2016 (1) TMI 1044 - HC - Companies Law

Disqualification or liability under Section 162 to act as an Director - Held that - Section 167(3) of the Act is not and could not have been intended to provide for a mode of appointment of a Director, contrary to the provisions elsewhere in the statute. A promoter, desirous of appointing a Director in the company, will have to propose the same either to the Board of Directors, if permitted to appoint an additional Director or if only the shareholders have reserved to themselves the right to appoint a Director, to the shareholders in the meeting of the shareholders to be held. Section 167(3) of the Act cannot be interpreted as entitling each and every promoter of a company, upon contingencies mentioned therein having occurred, to appoint a Director. The appointment has to be made by following the procedure elsewhere provided in the statute for appointment of a Director and thus the contention of the petitioners / applicants that they as promoters have a special right under Section 167(3) of the Act to appoint a Director de hors the opinion of the other shareholders / promoters, cannot be accepted. The petitioners / applicants are required to follow the procedure ordinarily provided for appointment of a Director and which procedure admittedly has not been followed. Moreover, from the order dated 20th October, 2010 of the CLB, it is evident that as of today, the petitioners / applicants stand restrained from writing any letters to the prejudice of the subject company. It can safely be assumed that the said order has been made assuming the petitioners / applicants to be not in control and management of the subject company. As far as the argument of the counsel for the petitioners / applicants, of petitioners suffering a disability unless permitted to act so is concerned, the same is also subject to the petitioners / applicants being accepted as of today as Directors. The question, whether the petitioners can be said to be Directors of the subject company is doubtful and without the petitioners / applicants having a clear right to act as Directors and which is being opposed, the question of the petitioners / applicants incurring any disqualification or liability under Section 162 of the Act also, would not arise. The application is thus dismissed with liberty to the petitioners / applicants to apply to the CLB for the same reliefs.

Summary

Issues:
1. Direction sought to Registrar of Companies (RoC) for uploading digital signatures.
2. Dispute regarding appointment of Directors and statutory compliances.
3. Interpretation of Sections 167(3) and 2(69) of the Companies Act, 2013.
4. Authority to decide on Director appointments and statutory compliances.
5. Disqualification of Directors under Sections 162 and 167.

Analysis:

1. The petitioners sought a direction for RoC to upload their digital signatures to file Annual Returns. The counsel argued that failure to file records led to Director disqualification.

2. The petitioners, as promoters, appointed themselves as Directors but RoC did not accept, citing pending FIR and civil case. CLB proceedings revealed no order on company affairs.

3. The counsel referred to Sections 167(3) and 2(69) to support the appointment. The judge questioned if any shareholder could appoint a Director under 167(3).

4. RoC stated its authority to decide on Director appointments. The judge emphasized following proper procedures for appointments.

5. The judge dismissed the application, advising petitioners to approach CLB for reliefs. The petitioners were allowed to seek authorization for statutory compliances.

Conclusion:
The judgment clarified the procedure for Director appointments and emphasized adherence to statutory requirements. It directed the petitioners to seek relief through CLB and highlighted the importance of following proper procedures in corporate governance matters.