Tribunal requires CFO candidates to meet eligibility criteria under Companies Act, 2013. NCLT decision set aside.

The tribunal concluded that all CFO candidates must meet the eligibility criteria under section 203 of the Companies Act, 2013. It found the NCLT erred in solely relying on Article 140 of the AoA without considering the Act's provisions. The tribunal set aside the Impugned Order, directing valid CFO nominations within sixty days in compliance with the Companies Act, 2013. The judgment's comments do not impact the main company petition before the NCLT, and no costs were ordered.

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Issues Involved:
1. Applicability of Article 140 of the Articles of Association (AoA) versus the Companies Act, 2013 in the appointment of the Chief Financial Officer (CFO).
2. Eligibility of the nominated candidates for the position of CFO under the Companies Act, 2013.

Issue-Wise Detailed Analysis:

1. Applicability of Article 140 of the AoA versus the Companies Act, 2013:

The primary issue revolves around whether Article 140 of the AoA is the sole provision governing the appointment of the CFO in the R-2 Company, or if the provisions of the Companies Act, 2013, particularly sections 203, 184, and 189, must also be considered.

The tribunal noted that Article 140 of the AoA allows Rose Investments (R-1) to nominate a person for the position of CFO. If the Joint Venture (JV) partners reject the first and second nominations, they must accept the third nomination. However, Article 140 does not specify eligibility criteria for the CFO position.

The tribunal emphasized that section 6 of the Companies Act, 2013, stipulates that the provisions of the Act shall override any contrary provisions in the AoA. Sections 184, 189, and 203 of the Act provide rational and reasonable norms for the eligibility of Key Managerial Personnel (KMP), including the CFO, ensuring transparency and unbiased management.

2. Eligibility of the Nominated Candidates for CFO:

The eligibility of the nominated candidates, Mr. Devendra Mehta and Mr. Venkataraman Subramanian, was questioned based on their employment status with their parent companies, Alvarez and Marsal India Private Limited (A&M) and Deloitte Touche Tohmatsu India LLP (DTT), respectively. The tribunal found that both candidates were proposed under 'secondment' arrangements, where they would continue to be employed by their parent companies and not be whole-time employees of R-2 Company, contravening section 203(3) of the Companies Act, 2013, which requires the CFO to be a whole-time KMP.

The third candidate, Mr. Bipin Kabra, was also scrutinized. The tribunal noted that Mr. Kabra held directorships in multiple companies and was the Managing Director of Eunoia Financial Services Private Limited. The tribunal pointed out that Mr. Kabra's affidavit did not explicitly state his resignation from these positions, which could contravene section 203(3) of the Act.

Conclusion:

The tribunal concluded that all suggested candidates must satisfy the basic eligibility conditions under section 203 of the Companies Act, 2013, to ensure the proper and professional appointment of the CFO. The tribunal found that the NCLT erred in interpreting Article 140 of the AoA without considering the eligibility criteria under the Companies Act. Consequently, the tribunal set aside the Impugned Order and directed the parties to make valid nominations for the CFO position, keeping in view section 203 of the Companies Act, 2013, and complete the appointment within sixty days from the date of the order.

Clarification:

The tribunal clarified that any comments or views in this judgment should not affect the main company petition pending before the NCLT. There was no order regarding costs.

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