Companies Act- Additional Directors On Equal Footing In Terms Of Power As Other Directors Are: Calcutta HC

The Calcutta High Court has held that the Additional Directors of a company appointed under Section 161(1) of the Companies Act, 2013 are on equal footing for managing the company affairs as other Directors are.

The Court said that the tenure of an additional director is up to the date of the forthcoming AGM, unlike directors which are duly appointed by shareholders in the general meeting.

A Single Bench of Justice Shampa Dutt (Paul) observed, “… additional directors are on equal footing, in terms of, of power, rights, duties, and responsibilities, as other directors are. … If the company wishes to continue with an additional director beyond the AGM, then it will have to go for his/her regularization.”

It was also noted by the Bench that the only difference between an additional director and other directors is regard to their appointing authority and their term of office.

Advocate Sandipan Ganguly appeared on behalf of the petitioner while Dipankar Dandapath appeared for the opposite parties.

Facts –

The petitioner being a director of a company was accused of violating the provisions of Section 217(3) of the Companies Act. The Metropolitan Magistrate issued summons against the petitioner and other accused persons.

The petitioner stating himself to be innocent and having no connection with the circumstances of the case chose not to take the course adopted by the rest of the accused persons and prayed for discharge by filing a petition but the same got rejected.

Following were the two issues before the High Court:

1. What post was held by the petitioner on the date of filing the report?

2. Whether the petitioner is responsible/liable for the offence alleged?

The High Court with regard to the first issue noted, “Form No. DIR – 11 clearly shows that on the date of resignation (30.12.2016) the petitioner was the “Director” of the Company. … Inspite of being shown on the portal as “Additional Director /Director” the petitioner did not lodge any complaint with the Ministry about the alleged wrong information. There is no case that the petitioner had filed any objection to the said wrong information (as alleged) on the portal.”

With regard to the second issue, the Court said that from the records it is seen that the petitioner was then an “Additional Director” of the Company and that admittedly the other accused persons pleaded guilty.

“ROC must be informed by filing a new DIR 12 that the additional director has been regularized as a director in the Company”, the Court further said.

It was further observed by the Court that the petitioner was an Additional Director on the date the board report was filed and that to counter the same, the evidence is required to be adduced during the trial.

The Court, therefore, held, “The responsibility of an Additional Director being the same as that of a director (but difficult from an independent director) they remain responsible, as the statute provides for the same. Thus to quash the proceedings by exercising this Courts inherent powers would amount to an abuse of the process of Court and would also amount to serious miscarriage of justice.”

Accordingly, the Court dismissed the plea of the petitioner.

Cause Title- Surendra Kumar Singhi v. Registrar of Companies, West Bengal & Anr.

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