IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 12/09/2003 CORAM THE HONOURABLE MR.JUSTICE R.JAYASIMHA BABU and THE HONOURABLE MR.JUSTICE N.V.BALASUBRAMANIAN Writ Petition No.42470 of 2002 and W.P.Nos. 42471, 44339 of 2002 and O.A.Nos.908 of 2002 in CS.Nos.904 of 2002 and 96, 131, 459, 460 & 578 of 2003 in C.S.No. 59 of 2003 Writ Petitions The Madras Medical Mission, 4-A Dr. J.J. Nagar, Mugappair, Chennai 600 050, represented by its Hon. Secretary K.V. George ..Petitioner in all the Writ Petitions. -Vs- 1. State of Tamil Nadu represented by its Chief Secretary to Government, Fort St. George, Chennai 9. 2. The Secretary to Government, Commercial Taxes Department, Secretariat, Chennai 9. 3. The Inspector General of Registration, 120 Santhome High Road, ..Respondents 1 - 3 Chennai 28. in W.Ps.42470 and 42471 of 2002 4. The District Registrar, Chennai (Central), Chennai-18. ..Respondent 4 in W.Ps. 42470 and 42471 of 2002 & Respondent in WP No.44339 of 2002 5. Dr. K.M.Cherian 6. P.V.Thomas 7. K.N.Oommen ..Respondent 5 - 7 in W.Ps.42470 and 42471 of 2002 (Respondents 5 to 7 impleaded as per orders of the Court on 05.12.2002 in WPMPs.64063 & 64064 of 2002; on 11.12.2002 in WPMPs. No.65263 and 65264/2002; on 10.03.2003 in WPMPs. No.66222 and 66223 of 2003.) O.A. No.908 of 2002 in C.S.No.904 of 2002 Mrs. George John Nellimala ..Applicant vs. 1.The Madras Medical Mission, No.4-A Dr. J.J. Nagar, Mogappair, Chennai 50. 2.K.V. George ..Respondents O.As.No.131, 96, 459, 460 & 578 of 2003 in C.S.No.59 of 2003 Alex Jacob ..Applicant vs. 1.K.V.George 2.K.M.Cherian ..Respondents Writ Petition No.42470 of 2002 filed under Article 226 of the Constitution of India for the issue of writ of declaration declaring that Sections 34-A and 34-B of the Tamil Nadu Societies Registration Act, 1 975, Act 27 of 1975 are ultra vires, null and void. Writ Petition No.42471 of 2002 filed under Article 226 of the Constitution of India for the issue of writ of certiorari to call for the records of the Secretary to Government, Commercial Taxes Department, Reference No.23247/M/2002-03 and quash the order dated 20.11.2002 made therein. Writ Petition No.44339 of 2002 filed under Article 226 of the Constitution of India for the issue of writ of mandamus directing the District Registrar, Chennai (Central), to comply with the provisions of Section 36(9) of the Tamil Nadu Societies Registration Act, 1975, and communicate the result of the inquiry under Section 36(1) and accept the information materials and documents furnished by the petitioner society and discharge his duties under Section 36 of the Act. Application No.908 of 2002 is filed in C.S. No.904 of 2002 seeking an order of interim injunction restraining the respondents, their men and agents from in any manner convening an Extraordinary General Body Meeting for amendment of By-laws specified in notice dated 27.11.200 2 to be held on 20.12.2002 or any other date pending disposal of the suit. Application No.96, 459 and 460 of 2003 are filed in C.S. No.59 of 20 03 seeking for a direction to the Managing Committee of the first respondent to render account of all the money received from the students including capitation fee and money expended or donation received; for an order of interim injunction restraining the first respondent from enlisting the students for medical course under PIMS controlled by it pending disposal of the suit; and for a direction to the Managing Committee not to work against the main objectives of the first respondent, namely Clauses 1, 1(A), and 2 of the Memorandum of Association. Application No.131 and 578 of 2003 are filed in C.S. No.59 of 2003 praying to appoint an Advocate Receiver to take charge and administer all the affairs of the first respondent till the first respondent is able to come out of the litigation in WP. No.42470 of 2002 and the present suit; and for a direction to the first respondent to deposit in a separate no-lien account the interest free refundable caution deposit, capitation fee etc., in any nationalised Bank to be collected from the students who are likely to be admitted for the academic year 2 002-03 pending disposal of the suit. !For Petitioner in all the writ petitions and for respondents in OA.908 of 2002 and for Respondent 1 in O.A.Nos.96, 131, 459, : Mr.Sriram Panchu, 460 & 578 of 2003 Senior Counsel for Mr.V.Achuthan ^For Respondent in WP.44339/2002; Mr.N.R.Chandran, For respondents 1 to 4 : Advocate General, in W.P.Nos.42470 and : assisted by 42471 of 2002 : Mr.D.Krishnakumar, Spl. Govt. Pleader For Respondent 5 in WP.Nos.42470 & 42471 : Mr.K.Chandru, of 2002 & for Applicant : Senior Counsel in OA 908/02 : for Mr.Yashod Varadhan For Respondent 6 in W.Ps.42470 & 42471/2002, : for respondent 2 in : O.As.96, 131, 459, 460 : & 578 of 2003 : Mr.S.Prabhakaran For Respondent 7 in WPs.42470 & 42471/2002; : Mr.S.Somayaji, & for Applicant in : Senior Counsel OAs.96, 131, 459, 460 : for Mr.Jeyesh Dolia & 578 of 2003 : :ORDER R.JAYASIMHA BABU, J. The common petitioner in these writ petitions--the Madras Medical Mission (MMM) whose membership is confined to Orthodox Syrian Christians--was registered 12.01.1982 as a Society under the Tamil Nadu Societies Registration Act, 1975 (Tamil Nadu Act 27/1975). It's President is Bishop of that Church at Chennai. It presently has 135 members. The objects of the Society are primarily to establish hospitals, conduct research studies in medicine and run educational institutions including medical colleges. 2. MMM owns and runs a well known super speciality hospital: Institute of Cardio Vascular Diseases (ICVD), which was established in the year 1987, as also the Institute for Reproductive Medicine and Women' s Health (IRM) and a Transplant Center at Chennai. The assets at Chennai are valued at about Rs.55 Crores. It has recently established at Pondicherry, the Pondicherry Institute of Medical Science (PIMS), which comprises of a 300 bed hospital and a medical college with an annual intake of hundred students. The hospital at Pondicherry commenced functioning in mid 2001 and the college admitted it's first batch of students in 2003. The estimated cost of the PIMS is Rs.80 crores of which about Rs.45 crores has been already invested. 3. The number of it's employees at Chennai is 794, whose mothly pay bill is about Rs.79 lakhs. At Pondicherry, the employees number 881 of whom 162 are doctors. The monthly pay bill is Rs.81.21 lakhs. The annual income generated at Chennai is about Rs.47 crores. The highest paid employee of MMM is the life time Director of ICVD, Dr.K.M. Cherian, whose annual remuneration of Rs.1.73 crores plus numerous valuable perquisites is over seven times that of the next highest salaried employee of the ICVD. The proceedings initiated at his instance is the cause for this litigation. 4. Dr.Cherian, who is a signatory to the memorandum of Association of MMM was its first Vice President and has been a member of the Board of MMM throughout, except for a short period. On 5.2.2000 he was entrusted by the Board of MMM with the additional responsibility of Chairman of the PIMS. On 14.9.2001--by which date the Pondicherry Government had given its no objection to the establishment of PIMS by MMM, the Pondicherry University had given its, in principle, consent to grant affiliation; the Government of India had granted a letter of intent for establishing a new medical college by MMM at Pondicherry; the construction of a ten storey hospital building of the PIMS had been completed and the hospital had started functioning--Dr. Cherian along with his wife and son and few of his friends registered a society at Pondicherry under the Societies Registration Act, 1860, with the name, "Pondicherry Institute of Medical Sciences", the very name under which MMM was establishing the medical college and hospital at Pondicherry. The registration of that society was without the knowledge or consent of the Board of MMM. The Constitution and Bye-laws of that society provided that Dr.Cherian was to be it's Chairman and Chief Executive for life. 5. After the formation of that society, Dr.Cherian secured a letter from the Pondicherry Government in March 2002 certifying the minority status of the PIMS 'run by the PIMS Society'. On 8.4.2002 Dr. Cherian wrote to the members of the MMM about the formation of his society and his consultation with financial and legal experts for transferring to his society the right of management of PIMS. All this was done without informing or obtaining the consent of the Board of MMM and at a time when he was still functioning as Chairman of the PIMS, a position which required him to safeguard the interest of MMM and not to do anything against the interest of MMM. 6. On 16.4.2002, Dr.Cherian was suspended from his position of Chairman of PIMS. A month later he challenged that order in this Court by filing C.S.No.322 of 2002, but was unsuccessful in regaining that position. 7. It was in this background that Dr.Cherian on 12.9.2002 addressed a letter to Mr.Shaktikanta Dass, Secretary to Government, Department of Commercial Taxes on the subject 'mismanagement of Madras Medical Mission', which led to the developments culminating in the issue by the Secretary to the Government of the impugned show cause notice, dated 20th November 2002, under S.34-A of the Tamil Nadu Societies Registration Act (Tamil Nadu Act 27 of 1975) proposing the supersession of the Committee of MMM by appointing a special officer. 8. In that letter of 12.9.2002, Dr.Cherian had sought the supersession of the Committee of MMM under s. 34-A of the Tamil Nadu Act 27 of 1975. He alleged in that letter that that MMM had violated various provisions of the Tamil Nadu Act 27 of 1975 and the Rules made thereunder--S.15 (3) by reason of proxy having been allowed for electing members of the managing committee; S.29 (f) as minutes were being typed and pasted in the Minutes Book; S.29 (3) by reason of Minutes Book not having been made available to him; and S.15 (6) which provision was deleted by Act 19 of 2000 and which provision during the period it remained on the statute book prohibited members continuing in the managing committee for more than six years at a stretch. Dr.Cherian, though he had knowledge of all this all along having been a signatory to the memorandum and having been a member of the Board almost continuously, had not taken any steps to set right these matters for nearly fifteen years and had also not regarded these matters as warranting the appointment of a Special Officer under s.34-A. 9. It was also alleged in that letter that funds belonging to ICVD had been diverted to IRM, though both are but divisions of MMM neither of which has a separate profit and loss account. Financial irregularities were alleged against the Secretary and Treasurer and certain other members of the Board of MMM. The action taken by MMM by way of writing letters to Pondicherry Government with regard to his suspension from Chairmanship of the PIMS Committee was yet another ground for his complaint. 10. That letter of Dr.Cherian was sent by the Secretary to the Inspector General of Registration on 18.9.2002 with a request to send a detailed report to the Government on the contentions made therein. 11. On 10.10.2002, the Inspector General of Registration decided to initiate an enquiry under S.36 (1) of the Tamil Nadu Act 27 of 1975 and nominated the District Registrar, Chennai Central to hold the enquiry. The Enquiry Officer on the same day informed MMM that he proposed to hold an enquiry into the constitution, working and financial condition of the society. 12. The enquiry commenced on 22.10.2002 at the office of MMM and continued on 23rd and 24th. On 22.10.2002, as noted by the Enquiry Officer, Dr.Cherian gave a further detailed account of his allegations against some members of the Governing Board of MMM. Those allegations were also enquired into by the Enquiry Officer. 13. Several members of the Board of MMM as also Dr.Cherian and K.N. Ommen a member of MMM, who had complained with regard to his nonelection at an AGM on account of use of proxies, and the rejection of his nomination at a subsequent Annual General Meeting, also took part in the enquiry. In his report the enquiry officer had noted that during the time of enquiry, evidence for both the parties to substantiate their stand were collected. 14. The enquiry officer rejected the allegation made by Dr.Cherian that MMM was not acting in furtherance of its objects. He held that "Hence the Madras Medical Mission is acting in furtherance of its objects". He found that the accounts are audited by Chartered Accountants who are appointed at the General Body. He did not find anything improper or incorrect in those accounts. He rejected Dr.Cherian's contention that the Institute of Reproductive Medicine and Women Health need not have been started because it makes losses, and held that ' profit making cannot be a motive of the society'. 15. He held that there was no proof to show that the Lokavani Press had made huge profits by doing the printing work for MMM-work which it had done for MMM from MMM's inception in 1982, and which work according to its owners who are also Members of the managing committee of MMM, were done free or at lower charges. 16. Allegations made against two other Board members who owned the company Asian Tech, were found to be untrue as no amount had been paid to them for their services in supervising the construction work of PIMS. 17. The allegation made against the Treasurer that he had enriched himself by supplying cement was found to be untrue as the "..rate of cement quoted to MMM is lesser than the market value". 18. Regarding the allegation made against the Secretary, the enquiry officer found that the company owned by him had supplied 32 concrete poles and 32 cross arms at the rate of Rs.3500/- per set as per specification. Despite the quotation for similar item at Rs.4300/- to another buyer having been shown to the enquiry officer and the Secretary's submission that supply to MMM was at a lower price, the enquiry officer held that in the absence of any quotation from any other supplier offering to supply the product to MMM, the MMM had favoured the Secretary's company. The value of this supply, quality of which was not disputed, is rupees one lakh and ten thousand. 19. As regards the allegation of K.N.Ommen that his nomination for election to the Committee held on 26.10.2002 had been improperly rejected, the enquiry officer held that the rejection was justified as Ommen's name was found in the nomination paper only as proposer. 20. In so far as the constitution and functioning of the Society was concerned, the enquiry officer recorded certain findings which have been incorporated in the impugned notice of 20.11.2002 sent by the Secretary to the Government. That notice was issued by the Secretary after he received the report of the enquiry officer through the Inspector General of Registration. 21. The Inspector General of Registration while sending the report of the enquiry officer to the Secretary had, in a casual manner, and without comprehending the full import of the enquiry report, opined inter alia, that 'serious violations in financial management' had been noticed, even though no serious violation of financial management had been found, and proceeded to recommend to the Government that the Committee of MMM be superseded. 22. The notice dated 20.11.2002 sent by the Secretary to the Government to the President, Vice President, Secretary and Treasurer of the MMM, reads as under:- "Sub: Societies - Tamil Nadu Societies Registration Act 1975 - Madras Medical Mission (Regd. No.1/1982) - Supersession of Committee under Section 34A of TNSR Act, 1975 by appointing Special Officer to manage the affairs of the Society - Show cause notice - issue of - regarding. --- The Madras Medical Mission is a registered society registered in 198 2 under the Tamil Nadu Societies Registration Act 1975. Dr.K.M. Cherian, Director, Madras Medical Mission, presented a petition reporting various irregularities in the administration of the Society. He has represented about the violation of the provisions of the Act and Rules and also financial mismanagement. Thiru K.N.Ommen a member of Madras Medical Mission in his representation has also brought to the notice of Government various irregularities in the administration of the Madras Medical Mission. The Inspector General of Registration was requested to send a detailed report on the above representations. 2. The Inspector General of Registration has appointed the District Registrar, Chennai (Central), under Section 36 (1) of the TNSR Act 19 75 as an Enquiry Officer in this matter. According to the findings of the Enquiry Officer, the following irregularities/lapses were noticed:- I. Constitution of the Society: (i) Bye-law No.47 envisages the Bishop of Madras Diocese to hold the Presidentship of the Society for the term for which he is the Bishop. This provision contravenes section 15 (3) and 15 (40 of the Act, according to which the members of the Governing Board should be appointed in the General Body and should hold office not exceeding three years. (ii) In Bye-law No.45, the Governing Board has been empowered to coopt members to fill up vacancies in the Governing board. This provision goes against the section 15 (3) of the Tamil Nadu Societies Registration Act, which warrants filling up of casual vacancy only by the General Body. (iii)By-laws No.44 is in contravention of the provision of Section 2 6(2) of the Act as 14 days of notice for calling General Body Meeting has been provided instead of minimum 21 days provided in the Act. II. Functions of the Society:- (iv)Proxy can be allowed only for the specific purpose of adopting special resolution as set forth in Section 2 (J) of the Act. Proxy is not allowed for any other purpose either in bye-law or in the Act. However the society has allowed proxies to participate in the General Body and to cast their votes for election of Governing Body members. In fact, one candidate Thiru K.N.Ommen, for Governing Board member, lost in an election due to admittance of proxies. This is utter violation of section 2 (J). (v) The Bye-law No.41 has been amended increasing the total number of the elected members of the Governing board from 14 to 20 members on 19.8.1995. This amendment has not been registered with the Registrar of Societies as required under section 12 (3) of the Act. Hence the Society has violated the provisions of section 12 (3) of the Act. Hence the Society has violated the provisions of section 12 (3) by not registering the amendment. (vi) According to the "Register of Members", there were only 5 members at the time of registration of the Society (i.e. 12.1.1982). However, in the memorandum and in the Bye-law submitted before the Registrar for registration, 9 persons were shown as members of the society. There should have been at least 7 members for registering the society as required in Section 7 (2). Hence the legality of registration itself is questionable. (vii) According to section 15 (2) read with Rule 17 (2), the notice of any change among the members of the society shall be filed in Form VII before the Registrar. After the registration of the society, there have been several changes in the members of the society. The notices in Form VII regarding changes have not been filed at all with the Registrar. Hence the society has wilfully failed to adhere to the provision of section 15 (2) read with Rule 17 (2). (viii)The General Body Meetings to elect 1/3 members to the Governing board had been held every year from 1983. The notice regarding changes of Governing Board members for the year 1988, 89, 91, 92, 9 3, 94, 95, 96, 98, 99, 2000 and 2001 were not filed with the Registrar. This is in violation of Section 15 (2). (ix) The Minutes Book is not maintained properly as provided in Section 29 of the Act. III. Financial aspects: (x) The Society had not submitted approved Balance sheet, Receipts and Expenditure Statement for the following financial years 1983-84, 1984-85, 1987-88, 1990-91, 1997-98 and 1999-2000. Thus section 16 (3) and Rule 22 have been violated in respect of the above mentioned years. (xi) The Secretary Thiru K.V.George has entrusted contract to supply 32 poles through M/s Concrete Product Poles Limited of which he is the director. By doing so, an act of financial impropriety has been committed. 3. Further, it has been reported that the President has not attended any of the meetings of the Governing Board. The very fact that the President has not attended even one meeting shows that the Governing Board is not functioning properly. Taking into account all the above aspects, the Government consider that the affairs of the society are not being properly managed and the Committee of the Society has contravened provisions of the Act and the Rules thereunder. 4. After careful examination, the Government consider that the existing committee of Madras Medical Mission be superseded by appointing a Special Officer under section 34A of Tamil Nadu Societies Registration Act, 1975 for a period of one year. I am therefore directed to request you to make representations if any within 15 days of receipt of this letter to the Government. If no reply is received within such period, the Government will issue final order on merits and on the basis of available document." 23. Immediately after the receipt of this notice, the Governing body of MMM met on 23.11.2002, and convened a General Body Meeting for being held on 20.12.2002. The agenda for that meeting was to consider the passing of special resolutions to amend Bye-laws 44, 45, 47, and 90, as in the notice sent by the Secretary to the Government it had been pointed out that those bye-laws were not in conformity with the provisions of Tamil Nadu Act 27 of 1975. The existing bye-laws 44, 45 , 47 and 90 and the proposed amendment to those bye-laws as set out in the notice issued on 27.11.2002 for the 'General Meeting to amend Bye-laws to be held on 20.12.2002', read as under:- "Existing by-laws & Proposed Amendments (in bold) 44. In case of more nominations than the required number, election should be held giving 14 days clear notice of such election to the member of the Society. Such election shall be by secret ballot. 44. In case of more nominations than the required number, election should be held giving 21 days clear notice of such election to the members of the Society. Such election shall be by secret ballot, by notice of such election to the members of the Society. Such election shall be by secret ballot, by members present and voting and not by proxy. 45. The Board shall have the power to co-opt members to fill up casual vacancies in the Board. Such persons shall hold office till the next Annual General Meeting. At the Annual General Meeting persons to fill up the remaining part of the term are to be duly elected. 45. If there are casual vacancies in the Board, persons to fill up the remaining part of the term are to be duly elected from among the members, during a General Meeting of the Society. 47. President : The President elect shall be ex-officio and shall hold office for the term for which he is Metropolitan of the Madras Diocese of the Church. 47. President : The President shall be elected by the Board from among the members of the Board and shall hold office for the term for which he is a member of the Board. 90. A 3/5 majority of the members present an voting at a meeting specially convened for the purpose and a simple majority of the total membership voting in person or by proxy is required for amending any of these bye-laws. 90. A s majority of the members present