Scheme For Administration Of SNDP Yogam Should Be Framed As Per Companies Act: Kerala High Court Upholds District Court's Order

The Kerala High Court has upheld the order of the Ernakulam District Court that a scheme for the administration of the Sree Narayana Dharma Paripalana (SNDP) Yogam shall be framed in accordance with the provisions of the Companies Act.

A Division Bench of Justice P.B Suresh Kumar and Justice C.S Sudha dismissed the appeal filed by SNDP Yogam, its general secretary Vellappally Natesan and a few others finding no infirmity in the decision of the district court.

"We are of the view that there is no infirmity in the decision of the court below that the plaintiffs have made out a case for a direction under Section 92 of the Code for the administration of the Yogam. It is all the more so since in terms of impugned judgment, the direction issued by the court is only for framing of a scheme for the administration of the Yogam in accordance with the requirements of the relevant statute governing companies."

The plaintiffs had approached the District Court arguing that although the Articles of Association (AoA) of the Yogam originally conferred a right to all members of the Yogam to participate in its annual general meeting (AGM) and to elect the Board of Directors and office-bearers, considering the difficulty in convening an AGM with several lakhs of its members, this provision was amended for a representative AGM with 1% of the members. Later, this was reduced to half through another amendment.

The plaintiffs argued that these amendments were illegal and not conducive to a proper administration of the Yogam since they took away the members' right to participate in AGM and to elect their office-bearers. It was also argued that several other amendments were made to the AoA contrary to the Companies Act and that as per one such amendment, persons other than elected representatives of the Yogam were also permitted to participate and elect the office bearers in its AGM.

It was argued that even assuming that the introduction of a representative annual general meeting is valid, permitting persons other than the representatives of the members to participate and elect the office bearers at the AGM was unauthorised and not conducive for a proper administration of the Yogam. It is also the case of the plaintiffs that unbridled and arbitrary disciplinary power is retained by the offices and officers of the Yogam over the Branches and Unions of the Yogam as also over its members; that such powers are not conducive for a proper administration of a social organisation like the Yogam.

The District Court had found that the Yogam was the successor body of a trust created for charitable and religious purposes nature and that it was subsequently registered as a company. Therefore, it was held that the subsequent registration of the Yogam as a company will not oust the jurisdiction of the court under Section 92 of CPC.

On these findings, it was observed that the suit was maintainable and that the plaintiffs were entitled to a decree for settling a scheme for the administration of the Yogam. However, the argument of the plaintiffs that the order of the Centre granting exemption to the Yogam from the provisions of the Companies Act, 1956 to enable the Yogam to convene a representative AGM is invalid, was repelled by the district court. Therefore, it passed a preliminary decree directing the framing of a scheme for the administration of the Yogam in accordance with the Companies Act.

Defendants 1 and 2 (appellants) were aggrieved by this decision and hence moved an appeal. There was also a cross objection by plaintiffs 5 and 6 challenging the finding regarding the correctness of the order passed by the Centre granting exemption to the Yogam from the Companies Act, 1956. Meanwhile, some of the plaintiffs and the defendants passed away pending suit and appeal.

The appellants argued that the suit was not maintainable since the Yogam was neither an express nor a constructive trust created for public purposes of a charitable or religious nature. Even if it is found that the Yogam is a trust, r as its members are ascertainable, it can only be regarded as a private trust.

Although the third defendant had filed a written statement along with the appellants, his counsel supported the impugned judgment on the premise that a decree directing the framing of a scheme for the proper administration of the Yogam is only in the best interests of not only the members of the Yogam in particular but also the members of Ezhava community in general.

The Bench found that considering its vast number of members, it is imperative for the Yogam to have a legal framework for a proper democratic representation of the members in its AGM. If the Yogam and its Branches and Unions constitute one single entity, if at all the same is the stand of the Yogam, there was absolutely no reason why the assets and liabilities as also the income and expenditure of the Branches and Unions cannot be regarded as assets and liabilities and income and expenditure of the Yogam.

It was also held that the only inference possible from the finding that denial of opportunity to the members to participate in its AGM and elect the office bearers of the Yogam is bad in law, is that the Yogam was not managed and administered by duly elected office bearers right from 19.03.1966. The contesting defendants have no case that they have obtained exemption from the State from the requirements of the company law to justify the convening of a representative AGM.

On the other hand, it had come out that the office bearers of the Yogam who had assumed office as early as 9.8.2015 were still continuing on the strength of the invalid provisions in the AoA.

The Bench held that even if the State grants exemption as done by the Centre, the questions of whether the members of the Yogam could be deprived of their right to participate in the AGM to elect its office bearers and whether the election of the office bearers by the representatives would be sufficient for its due administration so as to achieve its objects etc. would remain unanswered.

"True, the inability of the Yogam to convene the annual general meeting of all its members running to several lakhs is a genuine difficulty to be addressed. Whether a representative annual general meeting would be a solution for the said difficulty, is another question which needs to be addressed. That apart, the fact that the Articles of Association of the Yogam have been subsequently amended and large number of persons other than the representatives of the Yogam have been permitted to participate in the annual general meeting which elects the office bearers of the Yogam is not disputed by the contesting defendants. The specific case pleaded by the plaintiffs in this regard is that Article 44 of the Articles of Association which permits such participation is against the provisions of the Companies Act and not conducive for a proper administration of the Yogam. The court below has accepted the said case of the plaintiffs."

As such, the appeal was dismissed. 

Advocate A.N.Rajan Babu appeared for the appellants, Advocate D.Anil Kumar for the surviving plaintiffs and Advocate P.B.Krishnan for the third defendant in the matter.

Case Title: SNDP Yogam & Anr v. G. Krishnamoorthy & Ors

Citation: 2022 LiveLaw (Ker) 248

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