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CASE NO.: Appeal (civil)  2197 of 2007

PETITIONER: D. DWARAKANANTHA REDDY

RESPONDENT: CHAITNYA BHARATHI EDUCATIONAL SOCIETY & OTHERS

DATE OF JUDGMENT: 27/04/2007

BENCH: C.K. THAKKER & ALTAMAS KABIR

JUDGMENT: J U D G M E N T

CIVIL APPEAL No. 2197        OF 2007 Arising out of Special Leave Petition (Civil) No. 288 OF 2007 WITH CIVIL APPEAL No. 2198        OF 2007 Arising out of Special Leave Petition (Civil) Nos. 294 of 2007 DR. B. AVANINDRA REDDY                                  \005    Appellant Versus CHAITNYA BHARATHI EDUCATIONAL SOCIETY & OTHERS  \005    Respondents WITH CIVIL APPEAL No.        2196        OF 2007 Arising out of Special Leave Petition (Civil) Nos. 374 of 2007 DR. SRI VUNGARALA VENKATA SRIDHAR RAO           \005    Appellant Versus CHAITNYA BHARATHI EDUCATIONAL SOCIETY & OTHERS  \005    Respondents

C.K. THAKKER, J.

1.      Leave granted. 2.      All these appeals arise out of a common judgment  and order passed by the High Court of Judicature,  Andhra Pradesh at Hyderabad on January 2, 2007 in  Civil Revision Petition Nos. 6269, 6353 and 6301 of  2006.  By the said order, all the Revision Petitions were  dismissed by the High Court and the order passed by the  Court of IInd Additional Chief Judge, City Civil Court,  Hyderabad on December 1, 2006 in I.A. Nos. 4192 and  4194 of 2006 in O.P. Nos. 20070 of 2006 and 2146 of  2006 is confirmed.

3.      Short facts giving rise to the present litigation are  that M/s Chaitanya Bharathi Educational Society  (’Society’ for short) was registered in the year 1979 under  the Andhra Pradesh (Talengana Area) Public Societies  Registration Act, 1350 Fasli, vide Registration No. 964 of  1979.  Its objects as specified in the Memorandum of  Association are\027 (a) To establish, manage, aid and maintain  educational and other institutions, to impart  education and training at all stages for the  promotion of Engineering, Medicine,  Pharmacy, Agriculture, Commerce, Literature,  Arts and Sciences and Management and other  subjects and allied activities for diffusion of  useful knowledge and training, specially to  instill self-confidence, creative thinking and  entrepreneurship in the students and trainees.

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(b)     To devise ways and means and accord facilities  for candidates to specialize in all or any of the  above subjects (i.e.) to develop Centres of  excellence for research in the above subjects  with Industrial Orientation. (c)     To act as a Trust Board to accept endowments,  bequests, donations, subscription, grants from  institutions, both Private and Public,  Corporate bodies, and Government and other  transferee of property made to the Society and  administer them on the terms agreed to. (d)     To try to offer medical and clinical facilities to  the needy by opening the necessary hospitals,  aid clinical laboratories or X-Ray Institutions,  and to run, maintain Homes, Residential  Houses etc., for the needy either by purchasing  the necessary equipment or by approaching  such institutions or the Governments  including those of other Countries, for  donation of such equipment and the land and  buildings necessary for locating such  equipments and Institutions. (e)     To offer consultancy services in any area  directly or through the Institutions owned and  managed by the Society. (f)     To carry on activities for any other charitable  purposes and activities of General Public  Utility.

4.      There were 13 Founding Members who then  constituted General Body as well as Governing  Council/Executive Body who were distinguished persons  from various professions.  The Articles of Association of  the first respondent-society enumerate categories of  membership in Clause 4 as (i) Patron, (ii) Promoter, (iii)  Donor; and (iv) Member (ordinary member).  Clause 5  provides for termination of membership.  Whereas  functions of the General Body have been specified in  Clause 7, functions of the Board of Governors have been  dealt with in Clause 11.  Sub-clause (i) thereof enacts  that the Board of Governors ’have the power to admit  new members of the Society on a proposal sponsored by  at least two members of the Board of Governors’.  Clause  12 relates to meetings of the Board of Governors. 5.      It is the case of the appellants that in exercise of  power under Clause 11(i) of the Articles of Association,  the Board of Governors on January 20, 2000 resolved to  induct nine persons as Promoter-Members into the  General Body of the Society.  It was unanimous decision  of the Board.  It was also their case that the resolution  was subsequently accepted and approved by the General  Body of the first respondent-society in its meeting dated  March 22, 2006.  Thus, the appellants had become and  continued to remain as Promoter-Members of the society.   They are, therefore, entitled to participate in the election  of Board of Governors as per the Memorandum and  Articles of Association. The appellants stated that they  received a caveat from the first respondent-society on  October 23, 2006 stating therein that their claim as  Promoter-Members of the society and insisting and  calling for General Body Meeting was not tenable because  the very admission of the appellants as Promoter- Members was null and void.  It was further stated by the  appellants that on October 24, 2006, 118th Meeting of the  Board of Governors of first respondent-society was

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convened. Under Item No. 4 (any other item), induction of  admission of nine persons was questioned.  It was  resolved that the appellants could not be said to be  legally inducted members and their induction was totally  illegal and unlawful.  The resolution dated January 27,  2000 was merely a ’proposal’ with a condition that nine  persons would be admitted as members at an appropriate  time.  The resolution dated March 22, 2006 passed by  the General Body of the Society admitting them as  Promoter-Members was without authority and null and  void.  A consequential letter was written by the Secretary  of the Society that the admission of the appellants as  Promoter-Members was invalid and illegal and they were  not eligible to be members of the society.

6.      Being aggrieved by the above resolution, the  appellants filed Original Petition in the Court of Chief  Judge, City Civil Court, Hyderabad for a declaration that  they were legally inducted members and were entitled to  participate in the management and administration of the  Society.  A prayer was also made to grant permanent  injunction from conducting election to the Governing  Body without including the appellants.  The appellants  also filed application for interim injunction under Order  39, Rules 1 and 2 read with Section 151 of the Code of  Civil Procedure, 1908 (hereinafter referred to as ’the  Code’) restraining the first respondent from holding  election of the Governing Body of the first respondent- society without including Promoter-Members and without  giving them opportunity of participating the election  process.

7.      The learned IInd Additional Chief Judge, City Civil  Court vide an order dated December 1, 2006 dismissed  the application inter alia observing that no prima facie  case had been made out by the petitioners-appellants  herein and they could not be granted interim relief as  sought.  Ad interim relief of status quo which was granted  on October 30, 2006 was vacated. 8.      Being aggrieved by the order passed by the trial  Court, the appellants preferred Revision Petitions.  The  High Court, as observed earlier, dismissed all Revision  Petitions holding that the trial Court was right in  dismissing the application as no prima facie case had  been made out.  The High Court also directed the trial  Court to dispose of Original Petitions within a period of  three months from the date of receipt of the copy of the  order.  The above order has been challenged by all the  appellants in this Court.

9.      On January 10, 2007, this Court stayed operation  of the impugned order passed by the High Court till  January 19, 2007 which was the date fixed for  admission-hearing. On January 19, 2007, notice was  issued and parties were directed to file affidavits and  further affidavits. On March 2, 2007, the matter was  ordered to be placed for hearing.  We have accordingly  heard learned counsel for the parties. 10.        The learned counsel for the appellants contended  that the Board of Governors admitted the appellants as  Promoter-Members as early as in the year 2000. In an  Emergency Meeting of the General Body held on March  22, 2006, the action was approved by the General Body.  Neither the Memorandum of Association nor Articles of  Association had imposed a condition precedent for

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payment of Rs.1 lakh for becoming a Promoter-Member.  Non-payment of an amount of Rs.1 lakh, therefore,  cannot be made a ground to expel or remove the  appellants as Promoter-Members. Even otherwise,  appellants had never refused to pay the said amount.  

11.        It was also submitted that no notice was issued  by the Society to show cause why the Membership of the  appellants should not be terminated or discontinued, nor  an opportunity of hearing was afforded, nor principles of  natural justice were observed. The impugned action  taken by the respondents on October 24, 2006 treating  the membership of the appellants as void was non-est.  The action was also bad in law inasmuch as the  resolution admitting the appellants as Promoter- Members was taken by the Board of Governors and  accepted by the General Body. Resolution dated October  24, 2006 was passed by the Board of Governors which is  a body subordinate to the General Body. It, therefore,  could not have interfered with the action of the General  Body.

12.        It was also submitted that there were  amendments in the Articles of Association in the year  1981 which provided induction of eminent persons as  Promoter-Members without payment of any amount. All  the appellants are ’eminent’ in their respective fields and  they are entitled to continue as Promoter-Members.

13.        It was also contended that apart from the fact that  Articles of Association prescribed no time limit within  which a payment of Rs.1 lakh was to be made, even  respondents were of the same opinion. It was thus a case  of mutual mistake for which appellants cannot be  blamed.  The appellants were always treated as  Promoter-Members which fact is proved from various  photographs and reports.  It was alleged that the action  was mala fide and has been taken in colourable exercise  of power with a view to deprive the appellants from  participating in the next election. The counsel further  stated that in any case, the payment has already been  made by the appellants and that fact ought to have been  considered by the Courts and relief ought to have been  granted in their favour. On all these grounds, the appeals  deserve to be allowed by setting aside the order passed by  the trial Court and confirmed by the High Court by  continuing the appellants as Promoter-Members.

14.        The learned counsel for the respondents  supported the action taken by the Society and the orders  passed by the Courts below. It was submitted that the  appellants were never appointed as Promoter-Members  and the action which was taken by the Board of  Governors in its 85th Meeting dated January 27, 2000  was in the nature of mere proposal to induct the  appellants as Promoter-Members. Formal decision  admitting them as Members had never been taken. It was  also submitted that the language of Article 4 (i)(b) is  explicitly clear and provides that an applicant who ’pays’  Rs.1 lakh would become a Promoter Member. It is thus  clear that a person, before he can become Promoter- Member, must ’pay’ an amount of Rs.1 lakh. Admittedly,  no such payment was made in 2000 nor in March, 2006  when the so-called approval was granted by the General  Body.  Even on October 26, 2006, the amount was

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deposited by the appellants directly in the Bank without  even informing the Society and that was done after the  resolution was passed on October 24, 2006.

15.        According to the learned counsel, it was not a  case of removal, termination or expulsion of a Member  and hence there was no question of issuing notice,  calling for explanation or affording opportunity of hearing  or observance of principles of natural justice or fair play.  Since the appellants had never become Promoter- Members, what was done on October 24, 2006 was to  make it clear that their so called membership was void  and of no effect.  Reliance was placed on Hyderabad  Karnataka education Society v. Registrar of Societies &  Others, (2000) 1 SCC 566 : AIR 2000 SC 301 : JT 1999  (9) SC 482.

16.        According to the learned counsel, it was not a  case of mutual mistake. The relevant clauses of Articles  of Association were unambiguous and since no payment  was made as required, no right accrued in favour of the  appellants and the action of the Society was legal and  lawful.

17.        As to amendment of 1981, it was submitted that  no such amendment was made nor it was brought into  force.  It was, therefore, submitted that the action of the  Society was strictly in consonance with law. The main  matter is pending before the City Civil Court and it will  be decided on its own merits, but, taking into account  admitted facts and documentary evidence, if the trial  Court had not granted interim relief and the said order  was confirmed by the High Court, it cannot be said that  any illegality has been committed which deserves  interference under Article 136 of the Constitution. It was,  therefore, prayed that the appeals deserve to be  dismissed.

18.        Having heard learned counsel for the parties, in  our opinion, neither the trial Court nor the High Court  had committed any illegality in refusing interim relief. So  far as the action taken by the respondent-Society is  concerned, our attention has been invited by the counsel  for the parties to the Memorandum of Association as also  to the Articles of Association. We have already extracted  the objects for which the Society has been set up. Clause  4 of the Articles of Association provides for Membership  of Society and reads thus: 4.      MEMBERSHIP         The Society shall consist of the  following Classes of membership.

(i)(a)  PATRON

       Any person, who pays a sum of Rs.5  lakhs or more in one lump sum or  Rs.3 lakhs in one instalment and the  balance in two equal yearly  instalments, shall be called ’Patron’ of  the Society with hereditary rights  under the Laws of Primogeniture. Any  person who fails to pay the  subsequent instalments within the  specified time, i.e., second instalment  of Rs.one lakh before the end of first

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year, third instalment of Rs.one lakh  before the end of second year, from  the date of the payment of the first  instalment of Rs.3 lakhs, they will not  be entitled for privileges of Patron  Member and shall be treated as a  Promoter Member only from the date  of default in payment.

(b)     PROMOTER

       Any person who pays a sum of Rs.  one lakh or more but less than Rs.5  lakhs shall be called ’Promoter’ with  hereditary rights under the Laws of  Primogeniture.

(c)     DONOR

       Any person who pays a sum of  Rs.50,000/- or more but less than  Rs. one lakh shall be called ’Donor’  and their membership in the Society  is for a period of twelve years only.

(d)     MEMBER

(i)     Any person who pays Rs.20,000/- or  more but less than Rs.30,000/- shall  be called ’Member’ and is to be  treated as Member for a period of  twelve years. This class of  membership shall be restricted to  only two hundred members.

(ii)    Any change in the scale of fee or  qualification of membership made in  these presents shall take effect only  from the date of adoption of these  Articles as amended and shall not  affect the Status or scale of fee paid  by members enrolled previously  unless such member ceases to be the  Member of the Society for any reason  whatsoever.

(iii)(a)        Firms, Institutions, Associations or  Groups of Persons are also entitled  for the membership to any of the  classes mentioned above and shall be  entitled to nominate one  representative on their behalf to the  General Body and such person once  nominated shall represent in the  General Body during the tenure of the  membership of such Firm,  Institution, Association or Group of  Persons.

(b)     Any such nomination shall be valid  for a minimum period of three years  in the case of a member of Body of  Governors and in any other case for a  minimum period of one year.

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(iv)    GENERAL

       The name of the Chief Patron,  Patrons and Promoters and Donors  will be exhibited at the appropriate  places of the Institutions as decided  by the Board of Governors.

19.         Clause 5 relates to ’Termination of Membership’.  Clauses 6, 7 and 8 deal with General Body, its functions  and meetings to be convened. Clause 9 declares that  management is vested in the Board of Governors  constituted under Clause 10. Functions of the Board of  Governors have been mentioned in Clause 11.  Sub- clause (i) of Clause 11 empowers the Board to admit new  members of the Society on a proposal sponsored by at  least two members of the Board of Governors.  

20.        Reading of the Minutes of 85th meeting of the  Board of Governors of the Society makes it clear that  certain matters were taken up for consideration.  Item  No.2 related to proposals sponsoring Promoters- Members.  The relevant part thereof reads thus: ITEM NO.2 The Board members gave eleven  proposals sponsoring promoters  to Chaitanya Bharathi  Educational Society as per the  clause 4 (i) (b) and 11 (i) of  Articles of Association out of  whom nine promoters were  unanimously chosen as listed  below:

(1) Dr. H. Prabhakar Reddy (2) Dr. D. Dwarakanath Reddy (3) Sri N. Subhash (4) Sri B. Chandrasekhar Reddy (5) Dr. B. Avanendra Reddy (6) Sri D. Praveen Reddy (7) Sri P. Chandradhar Reddy (8) Sri V.V. Sridhar Rao (9) Sri Konda Viswaswara Reddy

The above candidates constitute a panel of  promoters selected and will be inducted into  General Body as per the constitution of  Chaitanya Bharathi Educational Society.

21.        It is thus clear that nine persons were selected  and as stated in the minutes, they "will be inducted" into  General Body as per the Constitution of the Society. It is  not even the case of the appellants that they had paid an  amount of Rs.1 lakh before or on January 27, 2000. In  fact, from the record it is clear that in 2006 when a  meeting of the General Board was convened on March  22, 2006 and the action of the Governing Board was  accepted, such amount was not paid by the appellants.  Even on October 24, 2006, when 118th meeting of the  Board of Governors of the Society was convened, it was  stated that the appellants had not paid an amount of  rupees one lakh for becoming a Promoter-Member and  hence a resolution passed by the Board of Governors of  the Society on January 27, 2000 inducting them as  ’Promoter Members’ and also a resolution, dated March

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22, 2006 passed by the General Body could not be said  to be legal and the action was nullity.  It was also  observed that the so-called Resolution No. 3 dated  October 3, 1981 amending the Articles of Association was  neither passed by the Board of Governors nor approved  by the General Body either on that day or at any later  date.  The Articles of Association of 1979, therefore, were  in force.  For the qualification for membership as  ’Promoter’ of the Society, rupees one lakh had to be paid.   Since no such payment was made by the persons  claiming Promoter-Members, their membership was  ’void’.  It was only thereafter that the appellants directly  deposited the amount in the bank in the name of the  Society without even informing the Society about such  payment.  

22.        Prima facie, we are of the view that the contention  of the Society is well founded that such an amount ought  to have been paid by a person before he is admitted as  Patron Member in the light of the phraseology used in  Clause 4 (b) of the Articles of the Association.  We are,  however, conscious of the fact that the main matter is  pending before the trial Court.  We may, therefore,  hasten to add that we are dealing with the contention of  the appellants and the arguments of the respondents  only for a limited purpose of deciding the appeal which  has been filed against an interlocutory order refusing  interim relief. In our opinion, it cannot be said that by  not granting interim relief, the Courts below had  committed an error of law or of jurisdiction. 23.        As to issuance of show cause notice calling for  explanation and giving an opportunity of hearing as also  observance of natural justice, the learned counsel drew  our attention to a decision of this Court in T.P. Daver v.  Lodge Victoria No.363, S.C. Belgaum, (1964) 1 SCR 1 :  AIR 1963 SC 1144.  After considering various cases, the  Court made the following observations;  "The following  principles may be gathered  from the above discussion.  (1)  A member of a  masonic lodge  is  bound  to abide  by the rules  of the lodge; and if the  rules  provide for   expulsion,       he  shall be expelled only  in the   manner provided  by  the  rules.  (2) The lodge is  bound to act strictly  according to the rules,  whether a particular rule is mandatory or  directory falls to be decided in each case, having  regard to the well settled rules of construction   in that regard. (3) The jurisdiction of a civil  court is rather limited; it cannot obviously sit as  a court of appeal from decisions of such a body;  it can set aside the order of such a body, if the  said body acts without jurisdiction or does not  act in good faith or acts in violation of the  principles of natural justice as explained in the  decisions cited supra".

24.       We are afraid the ratio laid down in Daver does not  apply to the facts of the case. In the instant case, the  controversy does not relate to expulsion of a member.   The question is whether the appellants can be said to  have been legally admitted as Promoter-Members. Once it  is held that the appellants were properly inducted and  had become Promoter-Members of the Society, principles  of natural justice required issuance of notice, calling for

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explanation and affording reasonable opportunity of  being heard. The case of the Society, however, is that  appellants were never legally inducted as Promoter- Members and their so called induction was not in  consonance with law.  The said issue is yet to be decided.  In our opinion, therefore, Daver is of no assistance to the  appellants at this stage.  [See also Board of Control for  Cricket in India & Anr. v. Netaji Cricket Club & Ors., (2005)  4 SCC 741 : JT 2005 (1) SC 235]

25.        The learned counsel for the appellants also relied  upon Halsbury’s Laws of England, Fourth Edition, Vol.  19(I), p 143, para 201, in which it was stated: 201. Expulsion. As a Society is  founded on a written contract expressing  the terms on which the members associate  together, there is no inherent power to  expel a member, and a member may not  therefore be expelled unless the rules  provide that power. Any power of expulsion  must be exercised in good faith, for the  benefit of the society and strictly in  accordance with the rules. If rules give the  committee or some other authority power  to expel a member for some act of  disobedience or misconduct on his part, its  decision cannot be questioned, provided  the decision is arrived at after the  member’s defence has been heard or he  has been given an opportunity of being  heard. If a member is not given the  opportunity the decision will be null and  void. If the rules have been strictly  observed, and the member has had due  notice and full opportunity of answering  the charges made against him and the  power of expulsion has been exercised in  good faith and for a reason which is not  manifestly absurd, no tribunal can  interfere to prevent the expulsion.

26.       In view of the fact that the appellants had not been  expelled or removed from Membership, in our considered  opinion, the observations in Halsbury’s Laws of England  have no application to the case on hand.

27.        The plea that the appellants were all throughout  treated by the Society as Promoter-Members and they  had worked for all these years which is established from  various photographs, reports etc., is of no consequence.  If the appellants had not been legally admitted as Patron  Members, they could not be treated as such and cannot  get benefit on the basis of photographs, reports,  functions, etc.

28.        To us, this is not a case of mutual mistake as  contended by the appellants. According to the appellants,  when no period is prescribed for payment of rupees one  lakh, such amount can be paid at any time or in any  case, within a ’reasonable period’. Prima facie, it appears  to us that the amount ought to be paid before or at the  time of becoming Member.  Hence, even if there was a  mistake, it was not a ’mutual mistake’ as sought to be  argued by the appellants. So-called payment was made

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only after the impugned resolution was passed and that  too without informing the Society. It is also pertinent to  note that the payment was made by the appellants on  October 26, 2006 and a petition was filed in the Court  under Section 23 of the Act on October 29, 2006 along  with an application for the interim relief.  But even in the  application for interim relief, the factum of payment of  amount after the resolution was passed was not  disclosed by the applicants.

29.         Regarding amendment of 1981, the counsel  stated that Clause 4 of Articles of Association was  amended by Resolution No.3, dated October 3, 1981 by  the Society.  The amended Clause 4 of the Articles of the  Association reads thus:  4.      MEMBERSHIP         The Society shall consist of the  following Classes of membership.

(i)(a)  PATRON

Firms, Institutions, Associations or  Groups of Persons who can  contribute substantially for the  objectives of the Society are entitled  for this membership and shall be  entitled to nominate one  representative on their behalf to the  General Body and such person once  nominated shall represent in the  General Body during the tenure of the  membership of such Firm,  Institution, Association or Group of  Persons.

(b)    PROMOTER

       Any person who is eminent in any  walk of life and who can contribute  financially or otherwise to the  objectives of the Society might be  chosen by the Board of Governors as  ’Promoters’.

(iv)    GENERAL

       The name of the Chief Patron,  Patrons and Promoters and Donors  will be exhibited at the appropriate  places of the Institutions as decided  by the Board of Governors. Any  change in the scale of fee or  qualification of membership made in  these presents shall take effect only  from the date of adoption of these  Articles as amended and shall not  affect the status or scale of fee paid  by members enrolled previously  unless such members ceases to be  the member of the Society for any  reason whatsoever.

30.         No such contention had been taken by the  appellants before High Court. But even otherwise, in our

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opinion, the learned counsel for the respondents is right  in contending that it was the case of the respondent- Society that no such amendment had been made and  brought into force, which is clear from the Minutes of  118th Meeting of the Board of Governors.  

31.         In our opinion, no particulars, much less  sufficient particulars, have been placed on record to  show that the action taken by the Society was mala fide  or had been taken in colourable exercise of power. A  question of law which arises for the consideration of the  Court is as to whether the appellants had become  Promoter-Members. If the answer is in the affirmative,  they are entitled to certain rights.  But if the answer is in  the negative, they cannot be treated as Promoter- Members. Considering the facts and documentary  evidence on record, the trial Court found that no prima  facie case has been made out.  It, therefore, did not grant  interim relief. The said order had been confirmed by the  High Court.  The High Court, in our opinion, rightly  observed in the operative part of the order that it was a  fit case to decide the main matter and accordingly a  direction was issued to decide the Original Petition within  three months.  

32.         For the foregoing reasons, in our opinion, the  orders passed by the Courts below cannot be said to be  illegal or unlawful.  The appeals deserve to be dismissed  and are accordingly dismissed. In the facts and  circumstances of the case, however, there shall be no  order as to costs.

33.         Before parting with the matter, we may clarify  that we have not entered into correctness or otherwise of  the allegations and counter-allegations made by the  parties and have decided the controversy on a limited  issue as to legality and sustainability of the order  refusing interim relief in an application filed by the  appellants under Order 39, Rules 1 and 2 read with  Section 151 of the Code and we may not be understood  to have expressed any opinion on the merits of the  matter. As and when the matters will be taken up by the  trial Court for hearing, they will be decided on their own  merits without being influenced by the observations  made in this judgment.

34.          The appeals are accordingly dismissed, however,  with no order as to costs.