Achintya Kumar Barua & Ors vs Ranjit Barthkur & Anr

Company Appeal (AT) No. 17 of 2018 IN THE MATTER OF : 1. Achintya Kumar Barua alias Manju Baruah, Village - Bochagaon, Kaziranga ... Original Petitioner No. 2 District - Golaghat, Assam - 785109.

2. Marami Goswami Barua, ... Original Petitioner No. 3 Village - Bochagaon, Kaziranga District - Golaghat, Assam - 785109.

3. Maan Singh Kharangi Barua, ... Original Petitioner No. 4 Village - Bochagaon, Kaziranga District - Golaghat, Assam - 785109.

4. Sikha Barua, ... Original Petitioner No. 6 R.G. Barua Road, Guwahati, Kamrup, Assam - 781024.

5. Baladev Barkakati, ... Original Petitioner No. 7 Village - Bochagaon, Kaziranga, District - - Golaghat, Assam - 785109. ... APPELLANTS NOS. 1 TO 5

Versus

1. Ranjit Barthkur, House No. 5, B.P. Barua Road, 1st Bye-Lane, Narikalbari, Guwahati, District - Kamrup (M), Assam - 781024.

2. Radhika Barthakur, House No. 5, B.P. Baruah Road, 1st Bye-Lane, Narikalbari Guwahati, District - Kamrup (M), Assam - 781024. ... RESPONDENTS NOS. 1 & 2

Present: Shri Sumant Bhushan, Advocate for the Appellants.

Company Appeal (AT) No. 17 of 2018 - 08.02.2018 2

ORAL JUDGEMENT 8th February, 2018 A.I.S. Cheema, J.

Heard the learned counsel for the appellants. This appeal has been

filed against the impugned order dated 27th October, 2017 passed by the

National Company Law Tribunal, Guwahati Bench, Guwahati (hereinafter

referred to as 'NCLT') in T.A. No. 02/2016 (CA No. 134/2016) in T.P. No.

06/397/398/GB/2016 (C.P. No. 287/2012).

2. It is stated that Respondent No. 1 moved application before the

NCLT seeking facility of attending the Board meetings through video-

conferencing. The petition was earlier filed under Sections 397 & 398

read with Section 402 of the Companies Act, 1956 ('Old Act' in brief).

Respondent No. 1 claimed right to participate in the Board meetings

through video-conferencing relying on Section 173(2) of the Companies

Act, 2013 ('New Act' in brief). The matter had earlier come-up before the

Company Law Board ('CLB') and being aggrieved by certain observations,

the same was carried to the High Court of Guwahati. The Hon'ble High

Court found that the appeal did not raise any question of law and sent

back the matter. The same came up before the NCLT and hearing both

sides, the NCLT allowed the application filed by Respondent No. 1

directing that the facility under Section 173(2) of the New Act should be

made available.

3. Learned counsel for the appellants states that Appellants Nos. 1

and 3 are other Directors of the Company and the appellants have filed

this appeal on behalf of the Company. According to the learned counsel,

Company Appeal (AT) No. 17 of 2018 - 08.02.2018 3

the appellants are aggrieved as they have apprehension that when the

original Petitioner participates in the meetings through video-

conferencing, it would not be possible to ensure that nobody else is

present from where the Original Petitioner would be participating.

According to him, the Secretarial Standards on Meetings of the Board of

Directors have considered this aspect and the Secretarial Standards have

prescribed that such option under the provisions of the New Act and the

Rules should be resorted to only when the facilities are provided by the

Company to its Directors.

4. Learned counsel submits that sub-Section (2) of Section 173 of the

Act is not a mandatory provision and it is not compulsory for the Company

to provide such facility. He referred to Clause (e) of sub-Rule (2) of Rule 3

of the Companies (Meetings of Board and its Powers) Rules, 2014

(hereinafter referred to as 'Rules') to submit that the responsibility has

been put on the Chairperson to ensure that no person other than the

concerned Director is attending or having access to the proceedings of the

meeting through video-conferencing mode or other audio-visual means.

It is stated that when a Director resorts to availing facility of video

conferencing, it would not be possible for the Chairperson to ensure that

the Director is alone when participating from wherever the video call is

made as the Chairperson would have no means to know as to who else is

sitting in the room or place concerned.

5. We have gone through the judgement of the NCLT. We have perused

provisions of Section 173 of the Act as well as the Rules referred. Going

through the judgement of the NCLT, we find that these provisions have Company Appeal (AT) No. 17 of 2018 - 08.02.2018 4

been introduced under the Act of 2013 and following these provisions

would be in the interest of the Companies as well as the Directors. It

would not be appropriate to shut-out these provisions on mere

apprehensions.

6. Section 173 of the New Act deals with Meetings of the Board of

Directors. Sub-Section (2) of Section 173 reads as under :-

"Sec. 173 Meetings of Board -- (1) xxx xxx

(2) The participation of directors in a meeting of

the Board may be either in person or through video

conferencing or other audio visual means, as may be

prescribed, which are capable of recording and

recognising the participation of the directors and of

recording and storing the proceedings of such meetings

along with date and time:

Provided that the Central Government may, by

notification, specify such matters which shall not be

dealt with in a meeting through video conferencing or

other audio visual means."

7. The above provision is admittedly a new provision in this Act and it

is stated that earlier there was no such facility provided in the Act.

8. The above proviso has laid down that the Central Government may

provide by notification which matters 'shall' not be dealt with in a meeting

through video-conferencing or other audio-visual means. The Central

Company Appeal (AT) No. 17 of 2018 - 08.02.2018 5

Government has with reference to powers conferred under Section 173

and also other sections of Companies Act, 2013 vide Notification No.

G.S.R. 240 (E) issued (through the Ministry of Corporate Affairs) on 31st

March, 2014 [The Gazette of India : Extraordinary - Part II Section 3(i)]

published the Rules, which have been enforced on 1st April, 2014. Rule 4

reads as under :-

"Rule 4. Matters not to be dealt with in a meeting

through video conferencing or other audio visual

means.-- (1) The following matters shall not be dealt

with in any meeting held through video conferencing or

other audio visual means :-

(i) the approval of the annual financial statement;

(ii) the approval of the Board's report;

(iii) the approval of the prospectus;

(iv) the Audit Committee Meetings for consideration of

accounts; and

(v) the approval of the matter relating to

amalgamation, merger, demerger, acquisition and

takeover."

9. Thus it is apparent that the matters as specified above cannot be

permitted to be conducted in Board of Directors meeting by video-

conferencing or other audio-visual means.

10. It is argued by the learned counsel for the appellants that the use

of the word "may" in the above Section 173(2) makes it clear that the

provision is directory and not mandatory to be followed. We find that the Company Appeal (AT) No. 17 of 2018 - 08.02.2018 6

word "may" which has been used in this sub-Section (2) of Section 173

only gives an option to the Director to choose whether he would be

participating in person or the other option which he can choose is

participation through video-conferencing or other audio-visual means.

This word "may" does not give option to the company to deny this right

given to the Directors for participation through video-conferencing or

other audio-visual means, if they so desire. In this regard, provisions of

Rule 3 are material. The relevant portions of this Rule for deciding the

present controversy may be reproduced as under :

"Rule 3. Meetings of Board through video

conferencing or other audio visual means.-- A

company shall comply with the following procedure, for

convening and conducting the Board meetings through

video conferencing or other audio visual means.

(1) Every company shall make necessary

arrangements to avoid failure of video or audio

visual connection.

(2) The Chairperson of the meeting and the Company

Secretary, if any, shall take due and reasonable

care --

(a) to safeguard the integrity of the meeting by

ensuring sufficient security and

identification procedures;

(b) to ensure availability of proper video

conferencing or other audio visual equipment Company Appeal (AT) No. 17 of 2018 - 08.02.2018 7

or facilities for providing transmission of the

communications for effective participation of

the directors and other authorised

participants at the Board meeting;

(c) to record proceedings and prepare the

minutes of the meeting;

(d) to store for safekeeping and marking the

tape recording(s) or other electronic recording

mechanism as part of the records of the

company at least before the time of

completion of audit of that particular year;

(e) to ensure that no person other than the

concerned director are attending or have

access to the proceedings of the meeting

through video conferencing mode or other

audio visual means; and

(f) to ensure that participants attending the

meeting through audio visual means are able

to hear and see the other participants clearly

during the course of the meetings.

Provided that the persons, who are differently

abled, may make request to the Board to allow a

person to accompany him.

Company Appeal (AT) No. 17 of 2018 - 08.02.2018 8

(3) (a) The notice of the meeting shall be sent to all

the Directors in accordance with the provisions of sub-

section (3) of section 173 of the Act.

(b) The notice of the meeting shall inform the

directors regarding the option available to them to

participate through video conferencing mode or other

audio video means, and shall provide all the necessary

information to enable the Directors to participate through

video conferencing mode or other audio visual means.

(c) A 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.

(d) If the Director intends to participate through

video conferencing or other audio visual means, he shall

give prior intimation to that effect sufficiently in advance

so that company is able to make suitable arrangements

in this behalf.

(e) The Director, who desire, 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.

(f) In the absence of any intimation under clause

(c), it shall be assumed that the Director shall attend the

meeting in person.

Company Appeal (AT) No. 17 of 2018 - 08.02.2018 9

(4) At the commencement of the meeting, a roll

call shall be taken by the Chairperson when every

Director participating through video conferencing or other

audio visual means shall state, for the record, the

following, namely :-

(a) name;

(b) the location from where he is participating;

(c) that he has received the agenda and all the

relevant material for the meeting; and

(d) that no one other than the concerned Director

is attending or having access to the

proceedings of the meeting at the location

mentioned in clause (b)."

11. Then there are other sub-Rules (5) to (12) of Rule 3 dealing with

further aspects regarding holding of the meeting and drafting of minutes

and circulation as well as recording in the Minute Book, etc.

12. It is clear that the Rules require that the company shall comply with

the procedure prescribed for convening and conducting the Board

meetings through video-conferencing or other audio-visual means. The

Chairperson and Company Secretary, if any, have to take due and

reasonable care as specified in Rule 3(2). The argument of the learned

counsel for the appellant is that sub-Rule (2)(e) puts the burden on the

Chairperson to ensure that no person other than the concerned Director

is attending and this would not be possible for Chairperson to ensure in

Company Appeal (AT) No. 17 of 2018 - 08.02.2018 10

video-conferencing. We do not find force in the submission as Rules, read

as a whole are a complete scheme. Sub-Clause (4)(d) of Rule 3 puts

responsibility on the Director participating also. The Chairperson will

ensure compliance of sub-Clause (e) or Clause (2) and the Director will

need to satisfy the Chairperson that Sub-Clause (d) of Clause 4 is being

complied.

13. We find that the provision of Section 173(2) of the New Act read with

these Rules as a progressive step. We have got so many matters coming

up where there are grievances regarding non-participation, wrong

recordings etc. In our view, Section 173(2) gives right to a Director to

participate in the meting through video-conferencing or other audio-visual

means and the Central Government has notified Rules to enforce this right

and it would be in the interest of the companies to comply with the

provisions in public interest.

14. Learned counsel for the appellants tried to rely on the Secretarial

Standard on Meetings of the Board of Directors to submit that the

guidelines are that such participation can be done "if the Company

provides such facility". We find that such guidelines cannot override the

provisions under the Rules. The mandate of Section 173(2) read with

Rules mentioned above cannot be avoided by the companies.

15. Coming to the facts of the present matter, it can be seen that the

NCLT took note of the fact that the Company in this matter had all the

necessary infrastructure available. The learned Judicial Member took

judicial notice of the physical condition of Kaziranga National Park and

Company Appeal (AT) No. 17 of 2018 - 08.02.2018 11

found that the Company had no reason not to provide the concerned

facility. The NCLT came to the conclusion that the provisions of Section

173 (2) of the New Act are mandatory and the companies cannot be

permitted to make any deviations therefrom. The NCLT directed non-

applicants before it to provide the facilities as per Section 173(2) of the

New Act subject to fulfilling the requirements of Rule 3(3)(e) of the Rules.

16. We do not find any reason to interfere with the impugned order. The

impugned order must be said to be progressive in the right direction and

there is no reason to interfere with the same.

17. The admission of the appeal is denied. The appeal is disposed of.

There shall be no order as to costs.

[Justice A.I.S. Cheema] Member (Judicial)

[Balvinder Singh] Member (Technical)

/ng/nn

Company Appeal (AT) No. 17 of 2018 - 08.02.2018