The Delhi High Court has ruled that Section 434(1) (c) of the Companies Act cannot be inferred to confer jurisdiction on the National Company Law Tribunal with respect to the cause of action over which it has no authority under the Act.
Case of the Plaintiff
Representative suit was filed by seven plaintiffs who were permanent members of Delhi Gymkhana Club. The plaintiff’s grievance was that the Club, a non-profit Company by Guarantee, was conferring “Green Card holder” status on certain category of persons though the same was not provided for in its Articles of Association.
The plaintiffs stated that under the Articles of Association, the Club classified its members in five categories, i.e. Permanent, Garrison, Temporary, Casual and Special Category. However, after attaining the age of 21 years, children of the permanent members continued to use the facilities of the Club upon applying for permanent membership in which case they are issued on Green Card despite the fact that no concept of Green Card is provided in the AOA.
They contended that the perks of green card was not being extended to those children who did not enjoy the facilities of the Club as minors and that such classification was inequitable. In the suit, the plaintiffs inter alia prayed for a decree declaring Clause 13(3)(b) of AOA to extend Green Card to the children of all the permanent members irrespective of their age and whether they had used the facilities of the Club or not as minors.
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Case of the Defendants
The Club argued that the suit was not maintainable as the appropriate forum to deal with the issue was the NCLT under Section 242 of the Companies Act. The Club stated that under Section 242 of the Companies Act, not only was there a provision of winding up of the company but other issues could also be considered and decided the NCLT.
It was submitted that the word and “any member in Section 241 of the Companies Act was very wide and that the word “member” under Section 2(55) included anybody who was subscribing to the Company’s Memorandum and Articles of Association.
Observation of the Court
The Court observed that before getting into the matter of deciding the jurisdictional limit of NCLT, attention should be given to assess as to what is the real cause of action. It was further observed that neither the suit allege any oppression, misbehavior classification of accounts of the club nor did it seek winding up or rectification of record.
In the words of the Court:
“The 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”.
Case Details
Before: Delhi High Court
Case Title: Naresh Dayal v. Delhi Gymkhana Club
Coram: Hon’ble Ms. Jutice Mukta Gupta
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