NCLAT Chennai Quashes Waiver Granted to Non-Members of Madras Race Club
Tribunal Reiterates That Only Current Members Can Seek Waiver Under Companies Act for Oppression Claims
In a significant ruling dated September 17, 2025, the National Company Law Appellate Tribunal (NCLAT) Chennai bench, comprising Justice Sharad Kumar Sharma and Member (Technical) Jatindranath Swain, has quashed the waiver granted to erstwhile members of the Madras Race Club under Section 244 of the Companies Act, 2013. The decision reinforces the principle that only existing members of a company can seek waivers to initiate proceedings on grounds of oppression and mismanagement under Sections 241 and 242 of the Act.
The case was brought before the tribunal by Madras Race Club, a non-profit entity registered under Section 8 of the Companies Act, challenging the waiver granted to R.D. Ramasamy and others, who were removed from the club’s membership following discrepancies revealed in an audit. The audit, conducted by M/s. Brahmayya & Co., identified that 635 individuals, including the respondents, had not fulfilled membership requirements, leading to their removal.
The NCLAT's ruling emphasized that the status of being a current member is a prerequisite for invoking Section 244, which allows the tribunal to waive certain requirements for initiating proceedings under Section 241. The tribunal found that the respondents, having been removed as members, did not meet this criterion. The judgment noted that mere past membership does not suffice for seeking a waiver, and exceptional circumstances claimed by the respondents were not substantiated with credible material.
The judgment also highlighted the potential for abuse of process if non-members were allowed to initiate such proceedings, leading to unending litigation. It underscored the necessity for maintaining procedural integrity by restricting waiver applications to existing members, thereby preserving the intended regulatory function of Sections 241 and 242 of the Companies Act.
The appellate tribunal’s decision overturns the earlier ruling by the National Company Law Tribunal (NCLT), which had allowed the waiver on grounds of exceptional circumstances. The NCLAT clarified that the NCLT's decision was based on presumptive grounds without adequate evidence, and reiterated the legal precedent set in previous cases such as Cyrus Investments Private Limited v. Tata Sons Limited, which established the necessity of membership status for waiver applications.
The ruling serves as a reminder of the stringent requirements under the Companies Act, ensuring that only those with a legitimate stake in the company can challenge acts of oppression and mismanagement, thereby safeguarding against frivolous and vexatious litigation.
Bottom Line:
For seeking a waiver under section 244 of the Companies Act, 2013, the applicant must establish that they are existing members of the company.
Statutory provision(s): Companies Act, 2013 - Sections 244, 241, 242, 59; NCLT Rules, 2016 - Rule 11
Madras Race Club v. R.D. Ramasamy, (NCLAT)(Chennai) : Law Finder Doc Id # 2780776
