Delhi and District Cricket Association v. Vinod Tihara & Ors.

3. The learned Senior Advocate for the appellant submits, that pursuant to the aforesaid findings, respondent no.1 was issued a Show Cause Notice on 20.12.2018, to show why he be not expelled from the membership of DDCA.

4. Aggrieved by the said Show Cause Notice, the respondent sought a restraint order. After hearing the parties, the learned Trial Court was, prima facie, of the view that, respondent no. 1 could be removed from the said position only by way of decision/ voting by the General Body and not by the Apex Council, which had issued the Show Cause Notice.

5. The appellant refers to Article 5(c) of the AOA of DDCA, which reads as under: “5. TERMINATION OF MEMBERSHIP

(c) If any member refuses or neglects to comply with any provision of the Memorandum and Articles of Association or any by-law made there under or is guilty of conduct which the Apex Council may consider likely to endanger the harmony or effect the character or stability or interest of Association, such member shall be liable to be expelled, subject to the provisions of Article 42, on the vote of two third of the members present at special meeting of the Apex Council summoned for the purpose, provided that at least one week before meeting, such member(s) shall have had notice thereof, and of the intended resolution for his expulsion and that he shall at such meeting and before the passing of such resolution have had an opportunity of giving orally or in writing any explanation he may think fit.”

6. The appellant contends that in view of the learned Ombudsman‟s conclusion, that respondent no.1 was guilty of indiscipline and misconduct, which was detrimental to the interests of the DDCA, requisite measures have been initiated in terms of the Article 5(c) by the Apex Council, which is empowered to remove any Member from the appellant Association. Therefore, the restraint ordered by the impugned order is erroneous and needs to be set aside.

7. The appellant submits that (i) since it is an incorporated company, its Secretary, i.e. respondent no. 1 could be treated as a Director of the company, his removal from that post would, to a large extent, be covered by section 284 of the Companies Act, 1956; (ii) additionally, the appellant‟s AOA provides a specific power to the Apex Council to remove members of the appellant Association (company), if such member is found guilty of misconduct, indiscipline or working contrary to the interests of cricket or to the interests of the appellant; and (iii) that in an identical circumstance, this Court had occasion to examine the issue, in Ravi Prakash Singh vs. Sugar Limited & Ors. in (CS(OS) No.1875/1993) decided on 12.07.2007, and observed, inter alia:-

8. The appellant contends, that likewise, all that is required to be examined in this case is whether the Apex Council, which is akin to the Board of Directors of an incorporated company, had issued due notice and granted appropriate opportunity to the noticee, to present his case before the said Apex Council (Board of Directors). It is stated that this exercise of due opportunity and natural justice has been carefully undertaken. Therefore, there can be no challenge to the procedure adopted by the appellant, nor can there be any question as to the Apex Council‟s power to remove a Member or Secretary of the appellant Association, because the Council is akin to a Board of Directors. It is further contended that a similar view has been taken in The Madras Stock Exchange Limited v. S.S.R. Rajakumar 2003 SCC OnLine Mad 148 and in

9. In The Madras Stock Exchange Limited (supra) it was held as under:

10. In K. Leela Kumar/M. Subbiah (supra) it was held, inter alia:

for the appellants. In any event, the validity of the proceedings of the impugned meeting is not in issue in the writ petitions. It is a matter of record that the 3rd respondent sent a letter dated 3-1-1989 calling upon the appellants to show cause as to why appropriate actions should not be taken against them for their prejudicial conduct. Since the appellants did not give any explanation, the 3rd respondent, after due consideration of the facts and circumstances by letter dated 9-1-1989 suspended the appellants from the membership of the Club, the appellant K. Leela Kumar for a period of 45 days and the appellant M. Subbaiah for a period of thirty days, since, in the opinion of the Committee, the conduct of the appellants was injurious to the prestige, interest and character of the club. We are of the view that the action of the Committee is perfectly valid, legal and proper being also a matter pertaining purely to the internal administration of the Club. We have already seen that the amendment was approved by the Regional Director of the Company Law Board, Madras, by letter dated 8-5-1974 by virtue of the power conferred on him under Section 25 of the Act, which has been delegated on him by the Government of India in Notification No. GSR 71 dated 1-1-1966. The appellants having been aggrieved by the order of suspension, have filed the writ petitions challenging the validity of Article XXVIII of the Articles of Association which confers power on the 3rd respondent to suspend a member.

21. It is the case of appellants that the said article cannot be enforced in view of the provisions of Section 9 of the Act and Circular No. 32 of 1975 issued by the 1st respondent. We are unable to appreciate the above contention for the following reasons. Necessary approval for amendment of Article XXVIII was given by the Regional Director, Company Law Board, Madras by his letter dated 8-5-1974, by virtue of powers delegated to him by the Government of India, whereas Circular No. 32 of 1975 was issued by the 1st respondent only on 1-11-1975. As rightly pointed out by the learned counsel for the 3rd respondent, Circular No. 32 of 1975 contains the mere opinion of the Department. It is not a statutory order issued pursuant to any statutory provision. The said Circular contains only certain administrative instructions and therefore it will not bind third parties like the 3rd respondent. Therefore, in our opinion, the writ petitions filed by the appellants to enforce those administrative instructions by filing a writ of mandamus invoking Article 226 of the Constitution of India, are not maintainable. Circular No. 32 of 1975 deals with only expulsion of a share-holder of a public limited company and it does not deal with a case of member for a short period. In any event, the said circular is not applicable to clubs, associations, etc., incorporated under Section 25 of the Act. It is settled by cateina of decisions of this Court and also of the Supreme Court, that the petition for issue of a writ of mandamus will not lie to enforce administrative instructions. The Circular in question, which contains clarifications issued by the 1st respondent, which are administrative in character, cannot confer any enforceable fights on third parties like the appellants. As already mentioned, the Circular in question is not a statutory order passed in exercise of any statutory power and therefore, it has no legal effect or sanction.”

11. Mr. Sandeep Sethi, the learned Senior Advocate for the appellant refers to this Court‟s order dated 20.09.2018 passed in FAO No. 413/2018 wherein the earlier orders of the learned Trial Court dated 28th & 30th August, 2018 had been modified to the extent that the operation of suspension of respondent no.1 purportedly dated 14.08.2018 issued by the Apex Council of DDCA had been stayed till a decision on the interim applications under Order 39 Rule 1 & 2 CPC was made on merits and the DDCA was further restrained from obstructing respondent no.1 in discharging his duties and functions as Secretary, DDCA to the extent that he function in accordance with the AOA of the DDCA till adjudication of the application under Order 39 Rule 1 & 2 CPC before the learned Trial Court or till the adjudication by the learned Ombudsman in terms of Article 62 of the AOA of DDCA. He submits that now that the learned Ombudsman has given his decision indicting and holding respondent no.1 guilty of indiscipline and misconduct, both being detrimental to the interest of the Association as well as to the game of cricket, the only option available to, indeed it is the duty of the appellant to take appropriate corollary steps under Article 5(c) of the AOA. He submits that the aforesaid modification by this Court would effectively have to be reviewed i.e. the suspension of R-1 would become operational automatically. He submits that: i) this would be a logical sequitor because respondent no.1 has been found to have conducted himself contrary to the interest of the DDCA; ii) the appellant does not wish to suffer any further at the hands of respondent no.1; iii) the appellant argues that respondent no.1 has harmed the DDCA and has the potential of further damaging the interest of the institution as a whole and indeed the game of cricket itself; iv) therefore, the appellant would like to take a decision about whether the said person should be kept on its rolls as a member or at all be retained in an administrative position. The appellant argues that in its SLP against the order of this Court‟s dated 20.09.2018 no substantive order has been passed and only notices have been issued. It is stated in the interim that the present impugned order has proceeded ahead and has disposed-off the plaintiff‟s application under Order 39 Rule 1 & 2 CPC. It is stated that it is open to the appellant to withdraw the SLP in view of the aforesaid altered circumstances, including the fact that the learned Ombudsman has given his decision to the reference.

12. The appellant states that in the SLP it has contended that for suspension of a member from the Association, it was not necessary to await the decision of the learned Ombudsman; that in any case in the interim the circumstances have changed and respondent no.1‟s actions have been found to be a case of clear indiscipline and misconduct, which is not only detrimental to the DDCA but also to the game of cricket. The appellant refers to various orders passed by this Court as well as by the Supreme Court, directing that the constitution of DDCA be brought in consonance with the structure of the BCCI, as proposed by the Justice Lodha Committee Report and approved by the Supreme Court. The amendments to the constitution of DDCA would be duly carried out both in terms of the orders of the Supreme Court as well as those suggested by the Committee of Administrators of the BCCI.

13. In the context of the above, the appellant contends that the administrative structure of DDCA as of today is legitimate. It comprises elected members and persons appointed by the three nominees of the Government of India (as mentioned in the appeal paper book at page 792).

14. Lastly, the appellant reiterates that insofar as Article 5(c) of the Constitution of the DDCA remains unaltered, the Apex Council has absolute powers to remove any member of the DDCA, whom it finds working against the interests of the DDCA as well as the interests of the game of cricket. The appellant contends that the only issue at hand is: whether the suspension against R-1 should continue till the Apex Council takes a decision on the reply by R-1 to the Show Cause Notice issued on 20.12.2018.

15. The appellant states that the impugned order dated 02.02.2019 does not even refer to the finding of the learned Ombudsman, which concludes that the conduct of R-1 has been seriously wanting. RESPONDENTS‟ ARGUMENTS

16. Refuting therefore, the said argument, Mr. Dayan Krishnan, learned Senior Advocate for respondent no.1 submits, that under Section 169 of Companies Act 2013, there is a subtle alteration of the statutory scheme for removal of directors of companies. Therefore, the aforesaid judgments passed in the context of Section 284 of the Companies Act, 1956 would not be applicable. Section 169 of the 2013 Act is essentially the same as section 284, except that the last word of sub-section 8 of section 169 has been changed to „Act‟ from „section‟. Sub-section 8 of Section 169 reads as under:- “169. Removal of directors (8) Nothing in this section shall be taken— (a) as depriving a person removed under this section of any compensation or damages payable to him in respect of the termination of his appointment as director as per the terms of contract or terms of his appointment as director, or of any other appointment terminating with that as director; or (b) as derogating from any power to remove a director under other provisions of this Act. (emphasis supplied)

17. Clause 7(b) of Section 284 of the Companies Act,1956 read as under:- “284. Removal of directors. (7) Nothing in this section shall be taken- (a) xxx xxx xxx (b) as derogating from any power to remove a director which may exist apart from this section.” (emphasis supplied)

18. The learned Senior Advocate contends that in the earlier Act there was ample scope for devising an alternate scheme for removal of a Director, provided that such alternative scheme was not substantially removed from the statutory scheme provided under Act. However, under the 2013 Companies Act, alternate schemes are drastically curbed and circumscribed; the removal of a Director has only to be in terms of what is specified under the Act. It is argued that section 169(c) mentions that the Director can be removed only by the Company and not by the Board of Directors, which in turn is appointed by the company i.e. its shareholders.

19. He further contends that section 6(a) of the 2013 Act is of wide ambit. It, in effect, renders redundant all alternate schemes for removal of directors of a company whether by way of memorandum, or articles of a company or resolutions, which are not in consonance with the statutory scheme, irrespective of whether the said scheme was registered, executed or passed either prior to or after coming into effect the Act of 2013. It is contended that insofar as Article 5(c) of the DDCA is repugnant to the scheme of the Act, it becomes void under Section 6(a) of the 2013 Act. It is argued that therefore, the impugned order does not suffer from any deficiency or error and this petition, being without merit, should be dismissed.

20. It is the respondent‟s case that the correct body for taking a decision on the suspension of respondent no. 1 from his post of Secretary of DDCA can be taken only by its General Body (shareholders).

21. In rebuttal, the appellant argues that the scheme of management of an incorporated company gives sufficient latitude under section 5(2) of the Act for the formation of an alternate scheme, so long as such scheme is not contrary to the scheme of the Act. It is argued that whenever the statute seeks to prohibit something, it stipulates so specifically and in unambiguous terms; such as in Section 164 and Section 175 which begin with the expression “no person shall” i.e. the prohibitory language is explicit. However, in contrast such a prohibitory expression is not to be found in section 5(2) of the Act read with section 169 thereof. The appellant contends that on the contrary, section 284 of the Companies Act, 1956 which is akin to Section 169 of the Companies Act, 2013, envisages the formation of an alternative additional scheme for removal of directors, insofar as it does not derogate from the statutory scheme. The appellant submits that its present scheme of governance and management has the imprimatur of the Supreme Court, insofar as its AOA have been amended in consonance with the structure of administration as proposed by Justice Lodha Committee Report and approved by the Supreme Court. Therefore, article 5(c) of its AOA stands duly approved as being in consonance with the statutory scheme, and the said provision empowers the appellants‟ Apex Council to remove any member from the Association (i.e. the appellant company).

22. The Court, however, is not persuaded by the aforesaid arguments of the appellant because very significantly amended provisions of the 2013 Act, permit for removal of directors. Under section 284(8)(b) of 1956 Act an alternate scheme for removal of directors was permitted as a stand-alone, specific provision, provided as said alternate scheme did not derogate from any power which existed under that section. In other words, the test of derogation, if any, was limited to section 284 only. However, under section 169 of the 2013 Act, the power for alternate scheme of removal of directors has been made subject to other provisions of the entire Act i.e. the alternate scheme would have to ensure that it does not derogate from any power to remove a director as specified under any other provision of the Act. That being the clear language of the statute, the only method in which a director could be removed is the one prescribed under section 169 of the 2013 Act, which stipulates that a director may be removed by ordinary resolution by a company. Section 6 (a) confers a paramount status to the provisions of the Act, overriding all other memorandum or articles, agreements or resolutions passed by the company. Section 169 (8) (b) ensures that the power to remove a director under other provisions of the Act are not affected by what is stipulated under the said section itself.

6. Act to override memorandum, articles, etc.— Save as otherwise expressly provided in this Act— (a) the provisions of this Act shall have effect notwithstanding anything to the contrary contained in the memorandum or articles of a company, or in any agreement executed by it, or in any resolution passed by the company[1] in general meeting or by its Board of Directors, whether the same be registered, executed or 1 company means a company incorporated under this Act or under any previous company law; passed, as the case may be, before or after the commencement of this Act; and

23. Section 169 requires that a director of a company be removed only by an ordinary resolution of the company (general body of shareholders) for the specific purpose. When a statute specifically mandates that the director shall be removed by the company, i.e. the shareholders/general body of the company, then the statutory scheme would have to be followed in letter and spirit. The Apex Council under Article 5(c) of the Articles of Association of the appellant, is akin to the Board of Directors of a company. It does not constitute or substitute for the General Body of the company, therefore, it cannot usurp any powers of the General Body of shareholders. Article 5(c) may well be applicable apropos an ordinary Member, but the Secretary (i.e. the Director) of the Association is in a different position, and he can be removed from that post only by the General Body which had appointed him. The underlying principle being that only the appointing authority can be the dismissing/removing authority and not the peers of the Apex Council, who are collectively chosen and entrusted with the administration of the DDCA by its General Body. Members of the Apex Council are equal to each other in terms of their appointment and cannot be removed by a peer. Although the position and functions of the members of the Apex Council are defined in terms of the AOA, nevertheless they being appointed by the General Body can only be removed by the latter, higher authority. Therefore, the reference to Ravi Prakash Singh (supra) is misplaced because it dealt with an alternate scheme of removal of directors under the scheme provided under section 284 of the 1956 Act. Whereas Article 5(c) of AOA is now being examined under the provisions of Section 169(8)(b) read with Section 6 (a) of the 2013 Act, which makes alternate schemes subject to the entire Act not only to a particular section. There is no answer forthcoming to the query as to whether this issue was examined earlier apropos the exercise undertaken for the amendment of Articles of Association, so as to bring the structure and administration of the appellant in consonance with the administrative structure of BCCI, as proposed by the Justice Lodha Committee Report.

24. The decision of the learned Ombudsman may be non-justiciable in terms of the AOA, inasmuch as he has found that respondent no.1 has acted against the interests of the DDCA as well as against the interest of the game of cricket. However, the conduct of respondent is not under examination by this Court. Instead, what is to be determined is whether R-1, as Secretary of the DDCA (akin to Director of a Company) can be removed by the appellants‟ Apex Council (Board of Directors‟) or by the company itself i.e. by the General Body of the shareholders.

25. What clearly emanates from the above discussion is that only the company i.e. General Body can remove a director, because anything other than that would be in derogation of the statutory provisions. In view of the above, there is no reason to interfere with the impugned order. The petition is without merit and is, accordingly, dismissed.

26. Lest the administration of the DDCA fester in internal squabbles of the parties and ultimately affect the game of cricket in Delhi, it would be prudent that the matter be resolved at the earliest i.e. the issue be placed before the General Body of the Association to consider the position of the respondent‟s Membership/Secretaryship, in view of the decision of the learned Ombudsman. The appellant may take a decision in this regard in four weeks from the date of this order.

27. With the aforesaid observations, the appeal is dismissed.

NAJMI WAZIRI, J JULY 2, 2019