Nasik Diocesan Trust Assn vs Uday Daniel Khare

(Arising out of order dated 12.06.2017 passed by the National Company Law Tribunal, Mumbai Bench, Mumbai in M.A. No.99 of 2017 in CP No.28 of 2016).

In the matter of: Before NCLT Before NCLAT

1. Nasik Diocesan Trust Assn. 1st Respondent Appellant Pvt Ltd, Ajinkya Building, Opp HDFC House, Opp Tibetan Market, Sharanpur Road, Nashik, Maharashtra 422005

2. Ajay P. Shrivastava, 2nd Respondent Appellant 480, Suprabha Niwas, Nr. Andriya Church, Sharanpur Road, Nr. Rachana Vidyalaya, Nashik, Maharashtra 422002

3. Atul Tulshidas Manmode 3rd Respondent Appellant MES D-107, Nr. Shiv Mandir, Pimple Nilakh Aundh Camp, Pune, Maharashtra 411027

4. Sachin Vitthal Katke, Nr PMC Office, Benergaon, Pune, Maharashtra 411045 5th Respondent Appellant

5. Jawahar Avinash Uzagare, 38, Pratibha Niwas, Sharanpur Road, Nasik 422002 9th Respondent Appellant

6. Nilima Pramod Shrivastava, 480, Suprabha Niwas, Nr. Andriya Church Sharanpur Road, Nr. Rachana Vidyalaya, Nashik, Maharashtra 422002 11th Respondent Appellant

Company Appeal (AT) No.368 of 2017 2

7. Swati Ajay Shrivastava, 480, Suprabha Niwas, Nr. Andriya Church, Sharanpur Road, Nr. Rachna Vidyalaya, Nashik, Maharashtra 422002 12th Respondent Appellant

Versus

1. Uday Daniel Khare, St Andreus Church, House No.26 Near Rachana School Sharanpur, Nashik, Maharashtra 1st Petitioner 1st Respondent

2. Arvind Gangadhar More B-3 Gopal Nagar Amrutdham, Ozar Road Panchavat, Nashik Maharashtra 422003 2nd Petitioner 2nd Respondent

3. Rt.Rev Pradip Lamuel Kamble Bishop House, 1 Outroom Road, Tarakpur, Ahmednagar, Maharashtra 4th Respondent 3rd Respondent

4. Appa Hanumant Waghmare, Malavani G, Baner, Taluka Haveli, Pune, Maharashtra 411045 6th Respondent 4th Respondent

5. Dev Koja Ram, Riwadi, Rewari, Jaisalmer, Rajasthan 345027 7th Respondent 5th Respondent

6. Girdhari Lal 276, Meghwal Vas, Sonu, Jaisalmer, Rajasthan 345001 8th Respondent 6th Respondent

7. Kump Alam Singh 221 ZGB BJS Colony,

Company Appeal (AT) No.368 of 2017 3

Jodhpur,

Sardarpura, Mohangarh, Jaisalmer, Rajasthan 345033 10th Respondent 7th Respondent

8. Satish Philip Kalshikar, House No.19/2 Mission Compound HPT College Road, Sharanpur Road, Nashik 422002 13th Respondent 8th Respondent

9. Sayaman Anthony Fernandes Acharya Atre Nagar, RB-17 S.M. Road, Antop Hill, Wadala (E), Mumbai 400 037 14th Respondent 9th Respondent

Present: For appellant: Shri Devansh Mohta with Mr. Venkat Poonia, Advocates.

For Respondents: Mr. Rahul Chitnis with Mr. Yogesh K. Ahirrao, Advocates 1st and 2nd Respondent.

Mr. Amol Arun Shinde, Advocate for Respondent No.3.

Mr. Abishek Jebaraj, Advocate for Respondent no.8.

JUDGMENT

BALVINDER SINGH, MEMBER (TECHNICAL)

1. The present appeal has been preferred by the appellants against the

order passed in M.A. No.99/2017 in C.P. No.28/2016 by the National

Company Law Tribunal, Mumbai Bench, Mumbai (hereinafter referred

to as the "Tribunal") dated 12th June, 2017 under Section 241, 242 and

244 of the Companies Act, 2013 granting waiver under the proviso to

Section 244(1) of the Companies Act, 2013 to Respondent Nos.1 and 2.

2. The brief facts of the case are that the Appellant No.1 was incorporated

under the Companies Act, 1913 as a company limited by Guarantee Company Appeal (AT) No.368 of 2017 4

and is admittedly a Section 8 company under the present Companies

Act, 2013. Appellant No.1 is also a registered charitable trust under

the provisions of the Bombay Public Trusts Act, 1950. The object of the

appellants are to promote Christianity in India and conduct charitable

and benevolent activities. 1st and 2nd Respondent filed a Company

Petition being CP No.28/2016 before the Tribunal for oppression and

mismanagement of the 1st appellant company by and at the hands of

2nd appellant thereby alleging that the 2nd Appellant, one of the director

of 1st appellant, with malafide intention convened an invalid, ultra vires,

fake and non-existent Extra Ordinary General Manager (EGM) on 30th

September, 2015 and removed 19 directors, most of them being

Members of the Company, under Sections 164 read with Section 167 of

the Companies Act, 2013 without giving any notice to these

directors/members of being heard. It was further alleged that Director

12 was digitally signed by 2nd appellant, certified by one Mr. Aashish

Kabra and filed with ROC with a fraudulent motive of mismanagement.

It is further alleged that 6 new directors/members were inducted on

30th September, 2015 by an invalid, ultra vires, fake and non-existent

EGM. It is further alleged that 2nd appellant who had vacated the office

on 30th September, 2015 and the appointment of 3 new directors was

done on the same day i.e. 30th September, 2015 vide Resolution No.6,

but he was authorised to do so on 3rd October, 2015 i.e. 3 days of his

vacation from the post of director. Other allegations have also been

levelled such as Board Meeting Resolutions are invalid, ultra vires, fake

and non-existent. Board Meetings were convened on 18th and 19th

Company Appeal (AT) No.368 of 2017 5

December, 2016 for removal of new directors and appointment of

additional new directors. The 1st and 2nd respondent sought the

following relief from the Hon'ble Tribunal:

I) That the Petitioners be granted a permanent order and injunction

of this Hon'ble Tribunal restraining the Respondent Nos 2 to 12

from posing as the director of the company.

II) That the petitioners be granted a permanent order and injunction

of this Hon'ble Tribunal restraining the Respondent Nos 2, 11,12

from posing as the members of the Company and cancel MGT-7

(annexure 1) with the Members.

III) That the Hon'ble Tribunal restraining Respondent No.2 in

mismanaging the operations of the company in disguise and

behind other respondents.

IV) That this Hon'ble Bench be pleased to pass an order directing

that the Petitioners/Respondent No.13, 14 are entitled to have

representation of the Board Meeting and General Meeting of the

company.

V) That this Hon'ble Bench declare the invalid, fake, non-existent

and ultra vires Extra Ordinary General Meeting dated 30th

September, 2015 and Board Meeting dated December 18, 2015

and December 19, 2015 alleged to be convened by Respondents

as null and void and any alleged resolution/documents/e-forms

based on above EGM/BM be declared null and void and be set

aside.

Company Appeal (AT) No.368 of 2017 6

VI) That this Hon'ble Bench declare the recent change in the

registered office from Ajinkya Building, Opp HDFC House, Opp

Tibetian Market, Sharanpur Road, Nashik, Maharashtra, India

422 005 to shop No.8 Snehal Tower, Sawarpada, Borivali (East),

Mumbai, Mumbai city, Maharashtra, India 400 066 with effect

from 5th November, 2015 as null and void and all alleged

meetings/actions/functions at the alleged new registered office

as null and void.

VII) That this Hon'ble Bench declare the change in the Articles of

Association as null and void and all alleged connected actions

based on alleged new Articles of Association.

VIII) Such further or any other orders be made as this Hon'ble

Tribunal Western Region may deem fit.

3. However, during the pendency of the Company Petition the 1st and 2nd

Respondent filed MA No.99/2017 in CP No.28/2016 before the Tribunal

stating that they being laymen were not aware about the technicalities

and provisions of Section 244 of the Companies Act, 2013 and

unfortunately their earlier counsel did not properly brief them about

the provision and inadvertently the company petition was filed due to

urgency as the 2nd appellant was mismanaging the affairs of the

company. The applicants further stated the members of company are

scattered in and around Maharashtra and hence the applicants could

not call the meeting and could not bring them all together to obtain

consent and/or to file the above referred petition alongwith them. The

applicants further stated that as an abundant precaution, they are in

Company Appeal (AT) No.368 of 2017 7

process to call for meeting and/or to obtain consent of all other

members of the company but it will take some time. The applicants

further stated that considering the embargo as provided under Section

244(b) of the Companies Act, 2013 read with Rule 81(2) of the National

Company Law tribunal Rules, 2016, as the petition should not be

rejected on technical grounds hence the petition filed by the 1st and 2nd

respondent may not be considered, and applicants/petitioners are filing

the application thereby seeking waiver from requirements as specified

under Clause (a) and (b) of the Section 244 of the Companies Act,

2013to apply under Section 241 of the Companies Act, 2013. Therefore,

the applicants prayed for the following:

A) That this Hon'ble Court may kindly be pleased to allow this

application thereby waiving the embargo as provided under Section

244(1)(a) and (b) as per proviso clause provided under Section 244(1)

of Companies Act, 2013.

4. After hearing both the parties the Tribunal passed the following order:

"I have taken due note of the two case laws cited from the

side the Respondent (2): (1) AE AI Ameen and others Vs

Bayangudi Muslim Educational Association and Others (C.P.

No.35 of 2004) and (2) Prem Nath Gangneja Versus

Edwardganj Public Welfare Association and another

(C.P.No.72 of 1985). However, noticed that those facts are

distinguishable from the facts of this case. A glaring

distinction is that if the Petitioner with mala fide intention

is creating litigation to hinder the social/charitable activity

Company Appeal (AT) No.368 of 2017 8

then the courts have thought it proper to thwart such

attempt. In contrast, the Petitioners in this case are making

a bonafide attempt to streamline the social/charitable

activity of this Institution. Before I conclude I want to make

it clear to both the parties that any of the observation in

this Interim Order shall not prejudice in any manner the

lawful claim of the litigants and nothing should be pre-

judged on the merits. The Petitioner under consideration

has already been admitted in the past. As a consequence,

the Petitioners are entitled to pursue this petition as per

law. The application (MA-99 of 2017) is allowed. Petition is

listed for hearing on 20th July, 2017."

5. Being aggrieved by the impugned order dated 12.06.2017 passed in MA-

99 of 2017 in Company Petition No.28/2016 the appellant has preferred

this appeal. The appellants have prayed for the following reliefs:

A) That this Hon'ble Appellate Tribunal be pleased to quash and/or set

aside the impugned order on the basis that Respondent Nos.1 and 2

were not entitled to file the Company Petition.

B) Strictly without prejudice, in the alternative and only if this Hon'ble

Appellate Tribunal is not pleased to grant prayer (A) above, in the

alternative, this Hon'ble Appellate Tribunal be pleased to quash

and/or set aside the impugned order and refer the matter to the

NCLT Mumbai for determination of whether Respondent Nos1 and 2

are members of Appellant No.1.

Company Appeal (AT) No.368 of 2017 9

C) That pending the hearing and final disposal of the present appeal,

this Hon'ble Appellate Tribunal direct that the Company Petition

No.28 of 2016 not be proceeded with before the NCLT Mumbai.

D) For ad-interim reliefs in terms of prayer clause (C) above;

E) For costs; and

F) For any and such other relief as this Hon'ble Appellate Tribunal

deem fit and proper in the circumstances;

6. Learned counsel for the appellants stated that at all times there have

been only 8 members of the 1st appellant and the respondents are not

the members of the appellant and the extract of the Register of Members

of 1st appellant had been annexed by 1st and 2nd appellant before the

Tribunal. Learned counsel for the appellant further stated that apart

from the heavily disputed alleged Minutes, there was no document on

record to show that 1st and 2nd respondent were members at all.

7. Learned counsel for the appellant stated that general meetings of

appellant No.1 were held on 30th September, 2015 and it was record

that various persons including the respondents hereto stood

automatically vacated of the office of directors by operation of law on

account of, inter alia, non-filing of annual accounts and annual returns

and failing to discharge their duties of directors and in terms of Section

167 read with Section 164 of the Companies Act, 2013 certain other

persons including appellant Nos 2 to 13 were appointed as directors. It

is further stated that this was necessary as the 1st appellant was being

mismanaged. Learned counsel for the appellant stated that the 1st and

2nd Respondent have wrongly alleged in the Company Petition that they

Company Appeal (AT) No.368 of 2017 10

were unlawfully removed from the directorship of the company whereas

actually the Respondents stood automatically vacated of the office of

directors by operation of law on account of non-filing of annual

accounts and annual returns and failing to discharge their duties as

directors. Learned counsel next stated that they have intimated this

fact only to the Registrar of Companies. Learned counsel for the

appellants stated that the respondents filed application before the

Tribunal and sought waiver from the requirements prescribed in

Section 244(I) on the basis that they were members but did not

constitute one-fifth of the total members. Learned counsel for the

appellants stated that the 1st and 2nd Respondents were not members

of the company so they were not entitled to apply for a waiver under

Section 244 of the Act. Learned counsel for the appellant submitted

that the Tribunal without considering that the 1st and 2nd respondents

are members of the company or not, passed the impugned order dated

12.6.2017.

8. Learned counsel for the appellants submitted that since the 1st and 2nd

respondents are not member of the 1st appellant, therefore, they are not

entitled for waiver under Section 244(1) of the Companies Act, 2013.

Learned counsel for the appellants further submitted that even the

Tribunal is not entitled to grant the said waiver under the Act without

determining whether the 1st and 2nd Respondents are the members of

the 1st appellant. Learned counsel for the appellants further submitted

that the Appellate Tribunal may decide whether the waiver under

Company Appeal (AT) No.368 of 2017 11 Section 244(1) of the Companies Act, 2013 would apply even to non-

members of 1st appellant.

9. Reply on behalf of 1st and 2nd respondent has been filed. Learned

counsel for the 1st and 2nd respondent submitted that as per the Articles

and Memorandum of Association of the company the appellant No.1 is

empowered to hold and manage various properties like churches,

institutions, schools and orphanages etc spread over company's

jurisdiction. The Articles and Memorandum of Association of the

company does not contain any provision regarding removal of directors

of the company. It is submitted that as per the Memorandum of

association and articles of association of the appellant No.1 the

company has jurisdiction and is to function only within the said

jurisdiction and the directors of the company should be one who is the

member of the company and who is residing within the jurisdiction of

the company and should also be christian. Learned counsel submitted

that the appellant no.2 was never ever a member of the company nor

any director but by misusing the online system, doing forgery with the

digital signatures, became a member and director of the appellant No.1.

The appellant by misusing the same thing and taking undue advantage

added some directors belonging to other religion for his personal gain

and also changed the Registered Office from Nashik to Mumbai which

is not as per the Memorandum and Articles of Association of the

appellant No.1.

10. Learned counsel for the 1st and 2nd respondent submitted that

the decision passed by this Appellate Tribunal in Cyrus Investment Pvt

Company Appeal (AT) No.368 of 2017 12

Ltd and Anr Vs Tata Sons Ltd & Ors cannot be made applicable and

differed with the present case as in the said petition the question was

arose in respect of company having share capital, on the contrary in the

present case the appellant No.1 is Section 8 of the Companies Act, 2013

having charity functions. Learned counsel submitted that even if it is

presumed without admitting that the Cyrus case is applicable to the

present case, even in that case the issue as raised by the appellants

herein in respect of 1st and 2nd respondent of being member or not of

appellant No.1, cannot be decided at the time of deciding application as

per the provisions of proviso clause enshrined under Section 244 of the

Companies Act, 2013.

11. Learned counsel for the 1st and 2nd respondent submitted that

they have represented the appellant No.1 in numerous cases which

proves that they are members of the appellant No.1. Learned counsel

for the 1st and 2nd Respondent submitted that unless and until they

being members of the company, they cannot be director of the company

and it is an admitting fact that presuming without admitting the alleged

resolution passed by the Appellant 2 to 7 removing the respondents

from their directorship, itself proves that till that date the 1st and 2nd

respondent were the members of the company and even today they are

the members as by no act they could be removed from membership of

the appellant 1 company.

12. Learned counsel for 1st and 2nd respondent submitted that it is

partly correct that the appellant No.1 was incorporated under the

provisions of Companies Act, 1913, as a company as per the provisions

Company Appeal (AT) No.368 of 2017 13

of Section 8 and the objects of the company are to promote Christianity

in India, conduct charitable and benevolent activities. Learned counsel

states that it is incorrect that the company is also a registered

charitable trust under the provisions of Bombay Pubic Trust act, 1950

and the appellant is a company registered as per provisions of the

Companies Act. Learned counsel further stated that the appellant is a

company registered as per the provisions of Companies Act whereas

Nashik Diocesan Council is a public trust registered as per the

provisions of Bombay Public Trust Act, both are two different and

distinct entities. Learned counsel further submitted that the appellants

No.2 to 7 are trying to mislead the Appellate Tribunal by purporting the

trust and company being the one and the same entity. Learned counsel

for the 1st and 2nd Respondent submitted that the appellants No.2 to 7

may produce the record as to who were the only 8 members of the

appellant No.1 since 1943 and to prove the authenticity of the extract

of the so called and self prepared Register of Members of the appellant

No.1. Learned counsel for the 1st and 2nd respondent submitted that the

appellants No.1 and 2 admitted that the 1st and 2nd respondent

alongwith several other the then directors have been stood

automatically vacated of the office of directors by operation of law on

account of non-filing of annual accounts and annual returns and

thereby failing to discharge their duties as directors. Therefore, the

appellants No.1 and 2 admits that 1st and 2nd respondent and several

other members were the directors of the appellant No.1 company. It is

Company Appeal (AT) No.368 of 2017 14

next submitted that unless and until being a member of the company

no one could be director of the company.

13. Learned counsel for the 1st and 2nd respondent submitted that

the Tribunal has correctly dealt with the application filed by it without

going into the merits of the Company Petition. Learned counsel for the

1st and 2nd respondent submitted that the they are members of the

appellant company and were legally entitled to waiver under the proviso

of Section 244(1) of the Companies Act, 2013 and the company petition

filed before the Tribunal is maintainable. Learned counsel further

submitted that the in view of the decision passed by this Hon'ble

Appellate Tribunal in Cyrus Investment Pvt Ltd and Anr Vs Tata

Sons Ltd & Ors the Tribunal has rightly allowed waiver to the 1st and

2nd respondent and the appellant No.2 to 7 were never ever being

members or directors of the appellant company. Merely misusing the

online system became members and online directors of the appellant

company and started mismanaging and their acts of oppression.

Learned counsel lastly submitted that the appeal is totally devoid of any

substance and the appeal is liable to be dismissed with compensatory

costs and the appellants are not entitled to any relief much less the

reliefs prayed for by it in the above appeal, not even for any ad interim

and/or interim relief as prayed for.

14. Reply on behalf of 3rd respondent has been filed. Learned counsel

for 3rd respondent stated that he is presently serving as the Bishop of

Nasik Diocese and Chairman of the Nasik Diocesan Council. Learned

Company Appeal (AT) No.368 of 2017 15

counsel further submitted that as per Memorandum of association and

Article of Association of the appellant company, the Bishop and other

Assistant Bishops and Archdeacons will be the ex-officio members and

directors of the company. Learned counsel for 3rd respondent further

submitted that the members of the company shall be Christians elected

or nominated by a Managing Council known as the Nashik Diocesan

Council of which the Bishop is the Chairman. Learned counsel for 3rd

respondent submitted that he having been appointed by the Church of

North India, as the Bishop of Nashik diocese, he is the first ex-officio

member, director and Chairman of the appellant company. Learned

counsel for 3rd respondent further submitted that till end of 2015 the

company was under his control and of Diocese Council.

15. Learned counsel for the 3rd respondent submitted that 2nd

appellant has illegally usurped the management of the company and is

steadily destroying its social and charitable purposes. Learned counsel

further submitted that 2nd appellant with a view to use the vast

properties held by the company for his malafide personal gain has

illegally removed several members of the company including removing

him. Learned counsel for 3rd respondent submitted that the 2nd

appellant convened an illegal meeting on 13.9.2015 and removed

several members without any notice or being given the opportunity of

being heard. It is also alleged that the 2nd appellant fraudulently signed

various company forms for the removal of the original directors and

added six new directors and the directors purportedly remaining in the

company all are close relatives or friends of 2nd appellant. Learned

Company Appeal (AT) No.368 of 2017 16

counsel for 3rd respondent submitted that the material objects of the

company were purported to be changed and the said appellants have

illegally procured documents to show shares issued to all the directors.

Learned counsel for 3rd respondent further submitted that event he

registered office of the appellant company was illegally changed by the

2nd appellant from Nashik to Mumbai in spite of the management being

the Nashik Diocese Council.

16. Learned counsel for the 3rd respondent further submitted that it

is prima facie made out that the 2nd appellant alongwith other

appellants have connived with one builder namely Prakash Pusaram

Laddha to usurp the properties of the company and to completely

destroy its charitable objectives. Learned counsel submitted that he

got registered FIR against the 2nd appellant for his criminal and

fraudulent acts and the 2nd appellant was denied anticipatory bail and

was taken in police custody for seven days and now he is remanded for

judicial custody at Nashik Central Jail on the same charges of corporate

and criminal fraud levelled against him. Learned counsel for 3rd

respondent further submitted that the 1st and 2nd respondent had

moved a Company Petition before the Tribunal under Sections 241 and

242 read with Section 244 of the Companies Act. Learned counsel

further submitted that the two members fell below the one fifth of total

member's threshold mandated under Section 244(b) of the Companies

Act, 1st and 2nd respondent moved a waiver application and the same

was allowed and further submitted that he supported the petition as

there were prima facie acts of serious oppression.

Company Appeal (AT) No.368 of 2017 17

17. Learned counsel for 3rd respondent submitted the waiver

application was filed by the members because the appellants have

admitted to issuing notice to the applicants to attend the EGM,

therefore, the appellants have admitted them to be members of the

Company. Therefore, the appellants cannot take a contrary stand that

1st and 2nd respondents are not members of the company. Learned

counsel for 3rd respondent submitted that the appellants have not

annexed the original MOA/AOA which forms the very basis for

determining members in this company. Learned counsel further

submitted that 1st and 2nd respondents are members of the company

and were illegally removed as members and the said act have been

challenged. Learned counsel for 3rd respondent also pointed out to Page

No.54 of the Appeal Paper Book and stated that the appellants had sent

notice to the 1st and 2nd respondents for the EGM which prove that they

are members of the company.

18. Learned counsel for 3rd respondent has submitted that the

appellants have wrongly stated that the company has had only 8

members at relevant times. It is further stated that the appellants have

cleverly used the words "at relevant times" which has no meaning in

law. It is further submitted that the Trust has been in operation for

over a hundred years with several Christian members that have been

appointed by the Nashik Diocesan Council. Learned counsel submitted

that these eight members have been falsely inducted in the year 2015

for forging and fabricating the documents digitally and against all of

them the FIR has been registered and all these 8 members are from the

Company Appeal (AT) No.368 of 2017 18

same family. Learned counsel stated that the all the appellants

particular Appellant No.2 are guilty of serious acts of oppression and

mismanagement which includes forging documents and illegally

removing members both of which have been prima facie observed by

the Tribunal. At the end the learned counsel concluded that the appeal

filed by the appellants may be dismissed with costs.

19. Rejoinder on behalf of appellant No.1 to the affidavit in reply filed

on behalf of 1st and 2nd respondent has been filed. Learned counsel has

submitted the submissions what has been stated in the appeal.

20. Rejoinder has been filed by the appellant No.1 to the affidavit in

reply filed on behalf of Respondent No.3. Learned counsel for the

appellant No.1 stated that the 3rd respondent would not be the ex-officio

Chairman-Director-Member of the appellant company in terms of the

order passed by Hon'ble High Court of Bombay in the matter of

Sadanand Shantwan Salvi and Ors Vs The Nasik Diocesan

Counsel Reg. Trust and Ors decided on March 13, 1997 and the

consequent amendment of the Memorandum and Articles of

Association of the Company in the year 2000. It is next stated that the

Hon'ble High Court in the said order observed the manner in which the

trust was being mismanaged due to the temporal nature of its

administrative structure. The Hon'ble Court observed that the

amended Memorandum and Articles of Association of the company did

not have any provisions for respondent herein to be the ex-officio

Member-Director. Learned counsel further submitted that even as per

Company Appeal (AT) No.368 of 2017 19

the Memorandum and Articles of Association of the Company of 1990,

there is no concept of ex-officio chairmanship of the appellant company.

21. We have heard the learned counsel for the parties, perused the

entire record and the impugned order.

22. The main issues raised by the appellants in this appeal are as

under:-

i)Whether the proviso to Section 244(1) would be applicable to the

present case and whether Respondents Nos. 1 and 2 would be

entitled to the waiver thereunder.

ii) Whether a person who is not a member is entitled to the waiver

under Section 244(1) would also have to be determined.

iii) Whether NCLT is entitled to grant the said waiver under

Section 244(1) even without determining whether a petitioner

before it is a member or not.

iv) Whether the waiver under the proviso to Section 244(1) could

apply even to non-members.

23. Section 244 of the Companies Act, 2013 came into force from 1st

June, 2016. Prior to the same, eligibility clause was laid down under

Section 399(1) of the Companies Act, 1956, which is para-materia same

that of sub-section (1) of Section 244.

24. In the Companies Act, 1956 there was no provision of 'waiver',

but under sub-section (4) of Section 399, on an application filed by any

member i.e. ineligible member or members of a company, the Central

Government was empowered to form opinion whether circumstances

Company Appeal (AT) No.368 of 2017 20

exist which make it just and equitable to do so, authorise the member(s)

of a company to apply before the Company Law Board under Sections

397-398 (now Section 241), notwithstanding that the requirements of

clause (a) or (b), as the case may be of sub section (1) of Section 399 are

not fulfilled.

25. Now there is a clear departure from earlier provision i.e. sub-

section (4) of Section 399 whereunder the Central Government was

empowered to permit the ineligible member(s) to file an application for

'oppression and mismanagement' by its executive power. Under proviso

to sub-section (1) of Section 244 now the Tribunal is required to decide

the question whether application merits 'waiver' of all or any of the

requirements as specified in clauses (a) and (b) of sub-section (1) of

Section 244 to enable such member(s) to file application under Section

241. Such order of 'waiver' being judicial in nature, cannot be passed

by Tribunal, in capricious or arbitrary manner and can be passed only

be a speaking and reasoned order after notice to the (proposed)

respondents. The basic principle of justice delivery system is that a

court or a Tribunal while passing an order is not only required to give

good reason based on record/evidence but also required to show that

after being satisfied itself the Court/Tribunal has passed such order.

To form an opinion as to whether the application merits waiver, the

Tribunal is not only required to form its opinion objectively, but also

required to satisfy itself on the basis of pleadings/evidence on record

as to whether the proposed application under section 241 merits

consideration.

Company Appeal (AT) No.368 of 2017 21

26. Section 241(1) of Companies Act, 2013 provides as under:

"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

interest 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

interest 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."

27. Counsel for the appellants has argued that the Respondents No.1

and 2 are not member of the company, therefore, they are not entitled

to move an application for waiver and the Tribunal has made a mistake

Company Appeal (AT) No.368 of 2017 22

in accepting the same. We observe from the pleadings that the

Appellant company is Section 8 company incorporated under the

Companies Act for religious and charitable objective such as promoting

the Christian faith and social welfare to the public at large. As per

Memorandum of Association and the Articles of Association of the

company, the Bishop and other Assistant Bishops and Archdeacons will

be the ex officio members and directors of the company. Further as per

Company Memorandum of Association and Articles of Association,

members of the said company shall be Christians elected or nominated

by a managing council known as the Nashik Diocesan Councils of

which the Bishop is the Chairman. The Appellant No.2 has stated that

the appellant company consist of 8 members. Neither of the

Respondents are members of the appellant company. Appellant No.2

further stated that general meeting of appellant No.1 was held on 30th

September, 2015 and it was recorded that various persons including

the Respondents hereto stood automatically vacated the office of

directors by operation of law on account of, inter alia, non-filing of

annual accounts and annual returns and thereby failing to discharge

their duties as directors, in terms of Section 167 read with Section 164

of the Companies Act, 2013. However, we observe that the Respondent

No.1 and 2 have attended the Annual General Meeting of Nasik

Diocesan Trust Association held on 28th November, 2014 and their

signatures are on the attendance Sheet at Sl.No.4 and 5 at Page 66.

28. As per Cyrus Mistry case it is admitted position that if applicant

is not member he cannot move an application. In the present case, we

Company Appeal (AT) No.368 of 2017 23

also noted that there are 46 members in the company meeting on

28.11.2014 at Nasik and the appellant is stating that there are only 8

members. Therefore, there has to be some linkage how 46 members

have become 8 members. Further the appellant has stated that certain

directors stood automatically vacated of the office of directors by

operation of law on account of non-filing of annual accounts and annual

returns and thereby failing to discharge their duties as directors.

However, we are of the opinion that there is provision in the Companies

Act that a director can be removed but members are not normally

removed. On the other hand, as per the claim of the appellant that

respondents are not members and counter claim by the respondents

that they are members. There are also some conflicting documents as

some documents are showing that they are members of the company at

some point of time and some documents are showing that they are not

members of the company. Even if there is a provision in the Articles of

Association for removal of the members, it may conflict with the

provisions of law and if not so, strict compliance with the requirement

for removal need to be placed on record so as to deny the membership

right to a person who has been a member at one point of time or the

other. This issue could be an exceptional circumstances, which may

merit "waiver".

29. Learned counsel for the respondents raised the issue that as per

Memorandum of Association and Articles of Association of the

Company, the company has jurisdiction and is to function only within

the districts of Nashik, Aurangabad, Ahmednagar (Local Jurisdiction)

Company Appeal (AT) No.368 of 2017 24

and also the directors of the appellant company should be one who is

the member of the company and who is residing within the jurisdiction

of the company. It is argued that the registered office of the company

has been shifted to Mumbai. Looking to the nature of the company,

location of the properties and the charity purpose for which the

Association has been formed for the districts of Nashik, Aurangabad,

Ahmednagar the shifting of the office from Nashik to Mumbai may be

ground for Members of the company to be concerned. This seems to us

exceptional circumstances for which waiver could be allowed to

Members who have moved the company petition.

30. In view of the above discussions we observe that for above

reasons the Tribunal has rightly exercised its discretion and allowed

the application for waiver. The appeal is dismissed. No order as to

costs. NCLT, Mumbai is directed to dispose of the company petition as

per Section 422 of the Companies Act, 2013.

(Justice A.I.S. Cheema) (Mr. Balvinder Singh) Member (Judicial) Member (Technical)

New Delhi

Dated: 21-05-2018

Company Appeal (AT) No.368 of 2017