt with mentioned in the Impugned Order in paragraphs 13

to 15, the issue of waiver was heard alongwith the other issues

Page 14 of 50 in the Company Petition and therefore, it is not very relevant as

to how and what stage the findings on the issue of waiver are

included in the Impugned Order.

18. The Learned Senior Counsel for HRAEI has claimed that

the company petition under sections 241-242 preferred before

NCLT pertained to not just one act of oppression and mis-

management, but started from the time an attempt was made

by some members of FHRAI to amend 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

Page 15 of 50 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 AoA, which have not fructified yet

due to hurdles placed be members of Eastern Region,

particularly Mr. Sudesh Kumar Poddar, which is the main

grouse of the Appellants and therefore, they want to stall his

appointment as President of FHRAI.

19. The Learned Senior Counsel for Respondent-HRAEI has

argued that in the AGM of FHRAI held on 30.10.2018 at 12.30

pm, Mr. Garish Oberoi, the President for the previous term and

other Executive Committee members retired, and new members

of Executive Committee were appointed for the next term. He

has argued that in such a situation, it was illegal for Mr. Garish

Oberoi to chair the meeting of the Executive Committee held on

30.10.2018 soon after the AGM wherein the controversy

regarding the election and appointment of the President of

FHRAI for the term 2018-19 erupted. He has also argued that

Mr. Garish Oberoi along with members of the Executive

Committee decided to overpower the members of EC, who

objected to his chairing the Executive Committee meeting and

thereafter, in a blatantly high-handed manner along with some

other members, resorted to randomly proposing the names of

persons from the Eastern Region other than Respondent No. 1

Page 16 of 50 Mr. Sudesh Kumar Poddar, even though such random persons

had neither given consent nor were interested in contesting the

elections for the post of President. Such actions of Mr. Garish

Oberoi and other members are clearly oppressional in nature

and further by appointing a member from the Western Region to

act as an Interim President, they have continued their actions of

oppression and mismanagement. He has argued that,

therefore, it is not a single act of oppression and

mismanagement, but a continuing series of such acts starting

from the actions of some members to bring an amendment in

the AoA culminating in the Casino Hotels case and many

objectionable actions, which constitute acts of oppression and

mismanagement.

20. Regarding election of President of FHRAI, which was an

agenda item in the meeting dated 30.10.2018 of Executive

Committee, the Learned Senior Counsel of HRAEI has referred

to Article 52 of AoA, which provides for rotation of presidency

between the four regions and gives the provision for election of

Federation's President. He has further referred to the minutes

of Executive Committee meeting dated 30.10.2018, wherein the

election of the President of FHRAI for the year 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

Page 17 of 50 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 followed, and since Mr.

Sudesh Kumar Poddar has been nominated by the Eastern

Region, therefore, he should be appointed as President. He has

further stated that some members of the Executive Committee

claimed that the name of Mr. Poddar was being thrust upon the

Executive Committee for appointment as President, whereas

some other members stated in the Executive Committee meeting

that since only one name of Mr. Sudesh Kumar Poddar was

proposed from Eastern Region for the post of President he

Page 18 of 50 should be appointed as President of FHRAI. He has argued that

the Chairman did not accede to the legitimate request of the

members of Executive Committee from the Eastern Region, and

the election of the President from the Eastern region was not

given effect to and as a result Shri Garish Oberoi continued to

chair the meeting of the Executive Committee and some agenda

items were decided under his chairmanship in the meeting

which was not lawful.

21. The Learned Senior Counsel for HRAEI has further

argued that in the Executive Committee meeting, after refusing

accept the sole candidature of Mr. Sudesh Kumar Poddar, the

Chairman Shri Garish Oberoi continued to request the Eastern

Region members to propose another name for President that is

acceptable to Executive Committee, but such a request was not

in keeping with the principles of corporate democracy and also

not in the interest of Eastern Region members, and despite the

insistence of Eastern Region members in putting forward the

name of Mr. Sudesh Kumar Poddar, whom they had confidence

in, the chairman Mr. Garish Oberoi did not listen to the

repeated requests of members from Eastern Region. He has

pointed out that in the past years, the practice has been that

the Executive Committee members from the region decide on a

single member's name, who would be then elected unopposed

as President of FHRAI. In this connection, he has pointed out

Page 19 of 50 that for the year 2014-15, Mr. Tejinder Singh Walia's name was

the sole name proposed and he was unanimously elected as

President of FHRAI. He has stated that again for the year 2015-

16 when the President was to be appointed from the Western

region, a single name of Mr. Bharat Malkani was proposed, who

was elected unopposed and unanimously as President. He has

also referred to the election of President for the year 2016-17,

when Mr. K. Syama Raju was the only name proposed from

Southern 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

Page 20 of 50 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 they declined to take up the post of President. He has

clarified that there is a sinister ploy of Executive Committee

members from Western and Northern regions to stall Mr.

Poddar from taking over as President, even though he is the

preferred and chosen candidate of Eastern Region and would be

elected unopposed if a proper election in accordance with

provisions of AoA were to take place. He has claimed that the

members of Executive Committee from the Western and

Northern Regions ae not abiding by the AoA, which is a clear act

of oppression and mis-management of the affairs of FHRAI by

the sitting President and Executive Committee members from

Western and Northern Regions.

22. The Learned Senior Counsel for Respondent HRAEI has

pointed out that even if there is one candidate in the fray, she is

still termed as elected, even though she is elected unopposed,

and such an election is a perfectly valid election. In this

connection, he has referred to judgment of Hon'ble Madras High

Court in the matter of T. Ekambara Nicker and Anr. vs.

Commissioner of the Madras Corporation (1926 SCC Online

Mad 437: AIR 1927 Mad 22) wherein it is held that on the date

of the notification there was only one valid nomination of a

Page 21 of 50 candidate for election and therefore, the lone candidate was

elected unopposed.

23. The Learned Senior Counsel for HRAEI has also cited the

judgment in the case of Vilas Dadarao Chavan vs. Kiran

Ashok Patil Dongaonkar [2008 SCC Online Bom 1167] in

support of his contention that even if there is only candidate in

the field, there is an obligation on the Returning Officer to

declare the election of such one candidate as the elected

candidate, and therefore, in the same way it was incumbent on

the Chairman presiding over the meeting of Executive

Committee on 30.10.2018 to consider candidature/nomination

of just one person viz. Mr. Sudesh Kumar Poddar for the

purpose of election and declare him as elected, even if there was

no contest and he was elected unopposed.

24. The Learned Counsel for Respondent HRAEI has also

referred to section 53 of The Representation of The People Act,

1951 to point out that in the light of provision regarding

elections which are uncontested, when there is only one

candidate in the field, such an election would be uncontested

but it would be still categorised as an election. The same

principle applies mutatis mutandis in Article 52 of the AoA of

FHRAI wherein the use of word 'election' does not necessarily

Page 22 of 50 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?

Page 23 of 50

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 and in the facts of the case, we reproduce the relevant

provision under section 244 of the Companies Act for

reference:-

"244. Right to apply under section 241 . - (1) The following members of a company shall have the right to apply under section 241, namely:--

(a) in the case of a company having a share capital, not less than one hundred members of the company or not less than one-tenth of the total number of its members, whichever is less, or any member or members holding not less than one tenth of the issued share capital of the company, subject to the condition that the applicant or applicants has or have paid all calls and other sums due on his or their shares;

(b) in the case of a company not having a share capital, not less than one-fifth of the total number of its members:

Provided that the Tribunal may, on an application made to it in this behalf, waive all or any of the requirements specified in clause (a) or clause (b) so as to enable the members to apply under section

241.

Explanation.--For the purposes of this sub-section, where any share or shares are held by two or more persons jointly, they shall be counted only as one member."

27. We note that the original CP No. 473/241-242/2018 was

preferred by eleven petitioners, with HRAEI being petitioner No.

1 and petitioners Nos. 2 to 11 are members of FHRAI. The

Page 24 of 50 company petition specifically notes that HRAEI, which is

petitioner No. 1, has around 450 hotel members, 266

restaurant members and around 58 associate members, all

located in the states of Eastern India. It is further noted that

HRAEI is an Organisation Member of FHRAI having

membership no. 50001 and petitioner nos. 2 to 11 are also

members of FHRAI and their membership numbers are 41062,

21933, 40245, 40027, 41076, 21758, 21918, 21986, 22404 and

11372 respectively. Thus, while petitioner no. 1 is one single

member of FHRAI, it actually represents at least 774 members

from the Eastern Region and other petitioners are also members

of FHRAI. FHRAI is a company, which does not have share

capital and as per section 244(1) (b), not less than 1/5th of total

members of FHRAI have the right to maintain a petition under

sections 241-242. The proviso to section 244 (1) provides that

NCLT may waive all or any of the requirements specified in

clauses (a) and (b) of section 244 (1) so as to enable members to

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

Page 25 of 50 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 Respondent HRAEI,

we are of the view that the acts of oppression and mis-

management have continued in one form or the other right from

the filing of the Casino Hotels petition, and therefore, in the

interest of corporate democracy and to ensure proper

functioning of FHRAI in accordance with the AoA and to

examine the alleged ats of oppression and mismanagement, we

are of the view that it is a case whether exceptional

circumstances demand grant of waiver under section 244 of the

Companies Act to enable the petitioners of CP 473/241-

242/2018 to raise their grievances which could then be

Page 26 of 50 adjudicated upon. We thus hold that the Impugned Order is

correct on this account.

29. On the issue whether the actions of the sitting President

Mr. Garish Oberoi and other Executive Committee members,

mainly from the Western and Northern Regions, can be labelled

as acts of oppression and mis-management, we note the

relevant provision of section 241 of the Companies Act, which is

as hereunder:-

"241. Application to Tribunal for relief in cases of oppression, etc.- (1) Any member of a company who complains that--

(a) the affairs of the company have been or are being conducted in a manner prejudicial to public interest or in a manner prejudicial or oppressive to him or any other member or members or in a manner prejudicial to the interests of the company; or

(b) the material change, not being a change brought about by, or in the interests of, any creditors, including debenture holders or any class of shareholders of the company, has taken place in the management or control of the company, whether by an alteration in the Board of Directors, or manager, or in the ownership of the company's shares, or if it has no share capital, in its membership, or in any other manner whatsoever, and that by reason of such change, it is likely that the affairs of the company will be conducted in a manner prejudicial to its interests or its members or any class of members,

may apply to the Tribunal, provided such member has a right to apply under section 244, for an order under this Chapter."

Page 27 of 50 30. We note that in the earlier petition titled CP/CA No.

273(ND/2017 was filed by the Casino Hotels Unit of CGH

Earth Pvt. Ltd. vs. FHRAI & Ors. under Sections 241, 242 &

244 of the Companies Act, 2013, the main issue was to restrain

the Respondents from making any amendment in clauses 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

Page 28 of 50 arose from the time of the Casino Hotels case. We are inclined

to think so because while Mr. Sudesh Kumar Poddar is fully

qualified to contest for the post of President, FHRAI, and that

the Eastern Region Executive Committee members have decided

to put forward his name as the sole candidate for the post of

President of FHRAI, the members of Executive Committee from

Northern and Western Regions are insistent on accepting any

other member as President except Mr. Sudesh Kumar Poddar,

which is a stand that does not have any legal or rational basis.

32. Thus, this act of the Western and Northern Region

members in EC is definitely an act of oppression and mis-

management and when seen in conjunction with the earlier

incident where members of Western and Northern Region were

bent upon amending the AoA to increase the number of terms of

membership in the Executive committee, it is clear that those

members, who either stood to benefit from such an amendment

or who were supporting it would be peeved or unhappy with the

stand taken by Mr. Sudesh Kumar Poddar. We, therefore, are

of the view that the procedure being adopted in the election of

the President of FHRAI for the year 2018-19 as interpreted by

the siting President Mr. Garish Oberoi is clearly an act of

oppression and mismanagement, which if not checked at

nascent stage right in the beginning, can result in further

oppression of FHRAI's members and mismanagement of the

Page 29 of 50 affairs of the company to the detriment of the functioning of the

company FHRAI and against the legitimate interests of its

members. The intent of sections 241-242 is to protect the

company's members from acts of oppression and mis-

management and to also protect and preserve the interest of the

company, and in that light we are of the clear view that in the

present case, the acts as stated in CP 473/241-242/PB/218,

clearly constitute acts of 'oppression and mismanagement'.

33. We also look at the judgment of Hon'ble Supreme Court in

the matter of Chatterjee Petrochem (India) Private Limited

(supra) cited by the Learned Senior Counsel for appellants. The

relevant portion as cited is as follows:-

"138. Let us examine as to whether any of the complaints contained in the company petition before the CLB make out a case that the affairs of the Company are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members, which was sufficient 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

Page 30 of 50 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 oppression of minority by a majority in the management of the company's affairs, and such oppression must involve at least an element of lack of probity or fair dealing to a member in the matter of his proprietary rights as a shareholder."

142. As has been indicated in some of the cases cited, the language of Section 397 suggests that the oppressive manner in which the Company's affairs were being conducted could not be confined to one isolated incident, but that such acts would have to be continuous as to be part of a concerted action to cause prejudice to the minority shareholders whose interests are prejudiced thereby. In the aforesaid context, what do the facts reveal in the instant case and do they bring the acts of oppression complained of within the purview of Section 397 for grant of relief under section 402 of the Companies Act?"

34. What follows from the above judgment of the Hon'ble

Supreme Court is that the conduct of the majority shareholders

should be considered not in isolation, but as part of consecutive

story in order to maintain a case of oppression of the minority

member. In the present case it is seen that from the time

certain members of the Executive Committee initiated attempt

to amend clause IV (b) and (c) of Appendix A of AoA, which was

resolutely opposed by some other members of the Executive

Page 31 of 50 Committee which section was challenged in the Casino Hotels

case(supra) and the later actions of members of the Executive

Committee to subvert the proper election process for the post of

President of FHRAI for the year 2018-19, we find that in the

instant case, there is a "continuing story" of oppression by some

members of the Executive Committee against some other

members of the Executive Committee who are both members of

FHRAI. Thus the judgment of Hon'ble Supreme Court in the

matter of Chatterjee Petrochem (India) Private Limited

(supra) is distinguished from the issue in the instant case on

the above basis.

35. On the third issue, which relates to the procedure

adopted in this election of President of FHRAI for the term 2018-

2019, we note the relevant provisions of AoA which are as

hereunder:-

"Articles of Association of The Federation of Hotel & Restaurant Associations of India.

Xx xx xx xx

EXCUTIVE COMMITTEE

40.(g) To determine its own procedure insofar as such procedure may not be 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

Page 32 of 50

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 and shall be vested with all administrative powers, including the appointment of necessary staff and the supervision of the work of the office.

The President may, however, delegate all or any of his administrative powers, including the appointment of necessary staff and the supervision of the work of the office, to the Honorary Secretary and/or Secretary General as may be considered necessary for conducting the day-to- day business. However, in the event of any contradiction, the decision taken and instruction issued by the Executive Committee shall be final and shall prevail."

36. We also note section 53 of The Representation of the

People Act, 1951, wherein the procedure in contested and

Page 33 of 50 uncontested elections has been provided, which is as

hereunder:-

"53. Procedure in contested and uncontested elections.

(1) If the number of contesting candidates is more than the number of seats to be filled, a poll shall be taken.

(2) If the number of such candidates is equal to the number of seats to be filled, the returning officer shall forthwith declare all such candidates to be duly elected to fill those seats."

37. Article 52 of the AoA of FHRAI stipulates that the election

to the post of President of FHRAI is carried out by the members

of the Executive Committee region-wise by rotation for one term

and theorder of rotation as stipulated is in the order of Eastern

Region, Western Region, Northern Region and Southern Region.

It is not disputed that it was the turn of Eastern Region to have

its member elected as President of FHRAI for the term 2018-19.

We also note that Article 49 of the AoA, provides that question

before the Executive Committee shall be decided by a majority

of members present. Further, clause (g) of Article 40 of the AoA

stipulates that the Executive Committee could devise its own

procedure in so far as such procedure is not inconsistent with

the Companies Act or the AoA. When we read the above

mentioned provisions of the AoA of FHRAI, it is clear that there

Page 34 of 50 shall be an election by the members of the Executive Committee

and such election shall decide the winner through a majority

vote and further, the Executive Committee could devise its own

procedure to carry out its duties insofar as such procedure is

not in consistent with the Companies Act or the provisions of

AoA. It is also logical and rational to assume 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

Page 35 of 50 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 Kothari from Eastern Region as the President of FHRAI. This was seconded by Mr Pradeep Shetty. Mr Kothari was elected as President by a majority vote. The Chairman announced that Mr Nitin Kothari from the Eastern Region has been elected as President. However, Mr. Kothari stated that he is unable to accept the Presidency and declined to take the Chair of the President.

Mr. P. S. Ghai then proposed the name of Mr. Ashoke Singh from Eastern Region as the President of FHRAI and Mr. Jaiswal seconded it. The Chairman then announced that Mr Ashoke Singh was elected as President by a majority vote. However. Mr. Ashoke Singh declined due to personal reasons as he stated that he would be travelling out of India more often this year.

Mr. Ashoke Singh further Informed Mr. Sudesh Kumar Poddar has been nominated by the Eastern Region for the post or President of FHRAI for the year 2018-19. Mr Ashoke Singh proposed the name of Mr Sudesh Poddar as President.

Mr P.S. Ghai then proposed the name of Mr. Vijay Dewan as the President.

The Chairman highlighted that usually voting does not take place in FHRAI for the post of the President, but since two names have been proposed by members i.e. Mr. Sudesh Poddar and Mr. Vijay Dewan for the President's position of FHRAI, he requested the members to give their opinion & vote on this. Thirteen members gave their assent for Mr Dewan as the President and five members in favour of Mr Poddar. Thus, Mr Dewan was elected as President by a majority vote.

Mr. Dewan was contacted over telephone by Mr. Sudesh Poddar and informed him about the decision of the EC to elect him as the President of FHRAI.

Mr. Dewan conveyed over telephone that tradition should be followed in FHRAI and the nomination from the Eastern Region for the President remains with Mr Sudesh Poddar

Page 36 of 50 and no one else. Further Mr Dewan declined to take up the post of President, FHRAI tor 2018-19.

Mr. Pradeep Shetty observed that after their elections to the Executive Committee is ratified by the AGM, the EC members of FHRAI function in their individual capacity as Board of Directors of FHRAI and in that respect any nomination from any region cannot be thrust on the EC members to be accepted. That would undermine the role of the. EC members. Mr Shetty further stated that once the regional nominees are approved by the FHRAI General 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 as President. Mr. Shetty informed that there had been a polling and in every election the electorate votes for someone and someone is defeated and that does not mean that a reason can be asked for not choosing the candidate who has lost.

Page 37 of 50 xx xx xx xx The Chairman once again requested the Eastern region to reconsider their decision and recommend a name acceptable to the EC Members."

(Emphasis supplied)

39. It is clear from the above extracted proceedings of the

Executive Committee meeting held on 30.10.2018, the names of

Mr. Nitin Kothari and after he declined that of Mr. Ashoke Singh

and after he refused to take up the post of President due to

personal reasons that of Mr. Vijay Dewan were proposed by

members from other regions. The minutes do not make clear

that while their names proposed and seconded by members of

Northern and Western regions, their consents were sought

before proposing their names, but the fact that they declined to

take up the President's post immediately after being elected is a

clear pointer to the fact that they were not consulted or their

consent was obtained prior to the proposal of their names. It is

also clear from the proceedings recorded in Item No. 7 that Mr.

Garish Oberoi, the outgoing Chairman continued to request the

Eastern Region members to propose the name for the President

that is acceptable to the Executive Committee, but the

members insisted on the name of Mr. Sudesh Kumar Poddar. It

is also seen from the proceedings that Mr. Poddar and Mr.

Tejinder Singh Walia wanted to know the reasons for not

accepting Mr. Poddar's name, but no reason was communicated

Page 38 of 50 by the Chairman. It is also seen from the proceedings that Mr.

Amanvir Singh and Mr. Sherry Bhatia (one of the Appellants in

CA(AST) No. 162 of 2022) even went to the extent of suggesting

that till such time the issue of President is resolved, one of the

Vice Presidents could be entrusted to deliver the functions of

the President and Mr. Amanvir Singh even suggested the name

of Mr. Gurubaxish Singh Kohli for this role.

40. We note that the members of the Executive Committee are

elected at every Annual General Meeting as provided in

Appendix 'A' of AoA and the incoming Executive Committee is

deemed to have taken office from the date its office bearers are

elected. Further, the previous Executive Committee as well

retiring office bearers continue 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

Page 39 of 50 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 pursuing their

iniquitous, perverse and flagrant design to block the

appointment of Sudesh Kumar Poddar as President of FHRAI as

preferred candidate of the Eastern Region. Such acts of

Executive Committee members, mainly by the above stated

members of the Northern and Western regions, are clearly acts

of oppression of members of the Eastern region and that the

outgoing President Mr. Garish Oberoi was clearly an active

party in perpetuating such illegal acts. Moreover, the FHRAI

which was not being allowed to elect a President for the term

2018-19 and would affect the smooth management of FHRAI's

affairs. Thus, these acts would also constitute acts leading to

mismanagement of the affairs of the company, which would be

Page 40 of 50 covered under sections 241-242 and which are not merely

'directorial complaints'.

42. We also consider the argument put forth by the Learned

Senior Counsel for the Appellants that Article 52 of the AoA lays

down that there should be election for the post of President,

whereas in the present case, the Executive Committee members

from Eastern Region were insisting on their chosen/nominated

person Mr. Sudesh Kumar Poddar to be appointed as President.

We refer to section 53 of The Representation of the People Act,

1951, which clearly lays down that even when a single member

is in fray in an election, she is elected unopposed, but the fact is

that it would still be called an election. We also refer to the

judgment cited by the Learned Senior Counsel for Respondent

HRAEI in the matter of T. Ekambara Nicket and another

(supra). The relevant portion of the judgment is as follows:-

" 21. Though I have thus come to the conclusion that the notification of the 28th of September fixing the election to be held on the 30th was illegal; as being against R. 6 it does not of course necessarily follow that I would be justified in issuing a mandatory order under Section 45 of the Specific Relief Act, restraining the holding of the election in this case. If it should be held that there remained on the date of the notification only one valid nomination of a candidate for election and that there was no right or possibility of making any other nominations, it follows that in the absence of any contest the election to be held would only be a merely formal election and the absence of three days' notice of the election, even though

Page 41 of 50 illegal, would not be calculated 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 General category, Scheduled Castes. Backward Classes and women by rotation and by lots in the manner prescribed.

Rule 70 sub-rule (4) of the Haryana Municipal Election Rules, 1978 ('Election Rules' for short) prescribes the manner in which the election to the office of President of municipality could be held. The Local Government Department of Haryana vide its notification dated 20-1- 1995 declared in terms of Rule 70(4) of the Election Rules that the seat of the President, Municipal Committee, Loharu, inter alia, shall be filled up from amongst the members belonging to Scheduled Caste category.......

Page 42 of 50

Xx xx xx xx

5. xx xx xx xx

On a combined reading of Article 243-T of the Constitution of India, Sections 10(5) and 18 of the Act and sub-rule (4) of Rule 70 of Election Rules, it becomes clear that Parliament as well as the legislature have enacted these provisions in order to provide for reservation of office of the President for members of Scheduled Castes, Scheduled Tribes, Backward Classes and women in rotation. A bare reading of Section 10(5) and Rule 70(4) shows that the offices of the Presidents are to be filled from amongst members belonging to different categories by rotation and by lots. It is not disputed that the post of President of Loharu Municipal Committee at the relevant time was reserved for Scheduled Caste women. So far as the appellant is concerned, she has been elected from Ward No. 5 on a seat reserved for Scheduled Caste women. Therefore, in that category she is the sole candidate. ..........The very concept of rotation presupposes that for the contest of Presidentship once by rotation a reservation is made for members elected from a particular category only those members can contest for Presidentship....."

(Emphasis supplied)

44. We also refer to the judgment of Hon'ble Bombay High

Court in the matter of Vilas Dadarao Chavan (supra), in which

the relevant portion regarding election in the event there is only

one candidate is as follows:-

"15.

xx xx xx

Page 43 of 50 There is no difficulty in coming to the conclusion that there is an obligation on Returning Officer to declare the election of such only one candidate in the field, as elected candidate and he has to do this forthwith. The mandatory duty is cast on the Returning Officer in this regard. Therefore, he had no option but to 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 of Mr. Sudesh Kumar Poddar has not been shown

Page 44 of 50 to be invalid or that he is an ineligible candidate and therefore,

he is fit to contest for the post of President.

47. We also take note of Articles 7 and 8 of the AoA, wherein

the provision for removal of the members of the Executive

Committee through "No Confidence Motion" is provided.

Therefore if, as contention of the Appellants that Mr. Sudesh

Kumar Poddar is not fit to be appointed as President, is correct,

the members of the Executive Committee could pass a no

confidence motion for his removal, but till the time removal of

Mr. Sudesh Kumar Poddar in such basis and manner does not

happen, he is entitled and eligible to contest as President of

FHRAI and no disqualification attaches to his candidature.

48. From perusal of the above stated judgments and the

provision cited above from The Representation of the People Act,

1951, it is lucidly clear that, even when there is a single

candidate in fray, she will be elected unopposed provided she is

eligible to contest, and such election is proper and legitimate

election in the eyes of law. Thus, the act of the Appellants not

to let Mr. Sudesh Kumar Poddar's name be proposed as a

'nominated' candidate of the Eastern Region when no other

candidate opposing him was in the fray, was certainly not in

accordance with the principle of corporate democracy and

corporate governance and also not in consonance with the

Page 45 of 50 requirement of Article 52 of the AoA of FHRAI. While holding

this view we are conscious of the fact that even for the years

2014-15, 2015-16, 2016-17 and 2017-18, there was a single

candidate every year, who was elected unopposed as President

of the FHRAI in the respective years and at that time nobody

raised an issue about the nomination of a single candidate from

the particular region. Quite clearly, the word 'nomination' when

used in a reference to putting forward the name of Mr. Sudesh

Kumar Poddar may give an impression that he is not a

contesting candidate, but practically in the eyes of law he is

merely a candidate, whose name would be duly proposed by any

Executive Committee member, and be considered a valid

nomination/candidate as is understood, under The

Representation of the People Act, 1951, where nomination

merely means that someone has proposed and some other

person has seconded the name of the candidate, but it that the

nominated candidate is 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.

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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 the post of President,

who is then elected unopposed as President. The fact still

remains that such a person is elected, even though she/he is

elected unopposed.

50. In the light of the above-stated detailed discussion, we are

of the clear view that the waiver granted by the NCLT with

regard to section 244 of the Companies Act, 2013 to the

petitioners of CP No. 437/242-242/2018 was in order and was

necessary to allow the petitioners to agitate their case about

alleged oppression and mis-management under sections 241- Page 47 of 50 242 of the Companies Act, 2013. We further find that the acts

of some members of the Executive Committee, who have formed

a "clique" to give shape to their chosen but perverse design are

clearly acts of "oppression and mismanagement" beginning from

the attempts to amend clause IV(b) and (c) of Appendix A of the

AoA, which had carried on till the time of election of President of

FHRAI for the year 2018-19. We also find that even if there is a

sole candidate, whose name is put forth as the preferred

candidate of a particular region, his election would be

unopposed, but that election would still qualify as a election

under article 52 of the AoA provided the proposed name is of a

person who is eligible to contest. We therefore hold that the

Impugned Order is correct and needs no intervention.

51. We direct that election for the post of President of FHRAI

for the year 2018-19 shall be completed within 30 days of this

judgment/order to enable the company FHRAI to carry on its

functions in accordance with law and for the benefit of the

Company and its members.

52. It is clear from the date of the Executive Committee

meeting dated 30.10.2018 that the parties in this case have

been continuously involved in litigation. It is also clear that the

normal activities of FHRAI including the meeting of the

Executive Committee in the absence of a regular President have

Page 48 of 50 not only affected the functioning of FHRAI, but have not been

carried out in accordance with provisions of the AoA. The

actions taken by the Executive Committee on 30.10.2018 in the

meeting chaired by Mr. Garish Oberoi are patently illegal and

this meeting should have taken place under the chairmanship

of the new President. We, therefore, are of the opinion that the

Executive Committee members as they stood on 30.10.2018

shall be deemed to continue to hold office till a fresh AGM is

held to elect Executive Committee members and thereafter the

meeting of the Executive Committee takes place to elect the

President for the term 2018-19 and appoint FHRAI's other office

bearers and transact regular business. We, therefore, view the

directions in para 24 (i), (ii) and (iii) of the NCLT order as fair

and just and uphold them.

53. We further, are of the view that the period starting from

30.10.2018 till the pronouncement of this judgment shall not be

included while considering the term and eligibility of the

Executive Committee members as provided in the A0A in the

election of President, Executive Committee members and other

office bearers of FHRAI.

54. With regard to IA No. 3749 of 2022, which was filed by

Respondent No. 12 FHRAI regarding direction for payment of

statutory dues etc. for meeting expenses of FHRAI we close it

Page 49 of 50 the new President shall be installed in accordance with the

orders given above within 30 days, and the Executive

Committee under charge of the new President shall be fully

entitled to consider the issues raised in IA No. 3749 of 2022.

Any other IAs pending in the matter are also closed in the light

of this judgment in the instant appeals.

55. In the above-mentioned situation, we find that the

judgment of NCLT and Impugned Order dated 30.8.2022 of

NCLT is correct and we do not see any reason to interfere with

the same. The appeals, namely CA(AT) No. 162 of 2022 and

CA(AT) No. 166 of 2022 are therefore found to be devoid of merit

and are disposed of accordingly through this common

judgment.

56. There is no order as to costs.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Dr. Alok Srivastava] Member (Technical)

New Delhi 21st February, 2023 /aks/

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