2015 (8) TMI 90 - HC - Companies Law

Setting lower and upper age limit for appointments and continued employment of Managing Directors Section 196(3)(a) of Companies Act, 2013 - Whether person attaining age of 70 was eligible for continued employment Held that - Vested right would arise only if Appellant had actually been appointed Merely because additional eligibility condition was laid down, it does not mean that any vested right of Appellants was affected, nor does it mean that Regulation laying down such minimum eligibility condition would be retrospective in operation On closer reading of Section proviso tells us age of 70 is not an absolute bar Public limited company may well appoint person of 80 years of age as Managing Director; all that is needed is special resolution Clearly in view of sections 196, 269(2) and 267, there was no discontinuance of Managing Directorship at age of 70; section applied only to his appointment (and that includes his reappointment) Section 196(3) does not interrupt appointment of Managing Director where at date of such appointment or re-appointment Managing Director was below age of 70 years but crossed that age during his tenure Word continue , therefore, must be read contextually Decision in the case of P. Suseela & Ors. v. University Grants Commission & Ors. 2015 (8) TMI 69 - SUPREME COURT followed - Decided against Appellant.

Summary

Issues Involved:
1. Whether Section 196(3)(a) of the Companies Act, 2013 applies retrospectively to terminate the appointment of a Managing Director upon attaining the age of 70.
2. The interpretation of the term "continue" within Section 196(3)(a) of the Companies Act, 2013.
3. Whether a special resolution is required for the continuation of a Managing Director who attains the age of 70 during their tenure.

Issue-Wise Detailed Analysis:

1. Retrospective Application of Section 196(3)(a):
The primary issue was whether the newly introduced Section 196(3)(a) of the Companies Act, 2013, which sets an upper age limit of 70 years for the appointment and continued employment of Managing Directors, applies retrospectively to terminate existing appointments. The Plaintiff argued that the 2nd Defendant's term as Managing Director ended by operation of law upon him attaining the age of 70 on 11th November 2014. However, the defense contended that the 2013 Act cannot have retrospective operation unless explicitly stated. The judgment concluded that the 2013 Act does not operate retrospectively to terminate the appointment of a Managing Director who was appointed before the Act came into force.

2. Interpretation of "Continue" in Section 196(3)(a):
The court analyzed the word "continue" in the context of Section 196(3)(a). The Plaintiff argued that the term implied an automatic cessation of the Managing Director's role upon reaching the age of 70. The defense, however, argued that the term "continue" should be interpreted to mean that a special resolution is required only for appointments or reappointments of individuals over 70 years of age, not for the continuation of an existing tenure. The court agreed with the defense, stating that the word "continue" in Section 196(3)(a) should be read to mean "appointment" and "reappointment," and not as an automatic disqualification upon reaching the age of 70.

3. Requirement of Special Resolution:
The court examined whether a special resolution is necessary for a Managing Director who attains the age of 70 during their tenure. The Plaintiff contended that a special resolution should be passed to justify the continuation of a Managing Director over the age of 70. The court noted that the proviso to Section 196(3)(a) allows for the appointment of individuals over 70 years of age through a special resolution, indicating that the age limit is not an absolute bar. The judgment concluded that a special resolution is required only at the time of appointment or reappointment of a Managing Director who is over 70 years old, not for the continuation of an existing term.

Conclusion:
The court held that Section 196(3)(a) of the Companies Act, 2013 does not apply retrospectively to terminate the appointment of a Managing Director who was appointed before the Act came into force. The term "continue" in Section 196(3)(a) should be interpreted to mean "appointment" and "reappointment," not an automatic cessation of the role upon reaching the age of 70. Consequently, a special resolution is required only for the appointment or reappointment of a Managing Director over the age of 70, not for the continuation of an existing tenure. The Plaintiff's request for interim relief was dismissed, and the Notice of Motion was denied.