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TMI Blog2006 (11) TMI 340X X X X Extracts X X X X X X X X Extracts X X X X ..... he administration of the affairs of M/s. Anupama Homes India Private Limited, the petitioners filed O.S. No. 696 of 2003, in the Court of 1st Senior Civil Judge, City Civil Court, Hyderabad. Respondents 1 and 2 are Directors, and others are associated with the affairs of the company. Two interlocutory applications filed in the said suit gave rise to filing of three revisions before this Court, viz. C.R.P. Nos. 5768, 5792 and 6756 of 2003. Through a common order, dated 19-7-2005, this Court, disposed of the revisions, directing inter alia, that pending the disposal of the suit, the affairs of the company shall be run and conducted, with the participation of the petitioners 1 and 2 and respondents 1 and 2, as directors, and that the day-to-da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to verification of qualification, when a person is inducted as a Director, but also to those who upheld the office. By making reference to clause (f) of the said provision, he contends that no other interpretation would be inconsistent, with the object sought to be achieved. 6. Sri S.R. Ashok, learned senior counsel for the 1st respondent, on the other hand, submits that though it is a matter of record that the 1st respondent was sentenced to imprisonment in C.C. Nos. 76 and 77 of 2003, the same does not entail in cessation of the office held by him, in view of the specific provision contained in sub-section (2) of section 283 of the Act. He submits that when the Act itself maintains clear distinction between the two situations, covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctor of a Company. It reads as under : "274. Disqualifications of directors.-(1) A person shall not be capable of being appointed director of a company, if- (a)he has been found to be of unsound mind by a Court of competent jurisdiction and the finding is in force; (b)he is an undischarged insolvent; (c)he has applied to be adjudicated as an insolvent and his application is pending; (d)he has been convicted by a Court of any offence involving moral turpitude and sentenced in respect thereof to imprisonment for not less than six months, and a period of five years has not elapsed from the date of expiry of the sentence; (e)he has not paid any call in respect of shares of the company held by him, whether alone or jointly with others, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f, become relevant, in this regard. The provision reads as under : "283. Vacation of office by directors.-(1) The office of a director shall become vacant if- (a )he fails to obtain within the time specified in sub-section (1) of section 270, or at any time thereafter ceases to hold, the share qualification, if any, required of him by the articles of the company; (b)he is found to be of unsound mind by a Court of competent jurisdiction; (c )he applies to be adjudicated an insolvent; (d)he is adjudged an insolvent; (e )he is convicted by a Court of any offence involving moral turpitude and sentenced in respect thereof to imprisonment for not less than six months; (f)to (l)****** (2) Notwithstanding anything in clauses ( d), (e) and ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an appellate forum the disqualification shall not take effect till expiry of 7 days, from the date on which the appeal has been disposed of, irrespective of the fact whether the appellate Forum had granted any order of stay or suspension. 10. From the above, it is clear that the Act maintains a distinction and dichotomy, as to the operation of disqualification, at the time of appointment of an individual as Director, on the one hand, and vacation of office by an existing Director, on the other hand, as a result of the disqualification suffered, in either case. While section 274 of the Act governs the matter, at the time of appointment of an individual as Director, section 283 gets attracted, in the matter of attaching disqualification to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , where a member of such body incurs such disqualification while in office, a different procedure is prescribed under sections 22 and 17, respectively, of the said enactments. Even where such disqualification is noticed, the concerned executive officer is placed under obligation, to inform the same to the prescribed authority, who in turn is required to institute proceedings before the stipulated Court, for adjudication. The provisions also mandate that pending such adjudication, the member shall continue to hold the office. 12. From the above discussion, it becomes evident that though the 1st respondent had been sentenced to imprisonment, and incurred disquali- fication under sections 274(1)(d) and 283(1)(e) of the Act, he cannot be compe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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