Company articles amended in 2014 lacked unanimous approval, making 2019 changes through special resolution valid under Section 113

NCLAT ruled that amendments to Articles 59 and 60 made in 2014 were not entrenched articles under Companies Act 2013, as they lacked unanimous member approval required for entrenchment. The tribunal held that subsequent amendments and deletions in 2019 were validly done through special resolution, not requiring all members' agreement. NCLAT confirmed that Section 113 nominees must exercise powers per board decisions unless given discretion. The court upheld the 2019 meeting approval and directed NCLT to expeditiously decide the pending company petition within six months.

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Issues Involved:
1. Whether the amendments made in the Articles of Association in the EOGM held on 30.09.2014 were to be treated as entrenched Articles under Section 5, sub-sections (3) and (4) of the Companies Act, 2013.
2. Whether the amendment of Articles 59 and deletion of Article 60 could be done by a special resolution as passed in the EOGM dated 03.05.2019 or required agreement by all members of the company.
3. Whether the Adjudicating Authority committed an error in approving the meeting held on 03.05.2019.
4. Whether a nominee under Section 113 of the Companies Act is bound to exercise his powers as per the decision of the Board of the Company.
5. Whether the result of the AGM held on 29.09.2023 on Resolution No. 4 with regard to the reappointment of Deepak as Executive Chairman of the FCL needs to be interfered with in this Appeal.
6. The relief, if any, to which the Appellant is entitled in this Appeal.

Detailed Analysis:

Issue 1: Entrenched Articles
The amendments made in the Articles of Association in the AGM held on 30.09.2014, amending Articles 59 and 60, cannot be treated as entrenched Articles under Section 5, sub-sections (3) and (4) of the Companies Act, 2013. The statutory requirement for entrenchment requires agreement by all members of the company, which was not met as only four out of thirteen members were present at the meeting.

Issue 2: Amendment by Special Resolution
The amendment of Article 59 and deletion of Article 60 could be done by a special resolution as passed in the EOGM dated 03.05.2019. There was no requirement for agreement by all members of the company since Articles 59 and 60 were not entrenched Articles. The special resolution passed in the EOGM met the statutory requirements under Section 14 and Section 114 of the Companies Act, 2013.

Issue 3: Approval of the Meeting
The Adjudicating Authority did not commit any error in approving the EOGM held on 03.05.2019. The resolutions passed in the EOGM were in accordance with the provisions of the Companies Act, 2013 and the Articles of Association, as the amendments did not require unanimous agreement from all members.

Issue 4: Nominee's Powers under Section 113
A representative under Section 113 of the Companies Act, 2013 is bound to exercise his representation as per the decision of the Board of the Company. If the Board has not given any specific decision for the exercise of power, the representative is free to exercise his representation as per his will. This ensures that the representative acts as an agent of the company and follows the Board's directions.

Issue 5: Result of AGM on 29.09.2023
The result of the AGM held on 29.09.2023 on Resolution No. 4 regarding the reappointment of Mr. Deepak Chhabria as Executive Chairman of the FCL does not need interference in this Appeal. The voting result showed 72.34% against the resolution and 27.66% in favor, which was declared by the Scrutinizer subject to the outcome of the Appeal.

Issue 6: Relief to the Appellant
The impugned order dated 31.12.2019 passed in MA No. 1449 of 2019 is not interfered with. The NCLT is requested to finally decide the Company Petition No. 47 of 2016 expeditiously, preferably within six months from the date of the copy of this order being produced. The decision of the AGM held on 29.09.2023 on Resolution No. 4 is also not interfered with. The parties shall bear their own costs.

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