Discussion on Applicability of Section 160 of the Companies Act, 2013 during the Process of Section 152(6)(e) of the Companies Act, 2013
This discussion was initiated due to recently, we encountered with a question that whether a candidate or a member, who is eligible to submit special notice under Section 160 of the Companies Act, 2013, may submit its special notice to the Company for appointment of Director in place of Director, who is retire by rotation under the provision of Section 152(6) of the Companies Act, 2013, or not?
In connection to the above-query, there are basically 2 provisions which we need to look, first is Section 160 for understanding the eligibility and the conditions for submitting the special notice and secondly the provision of Setion 152(6) of the Companies Act, 2013 for understanding whether any person other than the retiring director are eligible to be appointed as director in place of retiring director.
For its more understanding, we directly come to the provision of Section 160 of the Companies Act, 2013 which states that
“(1) A person who is not a retiring director in terms of section 152 shall, subject to the provisions of this Act, be eligible for appointment to the office of a director at any general meeting, if he, or some member intending to propose him as a director, has, not less than fourteen days before the meeting, left at the registered office of the company, a notice in writing under his hand signifying his candidature as a director or, as the case may be, the intention of such member to propose him as a candidate for that office, along with the deposit of one lakh rupees or such higher amount as may be prescribed which shall be refunded to such person or, as the case may be, to the member, if the person proposed gets elected as a director or gets more than twenty-five per cent. of total valid votes cast either on show of hands or on poll on such resolution.
Provided that requirements of deposit of amount shall not apply in case of appointment of an independent director or a director recommended by the Nomination and Remuneration Committee, if any, constituted under sub-section (1) of section 178 or a director recommended by the Board of Directors of the Company, in the case of a company not required to constitute Nomination and Remuneration Committee.
(2) The company shall inform its members of the candidature of a person for the office of director under sub-section (1) in such manner as may be prescribed.”
After considering the provision stated above, we can easily draw the following key elements of the provision of Section 160:-
1. A person who is not a retiring director in terms of section 152;
2. shall, subject to the provisions of this Act, be eligible for appointment to the office of a director at any general meeting;
3. if he, or some member intending to propose him as a director;
4. has, not less than fourteen days before the meeting;
5. left at the registered office of the company;
6. a notice in writing under his hand signifying his candidature as a director or, as the case may be, the intention of such member to propose him as a candidate for that office;
7. along with the deposit of one lakh rupees or such higher amount as may be prescribed;
8. which shall be refunded to such person or, as the case may be, to the member, if the person proposed gets elected as a director or gets more than twenty-five per cent. of total valid votes cast either on show of hands or on poll on such resolution.
If we analysis the above key elements then it can be easily draw the following broadly essentials of the provisions:-
1. Eligibility:- who are eligible
2. Conditions:- what eligible candidate to do
3. Refund:- at what situation Security deposit will refund.
In we align the above key elements with broadly essentials areas then we can derive the following:-
In order to conclude the understanding the provision of Section 160 of the Companies Act, 2013 then we can easily say that the provision does not restrict the Company to withhold such request of the candidate who are eligible and comply with the requirements, as specified above.
Now, coming to the second part of our discussion i.e., provision of Section 152 of the Companies Act, 2013, this part governing the concept related to retire by rotation:-
“(6) (a) Unless the articles provide for the retirement of all directors at every annual general meeting, not less than two-thirds of the total number of directors of a public company shall—
(i) be persons whose period of office is liable to determination by retirement of directors by rotation; and
(ii) save as otherwise expressly provided in this Act, be appointed by the company in general meeting.
(b) The remaining directors in the case of any such company shall, in default of, and subject to any regulations in the articles of the company, also be appointed by the company in general meeting.
(c) At the first annual general meeting of a public company held next after the date of the general meeting at which the first directors are appointed in accordance with clauses (a) and (b) and at every subsequent annual general meeting, one-third of such of the directors for the time being as are liable to retire by rotation, or if their number is neither three nor a multiple of three, then, the number nearest to one-third, shall retire from office.
(d) The directors to retire by rotation at every annual general meeting shall be those who have been longest in office since their last appointment, but as between persons who became directors on the same day, those who are to retire shall, in default of and subject to any agreement among themselves, be determined by lot.
(e) At the annual general meeting at which a director retires as aforesaid, the company may fill up the vacancy by appointing the retiring director or some other person thereto.
Explanation.—For the purposes of this sub-section, “total number of directors” shall not include independent directors, whether appointed under this Act or any other law for the time being in force, on the Board of a company.”
After considering the governing provision relating to retirement of director i.e., Section 152(6) of the Companies Act, 2013, we can easily say that the provision of clause (e) of the said provisions governs the appointment in place of Director retire by rotation and the said provision has following key elements:-
1. the company may fill up the vacancy
a. by appointing the retiring director or
b. some other person thereto.
Now, considering the provision and the key elements highlighted above, it is clear that the provision of Section 152 (6) of the Companies Act, 2013 does not restrict a candidate or a member to be appointed in place of retiring director, however, on the other side, the provision of Section 152 (6) (e) of the Companies Act, 2013 permits the Company that the Shareholders in its meeting either appoint the retiring director or some other person. Therefore, it can be concluded that the Company in its General Meeting appoint the retiring director or any other person in his place and the general body is the final authority to decide who should be appointed as director either the retiring director or some other person.
In relation to the above query, we also consider the commentary on the Companies Act, 2013 written by the pioneer in their fields:-
1. “A RAMIYA (Guide to the Companies Act)” 19e Volume 2 on its page no. 2813 states as follow:-
Section 152.7.8 Directors Liable to retire may be appointed at the AGM or the some other person can also be appointed under section 152(6)(e)
This clause contemplates that the person retiring by rotation at the AGM may be reappointed or alternatively it may be decided to appoint some other person. Where it is proposed to appoint the same person the company shall obtain from him confirmation to the effect that he is willing to seek appointment and that he is not in any way disqualified from acting as director.
It is important to note that where there is re-appointment of the retiring director, there is no need to file any return with the registrar as regards the re-appointment. This is on account of the fact that there is really no change in the status of the director in Krishna Mills Ltd v The State, 27 Comp Cas. 388 (1957).
If the Company intends to appoint another person in place of the retiring director, or alternatively the retiring director does not wish to seek re-appointment, it can take necessary action for this purpose. The proposed incumbent must have a valid DIN and shall given his consent for the appointment along with the confirmation to the effect that he is nott disqualified in any way from being a director.”
2. In Compendium of “KEY ISSUES UNDER CORPORATE LAW (Volume 4) by DR. K.R Chandratre” mentioned on page no 22-16, Para II mentioned that:-
“Section 152(6)(e) states that, at the annual general meeting at which a director retires as aforesaid, the Company may fill up the vacancy by appointing the retiring directors or some other person thereto. To fill the vacancy by appointing a person who is not a retiring director, the provision of Section 160 must be complied with”.
Accordingly, the Company can fill the vacancy either by reappointing the retiring director or by some other person thereto. In case the retiring director wishes to get reappointed, his consent to act as a director need to be served to the company. if meanwhile, any member of the Company exercising his power in section 160 of the Companies Act, 2013, proposes the candidature of some other person to appointed as a director, then it is wrong on the part of the Board to reject the proposal just because the retiring director wishes to get reappointed and a notice to that effect has been circulated.
Considering, the above discussion, it may be derived that a person, who is eligible, or any member of the Company are permitted to submit its special notice at the registered office of the Company for the appointment of Director in place of Director, who is retire by rotation under the provision of Section 152(6) of the Companies Act, 2013.
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