Shareholder locus standi and continuing director disqualification: amended company law applies to existing directors after rescheduled repayment dates.

Shareholders were treated as having locus standi to challenge the proposed appointment of directors allegedly disqualified by law, because they have a direct interest in lawful company management. The article also explains that section 274(1)(g) of the Companies Act, 1956 was construed to apply to existing directors where default had already commenced and continued after the amendment. It further notes that a lawful rescheduling of repayment under the RBI Act altered the due date for computing the statutory period of default, so the rescheduled date governed disqualification.

---

---

Issues: (i) Whether shareholders had locus standi to challenge the proposed appointment of directors alleged to be disqualified; (ii) whether section 274(1)(g) of the Companies Act, 1956 applied to directors who were already in office when the amendment came into force, and whether the Company Law Board's rescheduling order affected the computation of the default period.

Issue (i): Whether shareholders had locus standi to challenge the proposed appointment of directors alleged to be disqualified.

Analysis: Shareholders have a direct and legitimate interest in the lawful management of a company and in ensuring that persons proposed to be appointed as directors are not disqualified by law. The presence of tainted or disqualified directors may adversely affect the company and its stakeholders, and the challenge was not confined to a private dispute.

Conclusion: The shareholders had locus standi.

Issue (ii): Whether section 274(1)(g) of the Companies Act, 1956 applied to directors who were already in office when the amendment came into force, and whether the Company Law Board's rescheduling order affected the computation of the default period.

Analysis: The provision was construed on its plain language, particularly the expressions that the person "is already a director" and that the company "has failed to repay" its deposits. Those words were held to indicate that the amendment operated on existing directors where the default had already commenced and continued after commencement of the amendment. The Court further held that an order under section 45QA(2) of the Reserve Bank of India Act, 1934 rescheduling repayment modified the contractual due date, and the one-year period of continuing default had to be reckoned from the rescheduled date. On the facts, the company remained in default and the respondents continued to attract the disqualification.

Conclusion: Section 274(1)(g) applied to the respondents, and the Company Law Board's rescheduling order did not prevent disqualification.

Final Conclusion: The challenge to vacate the status quo failed, and the interim protection was continued pending disposal of the suit.

Ratio Decidendi: A statutory disqualification provision may apply to existing directors where the language of the amendment plainly indicates present and continuing default, and a lawful rescheduling of repayment alters the due date for computing the statutory period of default.

---