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CS (OS) No.3444/2015 Page

124. Ravinder Kumar Jain v. Punjab Registered (Iron and Steel) Stockholders Association Ltd., (1978) 48 Com Cas 401 (P & H) was concerned with a situation in which a petition was moved, before the High Court, under Section 166 of the erstwhile Companies Act, 1956, for declaration of a meeting of the Company, held on 28th September 1977, to be illegal and void. Following, inter-alia, the decision in Panipat Woollen and General Mills Co. (supra), it was held that the petition was competent. Similarly, a suit for declaration that the Annual General Meeting of the Company was illegal, was held to be competent, by the Kerala High Court, in R. Prakasam v. Sree Narayana Dharma Paripalana Yogam, (1980) 50 Comp Cas 611 CS (OS) 51/2018 & Ors. Page 18 of 45 (Ker), which went to the extent of holding that the Company Court could not grant relief in such matters.

CS (OS) No.3444/2015 Page

13. The exception which has been made to the rule in (1) Foss v. Harbottle in the English decisions referred to above has been adopted by the courts in India. In (5) Ramkissendas Dhanuka; v. Satya Charan Law 50 CWN 310, it has been held that the principle that the Court will not generally interfere with the internal affairs of a company except at the instance of the majority of the shareholders, is applicable only where the act complained of is merely irregular and not when it is ultra vires. The decision in Dhanuka's case has been approved by the Privy Council in an appeal from the decision in that case (See AIR 1950 Privy Council 80).

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23. Section 242 of the Companies Act which provides for the power of the Tribunal contemplates an action relating to the affairs of the company which is being conducted in a manner prejudicial or oppressive to any member or members and that to wind up the company would unfairly prejudice such member or members, but the facts justify the makings of a winding up order, the power of the NCLT can be invoked. However, in the present suit the plaintiffs do not claim winding up of the defendant No.1 Club which is a company by guarantee. As noted above, the cause of action pleaded by the plaintiff in this suit is the manner in which Article 13(3)(b) of the Articles of Association of the defendant company is being interpreted thereby creating irrational and illegal classification. NCLT not being empowered to determine the said cause of action, this Court is of the opinion that the plea of the defendant that the present suit is not maintainable and only a petition before the NCLT is maintainable, is liable to be rejected. Thus, issue No.1 is decided in favour of the plaintiffs and against the defendant No.1.

                                                          (MUKTA GUPTA)
                                                             JUDGE
JANUARY 22, 2021/vn






CS (OS) No.3444/2015                                                 Page