9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (12) TMI 1290 - Tri - Insolvency and BankruptcyRemoval of nominee director - entitlement to shares - shares freely transferable with the right to nomination or not - HELD THAT - The CD has got the right to maintain the required number of its nominated directors in R-5. Here in this case, by the force of Sub-Section 7 of Section 33 of the Code, the nominee directors deemed to have vacated their directorship under nomination from the CD unless they are permitted to continue by the liquidator as on the date of order of liquidation of CD. The liquidator has the power to nominate directors to maintain the required number of nominee directors in R-5. The nominee directors being nominated by the CD and CD having been taken over by the liquidator, the nominee directors are bound by the directions of the liquidator. Even under section 19 of the Code, and under section 284 of the Companies Act 2013, the nominee directors are bound to obey the directions of the liquidator. The nominee directors shall extend full cooperation to the liquidator in discharge of his functions and duties. Here, in this case they have failed in co-operating with the liquidator and also were reluctant to vacate the office as the nominee directors of CD in R-5. The Articles of Associations were entered into with express consent of the parties. The eventualities arising out of retirement, dismissal, removal or vacation of office voluntarily are dealt with in the agreement. Truly, eventualities like discharging authority conferred on nomination upon force of law is not dealt with in the agreement or in the Article of Association. But it appears to us that as per section 238, provisions of the Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law to override other laws. That being the legal position as of now, there is notice of discharge to the nominee directors of the CD in R-5 as per section 33(7) of the Code. The application filed by the Liquidator deserves consideration. It has come out in evidence that RI and R2 acted against the interest of the liquidator. It is incorrect to hold that R-5 is not bound by the terms of agreement so as to accept the proposal of the liquidator to accept the nominee directors proposed by the liquidator. R-5 is bound by the proposal and is obliged to present before the AGM for its approval. It cannot take a unilateral decision that it is not bound by the proposal legitimately submitted by the liquidator in exercise of the powers vested in him under the provisions the Code read with Article 121 and 140 (4) of the Article of Association. R-5 also is not entitled to know the reason behind the replacement of the existing nominee directors by the CD/liquidator. Even if the nominee directors are elected as the directors because they have acquired shares independently in R-5, they cannot under the provisions of the Code, unless the liquidator authorises them to continue, they have no right to sit as nominee director. Their nominee director status stands discharged with effect from 17.10.2017. These points are also answered in the affirmative. The power to remove the nominee directors and can nominate directors and that R-5 is bound to act upon the proposal of replacement of existing nominee directors of CD - Application allowed.
Issues Involved:
1. Whether the shares held by the corporate debtor in respondent No. 5 (R-5) would include in the Liquidation Estate and whether the liquidator is entitled to sell the shares with the power to nominate as per the provisions of JSA/Article of Association. 2. Whether the shares held by the corporate debtor in R-5 are freely transferable with the right to nomination. 3. Whether the liquidator has the right to remove a nominee director of the corporate debtor in R-5, and make an appointment in his place. 4. Whether the nomination of the directors in R-5 stands automatically discharged as per section 33(7) of the Code, and if so, can the liquidator appoint nominee directors in R-5. Issue-wise Detailed Analysis: Issue 1 & 2: Inclusion of Shares in Liquidation Estate and Transferability with Right to Nomination The Tribunal examined whether the shares held by the corporate debtor (CD) in R-5 are part of the Liquidation Estate and if the liquidator can sell these shares with the power to nominate directors. It was established that the CD holds 25% shares in R-5, formed under a Joint Sector Agreement (JSA). The shares held by the CD in R-5 are included in the liquidation assets as per Section 36(3)(a) and (d) of the Insolvency and Bankruptcy Code, 2016. The liquidator, therefore, holds these shares as part of the liquidation estate and has the authority to manage and control them. The liquidator's power to sell the shares is affirmed under Section 35 of the Code, which allows the liquidator to sell the shares by public auction or private contract, provided the buyer is eligible under Section 29A of the Code. The Tribunal concluded that the right of nomination attached to the shares is also transferable unless specifically barred by the Articles of Association. Issue 3 & 4: Right to Remove and Appoint Nominee Directors The Tribunal addressed whether the liquidator has the authority to remove the nominee directors of the CD in R-5 and appoint new ones. It was noted that the nominee directors of the CD in R-5 are bound by the directions of the liquidator as per Section 19 of the Code and Section 284 of the Companies Act, 2013. The Tribunal referred to Section 33(7) of the Code, which states that an order for liquidation is deemed to be a notice of discharge to the officers of the corporate debtor. Therefore, the nominee directors' positions are automatically discharged upon the liquidation order unless the liquidator decides otherwise. The Tribunal found that the liquidator has the power to remove the existing nominee directors and appoint new ones to ensure the beneficial liquidation of the CD's assets. Conclusion: The Tribunal concluded that the liquidator has the authority to manage, control, and sell the shares held by the CD in R-5, including the right to nominate directors. The existing nominee directors of the CD in R-5 are required to vacate their positions, and the liquidator's decision to appoint new nominee directors must be accepted by R-5. The application filed by the liquidator was allowed, directing the respondents to comply with the liquidator's instructions for the beneficial liquidation of the CD's assets. Orders: 1. Respondents 1 and 2 are directed to vacate their offices as nominee directors of the CD. 2. Respondent 5 is directed to accept the liquidator's decision regarding the nomination of directors and cooperate by providing necessary details for the sale of shares. 3. The application (CA(IB) No. 669/KB/2019) is disposed of accordingly. 4. Certified copies of the order may be issued to all concerned parties upon compliance with requisite formalities.
|
