M. F. SALDANHA, J. ( 1 ) THIS case raises certain interesting facets of law which to a very large extent are unprecedented. Briefly stated, the petitioners who are categorised as Stand Members of the Bangalore Turf Club Limited, which I shall hereinafter refer to as the Club, have presented this petition under S. 433 (f) of the Companies Act wherein they have contended that the respondent Company is liable to be wound up on a very unusual ground namely that it has been their charge the functioning of the respondent-company does not pass legal scrutiny. Effectively, the grievance of the petitioners is that they have been granted Stand Membership which according to them necessarily implies that they must be afforded the right to participate in the decision making and managerial process of the Company but that through a certain application of the Articles of Association, the petrs. are deprived of this right. The allegation is that the attitude of the respondents bristles with mala fides in so far as the petrs. allege that the affairs of the Company are being conducted by the restricted body of persons who come under the category of Members and according to them the petitioners and others similarly situated Stand Members are totally precluded from having any say particularly if it comes to corrective action. They have sought to argue that the grievance is very real and very genuine and the thrust of the argument is that what has happened is far higher than mere mismanagement; that it is basically illegal action and that if the respondents persist in carrying on with this state of affairs that the petitioners are entitled to demand that the Company be wound up under S. 433 (f ). ( 2 ) ). At first blush, I do concede that it would appear rather strange, even assuming that the petitioners have some ground for complaint, that they have sought the winding up remedy as a solution to the grievances. The case made out however is that in depriving a whole category of class of members voting rights, that the action is grossly discriminating and to this extent, the petitioners learned advocate has alluded to the overtones that flow from constitutional provisions.
The case made out however is that in depriving a whole category of class of members voting rights, that the action is grossly discriminating and to this extent, the petitioners learned advocate has alluded to the overtones that flow from constitutional provisions. I do not dispute that this is a Limited Company which effectively functions as a Club and that the petitioners are not dealing with an institution that comes under the definition of state or instrumentality of state but the fact remains that the respondents will have to subscribe to basic constitutional tenets in so far as the type of activity or business carried on by them does involve various sanctions and indirect state control. I have alluded to this position of law only to illustrate that this is an angle which the Court must necessarily take cognizance of particularly since the defence pleaded on behalf of the respondents is that even if they are a body corporate that they essentially bear the character of a club and that it is well settled law that a self-governing body is entitled to its own rules, regulations and bye-laws and persons who decide to opt for Membership necessarily subject themselves to these sets of regulations which thereafter bind them and that consequently, the petitioners, if they had become members of the Club are estopped from calling into question anything that is contained in the Articles of Association. ( 3 ) IT may be a little difficult to uphold the plea that a bar of estoppel exists in such cases, particularly in the present case, because I am of the opinion that it is well settled law that there can be no bar of estoppel in the face of an illegality. Whether an illegality exists or not is required to be examined but to my mind it would be incorrect to contend that the petitioners should be thrown out at the threshold on the ground that they are precluded from complaining about something which in their opinion constitutes an illegality. ( 4 ) THE respondents had sought to rely on the decision of the Supreme Court reported in (1996) 87 Company Cases.
( 4 ) THE respondents had sought to rely on the decision of the Supreme Court reported in (1996) 87 Company Cases. There can be no quarrel about the proposition that the ratio of this decision binds all such cases but as I have indicated earlier, the present case is an exceptional one, the facts are unprecedented and it would be extremely difficult to draw a parallel between the present case and the facts of the case before the Supreme Court. ( 5 ) THE respondents, learned counsel raised two preliminary objections. In the first instance, he contended that the petitioners have no locus standi to present the present petition or for that matter to approach any other forum because they are not members of the Company. In the reply it is pointed out that their names are not included in the Register of Members and the justification for this flows from Article 3 wherein it is contended that only Club Members shall be deemed to be Members within the meaning of the Companies Act. Learned counsel submitted that whether the petitioners like it or not, within the scheme of the Companies Act i. e. S. 36 of the Companies Act, these provisions bind the members and he submitted that therefore the petitioners have accepted a position that they may be granted restricted use of the Club's facilities without some of the privileges that full-fledged members are entitled to. To my mind, this point does require consideration but prima facie I find that it leads to an inherent contradiction because the respondents themselves contend that Art. 36 prescribes that the terms and conditions of the Articles of Association bind the members whereas in the same breath they contend that the petitioners are not members and it would be difficult therefore to fathom as to how and under what circumstances the respts contend that the restrictions must apply to the petrs, if they are not members.
On the other hand, petitioners learned counsel has pointed out that a reading of the Articles would very clearly indicate that the petitioners do come under one category of members and if this is the position, then the short point that falls for determination would be as to whether such categorisation is permissible and secondly, as to whether the respondents are justified in law in contending that the respondents cannot insist on the privileges that they are asking for. To my mind, these issues are directly germane in the present case and they do require a detailed consideration and adjudication. ( 6 ) THE second preliminary objection that has been raised is that the Companies Act has provided a separate forum to examine complaints about misconduct, mismanagement and the like and the respondents learned counsel submitted that if it is the contention of the petitioners that anything along these lines has taken place that the forum prescribed is the Company Law Board and on this ground alone the petition is liable to be dismissed. Learned counsel has relied on certain extracts from Palmer's Company Law in support of the contention that the Company Law Board is the only right and appropriate forum for a complaint of the present type and that this Court should not entertain the petition. As a corollary to this, learned counsel has also cited an extract from Buckley on the Companies Act, wherein the learned author has expressed the view that if a Company is proceeding to do something which is ultra vires, the remedy is to adopt proceedings to restrain the Company from continuing with that course of action but that the member has no right to come for a winding up order under the just and equitable clause. I do not dispute the fact that Ss. 397 and 398 do provide for alternate remedies and that S. 443 (2) clearly postulates the need to approach the correct forum in relation to the relief sought. The real issue is as to whether the petitioners having approached this Court should be redirected to the other forum or whether this is a case in which the Court should exercise its jurisdiction and examine the case. ( 7 ) RELIANCE was sought to be placed on the decision reported in ILR 1994 Karnataka 408 in support of this proposition.
( 7 ) RELIANCE was sought to be placed on the decision reported in ILR 1994 Karnataka 408 in support of this proposition. The petitioners learned counsel contended that the respondents are only attempting to evade coming to grips with meeting the case on merits by talking about change of forum and his contention was that the remedies prescribed under Ss. 397 and 398 of the Companies Act are only available to a member of a Company. He submitted that the respondents have all through in their reply disputed the status of the petitioners and contended that they are not members and he submits that in this background, there is every possibility that if the petitioners had approached Company Law Board that their complaints would have been stalled on the ground that their status is disputed. Apart from this, the petitioners learned counsel drew my attention to a decision of the Madras High Court in 1982 (52) Company Cases 514 as also to certain passages from Growers Company Law, 4th Edition in support of his contention that even if an application for winding up was presented to the Court, that the Act invests a Court with such wide powers as to pass appropriate orders which are corrective by nature and which does not necessarily involve the ultimate and fatal remedy of winding up the Company. The submission obviously was that the petitioners have been clamouring for corrective action and that nothing has happened and it was consequently argued that in this background if the Court felt that it was just and equitable that it could direct appropriate corrective action under S. 433 (f) without the need of winding up the Company if the Court felt that such procedure was more in consonance in the interest of justice. ( 8 ) THE issue that is before me really is the question as to whether the petitioners are precluded from continuing with the present petition, whether they are required to be directed assuming that they have a grievance, to an alternate forum and whether this Court in the unusual facts and circumstances of the case must entertain and examine the petition.
To my mind, having regard to the defence that has been taken up, there is sufficient justification in the apprehension expressed on behalf of the petitioners that an approach to an alternate forum can easily be stalled and that consequently, it cannot really be said that they have an alternate remedy. I am fortified in this view by the fact that there have been instances, though very few and far between, wherein the Courts may have had to examine the very manner in which a Company is functioning and if the conclusion is that there is something radically wrong that the Courts could direct a correction and if the direction is not heeded or complied with that the Courts could order winding up of the Company under S. 433 (f ). I do concede that these are exceptional situations but the fact of the matter is that the petitioners have made out a case that requires examination. I do not propose to comment beyond this because there is much that has been said in both sides and it will require a detailed evaluation of the facts but more certainly the legalities and a comprehensive and a detailed speaking order to decide the issue completely. Suffice it to say that the petitioners have made out a good enough case for the Court to entertain the petition and examine the issues that are involved. I need to point out here that all institutions, irrespective of their character, are required to conform to broad democratic legal principles of fairness and in evaluating the concept of whether a state of affairs is just and equitable, these principles would have to be borne in mind. ( 9 ) HAVING regard to the aforesaid situation, the petition is admitted. The office to list the same for hearing in usual course. It is open to the respondents to file further replies or documents or submissions if they so desire and to the petitioners to file any further material which they consider relevant or to file their rejoinders as the case may be. ( 10 ) BASED on the earlier submissions, the respondents learned advocate had contended that the petitioners have a straight remedy in acivil Court by way of a suit.
( 10 ) BASED on the earlier submissions, the respondents learned advocate had contended that the petitioners have a straight remedy in acivil Court by way of a suit. I have already made a reference to the decision of this Court reported in ILR 1994 Karnataka 408 and the respondents learned counsel submitted that quite apart from the Company Law Board, the right forum for the petitioners assuming they desired some relief is the Civil Court. The only answer to this argument is that in a given situation, a litigant may have many options. It has unfortunately become customary when a party approaches one Court to try and evade the issue by directing the party to go to some other Court. Litigation is not like a game of hide and seek but it is a far more serious issue and to my mind, before a party can be redirected to another forum it must be demonstrated that the party is precluded from prosecuting the remedy before the forum which it has approached. The respondents are a Limited Company. The Companies Act envisages that the High Court of the State shall exercise special jurisdiction under the provisions of the Companies Act and in a case which involves intricate points of law and where there is no dispute about the facts, it would hardly be available to the respondents to contend that the petitioners should be asked to seek their remedies before a Civil Court. This Court cannot also be oblivious of the fact that where a party complaints about deprivation of rights that it is only logical that the remedy if permissible, must come within a reasonable time or within the litigant's lifetime and it is a sad reflection on the performance of the Civil Courts that even ordinary suits do not reach hearing for up to two or three decades and this being the situation, I fail to see any ground on which the petitioners must be asked to approach a Civil Court. To my mind, this Court is invested with the powers of examining the issues involved in this dispute and therefore, the petition has been admitted and I am firmly of the view that this Court is the competent forum to hear and decide the questions involved. Order accordingly. --- *** --- .