NCLT USES ITS AUTHORITY TO REMOVE THE MANAGEMENT OF CHURCH OF SOUTH INDIA TRUST ASSOCIATION FOR THE IRREGULARITIES BY waiving off all or any of the requirements specified under Clause (a) or Clause (b) of Section 244 (1) of the Companies Act, 2013
John S.Dorai Vimal Sukumar
M/s. Church of South India Trust Association (CSITA)
Decided by NATIONAL COMPANY LAW TRIBUNAL, CHENNAI
Facts of the case
Interlocutory Application was raised mainly to look into the maintainability of the CP on the ground that the Respondent/Petitioner is neither a member of CSITA company nor 24 persons who had given consent to file the company petition are members of CSITA company.
It is stated in the IA that neither of them are entitled under provisions of Section 244 of the Act, 2013, to file the instant company petition invoking the provisions of Section 241 of the Act, 2013.
Based upon this fact, a prayer has been made to dismiss the company petition as not maintainable.
CSITA Company is a public religious and charitable trust known by the name and style “The Church of South India Trust Association” and it is registered as registered under Section 25 of the Companies Act.
It is observed that the main object of the company as set out in Sub Clause 'A ' of Clause III of the Memorandum of Association, is to promote the objects of the charity.
As per the Articles of Association, the total number of members who are directors is restricted to ten and total number of office bearers is four.
Members shall be elected only by the Synod of the Church, and election shall be conducted every two years. The tenure of the present Synod was expired in January2016. Thereafter, no such Synod is in its place.
It was mentioned in the petition that It has been stated that in W.P.No.21343/2011 the Hon’ble Madras High Court directed the Registrar of Companies, Tamilnadu, Chennai, to carry out a detailed inspection of the Company u/s 209A of the Companies Act, 1956 and the Registrar of Companies has pointed out 27 irregularities and issued show-cause notice to the Respondents mentioned in the company petition.
There are 43 criminal cases instituted against the respondents which are pending before the Economic Offences Court, Egmore and also before the Regional Director, Ministry of Corporate Affairs, Chennai.
When explanation was called for by the ROC with respect to irregularities, the reply that was filed on behalf of the Company is as follows:
"The official members of CSITA are of on honorary basis and they keep changing over two years and these committee members are religious heads and they are not conversant with the provisions of the Companies Act. "
The Registrar of Companies has rejected the explanation and recommended action against the company and its office bearers through Serious Frauds Investigation Office (SFIO).
Allegation against the Present Management of the Church
· The reason for such action is stated that the office bearers without any authority borrowed heavily on the properties of the company by way of creating charges on its properties.
· The present committee members stated to have been indulging in selling the property elsewhere in South India, for throw away prices.
· The present management committee is said to have executed powers of attorney to non-members of the company to deal with company's properties without any authorization.
· The present management committee members are said to be there for more than six years without any legal base. It is averred that Income Tax Department has conducted a couple of special audits of the accounts of the company and found several irregularities, due to which the Income Tax Department has not issued "Income Tax Exemption Certificate" to the company for more than three years.
Seeking Interim Prayers
In the backdrop of the above stated facts, the interim prayers that are made for seeking interim directions are as follows :-
· That the present Management Committee may be suspended
· To direct the Company to appoint the newly elected persons as Management Committee
· To permit the newly appointed Management Committee to carry out operations of the Company as per the provisions of the Companies Act, 2013
· To appoint such other person whom the Tribunal deems fit to supervise the functions of the newly appointed Management Committee.
It was argued by the respondents that petitioners are not having any right to sue the company Section244 of the Companies Act, 2013 as they are qualified members as stated in the above section.
However , NCLT Chennai bench observed that the Tribunal suo moto can waive off all or any of the requirements specified under Clause (a) or Clause (b) [as the case may be] of Section 244 (1) of the Act, so as to enable the member to apply under Section 241 of the Act.
NCLT, Chennai bench also observed that the petition, in essence, is a representative petition which falls within the purview of Order 1, Rule 8 of the Civil Procedure Code, 1908.
Once, it is established that R1 Company is a charitable institution which caters the needs of the beneficiaries/ stakeholders, the properties of such religious and charitable trust must be protected jealously. This has been observed by the Apex Court in Chenchu Rami Reddy & Anr. Vs Government of Andhra Pradesh & Ors, reported in 1986 SCR (1)989. In view of the factual and legal position.
In view of the factual and l legal posit ion stated above, I am of the view that it is a fit case where all the requirements laid down u/s 244(1) (b) of the Companies Act, 2013 for filing company.
Decision of the NCLT Bench, Chennai
Since the Company Petition is held maintainable and in the given circumstances there is an urgent need to regulate the affairs of R1 Company. Thus, NCLT, Chennai proceed to remove all the directors and managing committee including office bearers by appointing Hon'ble Justice Shri (Retd CT Selvam) as the Chairman who is authorised to nominate four suitable persons to be chosen from the sub units/Dioceses of Churches and three office bearers.