Tribunal Quashes NCLT Order, Dismisses Director, Appoints Mediator

The Tribunal quashed the interim order by the NCLT, directing the 2nd respondent to continue as a director and staying the appointment of the 3rd respondent. All decisions made post 12.10.2017 were set aside. An independent director was to be appointed to ensure compliance and mediate disputes, with a casting vote in case of disagreements. The issues of disqualification and the legality of the 3rd respondent's appointment remained pending for further determination.

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Issues Involved:
1. Disqualification of the 2nd respondent as a director.
2. Legality of the appointment of the 3rd respondent as an additional director.
3. Validity of the Board Meeting and resolutions passed on 12.10.2017.
4. Interim relief and status quo ante ordered by the National Company Law Tribunal (NCLT).

Issue-Wise Detailed Analysis:

1. Disqualification of the 2nd Respondent as a Director:
The appellant argued that the 2nd respondent was disqualified under Section 164(2)(a) of the Companies Act, 2013, which led to the vacancy of his office as a director. The 2nd respondent, however, contended that the disqualification was an error by the Registrar of Companies (ROC) and had been subsequently removed. The Tribunal noted that the disqualification of the 2nd respondent was an apparent error and that his rights as a director could not be stripped based on this error. The Tribunal emphasized that the issue of whether the disqualification was valid in fact and law was yet to be decided.

2. Legality of the Appointment of the 3rd Respondent as an Additional Director:
The appellant appointed the 3rd respondent as an additional director under Section 174(2) of the Companies Act, 2013, claiming that it was necessary to ensure the Board's functionality after the 2nd respondent's disqualification. The 2nd respondent argued that this appointment was illegal as it was done via email without a proper Board Meeting. The Tribunal highlighted that whether the appointment complied with legal provisions was yet to be determined and that fairness required consultation with the 2nd respondent, given the equal shareholding between the parties.

3. Validity of the Board Meeting and Resolutions Passed on 12.10.2017:
The 2nd respondent challenged the validity of the Board Meeting held on 12.10.2017, claiming no notice was given to him, and the resolutions passed were illegal and against the company's interest. The Tribunal observed that the decisions taken by the newly constituted Board, including the appointment of the 3rd respondent, were tainted with illegality. The Tribunal directed that the status quo ante 12.10.2017 be restored, setting aside all decisions taken subsequent to that date.

4. Interim Relief and Status Quo Ante Ordered by the NCLT:
The NCLT granted interim relief by restoring the status quo ante 12.10.2017, which the appellant challenged as a final order passed at an interim stage. The Tribunal, while quashing the impugned order, directed that the 2nd respondent would continue as a director along with the appellant, and the appointment of the 3rd respondent was stayed. The Tribunal also stayed the decisions taken by the original Respondent No.2 and 3 subsequent to 12.10.2017. To balance equities, the Tribunal requested the NCLT to appoint an independent director to ensure compliance with the Companies Act and Rules, granting the independent director a casting vote in case of disagreements between the parties.

Conclusion:
The Tribunal quashed the NCLT's interim order, emphasizing that the disqualification issue and the legality of the 3rd respondent's appointment were yet to be decided. The Tribunal directed the continuation of the 2nd respondent as a director and stayed the appointment of the 3rd respondent, as well as the decisions taken after 12.10.2017. An independent director was to be appointed to oversee compliance and mediate disagreements, ensuring the company's interests were safeguarded.

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