Case: A.E. Al Ameen and Ors. Vs Ilayangudi Muslim Educational Association and Ors.. Company Law Board
| Judges | Kanthi Narahari, Member |
| Issue | Company Laws |
| Citation | [2009] 150 CompCas 573 (CLB) |
| Judgement Date | March 20, 2009 |
| Court | Company Law Board |
Order:
Kanthi Narahari, Member
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The company petition is filed under 1 Sections 397 and 398 read with Section 402 of the Companies Act, 1956 ("the Act"), alleging various acts of oppression and mismanagement in the affairs of M/s. Ilayangudi Muslim Educational Association (hereinafter called "the association/company") and sought following directions:
(a) To supersede the council of management of the first respondent;
(b) To appoint an auditor to investigate into the conduct of respondents Nos. 2 and 3 and to surcharge respondents Nos. 2 and 3 for the funds diverted and utilised by them;
(c) To appoint an auditor to investigate into the accounts of the first respondent;
(d) To appoint a provisional administrator to take charge of the affairs of the company;
(e) To set aside the membership of 48 new members made on a single day, i.e., on August 26, 2002;
(f) To call for the records such as the applications of the new members, minutes book and accounts pertaining to donations from the first respondent; and
(g) To appoint an independent Commissioner to finalise the list of members as per the articles of association and to conduct election for the council of management as per such approved list of members.
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Shri Siva Prakash, learned Counsel for the petitioner in support of his petition submitted that the first respondent-company has been incorporated as a charitable institution and the main objects detailed in the memorandum of association are to establish and maintain in Ilayangudi panchayat area, high schools, higher secondary schools and elementary schools for boys and girls of all communities and in particular, the Muslim community, shall from time to time to be determined. The memorandum of association is filed as annexure A1 to the company petition. The petitioners are total 20 in number. The first, second and third respondents are the company, its president and its secretary, respectively. The articles of association as set out in Rule 1, that the number of members of the association is declared not to exceed 200. As per Rule 4 of the articles of association the members are divided into two classes (i) ordinary members; and (ii) patrons. Rule 5 of the articles of association prescribes the age and fee, i.e., to become a member-any person born within or residing within the panchayat limits of Ilayangudi who has attained the age of 21 years may become the member of the association on payment of Rs. 200 and any person who contributes a sum of Rs. 5,000 or more to the association shall be a patron of the association as per Rule 6. Rule 7 of the articles of association also provides that a patron shall be entitled to nominate any male member of his family as successor and on the patron ceasing to be such, his nominee shall become a patron in his place with the right of nomination in his turn. It is also provided on default of any such nomination by the deceased person such nomination shall be made by the council of management.
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To sum up, the following are the allegations of the petitioners:
That there were a number of buildings constructed with the contributions of the donors who had donated more than Rs. 5,000 but these donations were not taken into the account of the association only to avoid inclusion of donor members but they were routed through Old Boys Association, Parents-Teachers Association and Building Development Fund;
The present list of members consists of 192 members out of which 48 members have been inducted on a single day, i.e., on August 26, 2002, without following the rules as stipulated for the induction of the members and the petitioners dispute the induction of 48 members;
The status of the council of management during the period August 26, 2002, itself is questioned in these proceedings. Learned Counsel further submitted that the school was built in an extent of 14.5 acres of land which was donated by the Raja of Sivaganga. The major donors were three brothers, namely, (i) Mr. Isamail, (ii) Mr. Arif and (iii) Mr. Ebrahim along with other small donors. He contended that the management has failed to adhere to the norms of functioning and there were instances of refusals to induct persons donating more than Rs. 5,000 as patron members and also non-induction of legal heirs of the deceased patron members during the periods 1952-1972, etc.;
Regarding mismanagement is concerned, one Mr. K. K. Haneefa was the president of the council of management and his period ended in March, 1995, but the general body meeting was convened only in the month of September, 1995 and a council was elected. Mr. T. M. O. Thul Karunai was made a president and Mr. K. K. Haneefa became the secretary of the council and the functioning of the company has been driven from bad to worse in this period;
Though the council of management ended in March 1998, the general body was convened only on December 19, 1998, for the reasons best known to them and serious differences of opinion arose among the members and various allegations of mismanagement were made against the then council. In order to settle the disputes amicably, a three member committee (Peace Committee) consisting of Mr. Syed Akbar Akali, Mr. V.M. Mohammed Kasim and Mr. O.M. Mohammed Shariff was formed. However, Mr. K.K. Haneefa refused to accept the composition of the committee which was formed to settle the differences and disputes, but hurriedly convened a general body meeting on January 7, 2000, without proper notice as prescribed under the articles of association. The first petitioner herein filed a suit in the District Munsif Court, Manamadurai and obtained a temporary injunction against the convening of the said meeting. In spite of the court order, the general body meeting was convened and Mr. S. Hamman Ullah Khan was elected as the secretary/correspondent. The first petitioner filed another suit challenging the validity of the election and the said suit was subsequently transferred to District Munsif Court, Ilayangudi, which was renumbered as O. S. Nos. 41 and 44 of 2001. The O. S. No. 41 allowed in part so far as the relief to restrain the meeting, has become infructuous. O. S. No. 44 of 2001 was decreed as prayed for;
A general body meeting was convened in July, 2001, for election of the council of management and a new council of management was elected in the said meeting and the first petitioner was elected as the secretary/correspondent. The details of election were forwarded to the District Educational Officer (DEO) and registered. While so, the DEO cancelled the said registration on September 6, 2001, on the basis of objections from the erstwhile management. The erstwhile management forwarded another list of the management council said to have been elected in the general body meeting said to have been conducted on September 9, 2001. The petitioner states that there was no such meeting held and no notice was served on the members. As stated supra, a peace committee intervened to settle the issue pursuant to which Mr. Hamman Ullah resigned as a secretary and Mr. K. S. Ibrahim was elected as secretary as per Rule 26 of articles of association. The contentions of the petitioners are that even after the settlement there is no co-operation from the third respondent herein, thereby Shri K. S. Ibrahim resigned on October 1, 2003. A general body meeting was convened on October 19, 2003, which according to the petitioners, is in violation of the articles of association;
The financial transactions of the company are being conducted in a manner prejudicial to the benefit of the public and its members and proper accounts are not maintained and proper approval of the general body was not obtained for expenditures. For instance, a sum of Rs. 93,000 was shown as legal expenses in the accounts but no approval has been sought or obtained from the general body. As stated supra, Rule 7 of the articles of association was not scrupulously followed by the management since there are instances of patrons, whose legal heir are not included as members, namely, Mr. K.S.M. Ariff, Mr. P.N.P. Jainulaadin, Mr. T.K.H. Hameed Sultan and Mr. Gulam Khader. As stated supra, the induction of 48 new members on one day, i.e., on August 26, 2002, is nothing but an attempt to gain electoral majority by the second and third respondents and most of the new members belong to the family of the present management council and their well-wishers. A list of members is filed as annexure 2, wherein there are a total of 190 members. The induction of new members on August 26, 2002, is shown at Sl. Nos. 143 to 190. The petitioners contend that the induction of new members is invalid and a clear act of oppression against the minority members and the same is liable to be cancelled. Further, no notice was given to the existing members regarding the inclusion of new members and it has been done in a scandalous and secretive manner to deprive the right of the existing members, whereas an application was made by Mr. K. M. A. Mohideen Khader on October 30, 1998, along with a cheque for Rs. 200 but the then secretary returned the application on November 17, 1998, on the ground that there is no inclusion of the new members;
That the books of account of the company are not properly maintained and were not being audited properly and the accounts for the years 1998-99 to 2002-03 were finalised only in the year 2003 and audited balance-sheet was filed with the Registrar of Companies. It is pertinent to mention here that with regard to this allegation, an inspection of the books of account and other records of the company was conducted by the Registrar of Companies under Section 209A of the Companies Act and has found violation of Rule 14 of the articles of association along with other contraventions of the provisions of the Act, viz., Section 171 read with Section 170 and Section 159, Section 166, Section 210, Section 220 of the Companies Act, 1956-thereby violated Rule 27 of the articles. The...
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