Invalid circular resolutions: failure to circulate drafts to all directors renders board action void under company law.

Circular resolutions are invalid where draft resolutions are not circulated to all directors in the manner required by section 175, the mandatory secretarial standards under section 118(10), and the articles of association; that defect goes to the root of the process and renders the resolutions void in law. A request to continue an interim committee to manage day-to-day affairs was treated as otiose because later resignation and cessation of directors left no practical basis for the relief. Alleged contempt for breach of the interim stay order did not result in punishment, as wilful disobedience was not established to the tribunal's satisfaction.

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Issues: (i) Whether the circular resolutions dated 03.11.2020 were validly passed in accordance with the Companies Act, the secretarial standards and the articles of association; (ii) whether the request to sustain an interim committee to run the company's day-to-day affairs survived in view of later developments; (iii) whether contempt should be imposed for alleged breach of the interim stay order.

Issue (i): Whether the circular resolutions dated 03.11.2020 were validly passed in accordance with the Companies Act, the secretarial standards and the articles of association.

Analysis: Section 175 of the Companies Act, 2013 requires circulation of draft resolutions to all directors and approval by the required majority. Section 118(10) of the Companies Act, 2013 makes observance of secretarial standards mandatory. The articles of association also required proper written approval by the board majority. The circular resolutions were found not to have been circulated in draft to the appellant as required, and this defect was treated as going to the root of the matter.

Conclusion: The circular resolutions were held to be void in law and invalid.

Issue (ii): Whether the request to sustain an interim committee to run the company's day-to-day affairs survived in view of later developments.

Analysis: The relief relating to an interim committee was examined against the subsequent resignation and cessation of directors and the absence of any existing interim committee. In that factual setting, the proposed committee no longer had any practical utility.

Conclusion: The relief concerning the interim committee was held to be otiose and nugatory.

Issue (iii): Whether contempt should be imposed for alleged breach of the interim stay order.

Analysis: The standards governing contempt require clear wilful disobedience. Although the conduct complained of was disapproved, the tribunal declined to impose punishment and instead issued an advisory direction, taking into account the later factual position and the limited utility of the stayed resolutions.

Conclusion: No punishment or fine was imposed in the contempt application.

Final Conclusion: The appeal was disposed of with a declaration that the circular resolutions were invalid, while the remaining relief relating to the interim committee and the contempt request did not result in penal consequences.

Ratio Decidendi: A circular resolution is invalid where draft circulation is not made to all directors in the manner mandated by the statute, the secretarial standards and the articles, and a relief that has lost practical efficacy because of subsequent events may be treated as otiose.

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