2021 (2) TMI 1390 - SCH - Companies Law

Impleadment of Independent Directors in proceedings - non-application of mind by NCLT and the NCLAT to the role of the appellants in regard to their position as Independent Directors - HELD THAT - Neither before the NCLT nor before the NCLAT has there been an appropriate and due application of mind to the facts pertaining to the appellants before an order impleading them was passed. Insofar as the NCLT is concerned there is an observation to the effect that the second SFIO report does not implicate the role of the Independent Directors. In the concluding paragraph of the decision the NCLT noted the position relating to two other Independent Directors who were stated to be members of the Audit Committee of IFIN. On that basis an order of impleading the appellants was passed together with the proposed respondents. The NCLAT on the other hand has stated that it was primarily considering the facts of the auditors Deloitte Haskins Sells LLP treating that the appeal raised the same questions of law. The ends of justice would be met if an order of remand is passed requiring the NCLT to apply its mind to the issue as to whether the appellants should be impleaded. Undoubtedly Independent Directors have a vital role as is indicated by the provisions of the Companies Act 2013. While Independent Directors are intended to be independent they cannot remain indifferent to the position of the company. Since however the NCLT and NCLAT have not devoted due consideration to the role position and allegations against the appellants the proceedings remanded only in relation to them. This will not affect the impleading of others. Application disposed off.

Summary

Issues:
1. Impleadment of Independent Directors in proceedings relating to a company.
2. Application of mind by NCLT and NCLAT regarding the role of Independent Directors.
3. Liability of Independent Directors under Section 149 of the Companies Act 2013.
4. Remand order for appropriate consideration of impleading Independent Directors.

Analysis:
The judgment pertains to two appeals arising from a decision of the National Company Law Tribunal (NCLT) regarding the impleadment of Independent Directors in proceedings related to a company. The NCLT directed the impleadment of several individuals, including the appellants who were Independent Directors of the company. The NCLT observed that the role of the appellants was not specified in the SFIO report but noted that other Independent Directors who were part of the Audit Committee were also impleaded. The NCLAT, in its order, primarily focused on the arguments presented in another case but did not adequately consider the specific role of the appellants as Independent Directors.

The appellants contended that neither the NCLT nor the NCLAT had properly assessed their roles as Independent Directors. The respondents relied on Section 149(12) of the Companies Act 2013, emphasizing that Independent Directors can be held liable for acts of omission or commission if they occurred with their knowledge, consent, or connivance. The judgment highlighted a circular issued by the Ministry of Corporate Affairs concerning the liability of Independent Directors.

The Supreme Court found that there was a lack of appropriate consideration by both the NCLT and NCLAT regarding the role and allegations against the appellants before ordering their impleadment. Recognizing the crucial role of Independent Directors, the Court emphasized that they cannot be indifferent to the company's affairs. As a result, the Court remanded the case back to the NCLT for a fresh decision on whether the appellants should be impleaded, within a specified timeframe. The judgment clarified that this decision did not impact the impleading of other parties and refrained from expressing any opinion on the merits of the arguments presented. The appeals were allowed, setting aside the NCLAT's order and directing a fresh consideration by the NCLT solely concerning the appellants' impleadment.