TMI Blog2022 (1) TMI 463X X X X Extracts X X X X X X X X Extracts X X X X ..... nimum number of three directors in the case of a public company. However, there may be instances where the company during the course of business fails to meet the statutory limit. This also shall amount to casual vacancy in the office of director. There are no records showing that the office of Director who was appointed by an AGM is vacated either due to unforeseen reasons or due to any reasons by which the company fails to meet the statutory obligation. It is clear that the appointment of 4 Additional Directors in the Board Meeting dated 13.12.2017 was beyond the powers of the Board as provided in the Articles of Association of the Company and hence it is to be declared as ultra vires and illegal. Clause 51 of the Articles give power to the Board only to fill casual vacancies in the Board. Therefore, the appointment of these four Additional Directors under the pretext to fill casual vacancies as caretakers is against the cardinal principle of corporate law in as much as there were no casual vacancies at all on the date of appointment - in the letter of resignation it should be clearly mentioned the date from which the resignation takes effect. Otherwise the date of receipt of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der declaring the continuation of MS Nimmi John R-11 as Director of R1 Company after having resigned on 26-06-2018 as illegal U/S. 268 and remove her as Director U/S. 242(2)(h) and initiate prosecution against her U/S. 447 448 of Companies Act 2013 for giving false affidavits and statement as Director of R1 Company before this Learned Tribunal. iv. Order to keep the Director Board of the KCCI in abeyance or suspended and Supersede the Board of Directors of the R1 Company by the NCLT appointed Chairman until the 61st, 62nd 63rd AGM are held and new Board assume charge in office. 2. The applicants submitted that presently the conduct of the management of the Company is all the more prejudicial to its own interests as also of its members and in total violation of the directions of various courts including the Hon'ble High Court of Kerala and this Tribunal. Out of the 13 members acting as Directors, six members (R7, R8, R9, R12, R13, R4) are illegally appointed by the Board in violation of Article 5 of the Company and Section 161 of Companies Act 2013, after the last Annual General Meeting (AGM) held on 07.12.2017. 3 Directors (R4, R10, R14) including one from the ille ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such vacancies were existing in the Board of Directors of R1 Company when R7, R8 R9 were appointed by the Board as Directors of R1 Company on 13-12-2107. Hence these appointments were ultra-vires to the Articles of Association of the Company and therefore, illegal. In this regard, they referred to the decision of Srinivasan M.K. v. Subrahmanya Aiyer {W.S.} (1932) 2 Comp Case 147. 6. The learned counsel for the applicants submitted that the ROC had conducted a hearing as per judgment of Hon'ble High Court of Kerala dated 01.08.2019 in WP (C) No. 18865 of 2019 on the issue of illegal appointment of Directors by the Board and passed an Order No. ROC/4271/2019-20 dated 26.11.2019 and submitted before this Tribunal. The ROCs inquiry report dated 03.10.2019 clearly stated that Mr. Mathew George-R4 Mr. Ahamed lqbal-R15 are liable to vacate the office of Director U/S. 283(1)(h) of Companies Act 1956. But they are still continuing as directors and are liable to be punishable U/S. 167(2) of the Companies Act 2013. 7. The learned counsel for the applicant further submitted that the R11 herein Mrs. Nimmy John Chakola had resigned as Director of the R1 Company vide letter of resig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as Finance Director. Thus all the four Officer Directors are not competent to be in the respective offices. R14, R16, R17 R18 are Directors passive to the irregularities going on in the R1 without discharging their duties as Directors as envisaged U/S. 166 of Companies Act 2013. Thus they owe collective responsibility to all the mismanagement and oppression continuously going on in the Company. The term of the present Board expired on 30.09.2018 and the ROC had refused to allow extension of AGM. 11. The Respondents 1, 7, 10 11 in their reply submitted that the Company Petition was initially filed by the Applicants/Petitioners for 16 different reliefs. The 5th relief sought is removal of Respondents 2-6 hereto. Now in the intervening period between 2016 and 2021 it is seen that Respondents 2-6 are no longer in office on the Board of Directors of the 1st Respondent Company for various reasons. These Applicants/Petitioners have now come up with a fresh set of demands in this IA. 12. The respondents further submitted that R7, R8 and R9 have been duly and validly elected in the Board of Directors' Meeting held on 13.12.2017 to the vacant offices, and are discharging thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as a duly authorized office bearer as per Item No. 6 in Board Meeting dated 13th September 2018. The learned counsel referred to the decision of Supreme Court in Union of India V. Gopal Chandra Mishra, AIR (1978) SC 694. 16. Their final submission is that every effort legally possible has been made to conduct the AGM of the 1st Respondent Company. However, this could not materialize due to non-cooperation from the applicants. 17. The respondents 8, 9, 12, 14, 15, 17 18 in their counter stated that this application is barred by res-judicata, because for the very same relief these applicants have approached the Munsiff Courts Ernakulam in O.S. 774/2014 and it was dismissed by the Munsiff court and again the 1st petitioner had filed A.S. 12/2018 before the District court Ernakulam, which is pending for final hearing. 18. It is further stated that all the ingredients that are being alleged in this I.A. have been placed in A.S. 12/2018 before the Hon'ble District Court, Ernakulam for adjudication. Hence, the applicants have no locus standi to file this petition before this Tribunal, as it is a clear abuse of process of law. In order to bypass res judicata the applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot meant for the day to day affairs of the company. 23. The learned counsel for the respondents further argued that the appointment of Directors was done for the smooth functioning of KCCI. Respondent No. 7, 8 and 9 are validly elected Board members in the meeting held on 13.12.2017 of the first respondent company and continuing as care takers until the next validly held AGM as per Article 43 of the Articles of Association of the first respondent company. Respondent R-7, R-10 are in office in legal compliance of the applicable statutes. So the non-compliance to Section 152(5), Rule 8 of companies (appointment and disqualification of directors) will not effect this R1 company. 24. The respondents also stated that there is no legal infirmity in continuance of R11 as a Director in the Board of Directors of R1 company. The Board has not accepted the resignation of Nimmy John Chackola and subsequently she has withdrawn her resignation letter. So the allegation will not be applicable to the facts of Nimmy John Chackola. The demand for the vacation of the office of the director Shibu Prabhakaran-R10 under section 167, Mr. Mathew George R4, Mr. Ahamed Iqbal-R15 under section 283(1h) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record the full and correct facts necessary for deciding the issue involved. The argument against the validity of the appointment is that the Articles of Association of the company gave the power to the Board of directors for appointment of additional directors, is to be dealt in details to consider the first allegation. In this connection, the relevant portion of the Articles of Association of the Respondent Company is reproduced: 43. The Official Director and other Directors of the Director Board shall hold office till another Board is elected to office, in accordance with Section 255 of the Companies Act 1956. 51. Any casual vacancy occurring in the Director Board may be filled up by the Director Board, subject to the provisions of Section 262(2) of the Companies Act 1956. Provided (1) that in the case of a vacancy in the office of the Chairman, the Board shall clear one of the Vice chairman to that office. Provided (2) also in case of vacancies in the office of the Vice Chairman** or Director - Finance, the Board shall elect one of the Directors of the Board to the vacant office. ** or Secretary or Joint Secretary' deleted on 31-12-74 At ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies Act, 2013, every company shall have a Board of Directors consisting of individuals as directors and shall have a minimum number of three directors in the case of a public company. However, there may be instances where the company during the course of business fails to meet the statutory limit. This also shall amount to casual vacancy in the office of director. In the present case, we could not find any records showing that the office of Director who was appointed by an AGM is vacated either due to unforeseen reasons or due to any reasons by which the company fails to meet the statutory obligation. It is clear that the appointment of 4 Additional Directors in the Board Meeting dated 13.12.2017 was beyond the powers of the Board as provided in the Articles of Association of the Company and hence it is to be declared as ultra vires and illegal. Clause 51 of the Articles give power to the Board only to fill casual vacancies in the Board. Therefore, the appointment of these four Additional Directors under the pretext to fill casual vacancies as caretakers is against the cardinal principle of corporate law in as much as there were no casual vacancies at all on the date of app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to an office, it connotes the act of giving up or relinquishing the office. It has been held that in general juristic sense, in order to constitute a complete and operative resignation there must be the intention to give up or relinquish the office and the concomitant act of relinquishment. It has also been observed that the act of relinquishment may take different forms or assume a unilateral or bilateral character, depending on nature of the offence and conditions governing it. We have further referred to the decision of Hon'ble submitted by the applicant in J.S. Gambhir V. Millenium Health Institute Diagnostics Pvt. Ltd. [2014] 120 CLA 372 (Del.), where it is stated that: A resignation by a director implies a relinquishment of his office. This is a unilateral Act which unless the Articles of Association otherwise provide, is not contingent on the acceptance by the company. Directors act as agents of the company and are, thus, also entitled to terminate their agency. The act of resignation or relinquishment of the office would not require the consent of the company and, therefore, would become effective from the time when the intention to relinquish the office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the stipulated time period does not invalidate the resignation of R11. Thus, having regard to the letter of resignation in the present case, there can be no doubt that Smt. Nimmi J. Chakola (R11) had in her letter dated 26th June, 2018 indicated her unequivocal intention to the Chairman Board of Directors to resign with effect from the date of letter and the letter having been communicated to the Board of Directors and it is received, it was not open to R11 to withdraw or revoke that letter. Moreover, no letter addressed to the Chairman Board of Directors by R11 revoking-her resignation was submitted by the said Respondent and thus the plea must be completely brushed aside. In the inquiry report of Registrar of Companies dated 03.10.2019, it is stated that as per Section 295 of the Companies Act, 1956, previous approval of the Central Government is required if, any company, directly or indirectly gives loan to any private company of which Director of a lending company is a director or member. From the Financial Statement for the year 2013 filed by the Kerala Chamber of Commerce and Industry, it is evident that company has given advance to India Middle East Broadcasting N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... KCCI with immediate effect. Ordered so. With regard to Respondent Nos. 12 13, since, no minutes of the Board Meeting has been produced in this IA; no order is passed against them. ii. With regard to relief (b), the declaration sought against Respondent No. 10 cannot be granted now as the Registrar of Companies has not filed the report regarding the inquiry conducted against him. In view of the report of ROC dated 03.10.2019, Respondent No. 4 and Respondent No. 15 shall vacate the office as per Section 283(1)(h) of the 1956 Act with immediate effect. iii. Since the resignation of R11 took effect from 26th June, 2018, on which date she submitted her resignation, she ceases to hold office from that day. Therefore, reinstatement of R11 decided in Board of Directors Meeting held on 13.09.2018 is void ab initio and she is liable to be removed from the Director Board with immediate effect. iv. Respondents Nos. 4, 5 15 have repeatedly violated Section 295 of the Companies Act, 1956. As per Registrar of Companies inquiry report dated 03.10.2019, it is evident that the company has given advance to India middle east Broadcasting Network Pvt. Ltd. without obtaining prior approval ..... X X X X Extracts X X X X X X X X Extracts X X X X
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