| CITATION | AIR2021 SC 3166; AIR Online 2021 SC 273 |
| DATE OF JUDGMENT | 10th FEBRUARY, 2021 |
| COURT | Supreme Court of India |
| APPELLANT | Swati Ulhas Kerkar and Others |
| RESPONDENT | Sanjay Walavalkar and Others |
| BENCH | A.M. Khanwilkar, Indu Malhotra, Ajay Rastogi. |
INTRODUCTION
In the case involving the Prabodhan Education Society, a contentious situation arose when the organization’s Managing Committee faced allegations of mismanagement and maladministration, triggering a no-confidence motion against them. Despite the pending motion, the committee proceeded to admit new members into the Society. This decision was met with immediate legal challenge, as it was seen as a strategic maneuver to bolster support and influence the outcome of the no-confidence vote, thereby maintaining their position of authority. The legitimacy of these admissions was examined by the High Court and the Registrar of Societies. They came to the conclusion that the acts of the Managing Committee were illegal. The committee was judged to have overreached its authority by making important policy choices, such as membership admissions, while under internal turmoil and in danger of losing its authority as a result of the no-confidence motion.
This was perceived as a misuse of the procedure and against the organization’s bylaws, which require equitable and open governance even in times of internal conflict. The appellants, who were the new members accepted during this time, challenged the decisions, claiming that the internal conflicts within the committee had no bearing on their applications, which they submitted in compliance with the organization’s bylaws.
They wanted their rightful membership status to be acknowledged. The court maintained the decisions that the admissions were illegal while rejecting their appeal. Nonetheless, it recognized the appellants’ right to a fair hearing when applying for membership and ordered that their applications be given another look under more impartial and legal circumstances by a newly formed Managing Committee. This case emphasizes how crucial it is for corporate governance to follow legal and procedural requirements, especially when there is internal conflict and governance issues.
FACTS:
1. The Prabodhan Education Society was founded on September 17, 2017, and had 32 members prior to the induction of 22 new members, including the appellants. The society was formed under the Societies Registration Act, 1860.
2. A no-confidence vote was ongoing at the time of this induction, and a Special General Body Meeting (SGBM) was called to remove office bearers for suspected mismanagement.
3. The inductions of the new members were declared void by the Registrar and the High Court, who concluded that the Managing Committee’s actions were motivated by a desire to maintain control over the party and avert the fallout from the no-confidence motion.
ISSUES:
- The central issue is whether the invalidation of the appellants’ membership solely on the ground that the then Managing Committee hastened the admission of new members while facing a no-confidence motion is just and proper?
- whether the appellants, despite being eligible, can be denied membership due to the actions of the Managing Committee?
ARGUMENTS:
APPELLANTS:
- The appellants contend that they were not aware of the internal conflicts within the Society and that their membership applications were legitimate in accordance with the byelaws of the organization.
- They contend that their admissions ought to be handled differently because at least five of them submitted membership applications prior to the no-confidence motion being brought up.
- They also argue that the 97th Constitutional Amendment, which was tied to a ruling about cooperative societies, has been overturned, making the High Court’s reliance on it misguided.
RESPONDENTS:
- The respondents contend that the appellants were bound by the results because they were informed of the proceedings and decided not to contest the original decision.
- They claim that in order to consolidate control and change the makeup of the Society in their favor, the Managing Committee illegally and arbitrarily inducted the 22 individuals.
- They further contend that since the appellants had not been accepted as members, they were not eligible to take part in the election process.
JUDGMENT:
The Managing Committee’s decision to admit new members on September 17, 2017, was declared unlawful by the court, which regarded it as a colorable exercise of power. The ruling was maintained. This indicates that the committee’s decision was not made with good intentions and was made with the intention of using legal authority to further an inappropriate goal. The admissions made on that day were declared illegal by the court because it determined that the procedure was unfair and opaque.
Nonetheless, the appellants who had submitted membership applications were given a remedy by the court. It made clear that the previous committee’s unlawful activities should not be the reason for their petitions to be rejected outright. Rather, the court ordered that these requests be treated as pending. It is now the responsibility of the newly established Managing Committee to thoroughly analyze each of these petitions and assess each one on its own merits. This guarantees that the appellants will have an equal chance to be evaluated for membership according to the correct standards and protocols.
ANALYSIS:
The court’s analysis went into great detail about the illegality of the Managing Committee’s acts, pointing out that they were taken with a no-confidence motion against the committee pending. The committee’s decision to allow new members at this time was deemed by the court to be both strategically manipulative and defective in procedure. It seems that the committee wanted to change the makeup of the Society in order to maintain their position and stay out of trouble after the no-confidence vote.
In this regard, the court stressed that the appellants could not profit from the unlawful activities of the committee, even though they were eligible for membership. The court determined that accepting new members in these situations amounted to a misuse of authority since it was an effort to subvert democracy and influence the outcome of the impending no-confidence motion.
However, the appellants’ genuine entitlement to be considered for membership was also acknowledged by the court. It said that the committee’s wrongdoings should not be the only reason their petitions are rejected. Rather, the appellants’ applications were ordered to be considered as pending by the court and should be given another look by a newly appointed Managing Committee. The objective of this new committee is to assess the applications objectively and independently, without regard to the unlawful acts of the previous committee. By doing this, the integrity of the Society’s procedures is maintained and it is ensured that the appellants are given a fair and just chance to be considered for membership.
CONCLUSION:
Reiterating that the Managing Committee’s admission of additional members in the face of a resolution of no confidence was unlawful and arbitrary, the court denied the appeal. The court emphasized that such acts during a time of internal conflict were not only wrong, but also went against the fairness and openness standards that ought to guide any organization’s activities.
Consequently, the appellants’ memberships that the previous committee had awarded them were deemed void. The admissions were found to have been made in bad faith with the intention of changing the organization’s makeup in order to influence the outcome of the motion for no-confidence. This action was judged to be a blatant misuse of authority as well as against the organization’s ethical standards and bylaws.
The appellants’ eligibility and right to a just consideration for membership, however, were acknowledged by the court. It stated that even while their present memberships were canceled, they could still apply for membership in the future. The appellants’ applications were to be reevaluated by the newly elected Managing Committee, which would likely act with better impartiality and conformity to legal procedures, the court ruled. This directive makes sure that the appellants are given a fair and impartial chance to be evaluated in accordance with the membership requirements that have been set forth.
The court’s ruling emphasizes how crucial it is to follow legal and procedural standards, particularly when there are internal conflicts within organizations. It makes it quite evident that attempting to go around these rules for partisan or personal advantage would not be tolerated.
REFERENCE
- SCC Online
- https://indiankanoon.org/doc/111538592/
- https://www.livelaw.in/pdf_upload/march-2022-reportable-judgments-sc-vidhi-thaker-and-prastut-dalvi-live-law-414385.pdf
This Article is written by Bandi Yogitha, student of Damodaram Sanjivayya National Law Univercity, Vishakapatnam; Intern at Legal Vidhiya.
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