2020 (12) TMI 249 - HC - Companies Law

Permission to contest election for directorship of Respondent No.3 without insisting on deposit - Section 160 of the Companies Act, 2013 - HELD THAT - As per this provision, a person is eligible for election to the office of directorship at any general meeting, provided that his name is proposed not less than 14 days from the meeting by notice in writing along with deposit of ₹ 1 lakh or such higher amount as may be prescribed which is refunded if the person proposed gets elected as director or gets more than 25% of the total valid votes cast. When the law requires that there should be deposit of ₹ 1 lakh to contest for directorship of a company, we fail to understand as to how the same can be waived off at the instance of the petitioner. In such circumstances, we are not inclined to accede to the prayer for interim relief made by the petitioner. Accordingly, prayer for interim relief is declined. Stand over to 2nd February, 2021.

Summary

Issues:
Interpretation of Section 160 of the Companies Act, 2013 regarding the deposit requirement for contesting directorship elections.

Analysis:
The case involved a dispute regarding the interpretation of Section 160 of the Companies Act, 2013, specifically concerning the deposit requirement for contesting directorship elections. The petitioner sought permission to contest the election for directorship of Respondent No.3 without depositing the mandated amount of ?1 lakh. The petitioner relied on a notification issued by the Ministry of Corporate Affairs, Government of India, dated 5th June 2015, which exempted certain companies from the deposit requirement under Section 160. However, the respondent argued that the notification was applicable only to companies governed under Section 8 of the Companies Act, 2013, and highlighted the statutory requirement of the deposit for directorship contests.

Upon examining Section 160 of the Companies Act, 2013, the court noted that the provision stipulated the eligibility criteria for appointment as a director at a general meeting. It required a person, not less than 14 days before the meeting, to submit a written notice signifying candidature along with a deposit of ?1 lakh or a higher prescribed amount. The deposit would be refunded if the candidate was elected as a director or received more than 25% of the total valid votes cast. The court acknowledged that the law mandated a deposit of ?1 lakh for contesting directorship elections, emphasizing the importance of adhering to such requirements.

Given the clear statutory provision requiring the deposit for contesting directorship elections, the court declined the petitioner's request for interim relief to waive off the deposit amount. The court expressed its inability to accede to the petitioner's prayer in light of the legal obligation for the deposit. Consequently, the prayer for interim relief was rejected, and the matter was scheduled for further proceedings on a later date.

In conclusion, the judgment underscored the significance of complying with statutory provisions, particularly concerning the deposit requirement for contesting directorship elections as outlined in Section 160 of the Companies Act, 2013. The court's decision highlighted the necessity of upholding legal obligations and adhering to prescribed procedures in corporate governance matters.