Question5: Mr A, the director of a public company, has been removed by the company, before the expiry of his period of office, by passing an ordinary resolution in a general meeting. Is the removal of director valid? Decide while explaining the relevant provisions of the Companies Act, 2013. What are the provisions applicable to a director who wishes to resign from his office before the expiry of his term?
Answer :
A company limited by guarantee such as a social club, professional, cultural, religious or other such associations may expel any member of the company in accordance with the regulations and provisions contained in the articles of association.
Expulsion on the ground such as mis-conduct of the members is also possible. But the requisite in such case would be exercise of the power in the interest of the company as a whole not for a particular group of the members.
In the case of companies having share capital any provision in the articles of the company on expulsion of a member would be against the principle of corporate democracy and in violation of sections 100-104. The Department of Company Affairs issued a clarification by a circular dated November 1, 1975 regarding company’s power to expel a member.
The circular was issued because a public limited company altered its articles empowering its Board of Directors to expel a member in a case where the Board is prima facie of the view that activities or conduct of the member is detrimental to the company or that by reason of his continuance as a member, it would be prejudicial to the future of the company.
The Department, after considering the scheme of the Companies Act, is of the view that “amendment of articles of association of a company providing for expulsion of a member by the management is opposed to the fundamental principles of company law jurisprudence and is ultra vires the company.
Such a provision is repugnant to the various provisions of the Act pertaining to the rights of a member in a public limited company and cuts across the scheme of the Act as it has the effect of rendering nugatory the very powers of the Central Government under section 111 of the Companies Act, 1956 and the powers of the court under sections 107 and 395 of the Act and is, therefore, void by operations of section 9 of the Act.
The article of association is a contract between the company and its members setting out the rights of members inter se under the contract and expulsion of a member is not only a violation of this contract but is also opposed to the principles of natural justice.”
a Company is an artificial person and act through human beings, which are appointed according to provisions of the Companies Act, 2013. The person appointed to carry on business of a company are called director. A director will act as an agent of the Company and their collective authority is called Board of Directors. Board of Directors are the supreme body of a company except shareholders as its owners.
Sometime a director being aggrieved or due to his personal reason, wants to quit his position as director in a company. He through a notice or letter of resignation relinquish his office in the Company.
“Resignation is the formal act of giving up or quitting one’s office or position. A resignation can occur when a person holding a position gained by election or appointment steps down.”
Collins Dictionary: “resignation is a formal statement of your intention to leave a job or position”.
SOME DECIDED CASES ON RESIGNATION;
The Supreme Court of India in Moti Ram Vs. Param Dev AIR 1993 SC 1662 set out meaning of resignation as;
“Resignation means the spontaneous relinquishment of one’s own right and in relation to an office, it connotes the act of giving up or relinquishing the office. It has been held that in general juristic sense, in order to constitute a complete and operative resignation there must be the intention to give up or relinquish the office and the concomitant act of relinquishment. It has also been observed that the act of relinquishment may take different forms or assume a unilateral or bilateral character, depending on nature of the offence and conditions governing it.”
Union of India Vs. Gopal Chandra Mishra, AIR (1978) SC 694 it was held that if the act of relinquishment id of unilateral character, it comes into effect when such act indicating the intention to relinquish the office is communicated to the competent authority. The authority to whom the act of relinquishment is communicated is not required to take action and relinquishment takes effect from the date of such communication where the resignation is intended to operate in praesenti.
Section 168 of the Companies Act, 2013 provides that;
(1) A director may resign from his office by giving a notice in writing to the company and the Board shall on receipt of such notice take note of the same and the company shall intimate the Registrar in such manner, within such time and in such form asmay be prescribed and shall also place the fact of such resignation in the report of directorslaid in the immediately following general meeting by the company:
Provided that a director shall also forward a copy of his resignation along withdetailed reasons for the resignation to the Registrar within thirty days of resignation in suchmanner as may be prescribed.
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