2015 (7) TMI 337 - Board - Companies Law

Resignation of Director - Company refused to accept the resignation - The Board of Directors responded to the petitioner s letter by not accepting his resignation and seeking his co-operation in resolving the issues facing by the Company, which were, admittedly of his creation. The petitioner however, refused to communicate with the Company. Held that - From the plain reading of the provision of the Act, it is crystal clear that if the company made default in complying with any provisions of this Act which requires it to file or register with or deliver or send to, the Registrar any return, account or other documents, or to give notice to him of any matter, fails to make good the default within 14 days after the service of notice on the company requiring it to do so, the CLB on an application made to it by any Member or Creditor or by the Registrar, make an order directing the company and any officer thereof to make good the default within such time as may be specified in the order. Admittedly, the present petition is filed by the petitioner who is a member (shareholder) for seeking direction from this Bench to the company and any officer thereof to make good the default. Hence the petitioner entitled to file the present petition and the petition is maintainable. In the present case the petitioner tendered his resignation to the Board of directors in writing vide his letter dated 25.04.2012 therefore the intention is explicit and clear and the resignation takes effect from 25.04.2012. The only objection of the company in taking note of the resignation of the petitioner and filing Form 32 with the concerned Registrar is that the company incurred certain liabilities at the behest of the petitioner during October 2010 and April 2012. As stated supra the resignation will not however relieve the petitioner from any liability if any, which he may have incurred while in office as alleged by the respondents. I am of the view that the company and its officers made default by not filing Form 32 intimating the resignation of the petitioner from the post of director despite receipt of 14 days notice requiring it to do so. In view of the aforesaid reasons and in exercise of powers conferred under section 614 of the Companies Act, 1956, I hereby direct the company to file Form 32 with the concerned Registrar showing cessation of the petitioner from the post of director w.e.f. 25.04.2012 within a period of 15 days from receipt of copy of this order. - Decided in favour of appellant.

Summary

Issues Involved:
1. Whether the petition under Section 614 of the Companies Act, 1956, is maintainable.
2. Whether the petitioner's resignation as a director was valid and effective from 25.04.2012.
3. Whether the company and its officers defaulted by not filing Form 32 with the Registrar of Companies.
4. Whether the petitioner remains liable for the company's liabilities incurred during his tenure as director.

Issue-wise Detailed Analysis:

1. Maintainability of the Petition under Section 614 of the Companies Act, 1956:
The petitioner filed the petition under Section 614 of the Companies Act, 1956, seeking a direction for the respondents to file Form 32 with the Registrar of Companies (ROC) to record his cessation as a director from 25.04.2012. Section 614 empowers the Company Law Board (CLB) to direct a company and its officers to rectify defaults in complying with statutory requirements. The Bench confirmed that the petitioner, being a member (shareholder), is entitled to file the petition, making it maintainable.

2. Validity and Effectiveness of the Petitioner's Resignation:
The petitioner submitted his resignation via email on 25.04.2012, which was acknowledged by the company. The respondents contended that the resignation could not be accepted until the petitioner cleared all liabilities incurred by the company during his tenure. The Bench noted that there is no provision in the Companies Act, 1956, or the company's Articles of Association requiring acceptance of a director's resignation. It was established that a director's resignation is effective immediately upon submission, provided the intent is clear. The Bench concluded that the petitioner's resignation took effect on 25.04.2012, and the company's refusal to accept it based on pending liabilities was not a valid ground to withhold filing Form 32.

3. Default in Filing Form 32:
The company failed to file Form 32 with the ROC to record the petitioner's resignation, constituting a default under the Companies Act, 1956. The Bench emphasized that failure to notify the ROC of a director's resignation is a grave offence. Despite the petitioner issuing a notice under Section 614, the company did not comply. The Bench directed the company to file Form 32 within 15 days from the receipt of the order, indicating the cessation of the petitioner as a director effective from 25.04.2012.

4. Liability for Company's Debts:
The respondents argued that the petitioner incurred significant liabilities on behalf of the company and abandoned it, leading to financial distress. The Bench acknowledged that while resignation does not absolve a director from liabilities incurred during their tenure, it does not justify withholding the filing of Form 32. The petitioner's resignation and the company's obligation to file Form 32 are distinct from any financial liabilities he may have incurred.

Conclusion:
The Bench ordered the company to file Form 32 with the ROC, reflecting the petitioner's resignation effective from 25.04.2012, within 15 days. The petitioner's resignation was deemed valid and effective from the date of the resignation letter, and the company's failure to file Form 32 constituted a default. The petitioner remains liable for any debts incurred during his tenure as director, but this does not affect the requirement to file Form 32. The petition was thus ordered and disposed of.