Whether if no intimation is given by a
director of a company to attend the Board Meeting at the through e-mode at the
beginning of the calendar year, does it prevent him to attend a subsequent
meeting through Video conferencing –No says NCLT
Rupak
Gupta v. U P Hotels Ltd. [2016] 134 CLA 240 (NCLT)
Facts
of the case
Applicant
and his mother were Directors of the Respondent Company. On 28th May,
2016, applicant received a notice for a Board Meeting of the Company to be held
on 4thJune, 2016 having agenda item of selection of a Company Secretary and to
deal with other matters with permission of the Chair. As the selection of
Company Secretary is a major item for the Company, applicant and his mother
were desirous of attending the Board Meeting. However, they had scheduled for
foreign visit for the period ranging from 1stJune, 2016 to 14th June, 2016
and because of this reason applicant and his mother requested for rescheduling
of the Meeting either on or before 1st June, 2016 or after 14thJune, 2016.
In return, Respondent Director assured for rescheduling and fixed the date on
1st June, 2016.
But
on 30th day of May, 2016, another notice for the Board meeting was sent to
the applicant about rescheduling the Board Meeting from 1st June, 2016 to
4th June, 2016. The reason communicated to the Applicant was that the
candidates who had applied for the post of Company Secretary would not be able
to come for an interview on 1st June, 2016 and thus meeting to be held on
4th June, 2016.
Owing
to the importance concerning the position of Company Secretary in the Company,
the Applicant requested for facility to participate in the Board meeting
through video conferencing and the Respondent assured that the same would be
provided. The Applicant and his mother, trusted the Respondent Director’s
assurance, and left for their scheduled trip.
The
Respondent Director, on 3rd June, 2016, sent the Applicant an email
informing him that he and his mother would not be permitted to participate in
the meeting through video conferencing in order to comply with Rule 3(3)(e) of Companies
(Meetings of Board and its Powers) Rules, 2014.
Even
though Applicant sent his staff to arrange for video conferencing through
Skype, the Respondent Director disconnected the Skype facility to prevent the
Applicant and his mother from participating in the Board Meeting.
In
the same Board Meeting they appointed an Independent Director (Additional
Director) of the Company. Further on 22nd June, 2016 another Board Meeting
was held and the minutes of the Board Meeting held on 4thJune, 2016 were
considered to give effect to the resolution passed in the Meeting held on
4th June, 2016.
In
defence, Respondent Director cited Rule 3(3)(e) of the Companies (Meetings of
Board and its Powers) Rules, 2014. For ease of reference the said Rule 3(3)(e)
is reproduced below:
"…Rule 3(3)(e) - The
director, who desires, to participate may intimate his intention of
participation through the electronic mode at the beginning of the calendar year
and such declaration shall be valid for one calendar year."
The
Respondents contended that there being no prior intimation from the Applicant
at the beginning of the calendar year for participation in the Board Meetings
through video-conferencing, the Applicant and his mother were barred by the
fetters of Rule 3(3)(e) of the Companies (Meetings of Board and its Powers)
Rules, 2014, and, thus, could not be permitted to participate in the Company's
Board Meeting via video-conferencing.
NCLT
on the Issue:
The
NCLT held that:
Sub
Rule 3(e) states that intimation given at the beginning of a calendar year will
remain valid for the entire year. It is not said anywhere that if an
intimation to participate in a meeting through video conferencing or any audio
visual mode is not given at the beginning of the year, the directors are not
entitled to participate in the said meeting through video conferencing. Holding
a Board meeting and passing Board resolution by preventing the Applicant and
his mother from participating in the said meeting was unfair.
The
NCLT, therefore passed interim orders staying the operation of the resolutions
passed in the Board Meeting held on 4th June, 2016 and to withhold the
passing of resolutions in respect of other important items that were part of
the Board Meeting held on 22nd June, 2016.
Conclusion:
From
the present case, we can conclude that:
Director
intending to participate through video conferencing or audio visual means shall
communicate his intention to the Chairperson or the Company Secretary of the
company. It is important to note that sub Rule 3(e) of Rule 3 of Companies
(Meetings of Board and its Powers) Rules, 2014 provides an option to the
Director to submit a declaration stating their desire to attend the Board
Meeting through e-mode at the beginning of the calendar year and such
declaration shall be valid for one year. If a director fails to give such a
declaration, he cannot be prevented from participating in the Board meetings
through video conferencing and audio visual means.
From
the above decision of NCLT, it is spreading a clear and strong message that
oppressive act perpetrated by the Directors of the Company will not be
tolerated. As NCLT is clothed with far reaching powers, it is protecting stakeholders’
interest and making responsible persons more accountable.
