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2023 (3) TMI 178 - AT - Companies LawCircular Resolutions - the main grievance of the Appellants / Petitioners is that the Circular Resolutions, are not duly circulated to all the Directors, as per Section 175 of the Companies Act, 2013, these Resolutions, were contrary to the clause 6.2 of the Secretarial Standard 1, on the Meetings of the Board of Directors, and in Violation of the Articles of Association of the Company. HELD THAT - In reality, Section 175 of the Companies Act, 2013, provides that no Resolution, shall be deemed to have been duly passed by the Board, or by a Committee, by circulation, was circulated in Draft, all the Directors or Members of the Committee, at their addresses, registered with the Company in India, and was approved by a Majority. This Tribunal, points out Clause 22.4 of the Articles of Association of the Company, clearly mentions that A Circular Resolution, shall be deemed to have been duly passed by the Board, if it has been approved in writing (which would include confirmation via electronic or other means) by a majority of directors constituting the Board for the time being - Also that, Section 118 (10) of the Companies Act, 2013, enjoins that Every company shall observe secretarial standards with respect to general and Board meetings specified by the Institute of Company Secretaries of India constituted under Section 3 of the Company Secretaries Act, 1980 (56 of 1980), and approved as such by the Central Government. Furthermore, it is latently and patently quite clear that, as per Article 21.3 of the Articles of Association, the Majority, includes the consent of the 1st Appellant. That apart, as per Secretarial Standards-1 clause 6, the Circular Resolutions, have the same effect, as that of passed in the Board Meeting and hence, the Majority Vote, as applicable, for the Board Meeting, equally applies, to the Resolutions, passed by the Circulation, as well - the Circular Resolutions, cannot be said to have been duly approved, by the Majority Directors, and hence, this Tribunal, holds that the said Resolutions, are Void in Law. This Tribunal, keeping in mind of the divergent contentions, raised on either side and taking note of the facts and circumstances of the case, in a conspectus fashion, without any haziness, holds that the Circular Resolutions No. 1 to 6 dated 03.11.2020, are Void in Law. Appeal disposed off.
Issues Involved:
1. Validity of Circular Resolutions. 2. Compliance with Secretarial Standards and Articles of Association. 3. Role and authority of Interim Judicial Manager (IJM). 4. Allegations of oppression and mismanagement. 5. Formation and function of an Interim Committee. 6. Contempt of court for non-compliance with interim stay orders. Detailed Analysis: 1. Validity of Circular Resolutions: The Appellants argued that the Circular Resolutions dated 03.11.2020 were void as they were not properly circulated to all Directors, violating Section 175 of the Companies Act, 2013, Secretarial Standard-1, and the Articles of Association of the Company. The Tribunal held that the Circular Resolutions were not circulated to the 1st Appellant in draft form, leading to a violation of Section 175(1) of the Companies Act, 2013, and non-compliance with clause 6.2 of the Secretarial Standard-1. Consequently, the Circular Resolutions were declared void in law. 2. Compliance with Secretarial Standards and Articles of Association: The Tribunal emphasized the mandatory nature of Secretarial Standards under Section 118(10) of the Companies Act, 2013. It was found that the Circular Resolutions did not adhere to the required procedures, including the necessity for approval by a majority of Directors as stipulated in Clause 22.4 of the Articles of Association. The Tribunal concluded that the non-compliance with these standards rendered the resolutions invalid. 3. Role and Authority of Interim Judicial Manager (IJM): The Appellants contended that the IJM, appointed by a foreign court, should not have control over the Indian subsidiary. The Tribunal noted that the Judicial Management Process of the parent company had been overridden by liquidation proceedings, and the role of the IJM was replaced by a Liquidator. Therefore, the Circular Resolutions related to the IJM no longer served any purpose and were rendered otiose. 4. Allegations of Oppression and Mismanagement: The Appellants alleged that the Respondents' actions, including the removal of the 1st Appellant from the Board and the control exerted by the IJM, constituted oppression and mismanagement. The Tribunal acknowledged these allegations but focused on the procedural lapses in the Circular Resolutions. The Tribunal did not delve into the merits of the oppression and mismanagement claims, leaving them to be addressed in the main Company Petition (CP/794/2020). 5. Formation and Function of an Interim Committee: The Tribunal noted that the National Company Law Tribunal (NCLT) had suggested the formation of an Interim Committee to manage the day-to-day affairs of the Company. However, due to subsequent resignations of several Directors, including those who were part of the Interim Committee, the Tribunal found that no such committee existed as of the current date. The relief regarding the Interim Committee was deemed nugatory and otiose. 6. Contempt of Court for Non-Compliance with Interim Stay Orders: The Appellants filed a Contempt Petition (IA No. 195 of 2021) alleging that the 9th Respondent violated the interim stay order dated 23.04.2021 by attempting to sell the Company's assets. The Tribunal acknowledged the seriousness of the contempt allegations but refrained from imposing punishment. Instead, it issued an advisory direction to the 9th Respondent to act with utmost prudence and diligence in the future, emphasizing the importance of adhering to court orders. Conclusion: The Tribunal declared the Circular Resolutions dated 03.11.2020 void in law due to procedural violations. It recognized that the relief regarding the formation of an Interim Committee had become otiose due to subsequent developments. The Contempt Petition was disposed of with an advisory direction to the 9th Respondent to ensure compliance with judicial orders. The main Company Petition (CP/794/2020) will proceed with the opportunity for all parties to present their factual and legal arguments.
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