Coercive Action Against Members Backing Oppression, Mismanagement Cases Undermines Statutory Rights: NCLT Kolkata

The National Company Law Tribunal (NCLT) at Kolkata has granted limited interim protection to the former president of Asansol Club Ltd and another supporting member. It observed that allowing disciplinary or coercive action against members backing oppression and mismanagement proceedings during their pendency could undermine the very object of the Companies Act.

A coram comprising Judicial Member Bidisha Banerjee and Technical Member Siddharth Mishra allowed an application seeking waiver of the statutory eligibility requirement under Section 244 of the Companies Act, along with interim relief, in a dispute concerning the internal governance of the club.

“We are also mindful that proceedings under Sections 241 and 242 are intended to provide an effective remedy against acts of oppression and mismanagement. Allowing disciplinary or coercive action against members supporting such proceedings, during pendency, may have a chilling effect on the exercise of statutory rights and undermine the very object of the legislation,” the tribunal observed.

The dispute stems from the club's 105th Annual General Meeting held on September 21, 2024, where certain objections raised by members led to the adjournment of the agenda item on adoption of the annual accounts for the financial year ended March 31, 2024. Elections to the Executive Committee were nevertheless held on the same day, resulting in a change of office-bearers.

The club's then president narrowly lost the election and continued as an ex officio member in his capacity as immediate past president under the club's Articles of Association.

Matters escalated after show cause notices dated March 10, 2025 were issued to him alleging financial and administrative irregularities, followed by termination of his membership by a letter dated August 1, 2025, purportedly based on a decision of the Executive Committee.

The petitioners contended that the scrutiny and disciplinary committees that issued the notices were illegally constituted and that the AGM minutes relied upon by the club were fabricated. They further argued that termination of membership could only be effected through an Extraordinary General Meeting with the requisite majority, and not by the Executive Committee alone.

After the filing of a company petition alleging oppression and mismanagement, the club withdrew the termination and issued a suspension letter dated December 17, 2025, followed by a notice convening an Extraordinary General Meeting to consider expulsion.

Opposing the plea, the club maintained that the AGM had authorised an investigation into the accounts, that the committees were validly constituted, and that disciplinary steps were taken in accordance with the Articles of Association.

It further held that refusal of waiver at the threshold would shut the doors of judicial scrutiny and frustrate the very object of the statutory remedy under Sections 241 and 242 of the Companies Act.

“If, during the pendency of the Company Petition, further coercive steps such as termination, suspension, or denial of membership facilities are permitted, the same may cause irreparable prejudice to the affected member and may render the proceedings before this Tribunal infructuous,” the Bench said.

Accordingly, while clarifying that it was not expressing any final opinion on the merits, the tribunal restrained the club from removing, expelling, or depriving both the members of their membership rights pending final adjudication of the company petition.