D. DWARAKANANTHA REDDY v. CHAITNYA BHARATHI EDUCATIONAL SOCIETY AND ORS

Citation: [2007] 5 S.C.R. 775

Court: Supreme Court of India

Bench: C.K. THAKKER, ALTAMAS KABIR

Case summary

D. DWARAKANANTHA REDDY v. CHAITNYA BHARATHI EDUCATIONAL SOCIETY AND ORS.pdf

Judgment text

D. DWARAKANANTHA REDDY v. CHAilNYABHARATHI EDUCATIONAL SOCIETY AND ORS. APRIL 27, 2007 [C. K. THAKKER AND ALTAMAS KABIR, JJ.

) Code of Civil Procedure, 1908-0rder 39, Rules 1 und 2-Jnterim injunction-Grant of-Prima facie case-Registered Society-Persons inducted as Promoter-Members into General Body allegedly by resolution ofBoard ofGovernors and subsequently approved by General Body-Society claiming that induction was null and void as resolution ofBoard ofGovernors was merely a 'proposal' and subsequent approval ofGeneral Body ofSociety from holding election of Governing Body authority-Interim injunction to restraint Society from holding election of Governing Body without giving them opportunity of participation-Rejected by Courts below on lack of prima facie case-Correctne~s of-Held-Resolution ofBoard ofGovernors merely stated that nine persons will be inducted into General Body as per Constitution ofSociety-As per Articles ofAssociation ofSociety an amount had to be paid by a person before his admission, and that was not paid either at the time of meeting ofBoard of Governors or General Body meeting ; it was paid only after impugned resolution was passed and that too without informing Society-Even ifthere was a mistake, it was not a mutal mistake- Notice calling for explanation and opportunity of hearing was not required as controversy did not re/ate to expulsion of member and issue whether induction into General Body was legal, was yet to be decided-Jn absence • ofany particulars, it cannot be said that action ofSociety was mala fide or co/ourable exercise of power-Photographs, reports etc.

showing that all throughout they were treated as Promoter~Members and worked as such, were immaterial, if admission in Society was illegal. Respondent is a registered Society. Its Founding Members Constituted General Body as well as Governing Council/Executive Body. It is the case of the appellants that they were inducted as Promoter-Members into the General Body ofthe Society by a unanimous resolution ofthe Board of Governors dated January 27, 2000, in exercise of their power under Clause ll(i) of the Articles of Association, and this was subsequently approved by the General Body of the respondent on March 22, 2006. They were therefore entitled to participate in the election of Board of Governors as per the Memorandum and Articles of Association. They received a caveat from the respondent stating that their claim as Promoter-Members of the society and calling for General Body Meeting was not tenable because their admission as Promoter-Members was null and void.

It stated that the resolution dated January 27, 2000 was merely a 'proposal' with a condition that nine persons would be admitted as members at an appropriate time, and the resolution dated March 22, 2006 passed by the General Body of the Society admitting them as Promoter-Members was without authority and null and void. Aggrieved by the above, the appellants filed Original Petitions in the City Civil Court for a declaration that they were legally inducted members and were entitled to participate in the management and administration ofthe respondent. A prayer was also made for permanent injunction, along with application for interim injunction under Order 39, Rules 1 and 2 read with Section 151 of the Code of Civil Procedure, 1908, to restrain the respondent from holding election of the Governing Body without including them and without giving them opportunity of participating in the election process.

The City Civil Court dismissed the application for interim injunction inter alia observing that no prima facie case had been made out Aggrieved by this order, the appellants preferred Revision Petitions. The High Court dismissed all Revision Petitions, and directed the trial Court to dispose of Original Petitions. This is challenged by all the appellants in the present appeals. Appellants contended that (i) neither the Memorandum of Association n9r Articles ofAssociation imposed a condition precedent for payment ofRs. I lakh for becoming a Promoter-Member, and its non-payment cannot be made a ground to expel or rem9ve them; even otherwise, they had never refused to pay the said amount; (ii) apart from the fact that Articles of Association prescribed no time limit within which a payment of Rs.

l lakh was to be made, even respondents were of the same opinion; it was thus a case of mutual mistake for which they cannot be blamed; (iii) the payment has already been made and that fact ought to have been considered by the Courts and relief ought to have been granted in their favour; (iv) no notice was issued by the respondent to show cause why their Membership should not be terminated or discontinued, nor an opportunity of hearing was afforded, nor principles of natural justice were observed; (v) they were always treated as Promoter- Members which fact is proved from various photographs and reports (vi) the action of respondent was mala fide and has been taken in colourrable exercise D. DWARAKANANTHA REDDY'· CHAITNYA BHARATHI EDUCATIONAL SOCIETY of power with a view to deprive them from participating in election. Respondents contended that (i) Article 4(i)(b) provides clearly that an applicant who 'pays' Rs.

1 lakh would become a Promoter Member; (ii) no such payment was made in March, 2006 when the so-called approval was granted by the General Body; (iii) the said amount was deposited by the appellants directly in the Bank without even informing them; (iv) it was not a case of mutual mistake; the relevant clauses of Articles of Association were unambi~uous and since no payment was made as required, no right accrued in favour ofthe appellants and the action of the Society was legal and lawful; (v) it was not a case of removal, termination or expulsion of a Member and hence there was no question of issuing notice, calling for explanation or affording opportunity of hearing or observance of principles of natural justice or fair play. Dismissing the appeal, the Court HELD: 1. Neither the trial Court nor the High Court had committed any illegality in refusing interim relief. [Para 18) (784-C) 2.

Reading ofthe Minutes of85th meeting of the Board of Governors of the Society makes it clear that nine persons were selected and as stated in the minutes, they "will be inducted" into General Body as per the Constitution of the Society. [Para 20 and 21) (786-A-B; F-G) 3. 1. Primafacie, the contention of the Society is well founded that an amount ought to have been paid by a person before he is admitted as Patron Member in the light of the phraseology used in Clause 4 (b) of the Articles of the Association. [Para 22) (787-C-D) 3. 2. It is not even the case ofthe appellants that they had paid. an amount ofRs. 1 lakh before or on January 27, 2000. (Para 21] (786-F-G] 3. 3. Even ifthere was a mistake, it was not a 'mutual mistake'. [Para 28) [789-B-C] 3. 4. So-called payment was made only after the impugned resolution was passed and that too without informing the Society. [Para 28] (789-B-C) 3. 5.

It is also pertinent to note that the payment was made by the appellants on October 26, 2006 and a petition was filed in the Court on October 29, 2006 along with an application for the interim relief. But even in the application for interim relief, the factum of payment of amount after the resolution was passed, was not disclosed by the applicants. (Para 281 (789-C-D) 4. The controversy does not relate to expulsion of a member. The question is whether the appellants can be said to have been legally admitted as Promoter- Members. Once it is held that the appellants were properly inducted and had become Promoter-Members of the Society, principles of natural justice l required issuance of notice, calling for explanation and affording reasonable opportunity of being heard. The caSt: ofthe Society, however, is that appellants were never legally inducted as Promoter-Members and their so called induction was not in consonance with law. The said issue is yet to be decided.

[Para 241 (788-A-C) Board ofControl for Cricket in India and Anr. v. Netaji Cricket Club & Ors. , (200514 SCC 741, referred to. T. P. Daver v. Lodge Victoria, No. 363, S. C. Belgaum, (196411SCR1, distinguished. Halsbury's Laws ofEngland, Fourth Edition, Vol. 19(1), p 143, para 201, referred to. 5. No particulars, much less sufficient particulars, have been placed on record to show that the action taken by the Society was malajide or had been taken in colourable exercise of power. [Para 31) (790-D-EI 6. The plea that the appellants were all throughout treated by the Society p as Promoter-Members and they had worked for all these years which is established from various photographs, reports etc. , is of no consequence. If . the appellants had not been legally admitted as Patron Members, they could not be treated as such and cannot get benefit on the basis of photographs, reports, functions, etc. [Para 27) (788-G-H; 789-A-BI CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2197 of2007.

From the Final Judgment and Order dated 02. 01. 2007 ofthe High Court of A. P. at Hyderabad in CRP No. 6301 of2006. WITH C. A. Nos. 2196 of2198 of2007. D. DWARAKANANTHA REDDY v. CHAITNYABHARATIIl EDUCATIONAL SOCIETY [[C. K. TIIAKKER, I. ] 779 K. K. Venugopal, Soli J Sorabjee and Ravindra Shrivastava, Dr. S. K. Venna, Kuna! Venna, Ramakanth Reddy, Ranbir Singh Yadav, Arjun Garg, Ardhendunauli KR. Prasad, M. Mannam and Raju! Shrivastava for the Appellant. K. Rajendra Chowdhary, K. Swami, Prabha Swami, Rakesh K. Sharma, Bina Madhavan, S. Udaya Kumar Sagar, Venayagam and Mishi Choudhari (for Mis. Lawyers' Knit & CO. ) for the Respondents. The Judgment of the Court was delivered by C. K. THAKKER, J. 1. Leave granted. 2. All these appeals arise out of a common judgment and order passed by the High Court of Judicature, Andhra Pradesh at Hyderabad on January 2, 2007 in Civil Revision Petition Nos. 6269, 6353 and 6301 of2006.

By the said order, all the Revision Petitions were dismissed by the High Court and the order passed by the Court of Ilnd Additional Chief Judge, City Civil Court, Hyderabad on December I, 2006 in I. A. Nos. 4192 and 4194 of2006 in O. P. Nos. 20070 of 2006 and 2146 of 2006 is confinned. 3. Short facts giving rise to the present litigation are that Mis Chaitanya Bharathi Educational Society ('Society' for short) was registered in the year 1979 under the Andhra Pradesh (Talengana Area) Public Societies Registration Act, 1350 Fasli, vide Registration No. 964 of 1979.

Its objects as specified in the Memorandum of Association are- (a) To establish, manage, aid and maintain educational and other institutions, to impart education and training at all stages for the promotion of Engineering, Medicine, Phannacy, Agriculture, Commerce, Literature, Arts and Sciences and Management and other subjects and allied activities for diffusion of useful knowledge and training, specially to instill self-confidence, creative thinking and entrepreneurship in the students and trainees. (b) To devise ways and means and accord facilities for candidates to specialize in all or any of the above subjects (i. e. ) to develop Centres of excellence for research in the above subjects with Industrial Orientation. (c) To act as a Trust Board to accept endowments, bequests, donations, subscription, grants from institutions, both Private .

, ,,&:'and Public, Corporate bodies, and Government and other transferee of property made to the Society and administer them on the terms agreed to. (d) To try to offer medical and clinical facilities to the needy by opening the necessary hospitals, aid clinical laboratories or X- Ray Institutions, and to run, maintain Homes, Residential Houses etc. , for the needy either by purchasing the necessary equipment or by approaching such institutions or the Governments including r those of other Countries, for donation ofsuch equipment and the land and buildings necessary for locating such equipments and Institutions. (e) To offer consultancy services in any area directly or through the Institutions owned and managed by the Society. (t) To carry on activities for any other charitable purposes and activities of General Public Utility. 4.

There were 13 Founding Members who then constituted General Body as well as Governing Council/Executive Body who were distinguished persons from various professions. The Articles of Association of the first respondent-society enumerate categories of membership in Clause 4 as (i) Patron, (ii) Promoter, (iii) Donor; and (iv) Member (ordinary member). Clause 5 provides for termination of membership. Whereas functions of the General Body have been specified in Clause 7, functions of the Board of Governors have been dealt with in Clause 11. Sub-clause (i) thereof enacts that the Board of Governors 'have the power to admit new members of the Society on a proposal sponsored by at least two members of the Board of Governors'. Clause 12 relates to meetings of the Board of Governors. .. 5.

It is the case of the appellants that in exercise of power under Clause 11(i) of the Articles of Association, the Board of Governors on January 20, 2000 resolved to induct nine persons as Promoter-Members into the General Body ofthe Society. It was unanimous decision ofthe Board. It was also their case that the resolution was subsequently accepted and approved by the General Body of the first respondent-society in its meeting dated March 22, )... 2006. Thus, the appellants had become and continued to remain as Promoter- Members of the society. They are, therefore, entitled to participate in the election of Board of Governors as per the Memorandum and Articles of Association. The i:ppellants stated that they received a caveat from the first respondent-society on October 23, 2006 stating therein that their claim as D. DWARAKANANTHA REDDY v. CHAITNYABHARATHI EDUCATIONAL SOCIETY[[C. K. THAKKER,J.

f78 l Promoter-Members of the society and insisting and calling for General Body Meeting was not tenable because the very admissien of the appellants as Promoter-Members was null and void. It was further stated by the appellants that on October 24, 2006, I18th Meeting of the Board of Governors of first respondent-society was convened. Under Item No. 4 (any other item), induction of admission of nine persons was questioned. It was resolved that the appellants could not be said to be legally inducted members and their induction was totally illegal and unlawful. The resolution dated January 27, 2000 was merely a 'proposal' with a condition that nine persons would be admitted as members at an appropriate time. The resolution dated March 22, 2006 passed by the General Body of the Society admitting them as Promoter-Members was without authority and null and void.

A consequential letter was written by the Secretary of the Society that the admission of the appellants as Promoter- Members was invalid and illegal and they were not eligible to be members... Gf the society. 6. Being aggrieved by the above resolution, the appellants filed Original Petition in the Court ofChiefJudge, City Civil Court, Hyderabad for a declaration that they were legally inducted membm and were entitled to participate in the management and administration of the Society. A prayer was also made to grant permanent injunction from conducting election to the Governing Body without including the appellants.

The appellants also filed application for interim injunction under Order 39, Rules I and 2 read with Section 151 of the Code of Civil Procedure, 1908 (hereinafter referred to as 'the Code') restraining the first respondent from holding election of the Governing Body of the first respondent-society without including Promoter-Members and without giving them opportunity of participating the election process. 7. The learned llnd Additional Chief Judge, City Civil Court vide an p order dated December I, 2006 dismissed the application inter alia observing that no prima facie case had been made out by the petitioners-appellants herein and they could not be granted interim relief as sought. Ad interim relief of status quo which was granted on October 30, 2006 was vacated. 8. Being aggrieved by the order passed by. the trial Court, the appellants preferred Revision Petitions.

The High Court, as observed earlier, dismissed all Revision Petitions holding that the trial Court was right in dismissing the application as no prima facie case had been made out. The High Court also directed the trial Court to dispose of Original Petitions within a period. of three months from the date of receipt of the copy of the order. The above order H· >has been challenged by all the appellants in this Court. 9. On January IO, 2007, this Court stayed operation of the impugned order passed by the High Court till January 19, 2007 which was the date fixed , for admission-hearing. On January 19, 2007, notice was issued and parties were directed to file affidavits and further affidavits. On March 2, 2007, the matter was ordered to be placed for hearing. We have accordingly heard learned counsel for the parties. .. I0. The learned counsel for the appellants contended that the Board of Governors admitted the appellants as Promoter-Members as early as in the year 2000.

In an Emergency Meeting ofthe General Body held on March 22, 2006, the action was approved by the General Body. Neither the Memorandum ofAssociation nor Articles ofAssociation had imposed a condition precedent for payment ofRs. l lakh for becoming a Promoter-Member. Non-payment of an amount of Rs. I lakh, therefore, cannot be made a ground to expel or remove the appellants as Promoter-Members. Even otherwise, appellants had never refused to pay the said amount. 11. It was also submitted that no notice was issued by the Society to show cause why the Membership of the appellants should not be terminated or discontinued, nor an opportunity of hearing was afforded, nor principles ofnatural justice were observed. The impugned action taken by the respondents on October 24, 2006 treating the membership of the appellants as void was non-est.

The action was also bad in law inasmuch as the resolution admitting the appellants as Promoter-Members was taken by the Board of Governors and accepted by the General Body. Resolution dated October 24, 2006 was passed by the Board of Governors which is a body subordinate to the General Body. It, therefore, could not have interfered with the action of the General 'f Body. 12. It was also submitted that there were amendments in the Articles of Association in the year 1981 which provided induction of eminent persons as Promoter-Members without payment of any amount. All the appellants are 'eminent' in their respective fields and they are entitled to contirwe as Promoter-Members. .. 13. It was also contended that apart from the fact that Articles of Association prescribed no time limit within which a payment of Rs. I lakh was to· be made, even respondents were of the same opinion. It was thus a case ofmutual mistake for which appellants cannot be blamed. The appellants were 0.

OWARAKANANTHA REDDY v. CHAJTNYAOHARA1111 EDUCATIONAL SOCIETY[[C. K. TIIAKKER ,I. ]783 always treated as Promoter-Members which fact is proved from various photographs and reports. It was alleged that the action was mala fide and has been taken in colourable exercise ofpower with a view to deprive the appellants from participating in the next election. The counsel further stated that in any case, the payment has already been made by the appellants and that fact ought to have been considered by the Courts and relief ought to have been granted in their favour. On all these grounds, the appeals deserve to be allowed by setting aside the order passed by the trial Court and confirmed by the High Court by continuing the appellants as Promoter-Members. 14. The learned counsel for the respondents supported the action taken by the Society and the orders passed by the Courts below.

It was submitted that the appellants were never appointed as Promoter-Members and the action which was taken by the Board of Governors in its 85th Meeting dated January 27, 2000 was in the nature of mere proposal to induct the appellants as Promoter-Members. Formal decision admitting them as Members had never been taken. It was also submitted that the language of Article 4 (i)(b) is explicitly clear and provides that an applicant who 'pays' Rs. I lakh would become a Promoter Member. It is thus clear that a person, before he can become Promoter-Member, must 'pay' an amount ofRs. 1 lakh. Admittedly, no such payment was made in 2000 nor in March, 2006 when the so-called approval was granted by the General Body. Even on October 26, 2006, the amount was deposited by the appellants directly in the Bank without even informing the Society and that was done after the resolution was passed on October 24, 2006. 15.

According to the learned counsel, it was not a case of removal, termination or expulsion of a Member and hence there was no question of ) issuing notice, calling for explanation or affording opportunity of hearing or observance of principles of natural justice or fair play. Since the appellants had never become Promoter-Members, what was done on October 24, 2006 was to make it clear that their so called membership was void and ofno effect. Reliance was placed on Hyderabad Karnataka education Society v. Registrar ofSocieties & Ors. , [2000] l SCC 566: AIR (2000) SC 301 : JT (1999) 9 SC 482. 16. According to the learned counsel, it was not a case of mutual mistake. The relevant clauses of Articles of Association were unambiguous and since no payment was made as required, no right accrued in favour of the appeUants and the action of the Society was legal and lawful. ; . 17. As to amendment of 1981, it was submitted that no such amendment was made nor it was brought into force.

It was, therefore, submitted that the action of the Society was strictly in consonance with law. The main matter is pending before the City Civil Court and it will be decided on its own merits, but, taking into account admitted facts and documentary evidence, if the trial Court had not granted interim relief and the said order was confirmed by the High Court, it cannot be said that any illegality has been committed which deserves interference under Article 136 of the Constitution. It was, therefore, prayed that the appeals deserve to be dismissed. ~- 18. Having heard learned counsel for the parties, in our opinion, neither the trial Court nor the High Court had committed any illegality in refusing interim relief. So far as the action taken by the respondent-Society is concerned, our attention has been invited by the counsel for the parties to the Memorandum of Association as also to the Articles of Association.

We have already extracted the objects for which the Society has been set up. Clause 4 of the Articles of Association provides for Membership of Society and reads thus: 4. MEMBERSHIP The Society shall consist ofthe following Classes ofmembership. (iXa) PAlRON Any person, who pays a sum of Rs. 5 lakhs or more in one lump sum or Rs. 3 lakhs in one instalment and the balance in two equal yearly instalments, shall be called 'Patron' of the Society with hereditary rights under th. e Laws of Primogeniture. Any person who fails to pay the subsequent instalments within the specified time, i. e. , second instalment of Rs. one lakh before the end offirst year, third instalment of Rs. one lakh before the end of second year, from the