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2021 (12) TMI 682 - AT - Companies LawInterference from acting as Director and Vice Chairman of the Appellant Company - Section 184 r/w Section 167 of Companies Act. Whether K C Nuwal contravened the provision of Section 184(1) of the Act, if yes consequences? - HELD THAT - In Section 184(1) deals the occasions when the director is required to disclose his concern or interest in any company or companies or bodies corporate, firms or other associations of individuals. In the present case, K C Nuwal was required to disclose his interest in AGT Company when he acquired the shares i.e. on 02.05.2019 in a prescribed form MBP-1. Undisputedly, K C Nuwal vide email dated 03.05.2019 informed Khushboo Pasari that he became the director in AGT from 02.05.2019 and requested to inform RoC and others. Thereafter, vide email dated 28.06.2019 informed Khusbhoo Pasari that he has acquired 31,76,751 shares in AGT. It is true that K C Nuwal has not furnished information in prescribed form i.e. MBP-1. We are of the view that K C Nuwal has substantially complied with the requirement of Section 184 (1) of the Act. Non-compliance of Section 184(1) has no link with Section 167 of the Act. Section 184(4) of the Act provides that if a director of the company contravenes the provisions of sub-section (1) or sub-section (2), such director shall be punishable with imprisonment for a term which may extend to one year or fine which may extend to one lakh rupees, or with both. Thus, non-compliance of Section 184(1) would not lead to automatic vacation of the office as director of the Company. Whether K C Nuwal contravened the provisions of Section 184(2) of the Act, if yes consequences? - HELD THAT - It is an admitted fact that on 07.11.2019 in the board meeting after discussion it was resolved to take the premises of AGT on rent for the Appellant Company. Admittedly in this board meeting K C Nuwal was not present. According to Ld. Sr. Counsel for the Appellant in the agenda of the board meeting one of the item for discussion was to take the AGT premises on rent and the agenda was served on K C Nuwal. Therefore, even if, he was not present in the meeting, it be presumed that constructively he was present in the meeting - K C Nuwal has not contravened the provisions of Section 184(2) of the Act. Therefore, he is not liable for the consequences as provided under Section 167 (1) (c) and (d) of the Act. Whether the Tribunal ordered for reinstatement of K C Nuwal as director under Section 242 (4) of the Act? - HELD THAT - The Tribunal by the impugned order issued an injunction from implementation of notice dated 30.07.2020. The Tribunal has not passed any order of reinstatement of K C Nuwal as director. The Tribunal while exercising the powers under Section 242 (4) of the Act, on the Application of any party to the proceedings, make any interim order which he thinks fit for regulating the conduct of the company affairs upon such terms and condition as appear it to be just and equitable. In the facts of the present case the interim order is just and equitable. Whether without deciding the issue of quasi partnership, such interim relief cannot be granted? - HELD THAT - It is argued on behalf of the Appellant that Ld. Tribunal without giving finding that the Appellant Company is a quasi partnership could not grant interim relief, as prayed by K C Nuwal - We are unable to convince with this argument, while granting the interim relief Ld. Tribunal has only examined the legality of the letter (notice) dated 30.07.2020 and granted the relief in reference to this letter. Appeal dismissed.
Issues Involved:
1. Compliance with Section 184(1) of the Companies Act, 2013. 2. Compliance with Section 184(2) of the Companies Act, 2013. 3. Reinstatement of K C Nuwal as Director under Section 242(4) of the Companies Act, 2013. 4. Granting interim relief without deciding the issue of quasi-partnership. Detailed Analysis: Issue No. (i): Compliance with Section 184(1) of the Companies Act, 2013 The core issue revolves around whether K C Nuwal contravened Section 184(1) of the Act. The controversy began when the Company Secretary (CS) sent an email on 31.07.2020 stating that K C Nuwal failed to disclose his interest in AG Technologies Pvt. Ltd. (AGT) in the requisite format (Form MBP-1) after acquiring shares on 02.05.2019. However, evidence shows that K C Nuwal informed the CS via email on 03.05.2019 about his directorship in AGT and later about his shareholding on 28.06.2019. The Tribunal found that the CS should have assisted K C Nuwal in filing the proper form. Thus, while K C Nuwal did not use the prescribed form, he substantially complied with the disclosure requirements. Non-compliance with Section 184(1) does not lead to automatic vacation of office under Section 167 of the Act but may result in penalties under Section 184(4). Issue No. (ii): Compliance with Section 184(2) of the Companies Act, 2013 Section 184(2) mandates that a director must disclose their interest in a contract or arrangement at the board meeting where it is discussed. The board meeting on 07.11.2019 involved a decision to rent premises from AGT, where K C Nuwal held an interest. Although K C Nuwal was not present at this meeting, other directors, including S N Nuwal and Manish Nuwal, were aware of his interest and did not object. Therefore, the Tribunal concluded that K C Nuwal did not contravene Section 184(2) and is not subject to the consequences under Section 167(1)(c) and (d). Issue No. (iii): Reinstatement of K C Nuwal as Director under Section 242(4) of the Companies Act, 2013 The Tribunal issued an injunction against the implementation of the notice dated 30.07.2020, which claimed that K C Nuwal had vacated his office as director. The Tribunal did not order reinstatement but rather prevented the enforcement of the notice. Under Section 242(4), the Tribunal can make interim orders to regulate company affairs if deemed just and equitable. The Tribunal found the interim order appropriate in this context. Issue No. (iv): Granting interim relief without deciding the issue of quasi-partnership The Appellant argued that interim relief should not be granted without first determining whether the company is a quasi-partnership. The Tribunal, however, focused on the legality of the notice dated 30.07.2020 and granted relief accordingly. The Tribunal will examine the main petition independently, without being influenced by this interim order. Conclusion The Tribunal found that K C Nuwal had substantially complied with Section 184(1) and did not contravene Section 184(2). The interim relief granted was deemed just and equitable, focusing on the legality of the notice rather than the quasi-partnership issue. The appeal was dismissed, and the interim order vacated.
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