Kerala High Court
Church Of South India vs The Alwaye Settlement on 26 April, 2012
Author: Babu Mathew P. Joseph
Bench: P.R.Ramachandra Menon, Babu Mathew P.Joseph
C. R.
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON
&
THE HONOURABLE MR. JUSTICE BABU MATHEW P.JOSEPH
FRIDAY, THE 27TH DAY OF MAY 2016/6TH JYAISHTA, 1938
Co. Appeal.No. 9 of 2012 (E)
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AGAINST THE ORDER IN CP 64/2010 of THE COMPANY LAW BOARD, CHENNAI
BENCH DATED 26-04-2012
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APPELLANTS/PETITIONERS:
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1. CHURCH OF SOUTH INDIA, DIOCESE OF NORTH KERALA, C.S.I DIOCESAN
OFFICE, SHORNUR-679121, KERALA STATE, REP.BY
RT. REV.DR.K.P.KURUVILA, BISHOP, CSI DIOCESE OF NORTH KERALA.
2. MAR THOMA SYRIAN CHURCH OF MALABAR
(MALANKARA MARTHOMA SYRIAN CHURCH) APOSTILIC SEE OF
ST.THOMAS POOLATHEEN, THIRUVALLA-689101, KERALA STATE, REP.BY
DR.JOSEPH MAR THOMA, METROPOLITAN, MARTHOMA SYRIAN CHURCH
OF MALABAR
BY ADV. DR.VINCENT PANIKULANGARA
RESPONDENTS/RESPONDENTS 1 TO 22 IN CP 64/10:
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1. THE ALWAYE SETTLEMENT
HAVING ITS REGISTERED OFFICE AT UC COLLEGE(PO)ALUVA-683102,
ERNAKULAM DIST, KERALA STATE.
2. MRS.ANNIE PHILIP
(SECRETARY OF THE IST RESPONDENT), PRINCIPAL, THE ALWAYE
SETTLEMENT HIGHER SECONDARY SCHOOL, UC COLLEGE P.O.,
ALUVA-683102,ERNAKULAM ,KERALA.
3. MR.O.V.MATHAI,
(CHIEF EXECUTIVE OFFICER OF THE IST RESPONDENT)MANAGER, THE
ALWAYE SETTLEMENT , U C COLLEGE P.O.683102, ERNAKULAM.
4. MR.T.V.PAULOSE,
BURSAR, THE ALWAYE SETTLEMENT , U C COLLEGE P.O.683102,
ERNAKUAM.
5. MR.T.P.PETER
(M NO.004352, AUDITOR OF THE IST RESPONDENT)CHARTERED
ACCOUNTANT, PATTERIPURAM, ALUVA-683101, ERNAKUAM, KERALA.
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6. MR.M.C.GHEEVARGHESE,
(CHAIRMAN OF THE IST RESPONDENT)MUTHALATHOTTATHIL HOUSE,
III/330,OLD DESOM ROAD,THOTTAKKATTUKARA P.O.,ALUVA,
ERNKAULAM ,KERALA-683108.
7. MR.GEORGE THOMAS,
NEDUMTHALLIL HOSUE # 20 KKP NAGAR ,U C COLLEGE P.O., ALUVA,
ERNAKULAM, KERALA - 683102.
8. MR.GEORGE PHILIP,
THOTTATHIL HOUSE, THOTTURMUGHAM P.O.,ALUVA ERNAKULAM,
KERALA-683105.
9. MR.BABY JOHN
POOVANUMOOTTIL HOUSE, U C COLLEGE P.O.,
ALUVA, ERNAKULAM - 683102.
10. MR.T.I.PUNNEN,
THERATHANATH HOUSE, SEMINARI JUNCTION, U C COLLEGE P.O.,
ALUVA - 683102, ERNAKULAM , KERALA.
11. DR.BENNY CHERIAN,
READER, U C COLLEGE P.O., ALUVA- 683102, ERNAKULAM , KERALA.
12. MS.C.G.JOLLY,
34/1219,GREEN FIELDS, BALAKRISHNA MENON ROAD,EDAPPALLY,
KOCHI-682024.
13. MR.T.BABURAJ,
THOTTATHIL HOUSE, NEDUMBASSERY, ALUVA-683585,
ERNAKULAM DIST.
14. MR.M.C.ALEXANDER,
DEEPTHI, U C COLLEGE P.O., ALUVA, ERNAKULAM,
KERALA - 683 102.
15. DR.RAJAN VARGHESE,
43/2080, SARAJ HOUSE, SRM ROAD, KOCHI-682012.
16. MR.S.G.HENRY
SEW COTTAGE, OPP PWD QUARTERS, ALUVA, ERNAKULAM-683101.
17. MR.MOHAN MATHUNNI,
CHEMPANIL HOUSE, U C COLLEGE P.O., ALUVA, ERNAKULAM,
KERALA-682102.
18. MS.J.OMMEN
44/812, PARINAMAM LANE, PERANDOOR ROAD, KOCHI-682017, KERALA.
19. DR.SHEELAKUMARI ISSAC,
READER, U C COLLEGE, U C COLLEGE P.O., ALUVA,
ERNAKULAM-683102.
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20. DR.THARA K. SIMON,
S.GR.LECTURER, U C COLLEGE, UC COLLEGE P.O.,
ALUVA, ERNAKULAM-683102.
21. REGISTRAR OF COMPANIES,
KERALA & LAKSHADEEP, COMPANY LAW BHAVAN, BMC ROAD,
THRIKKAKARA, KOCHI, KERALA, 682021.
22. THE REGIONAL DIRECTOR (SOUTHERN REGION)
MINISTRY OF CORPORATE AFFAIRS, 5TH FLOOR, SASTRI BHAVAN, 26,
HADDOWS ROAD, CHENNAI-600006.
R21-R22 BY ADV. SRI.P.PARAMESWARAN NAIR,ASG OF INDIA
R1 TO 9,R16,R18 BY ADV. SRI.N.N.SUGUNAPALAN (SR.)
R1 TO 9,R16,R18 BY ADV. SRI.S.SUJIN
RR15 BY ADV. SRI.A.JAYASANKAR
RR15 BY ADV. SRI.MANU GOVIND
RR15 BY ADV. SRI.ANIL VINCENT
RR15 BY ADV. SRI.V.H.NOUFALMON
R13 BY ADV. SRI.P.SAMSUDIN
R22-R23 BY ADV. SRI.N.NAGARESH, ASSISTANT SOLICITOR
GENERAL
THIS COMPANY APPEAL HAVING BEEN FINALLY HEARD ON 27-05-2016,
THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
C. R.
P. R. RAMACHANDRA MENON
&
BABU MATHEW P. JOSEPH, JJ.
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Company Appeal No.9 of 2012
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Dated this the 27th day of May, 2016
JUDGMENT
Babu Mathew P. Joseph, J.
1. aThis appeal is directed against the order dated 26-04-2012 passed by the Company Law Board, Chennai Bench, in Company Petition No.64 of 2010. The appellants are the petitioners and the respondents are the respondents in the Company Petition.
2. Heard Dr. Vincent Panikulangara, learned counsel appearing for the appellants, and Sri.N.N.Sugunapalan, learned Senior Counsel appearing for the contesting respondents.
3. The Company Petition was filed before the Company Law Board under Sections 397 and 398 read with Sections 402, 403 and 406 of the Companies Act, 1956, for short, the Act. The first petitioner/appellant is Church of South India, Company Appeal No.9 of 2012 -2- Diocese of North Kerala, represented by their Bishop. The second petitioner/appellant is Mar Thoma Syrian Church of Malabar, represented by their Metropolitan. The Company Petition/Appeal is in the matter of 'The Alwaye Settlement', for short, the Settlement or the Association. The Alwaye Settlement, an association limited by guarantee, is a company registered under the Travancore Companies Regulation (1 of 1092 ME) without the addition of the word 'limited' to its name. It is a company as defined under Section 3 of the Act and hence the provisions thereof are applicable to it. The Settlement was established with the objects of organizing institutions and agencies for effecting educational, economic, social, medical and moral progress of village communities along Christian lines, particularly among the depressed classes, by establishing residential and other schools for boys and girls, land colonies, printing presses, rural reconstruction centres including co-operative societies, dairies, stores, agricultural farms, industries or Company Appeal No.9 of 2012 -3- allied activities and by other means and for other purposes set out in its Memorandum of Association.
4. The Company Petition has been filed seeking to declare that the Settlement is not composed of in accordance with its Articles of Association and that the respondents 2 to 4 and 6 to 20 are not its members and that all the decisions taken by them hitherto were invalid and inconsequential and for consequential and other reliefs. The original membership of the Settlement was 25. It was reduced to 21 by the amendment of the Articles of Association in 1984. The membership of the Association shall be composed of:-
a) Four representatives each from the co-operating churches, namely the Malankara Syrian Church and the Malankara Marthoma Syrian Church and the Church of South India.
b) The Manager, Headmaster and the Bursar of the Alwaye Settlement.
Company Appeal No.9 of 2012 -4-
c) Three representatives of the Union Christian College, Alwaye.
d) Two representatives each from such other churches or other organised christian bodies who are admitted to join in support of the Association in pursuance of Article 7.
e) The remaining number of seats to complete the full complement of membership of the Association may be filled up by co-option by a vote of 75 percent of those present at the meeting of the Association adopting these articles and thereafter at the first General meeting of the Association held after the appointment of the membership in accordance with Article 5. Provided, however, that at least one of the co-
opted members be from the backward Christian Community, one from the Settlement staff and another from the School staff provided they are elected by the council from persons among the members of the Group.
5. The petitioners/appellants alleged oppression and mismanagement. Also alleged that there are only 18 Company Appeal No.9 of 2012 -5- members in the Association as against the required number of 21 prescribed by the Articles of Association. All of them are usurpers. Various averments and allegations are made in support of the contention of the appellants. The third respondent in the Company Petition filed a counter affidavit in which the averments and allegations raised in the Company Petition are either denied or disputed. It is also contended that the Company Petition is not maintainable in law or in facts. The respondents 1, 2, 4 to 9, 11, 12, 14 to 16 and 18 to 20 have adopted the counter affidavit filed by the third respondent. The 13th respondent has filed a counter affidavit supporting the petitioners. It is the case of the contesting respondents that the 13th respondent was defeated in the elections conducted in the year 2009 to the Council of the Association. Therefore, he has raised this controversy through his driver, the power of attorney holder of the petitioners.
6. The Company Law Board, after considering the rival Company Appeal No.9 of 2012 -6- contentions, found that, as clearly provided under Section 399 of the Act, only the members of a company shall have the right to apply under Sections 397 and 398 of the Act. Strangers cannot institute proceedings against a company claiming public interest and hence the Company Petition was found to be unsustainable for want of locus standi. Also found that all indications available would show that the power of attorney holder of the petitioners is virtually the petitioner. It was further found that the petitioners, not being members of the Association, cannot raise any complaint based on oppression and mismanagement. Notwithstanding these findings entered, the Company Law Board made some observations and issued some directions in the matter of the Association and finally dismissed the Company Petition. Aggrieved by the order passed by the Company Law Board, the petitioners have approached this Court by way of filing this Company Appeal raising various contentions. A counter affidavit has been filed by the third Company Appeal No.9 of 2012 -7- respondent for himself and for respondents 1, 2, 4 to 9, 16 and 18. The appellants have filed a reply affidavit also. The contesting respondents, inter alia, raised a contention that the Company Petition as well as the Company Appeal are not maintainable in view of the mandatory provisions contained in the Act.
7. The Company Petition has been filed by two organizations, viz. (1) Church of South India, Diocese of North Kerala, represented by its Bishop Dr.K.P.Kuruvila and (2) Mar Thoma Syrian Church of Malabar represented by its Metropolitan Dr.Joseph Mar Thoma. It was filed alleging oppression and mismanagement as provided under Sections 397 and 398 of the Act. Any member or members of a company who has/have a right to apply by virtue of Section 399 of the Act are only entitled to file application under Section 397 or 398 of the Act. Section 399 of the Act reads as follows:
"399. Right to apply under sections 397 and
398.-- (1) The following members of a company Company Appeal No.9 of 2012 -8- shall have the right to apply under section 397 or 398:--
(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, provided that the applicant or applicants have paid all calls and other sums due on 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.
(2) For the purposes of sub-section (1), where any share or shares are held by two or more persons jointly, they shall be counted only as one member.
(3) Where any members of a company are entitled to make an application in virtue of sub-
section (1), any one or more of them having obtained the consent in writing of the rest, may make the application on behalf and for the benefit of all of them.
(4) The Central Government may, if in its opinion circumstances exist which make it just and equitable so to do, authorise any member or members of the company to apply to the Tribunal under section 397 or 398, notwithstanding that the requirements of clause (a) or clause (b), as the Company Appeal No.9 of 2012 -9- case may be, of sub-section (1) are not fulfilled. (5) The Central Government may, before authorising any member or members as aforesaid, require such member or members to give security for such amount as the Central Government may deem reasonable, for the payment of any costs which the Tribunal dealing with the application may order such member or members to pay to any other person or persons who are parties to the application."
The originals of the Certificate of Incorporation, Memorandum of Association and the Articles of Association of the Settlement have not been produced. But, their copies have been produced. There is no dispute with regard to the fact that the copies so produced are the true copies of their originals. Ext.A1 is a copy of the Certificate of Incorporation of the Settlement. It can be seen from this document that the Settlement is a company limited by guarantee, but without the addition of the word 'limited' to its name. There is no dispute regarding the fact that the Settlement is a company limited by guarantee having no share capital. Ext.A3(a) is a copy of the Articles of Association as it exists after its amendment in 1984. This document also specifically Company Appeal No.9 of 2012 -10- says that the Settlement is an association limited by guarantee. Therefore, Clause (a) of Subsection 1 of Section 399 of the Act has no application to the facts of the case on hand. The Settlement being a company not having a share capital, Clause (b) of Subsection 1 of Section 399 of the Act is applicable. As provided in Clause (b), not less than 1/5th of the total number of its members can apply under Section 397 or 398 of the Act. Therefore, for applying under Section 397 or 398 of the Act, alleging oppression or mismanagement, a minimum of not less than 1/5th of the total number of the members of the Settlement is required. They themselves or, as provided in Subsection 3, any one or more of them having obtained the consent in writing of the rest alone can file an application under Section 397 or 398 of the Act. Then arises another question. Who are the members of the company? Section 41 of the Act defines 'member' which reads as follows:
"41.Definition of "member".-- (1) The subscribers of the memorandum of a company Company Appeal No.9 of 2012 -11- shall be deemed to have agreed to become members of the company, and on its registration, shall be entered as members in its register of members.
(2) Every other person who agrees in writing to become a member of a company and whose name is entered in its register of members, shall be a member of the company.
(3) Every person holding equity share capital of a company and whose name is entered as beneficial owner in the records of the depository shall be deemed to be a member of the concerned company."
As per this definition, the subscribers of the Memorandum of Association of a company shall be deemed to have agreed to become members of the company and, on the registration of the company, their names shall be entered as members in its register of members. Ext.A2 is a copy of the Memorandum of Association of the Settlement. It can be seen from this document that 21 persons are the subscribers of the Memorandum of Association of the Settlement. The petitioners in the Company Petition are not among these subscribers of the Memorandum of Association. These 21 Company Appeal No.9 of 2012 -12- subscribers of the Memorandum of Association should be deemed to have agreed to become members of the company. Their names should be entered as members of the company, on its registration, in the register of members. The register of members of the Settlement is not among the records. Since the names of the petitioners are not among the names of the subscribers of the Memorandum of Association, the petitioners will not acquire the status of members even if these 21 persons are treated to be members of the Settlement. Therefore, Subsection 1 of Section 41 of the Act defining a member will not come to the rescue of the petitioners.
8. Every person, other than the subscribers of the Memorandum of Association, agrees in writing to become a member of a company and whose name is entered in its register of members shall be a member of a company according to Subsection 2 of Section 41 of the Act. As already noted, the register of members of the Settlement is Company Appeal No.9 of 2012 -13- not among the records. Moreover, the petitioners do not have a case that they have become members of the Settlement as provided under Subsection 2 of Section 41 of the Act. Therefore, the petitioners have not acquired the status of members as provided under Subsection 2 of Section 41 of the Act. Subsection 3 of Section 41 of the Act does not have any application to this case. In the light of the definition of member under Section 41 of the Act and in the absence of register of members of Settlement, it cannot be found who were actually the members of the Settlement at the time of filing the Company Petition by the petitioners. At the same time, it can be found that the petitioners were not members of the Settlement as defined under Section 41 of the Act at the time of filing the Company Petition. Since the members of a company alone have the right to file application under Section 397 or 398 of the Act as provided under Section 399 of the Act, the petitioners, not being members of the Settlement, were not entitled to prefer the Company Appeal No.9 of 2012 -14- Company Petition. Therefore, the Company Petition filed by the petitioners was incompetent for want of locus standi and hence it was liable to be dismissed as not maintainable. The Company Law Board, in fact, found that the Company Petition was not maintainable.
9. The question of membership of the company can be viewed at a different angle. Ext.A3(a) copy of the Articles of Association of the Settlement declares that the Association is to consist of 21 members and such membership of the Association shall be composed of as provided under Clause 3 of the Articles of Association which we have already noted. Notwithstanding the contention of the petitioners that the composition of membership of the Association is not as provided in the Articles of Association, they have averred in the Company Petition that the Association consists of only 18 members and not 21 as required by the Articles of Association. The petitioners produced Exts.A8, A9, A10, A11 and A12 documents showing the members of the Association Company Appeal No.9 of 2012 -15- for the years 2004-2005 to 2008-2009 respectively. These documents show that during these years the Association had 18 persons as its members representing different groups as provided in Clause 3 of the Articles of Association. It can be seen from these documents that the petitioners were not at all members of the Association during these years. It can also be found that the petitioners never became such members of the Association thereafter as well. Of course, their contention is that the composition of the membership of the Association is not as provided in Clause 3 of the Articles of Association. That is a different matter. The fact remains that the petitioners are not the members of the Association. They contend that they are the co-operating churches. But, the co-operating churches are not members of the Settlement. Members are defined under Section 41 of the Companies Act. The petitioners were never selected as members of the Association. Therefore, they are incompetent to file the Company Petition under Section 397 Company Appeal No.9 of 2012 -16- or 398 of the Act.
10. The matter can also be considered in a different angle. Even if the petitioners are considered as members of the Association, they are not entitled to file the Company Petition. Because, the petitioners are only two in number. Clause (b) of Subsection 1 of Section 399 of the Act mandates that in the case of a company not having a share capital, not less than 1/5th of the total number of its members or, as provided in Subsection 3, any one or more of them having obtained the consent in writing of the rest alone can file an application under Section 397 or 398 of the Act. There are 18 members in the Association. 1/5th of 18 is 3.6. That means, two applicants cannot constitute the required number of persons as stipulated in Clause (b) of Subsection 1 of Section 399 of the Act for preferring a Company Petition alleging oppression and mismanagement.
11. The scope of Clause (b) of Subsection 1 of Section 399 of the Act has been considered by a learned single Company Appeal No.9 of 2012 -17- Judge of this Court in S.N.D.P. Yogam, Quilon, In re [1970 (40) Company cases 60] and held that in the case of a company falling under Clause (b) of Subsection 1 of Section 399 of the Act, an application under Section 397 or 398 of the Act shall be by not less than 1/5th of the total number of its members or by any one or more of them with the written consent of the rest. Since such a condition prescribed for preferring a Company Petition has not been complied with, it was held in that case that the Company Petition was not maintainable and hence dismissed the same. We are in respectful agreement with the view so taken by the learned single Judge in that case. In the case of a company limited by guarantee, a similar view was taken by a learned single Judge of the Punjab and Haryana High Court in Edwardganj Public Welfare Assn., In re [1990 (69) Company Cases 787].
12. For the foregoing reasons, the Company Petition filed by the petitioners/appellants is liable to be dismissed as Company Appeal No.9 of 2012 -18- not maintainable and, in turn, the Company Appeal is also liable to be dismissed. The Company Law Board, even though found that the petitioners had no locus standi and hence the Company Petition was not maintainable, made certain observations and issued certain directions. Since the Company Petition was found to be not maintainable, such observations and directions were unnecessary. Therefore, we vacate such observations and directions.
In the result, the Company Petition as well as the Company Appeal are dismissed. In the circumstances, the parties are directed to suffer their respective costs.
Sd/-
P. R. RAMACHANDRA MENON JUDGE Sd/-
BABU MATHEW P. JOSEPH JUDGE kns/-
//TRUE COPY// P.A. TO JUDGE