Tribunal Invalidates Director Appointments, Orders Removals & Investigations

The Tribunal declared the appointments of certain directors invalid due to statutory non-compliance, ordering their immediate removal. A director's resignation was deemed effective from the date of submission to the company, leading to her removal. Disqualification of directors was deferred pending a regulatory report, while others were ordered to vacate their positions for violations. An inquiry into mismanagement was directed, and the conduct of Annual General Meetings was postponed. The Ministry of Corporate Affairs was tasked with further investigation. The application was partially allowed, resulting in removals, disqualifications, and investigative directions.

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Issues Involved:
1. Validity of the appointment of certain directors.
2. Resignation and continuation of a director.
3. Alleged disqualification of directors due to statutory non-compliance.
4. Allegations of mismanagement and oppression.
5. Conduct of Annual General Meetings (AGMs).

Detailed Analysis:

1. Validity of the Appointment of Certain Directors:
The applicants challenged the appointment of six directors (R7, R8, R9, R4, R12, R13) by the Board of Directors in meetings dated 13-12-2017 and 06-02-2019, claiming these appointments were in violation of Article 5 of the Company's Articles of Association and Section 161 of the Companies Act, 2013. The Tribunal found that the Articles of Association only allowed the Board to fill casual vacancies, which were not present at the time of these appointments. Therefore, the appointments were declared ultra vires and illegal, and the directors were ordered to be removed from the Board with immediate effect.

2. Resignation and Continuation of a Director:
The applicants contended that R11 had resigned on 26-06-2018 but continued to act as a director. The Tribunal noted that under Section 168 of the Companies Act, 2013, a director's resignation takes effect upon receipt by the company. The Tribunal found that R11's resignation was effective from 26-06-2018, and her continuation as a director was void ab initio. Therefore, she was ordered to be removed from the Board with immediate effect.

3. Alleged Disqualification of Directors Due to Statutory Non-Compliance:
The applicants alleged that R10 and other directors were disqualified under Sections 167 and 283(1)(h) of the Companies Act, 1956, due to non-compliance with statutory requirements. The Tribunal noted that the Registrar of Companies (ROC) had initiated an inquiry against R10, and the report was pending approval. Therefore, the Tribunal deferred the decision on R10's disqualification until the main Company Petition is heard. However, the Tribunal found that R4 and R15 had violated Section 295 of the Companies Act, 1956, by giving advances without prior approval of the Central Government. Consequently, they were ordered to vacate their offices and their Director Identification Numbers (DINs) were to be blocked.

4. Allegations of Mismanagement and Oppression:
The applicants claimed that the current management was prejudicial to the company's interests and in violation of various court directions. The Tribunal found that the term of the present Board had expired, and the ROC had refused to extend the AGM. The Tribunal directed the Ministry of Corporate Affairs to conduct an inquiry into the current directors' status and file a report to decide the main Company Petition.

5. Conduct of Annual General Meetings (AGMs):
The Tribunal noted that the last AGM was held on 07-12-2017, and subsequent attempts to conduct AGMs were hindered due to non-cooperation by the Board of Directors. The Tribunal had appointed independent chairpersons to conduct the AGMs, but they resigned due to non-cooperation. The Tribunal deferred the decision on the conduct of AGMs until the main Company Petition is heard.

Order:
i. The appointments of R7, R8, and R9 were declared invalid and they were ordered to be removed from the Board with immediate effect.
ii. The declaration sought against R10 was deferred pending the ROC's report. R4 and R15 were ordered to vacate their offices.
iii. R11's resignation was effective from 26-06-2018, and she was ordered to be removed from the Board.
iv. R4, R5, and R15 were found disqualified under Section 283(1)(h) of the Companies Act, 1956, and their DINs were to be blocked.
v. The Ministry of Corporate Affairs was directed to conduct an inquiry into the current directors and file a report.
vi. The Registry was directed to furnish a copy of the order to the Ministry of Corporate Affairs.

Conclusion:
IA 150/KOB/2020 was allowed to the extent specified above, with detailed orders for the removal and disqualification of certain directors and directions for further inquiry by the Ministry of Corporate Affairs.

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