2018 (3) TMI 868 - AT - Companies Law

Application before the NCLT seeking facility of attending the Board meetings through video-conferencing - appellant contended that, sub-Rule (2)(e) puts the burden on the Chairperson to ensure that no person other than the concerned Director is attending and this would not be possible for Chairperson to ensure in video-conferencing. - Held that - It would not be appropriate to shut-out these provisions on mere apprehensions. - NCLT took note of the fact that the Company in this matter had all the necessary infrastructure available. The learned Judicial Member took judicial notice of the physical condition of Kaziranga National Park and found that the Company had no reason not to provide the concerned facility. NCLT came to the conclusion that the provisions of Section 173 (2) of the New Act are mandatory and the companies cannot be permitted to make any deviations therefrom. NCLT directed non-applicants before it to provide the facilities as per Section 173(2) of the New Act subject to fulfilling the requirements of Rule 3(3)(e) of the Rules. No reason to interfere with the impugned order. The impugned order must be said to be progressive in the right direction and there is no reason to interfere with the same.

Summary

Issues:
- Interpretation of Section 173(2) of the Companies Act, 2013 regarding participation in Board meetings through video-conferencing.
- Applicability and compliance with Rules for conducting Board meetings through video-conferencing.
- Dispute over the mandatory nature of Section 173(2) and the role of the Chairperson in ensuring compliance.
- Conflict between Secretarial Standards and statutory provisions regarding participation in meetings through video-conferencing.

Analysis:
The judgment revolves around the interpretation and application of Section 173(2) of the Companies Act, 2013, concerning the participation of directors in Board meetings through video-conferencing. The appeal was filed against an order passed by the National Company Law Tribunal (NCLT), which allowed a director's application to attend meetings via video-conferencing under Section 173(2) of the Act. The appellants argued that providing such a facility was not mandatory and raised concerns about ensuring the director's sole presence during video participation.

The Tribunal examined the provisions of Section 173 of the Act and the accompanying Rules. It emphasized that the new provisions introduced in the Act were in the interest of companies and directors, dismissing the appellants' apprehensions about video-conferencing participation. Section 173(2) explicitly allows directors to participate through video-conferencing, with the Rules detailing the procedure for conducting such meetings to safeguard integrity and compliance.

The Tribunal highlighted Rule 3, which outlines the requirements for conducting Board meetings via video-conferencing. It clarified that the use of the term "may" in Section 173(2) provided directors with an option for participation, not companies to deny this right. The Rules mandate compliance with the prescribed procedures, emphasizing the responsibilities of the Chairperson and directors to ensure proper conduct during video-conferencing meetings.

Moreover, the judgment addressed the conflict between Secretarial Standards and statutory provisions. It emphasized that the Rules enforced by the Central Government, in line with Section 173(2), take precedence over any guidelines suggesting participation only if the company provides the facility. The Tribunal upheld the NCLT's order, emphasizing the mandatory nature of Section 173(2) and the importance of complying with the prescribed Rules for conducting Board meetings through video-conferencing.

Ultimately, the Tribunal denied the appeal, endorsing the progressive approach of the NCLT's order and emphasizing the importance of adhering to statutory provisions for ensuring transparency and effective participation in Board meetings.