Telangana High Court
Bellezza Apartment Owners Welfare ... vs N. Kalyan Chakradhar Reddy on 5 February, 2021
Author: A.Rajasheker Reddy
Bench: A.Rajasheker Reddy
HON'BLE SRI JUSTICE A.RAJASHEKER REDDY
CIVIL REVISION PETITION Nos.1284, 1282 & 1283 OF 2020
COMMON ORDER::
These Civil Revision Petitions, under Article 227 of the Constitution of India are filed aggrieved by the common order dated 19-11-2020 passed in IAs Nos.914, 915 & 916 2020 in SOP No.2 of 2020 by the trial Court.
02. The petitioners herein are respondents and respondents herein are petitioners in SOP No.2 of 2020. The parties will be referred to as they are arrayed in the SOP. The petitioners in SOP filed the IAs for the following relief:-
IA No.914 of 2020: "....to appoint official receiver to take over the charge of the Respondent no.1 from Respondent no. 2 to 14 seizing the accounts and records of the Respondent No.1...".
IA No.915 of 2020: "....to direct the official receiver to conduct proper audit of the Respondent No.1 society from the date of Respondents no.2 to 15 taking over charge to till date by appointing qualified auditors for auditing of all procedures and accounts as per bye-laws of Respondent no.1....".
IA No.916 of 2020: "....to direct the Respondents No.1 to 14 not to implement the decisions taken in the Virtual Emergency Special General Body meeting conducted on 09-08-2020....".
03. The gravamen allegation in all these applications is that respondent Nos.2 to 7 being the officer bearers and respondent nos.8 to 14 executive members and respondent no.15 ex-secretary of 2 ARR,J respondent no.1 society have mis-utilized the office of the respondent No.1 for their personal gains, misappropriated and involved in violations which include inter-alia: (i) non-transparency in the management of the affairs of the society; (ii) repeated violations of the bye-laws of the society; (iii) siphoning of funds; (iv) fudging and manipulation of the books and records of the society; and (v) taking decisions and actions thereon without the prior approval of the General Body.
04. The trial Court by the impugned common order, passed the following order, relevant portion reads thus:-
"28.The relief regarding appointment of receiver to seize the accounts and records of respondent No.1 is dismissed. However, the respondent nos.2 to 14 representing the respondent no.1 society are directed to handover separate set of all accounts and records pertaining to respondent no.1 covering the period from 07.01.2018 to till date duly signed to the Court within one week from the date of this order and similarly another set of the same to the named, qualified and authorized auditor informed to court by the petitioners (name of the qualified and authorized auditor to be informed by the petitioners to court within one week of the date of this order) to enable conducting of proper and detailed auditing of all procedures and accounts as per bye-laws of the respondent No.1 society and for submission of the report by the said named auditor to this Court. No order as to costs. The respondent Nos. 2 to 14 are also at liberty to get the accounts and records referred to above audited separately, if they so desire, on behalf of respondent No.1 and submit the report.
29.All the costs for audit shall be borne by the petitioners for their report and so far as the costs for the report at the instance of respondent Nos.2 to 14 representing the respondent No.1, shall be met from the fund of the respondent No.1 society (in case of obtaining a new outside agency audit report). However, in case of the petitioners establishing any discrepancies and illegalities in the accounts and 3 ARR,J record maintenance by the respondent Nos.2 to 15 on behalf of the respondent No.1 society, the petitioners shall be entitled to get the audit costs reimbursed from the fund of the respondent No.1 society subject to Final acceptance of the reports concerned by the Court.
30. In the result, IA No. 916 of 2020 is allowed and the respondent Nos.2 to 14 or any other members representing respondent No.1 society are directed not to implement the decisions taken in the virtual emergency Special General Body Meeting conducted on 9.8.2020 until final acceptance by the Court pertaining to the report/reports submitted by the auditor/auditors as per the common orders in IA Nos.914/2020 and 915/2020 or until final disposal of the main case as the case may be. Further the respondent Nos.2 to 14 while conducting day to day affairs shall administer respondent No.1 society in accordance with the already approved and originally existing bye-laws only and not to act upon or further put into the force unapproved bye-laws so far as financially related matters and issues are concerned pending final acceptance of the audit reports by the Court as ordered in I.A.No.914/2020 and 915/2020 or until further final orders to avoid further controversies".
05. Sri CV Mohan Reddy, learned senior counsel appearing on behalf of Sri Avinash Desai, learned counsel for the petitioners- respondents in SOP contended that order of the trial Court in appointing auditors to audit accounts of the 1st respondent-society for the relevant period amounts of collection of evidence, which the petitioners in SOP are otherwise required to prove by adducing evidence. That activities of the respondent no.1 society cannot be interdicted and issues pertaining to the affairs of the respondent no.1 society has to be resolved internally in terms of bye-laws of the society. That without considering the fact that the resolution passed in virtual special general body meeting was approved by nearly 90% of the registered members of the society, which is functioning in a 4 ARR,J democratic manner, the will of the majority members of the general body being supreme and it is to be honoured by all the members; the trial Court ought not to have stayed its implementation. That the resolutions adopted in the virtual special general body meeting of the members pertains to decisions taken to tackle COVID-19 pandemic affects and to safeguard the service personnel of the society and, therefore, the petitioners cannot find fault with such decisions and auditor cannot be appointed only on mere asking at the instance of few ex-committee members of the society. That trial Court ought not to have granted the relief by way of interim order as the allegations which formed the basis in the IAs is the same in the SOP among others and there is no prima facie case, muchless balance of convenience in favour of the petitioners in SOP. The reliefs sought in the interlocutory applications are also prayed for in the main SOP and as such main reliefs prayed for cannot be granted in the interlocutory applications.
06. Sri S. Ram Babu, learned counsel for the respondents- petitioners in SOP, on the other hand, submitted that in the light of the several violations brought to light by the petitioners as to the activities of the respondents which includes excess utilization of funds than the approved allocation of budget as also sanction and spending of society funds during lockdown period without the 5 ARR,J approval of the general body, unilaterally by the respondents and other issues of conflict of interest in award of civil works, the trial Court having found prima facie case passed the impugned order, which is protective in nature and in the interest of the respondent no.1 society and its members, therefore, no exception can be taken to the impugned order. That the respondents adopted the amended bye- laws and the amendments are not registered with the Registrar of Societies. That no prejudice would be caused to the respondents by auditing the accounts of the respondent no.1 society and the trial Court, on proper appreciation of the matter, passed the impugned order and the same does not warrant any interference by this Court and, therefore, these revision petitions being devoid of merits are liable to be dismissed.
07. As seen from the pleadings, the 1st respondent-society viz., Lodha Bellazza Apartment Owners Welfare Association, is a ultra- luxurious multi-storied nine residential towers in all having 362 flats, and an amount of Rs.80 lacs is being collected towards maintenance charges per month. The petitioners who are ex-managing committee members have alleged mismanagement of the affairs of the 1st respondent society by the respondents; resorted to non-transparency in the management of the society by repeatedly violating the bye-laws and siphoning of the funds of the society by manipulating the books 6 ARR,J of accounts of the society and ratifying the same by the virtual special general body meeting and for that purpose resorted to amendment of the bye-laws and one such instance was the resolutions taken in virtual special general body meeting dated 09-08- 2020.
08. The case of the respondents is that the managing committee incurred expenditure of Rs.5 lacs towards cost of rice and other essentials distributed through the local MLA to the BPL families as a Covid-19 relief fund. That the budget allocation for the CCTV systems initially was Rs.40 lacs, but later it escalated to Rs.53 lacs due to non-functional cameras as also the coverage had to be extended widely within the premises.
09. That during Covid-19 pandemic, 80 staff members were persuaded to stay in the Club House to avoid spread of disease and an expenditure of Rs.47 lacs was incurred for about two months to maintain and feed them and Rs.6 lacs out of Rs.47 lacs was incurred in cash for purchase of vegetables, cooking gas, water, etc. and these issues were discussed in virtual special general body meeting dated 09-08-2020 and the decisions taken thereon were ratified by the members including to adopt the amended bye-laws of the respondent no.1 society.
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10. The respondents as part of their activities to protect the interest of the respondent no.1 society also stated to have settled scores with the Builder of the apartments and recovered considerable amounts for deficiency in providing services and for that purpose amended the bye-laws by way of resolution on 13-08-2017 and got the same registered.
11. It is to be seen that what is allowed by way of interim relief is calling for an audit report in respect of the accounts of the respondent no.1 society by an authorized auditor, name to be suggested to the Court by the respondents and with liberty to the petitioners also to get the accounts audited, besides staying the implementation of the resolutions taken on 09-08-2020.
12. It is also to be noticed that the respondent no.1 society is an elected body and when once the elected body adopts a resolution/takes decision with the regard to the affairs of the society either by way of virtual special general body meeting dated 09-08- 2020, as in this case, or by way of a general body meeting and it is approved by the required number of members of the 1st respondent- society, in such an event, all the members must respect it, unless the same is opposed to law or contrary to the aim and objects of the society. Opposition for the sake of opposition by a few members is not in the fitness of things and to serenity in a society which is having 8 ARR,J 360 units and living in an conglomeration peacefully. The universally affected COVID-19 pandemic brought financial, psychological and emotional changes in every day life of a common man in particular and in all others in general. Most of the decisions taken in virtual special general body meeting dated 09-08-2020, are stated to have been approved by 90% of the members, in such circumstances, unless the said resolutions are contrary to the provisions of the any law or the bye-laws itself or against the interest of the members of society, resolutions taken therein by an elected body cannot be scuttled. Whether the special general body resolutions are violative of law or against the interest of the respondents no.1 society, and whether allegedly the respondents siphoned off the society funds is a matter to be decided after full trial and after perusal of the rightly called for audit report which would highlight the correctness or discrepancies if any, in the accounts of the society. The relief of staying the implementation of the virtual special general body resolutions taken by the elected body has an effect of partially granting the suit relief even before the parties coming into the witness box to give their evidence. Interim relief, which has the tendency to allow the final relief claimed in the proceedings should not be granted lightly.
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13. Democratically elected general body is supreme and has all the powers to amend, vary, rescind or interpret the rules of the society and the jurisdiction of the Court to interfere in the management of a democratically run society is limited and Courts do not normally interfere in matters of the internal management of the society. No member of the society has a right to seek interim reliefs against the society merely based on mischievous allegations. (see SUPREME COURT BAR ASSOCAITION vs. B.D.KAUSHIK1). Interim order has to be passed after considering prima facie case, balance of convenience and irreparable loss in toto. Satisfaction that there is a prima facie case by itself is not sufficient to grant injunction. (see DALPAT KUMAR vs. PRAHLAD SINGH2 & ZENIT MATAPLAST PVT. LTD. vs. STATE OF MAHARASHTRA3).
14. Prima facie, without expressing any conclusive opinion, even if the amended bye-laws are adopted in the virtual special general body meeting, it is suffice if the Registrar of Societies takes it on record. Section 8 (3) (4) & (5) of the Telangana Societies Registration Act, 2001 reads as follows:-
(3) Any alteration of the memorandum of the society shall not be valid unless such alteration is registered under this Act.
(4) If any alteration of the memorandum is filed with the Registrar and if they are not contrary to the provisions of this Act, he shall register the same and shall 1 (2011) 13 SCC 774 2 (1992) 1 SCC 719 3 (2009) 10 SCC 388 10 ARR,J certify the registration of such alteration under his hand and seal within thirty days from the date of receipt of the resolution. The certificate shall be conclusive evidence that all the requirements of this Act with respect to the alteration and the certification thereof have been complied with and henceforth the memorandum as so altered shall be the memorandum of the society.
(5) Every alteration in the bye-laws of the society should be sent to the Registrar and he shall take it on record if it is not contrary to the provisions of this Act".
15. Under Section 8 (4) of the Act any amendment of the bye-laws, the approval of the Registrar is not a requirement and it is suffice if it is informed and the Registrar takes it on record. Even otherwise, it has come in the counter affidavit filed by the respondents in the interlocutory applications that in-fact the respondents sought to register the amendments, but the Registrar of Societies decided not to register the amendments in the light of the circular dated 11-03-2019 issued by IG Registration & Stamps prohibiting registration of bye- laws in certain circumstances, however, this issue can be decided after conclusion of the trial.
16. IA No.914 of 2020 has been filed seeking to appoint receiver and to take charge including to seize the records of respondent no.1 society, and though no relief has been granted, the trial Court observed as partly allowed and partly dismissed. In the circumstances, IA No.914 of 202 is dismissed and consequently the revision CRP No.1284 of 2020 filed there against is also dismissed. Likewise, IA No.915 of 2020 which is filed for the relief to direct the 11 ARR,J receiver to conduct audit of respondent no.1 society and to take charge of the records for that purpose is dismissed and modified to that of the order to the trial Court as regards appointment of auditor, name to be suggested by the respondents as also option to the petitioners to go for audit of accounts, is maintained and consequently the CRP No.1282 of 2020 is disposed of. As regards IA No.916 of 2020 which seeks to stay the implementation of the decisions taken in virtual special general body meeting on 09-08-2020 is liable to be set aside in the light of the reasons stated above and accordingly set aside and the consequently CRP No.1283 of 2020 is allowed. Subject to above, the rest of the impugned order of the trial Court is maintained. This Court has not expressed any opinion on the merits of the matter and any finding recorded in this order is only for the purpose of disposing of these CRPs against interlocutory order, as such trial Court is directed to dispose of the main SOP on merits without being influenced by any of the observations made herein. Miscellaneous petitions, if any pending also stand disposed of. There shall be no order as to costs.
___________________________ A.RAJASHEKER REDDY, J Dated: 05-02-2021 NRG 12 ARR,J HON'BLE SRI JUSTICE A.RAJASHEKER REDDY CIVIL REVISION PETITION Nos.1284, 1282 & 1283 OF 2020 COMMON ORDER::
Date: 05 -02-2021 NRG