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2015 (8) TMI 90 - BOMBAY HIGH COURT

2015 (8) TMI 90 - BOMBAY HIGH COURT - TMI - Setting lower and upper age limit for appointments and 'continued employment' of Managing Directors Section 196(3)(a) of Companies Act, 2013 - Whether person attaining age of 70 was eligible for continued employment Held that:- Vested right would arise only if Appellant had actually been appointed Merely because additional eligibility condition was laid down, it does not mean that any vested right of Appellants was affected, nor does it mean that .....

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ent) Section 196(3) does not interrupt appointment of Managing Director where at date of such appointment or re-appointment Managing Director was below age of 70 years but crossed that age during his tenure Word 'continue', therefore, must be read contextually Decision in the case of P. Suseela & Ors. v. University Grants Commission & Ors. [2015 (8) TMI 69 - SUPREME COURT] followed - Decided against Appellant. - NOTICE OF MOTION (L) NO. 434 OF 2015, SUIT (L) NO. 146 OF 2015 - Dated:- 16-7- .....

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No. 2 and Ms. Thakkar, learned Counsel for the 1st Defendant. I have considered the material before me. With their assistance, I have also considered the statutory provisions applicable and the precedents cited. 2. A few facts are necessary. The 1st Defendant is a public limited listed Company. The 2nd Defendant was appointed as a Chairman and Managing Director of the 1st Defendant-Company on 13th August 1990. On 21st May 1998, the Plaintiff was appointed a Director of the 1st Defendant. On 1st .....

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56 Act"). That clause apparently sets a lower and upper age limit of 21 years and 70 years respectively on the appointments and 'continued employment' of Managing Directors, Whole Time Directors and Managers. The entire matter turns on an interpretation of this newly introduced statutory provision. For, it is the Plaintiff's case that since the 2nd Defendant attained the age of 70 years on 11th November 2014, his five year term as Managing Director, one that commenced on 1st Aug .....

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ppointment shall be made earlier than one year before the expiry of his term. (3) No company shall appoint or continue the employment of any person as managing director, whole-time director or manager who - (a) is below the age of twenty-one years or has attained the age of seventy years: Provided that appointment of a person who has attained the age of seventy years may be made by passing a special resolution in which case the explanatory statement annexed to the notice for such motion shall in .....

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d the terms and conditions of such appointment and remuneration payable be approved by the Board of Directors at a meeting which shall be subject to approval by a resolution at the next general meeting of the company and by the Central Government in case such appointment is at variance to the conditions specified in that Schedule: Provided that a notice convening Board or general meeting for considering such appointment shall include the terms and conditions of such appointment, remuneration pay .....

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erned here with sub-section (3) and specifically with sub-section section (3)(a). This introduces an upper and lower age limit in regard to the appointments of Managing Director, any Whole Time Director or Manager of a public limited company. As regards persons who are below the age of 21 years, they may not hold or ever be appointed to any of these three positions. For them, there is no exception. The position is, however, slightly different for persons who attain the age of 70, for there the s .....

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shareholders of the Company should know and be informed of the reasons why somebody over the age of 70 should hold office as a Managing Director. Some compelling reasons must be shown. Any other interpretation, according to him, would have the effect of nullifying the statutory and legal intent. Mr. Mulsamy relies on several decisions of the Supreme Court for the proposition that where the words of a statute are plain and clear, the language of the statute should not be changed by judicial inte .....

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exception. He also submits on the basis of the decision in Reserve Bank of India v. Peerless General Finance & Investment Co. Ltd., AIR 1987 SC 1023 that the use of a proviso is well established and it can never be used to wholly nullify the main or substantive legislative provision. 7. Mr. Seervai's response to this is, firstly, that the 2013 Act cannot possibly be retrospective. For it to be so, it would necessarily have to explicitly say as much in so many words. Ordinarily, no statu .....

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mends, can never be presumed where there are vested rights in place. 8. In the context of the latter, a recent decision of the Supreme Court in P. Suseela & Ors. v. University Grants Commission & Ors. 2015 (3) SCALE 726 : 2015 (3) ALL MR (SC) 981; per R.F. Nariman, J. is most instructive. The Court drew a distinction between the impact of a statute on existing rights as against its impact on vested rights. Citing the five-judge bench decision of the Supreme Court in Trimbak Damodhar Rajp .....

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ak Damodhar Rajpurkar v. Assaram Hiraman Patil, 1962 Suppl. 1 SCR 700. In that case a question arose as to whether an amendment made to Section 5 of the Bombay Tenancy and Agricultural Lands Amendment Act could be said to be retrospective because its operation took within its sweep existing rights. A bench of five Hon'ble Judges of this Court held that Section 5 had no retrospective operation. This Court held: ... ... In this connection it is relevant to distinguish between an existing right .....

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ot this case. The question here is whether a certain provision as to the contents of leases is addressed to the case of all leases or only of some, namely, leases executed after the passing of the Act. The question is as to the ambit and scope of the Act, and not as to the date as from which the new law, as enacted by the Act, is to be taken to have been the law." These observations were made in dealing with the question as to the retrospective construction of Section 3 of the Conveyancing .....

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fine shall be payable for or in respect of such licence or consent. It was held that the provisions of the said section applied to all leases whether executed before or after the commencement of the Act; and, according to Buckley, L.J., this construction did not make the Act retrospective in operation; it merely affected in future existing rights under all leases whether executed before or after the date of the Act. The position in regard to the operation of Section 5(1) of the amending Act wit .....

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held in Durlabbhai case [(1956) 58 BLR 85] that the relevant provision of the amending Act would apply to all proceedings where the period of notice had expired after the amending Act had come into force and that the effect of the amending Act was no more than this that it imposed a new and additional limitation on the right of the landlord to obtain possession from his tenant. It was observed in that judgment that "a notice Under Section 34(1) is merely a declaration to the tenant of the i .....

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efore us had actually been appointed to the post of Lecturer/Assistant Professors. Till that date, there is no vested right in any of the Appellants. At the highest, the Appellants could only contend that they have a right to be considered for the post of Lecturer/Assistant Professor. This right is always subject to minimum eligibility conditions, and till such time as the Appellants are appointed, different conditions may be laid down at different times. Merely because an additional eligibility .....

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enario described in paragraph 15 of P. Suseela. The 2nd Defendant was already the Chairman and Managing Director of the 1st Defendant when he turned 70. The 2013 Act cannot, I think, operate as an immediate termination of his appointment. That would mean dating the operation of the 2013 Act back to the date of his appointment in 2012, i.e., giving it a retrospectivity. That is not possible, and to that extent Mr. Seervai is correct. 10. However, in the Affidavit in Reply, the 2nd Defendant provi .....

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013 Act. This word seems to have been carried over from the earlier Section 267 of the 1956 Act, as have sub-sections 3(b), 3(c) and 3(d), equivalent to Section 267(a), (b) and (c). The 2013 Act also use the identical expression 'continue'. What is it that the proviso tells us? Is the age of 70 an absolute bar? That is not even Mr. Mylsamy's suggestion. A public limited company may well appoint a person of 80 years of age as a Managing Director; all that is needed is a special resolu .....

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of the 2013 Act. Those provided for eventualities that must result in an instantaneous cessation of Managing Directorship. If a person, appointed as a Managing Director, Whole Time Director or Manager, is an undischarged insolvent, or is so adjudged; or if he suspends payment to or makes a composition with his creditors; or is convicted of an offence involving moral turpitude, he cannot be allowed to occupy that position for a minute longer. Evidently, none of these three situations could ever .....

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rnative scenarios, some that lie perhaps at the extremeties? Take, for instance, a case where X is appointed Managing Director on 31st March 2014 for five years; he turns 70 the next day. Can Section 196(3) operate in such a situation, to stop his tenure before it has even started? I would venture not; yet this is precisely the effect of Mr. Mylsamy's submission. Or take another case, where X is appointed for five years before 1st April 2014, but turns 70 just one day before that five-year t .....

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without allowance for context is to my mind not just impermissible; it actually defeats the avowed statutory intent. After all, the proviso only adds a further check or balance: it demands a justification in the form of a special resolution for the appointment of a person over 70. It is hardly plausible to suggest that on turning 70 - surely an occasion for celebration and, barring the unfortunate, a physiological inevitability - a Managing Director, only for that reason, should find himself ke .....

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ntly. The relevant part, Section 269(2) said: Appointment of managing or whole-time director or manager to require Government approval only in certain cases. (1) ... (2) On and from the commencement of the Companies (Amendment) Act, 1988, no appointment of a person as a managing or whole-time director or a manager in a public company or a private company which is a subsidiary of a public company shall be made except with the approval of the Central Government unless such appointment is made in a .....

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ROVAL OF THE CENTRAL GOVERNMENT PART I APPOINTMENTS No person shall be eligible for appointment as a managing or whole-time director or a manager (hereinafter referred to as managerial person) of a company unless he satisfies the following conditions, namely:- (a) ... (b) ... (c) he has completed the age of twenty-five years and has not attained the age of 70 years Provided that where- (i) he has not completed the age of 25 years, but has attained the age of majority; or (ii) he has attained the .....

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to eliminate the previous regime of Central Government approval). This tells us that the age of 70 was never an automatic mid-stream disqualification even under the 1956 Act. It only required a certain precautionary measure at the commencement of the term, i.e., at the time of appointment (or reappointment), i.e., a special resolution. There is nothing to suggest that the rationale behind this has in any way changed in the 2013 Act. It is not possible, in my view, to accept Mr. Mylsamy's con .....

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eating of the Managing Director at all. In other words, a company may well order its affairs to give its Managing Director an advance pass to remain aboard the bus, or to ensure that if he is forced to alight one evening, he is allowed to board the bus again the very next morning. To do any of this would be as permissible as it is entirely unnecessary and meaningless, and I do not believe that any statute should be read in a manner that results in so pointlessly pedantic a result. All of this mi .....

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