Board can appoint independent director above 75 without prior shareholder approval under Regulation 17(1A)

The Securities Appellate Tribunal, Mumbai held that a board of directors can appoint a person above 75 years as additional non-executive independent director without prior shareholder approval through special resolution. The appointment must be subsequently approved by shareholders within three months or by the next AGM, whichever is earlier. The Tribunal ruled that Regulation 17(1A) of LODR Regulations should be read harmoniously with Companies Act provisions, allowing board appointment subject to later shareholder ratification. BSE and NSE penalties for alleged regulatory violation were deemed improper as the company complied by obtaining shareholder approval within the prescribed timeframe.

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Issues Involved:
- Compliance with Regulation 17(1A) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 regarding the appointment of an additional director.

Summary:
The appeal was filed against fines imposed by BSE and NSE for alleged non-compliance with Regulation 17(1A) of the LODR Regulations due to the appointment of Mr. Swaminathan Sivaram as an additional director without prior approval. The appellant company, a public limited company listed on BSE and NSE, had a board composition in accordance with the LODR Regulations, including independent directors. The Nomination and Remuneration Committee recommended Mr. Sivaram's appointment, which was approved by a special resolution at the 36th Annual General Meeting. The core issue was whether approval was required before appointing a person over 75 years old as a director.

The tribunal analyzed relevant provisions of the Companies Act and LODR Regulations. While directors must be appointed by shareholders in the Annual General Meeting, the board can appoint an additional director until the next AGM. Regulation 17(1A) mandates a special resolution for appointing a director over 75 years old, to be approved within three months. The tribunal noted that the appointment of Mr. Sivaram was made by the board and subsequently approved by members within the specified timeframe, aligning with the regulations.

Referring to a previous case, the tribunal clarified that prior shareholder approval through a special resolution was not a prerequisite for appointing a non-executive independent director. Harmonizing Regulation 17(1A) and 17(1C) with relevant sections of the Companies Act, the tribunal concluded that the appointments were made in compliance with the regulations. Consequently, the fines imposed by BSE and NSE were deemed unjustified, and the impugned orders were quashed. The appeals were allowed with no costs awarded.

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