Legal formulations cannot be divorced from the fact situation of the case

HIGH COURT OF DELHI

N.C. Bakshi

versus

Union of India

W.P. (C) NO. 6260 OF 2010

C.M. NOs. 12384 OF 2010 & 435 OF 2012

DECEMBER 21, 2012

JUDGMENT

1. The petitioners who are two in number, claiming to be members of respondent No. 3 – Cricket Association, seek quashing of Approval under Section 25(8) of Companies Act, 1956 for alteration of Articles of Association of respondent No. 3 granted on 17th November, 2009 (Annexure-N) and a mandamus to first two respondents to grant fair hearing to petitioners and to dispose of their Representation of 16th April, 2009 (Annexure-E Colly) alleging that alteration in the Articles of Association is contrary to provisions of the Companies Act, 1956.

2. Petitioners assert that respondent No. 3 – Association is a company incorporated under the Companies Act, 1956 and was granted a license under Section 25 of the Companies Act, 1956 in the year 1985 and as per the license condition, no alteration can be made in Memorandum of Association or in Articles of Association unless the alteration has been previously submitted to and approved by the Central Government.

3. Though the alterations made in Articles of Association through a special Resolution in the Annual General Meeting of 20th March, 2009, has been accorded Approval vide impugned Communication (Annexure-N) by the Competent Authority, i.e., second respondent but the grievance of petitioners herein is that the impugned Approval has been granted without considering petitioners’ detailed Representation (Annexure-E). To substantiate it, attention of this Court has been drawn to Information of 6th May, 2009 (Annexure-G) obtained under The Right to Information Act, 2005, (hereinafter referred to as ‘RTI Act’) disclosing no application under Section 25(8) of Companies Act, 1956 had been received from respondent No. 3 till date and another Information of 8th September, 2009 (Annexure-I), obtained under ‘RTI Act’, disclosing that application under Section 25(8) of Companies Act, 1956 of respondent No. 3 is pending and through Information of 24th November, 2009 (Annexure-M) obtained under ‘RTI Act’ petitioner had learnt about the grant of approval to the alteration made in the Articles of Association by third respondent.

4. While entertaining this writ petition filed in the year 2010, petitioners were called upon to explain the delay and laches in approaching this Court. Though the delay was often months or so, but first petitioner had actively participated in the elections of respondent No. 3 – Association in December, 2009 which were held in accordance with altered Articles of Association and the candidate proposed and nominated by first petitioner, had been elected in the elections held in November, 2009 and September, 2010 and so, plea of acquiescence is sought to be raised against petitioners by respondents.

5. Learned senior counsel for petitioners had urged that the delay and laches would not stand in the way of petitioners because Representation of petitioners was still pending which was not considered while granting the impugned approval and because the illegality in alterations made in the Articles of Association is a continuing wrong.

6. Learned senior counsel for petitioners relies upon decisions in Vaishanava Dass v. Faqir Chand AIR 1968 Delhi 6 Pramod Chopra v. Apparels Export Promotion Council ILR 1984 Delhi 717; Rahul Mehra v. Union of India [2004] 114 DLT 323 (DB); C.P. Singhania v. Garware Club House [2003] 46 SCL 659 (Bom.) Ashok Kumar v. State of Bihar AIR 2008 SC 2723; order of 3rd April, 1987, passed by learned Sub Judge, Delhi in Suit No. 100/87 tilted as N.C Bakshi v. DDCA; order of 1st June, 1987 passed by learned Senior Sub Judge in MCA No. 108/87; and order of 15th September, 1987 passed by coordinate Bench of this Court in C.R. No. 499 of 1987, in support of the aforesaid stand taken.

7. Learned senior counsel for respondent No.3 relies upon decisions in DLF Universal Ltd. v. Greater Kailash-II Welfare Association [2006] 127 DLT 131 (DB); Oswal Fats & Oils Ltd. v. Additional Commissioner (Administration), Bareilly Division, Bareilly [2010] 4 SCC 728 & Haryana Financial Corpn. v. Kailash Chandra Ahuja [2008] 9 SCC 31 to contend that upon collective reading of Section 255 and 256 of the Companies Act, 1956, it clearly emerges that 1/3rd of the Directors/Office Bearers can remain in office for a period of three years and infact each Director/Office Bearer in the three groups of this Association is retiring, i.e., eight office bearers in Group C every year, eight office bearers in Group B, after every two years and eight office bearers in Group A, after every three years and this is in accordance with the provisions of the Companies Act, 1956.

8. Learned senior counsel for third respondent further contends that if petitioners have any bonafide grievance they can always invoke the jurisdiction of Company Law Board or to avail of civil remedy as the impugned approval is an administrative act which had been duly granted within the parameters of the Companies Act, 1956 and that petitioners have not demonstrated how they have been prejudiced by alleged non-grant of hearing prior to grant of impugned Approval. Lastly, it is pointed out that in the Annual General Meeting of 31st December, 2011, elections were held for post of eight members as per the amended Articles of Association and not only on the ground of delay and laches but because petitioners have acquiesced, so this writ petition merits rejection.

9. Although various grounds have been taken in the pleadings and even in their written synopsis submitted by both sides but learned senior counsel for the contesting parties had confined their submissions to the impugned amendments in the Articles of Association of respondent- Delhi District Cricket Association i.e. regarding deletion of Article 22 and addition of Article 23 (A) in the Articles of Association, which according to petitioner violates the mandate of Sections 255 and 256 of the Companies Act and in particular Sub-Section (2) of Section 256 of the Companies Act, which is said to be hit by Section 9 of the Companies Act. That is to say, any amendment in Articles of Association of a company, which is contrary to the provisions of the Companies Act is void. Attention of this Court was drawn to Sub-Section (6) of Section 25 of the Companies Act by learned senior counsel for the contesting respondents to point out that the impugned alterations had the approval of the Government and so, they enjoy immunity from challenge, as the same being in nature of exemption. In support of this stand, attention of this Court is drawn to the decision in C.P. Singhania’s case (supra).

10. Upon hearing both the sides and on perusal of the material on record and the decisions cited, this Court is of the considered opinion that even if petitioners have acquiesced by participating in elections prior to filing of the writ petition, still, the delay and laches of ten months will not stand in their way to legitimately question the altered Articles of Association being in contravention of provisions of the Companies Act, 1956, as Section 9 of the Companies Act, 1956 mandates that this Act overrides the Memorandum, Articles, etc. to the extent they being repugnant to the provisions of this Act. So, respondent’s plea of delay, laches and acquiescence is repelled.

11. Regarding the pendency of Representation (Annexure-E), stand of second respondent in the counter affidavit is that various complaints were received and were being separately dealt with by the complaint section. When petitioners had filed C.M. No. 435 of 2012, seeking directions to respondents to grant hearing on the pending Representation (Annexure-E), the second respondent in its reply maintained that no complaint of 16th April, 2009 (Annexure-E) is pending and the said complaint/Representation was duly considered and thereafter the Approval was granted.

12. By invoking ‘RTI Act’, petitioners have obtained second respondent’s Official Notings pertaining to application of respondent No. 3 seeking alteration in the Articles of Association and the same are on record as (Annexure-O Colly) which reveals that the Regional Director had initially asked for status of the complaints from the Complaint Cell, but had ultimately agreed that the complaint made may be dealt separately. This is so evident from the second respondent’s Official Notings of 28th October, 2009. Impugned Approval (Annexure-N) is an outcome of Official Noting of 12th November, 2009 of second respondent which speaks for itself. It reads as under:-

“1.  As stated on pre page this application is for alteration in Articles No. 3, 10, 13, 15, 20, 22, 23, 24, 34, 38, 39, 40 and 48. The alteration has been approved in the AGM 20.03.2009.

 2.  It is observed from the list of members submitted by the company that there are 4,185 members. The company was asked to furnish the copy of notice for AGM held on 20.03.2009 and documentary proof for sending the notices to all the members.

 3.  The company has submitted the copy of notice for AGM held on 20.03.2009, which does not bear any date.

 4.  Documentary proof submitted by the company is Postal Receipt of Postal Department dated 02.03.2009 for dispatch of 4,200 letter through Registered Post.

 5.  As per Attendance Sheet the AGM has been attended by 117 members in which the proposed changes in the Articles of Association have been approved.

 6.  Comparative chart giving existing clauses & proposed clause is flagged may kindly be seen. Proposed changes appears non contrary to provisions of Companies Act, 1956.

In view of above application u/s 25(8) may be considered for grant of approval u/s 25(8) of the Companies Act, 1956.

Submitted pl.

Sd/-

12/11/09

Sanjay

JDI Pl.

Reference note above, the proposed amend in A.O.A. which are Internal Administration of the Association and are in consonance with the provisions of the Act as such, we may allow the proposed amendment in AOA of the Co. which are approved in its AGM held on 2.3.2009.

(2) ROC Delhi has already confirmed vide its report that the Co. has filed proposed amendment inform 23 and the same has been taken on record.

(3) Submitted for orders.”

13. Afore-going narration makes it quite evident that petitioners’ Representation (Annexure-E) was not considered while granting impugned Approval. The question which falls for consideration in this matter is not of petitioners suffering prejudice or not by grant of impugned Approval but is whether it results in failure of justice. It is in this context, grant of post decisional hearing assumes importance. Apex Court in Canara Bank v. V.K. Awasthy [2005] 6 SCC 321, has considered the issue of no prejudice vis-à-vis grant of post decisional hearing while observing as under:-

“18. As observed by this Court we need not to go into “useless formality theory” in detail; in view of the fact that no prejudice has been shown. As is rightly pointed out by learned counsel for the appellant, unless failure of justice is occasioned or that it would not be in public interest to do so in particular case, this Court may refuse to grant relief to the employee concerned, (see Gadde. Venkateswara Rao v. Govt. of A.P. and Ors. [1966] 2 SCR 172. It is to be noted that legal formulations cannot be divorced from the fact situation of the case. Personal hearing was granted by the Appellate Authority, though not statutorily prescribed. In a given case post-decisional hearing can obliterate the procedural deficiency of a pre-decisional hearing. (See Charan Lal Sahu v. Union of India AIR 1990 SC 1480″.

14. In the above background, it is deemed appropriate to direct second respondent to provide a post decisional hearing to petitioners or their authorised representative on their Representation (Annexure-E Colly) within a period of six to eight weeks and to pass a speaking order on the aforesaid Representation (Annexure-E) while returning a positive finding as to whether the alterations in Articles of Association impugned herein are repugnant to Sections 255 and 256 of Companies Act, 1956 and as to whether reliance upon Section 263A and Section 265 of Companies Act, 1956 by the third respondent, justifies the impugned Approval or not. Such a course is adopted as Competent Authority is the best person to do so. The principles of Natural Justice mandate hearing and disposal of objections prior to grant of Approval in question. A Writ Court would refrain to dwell upon the soundness of impugned alterations in Articles of Association by requiring the Competent Authority to certify compliance of Section 9 of the Companies Act by effectively meeting the objections of petitioners. The decision so taken by second respondent in terms of the directions as above, be conveyed to petitioners within two weeks, so that petitioners may seek their remedy as available in law against the order so passed, if aggrieved by it.

15. This writ petition and the pending applications are accordingly disposed of while leaving the moot question of impugned Approval being in contravention of the provisions of the Companies Act, 1956 or not, open to be considered by the second respondent uninfluenced by any observation made herein. Needless to say that if the second respondent comes to a conclusion that the impugned Approval is in violation of any provision of the Companies Act, 1956 then the second respondent would be well within its rights to withdraw the impugned Approval but only after affording an opportunity of hearing to the third respondent. Interim orders stand vacated. The parties are left to bear their own costs.