NCLT upholds director’s right to participate in board meeting through video-conferencing

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Customer Care No. 91-11-45562222
NCLT upholds directors right to participate in
board meeting through video-conferencing
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• Introduction
• Technology Meets Trade
• 1. The Companies Act, 2013 ('the Act of 2013')
  ushered in a new era in the corporate law regime
  in India and has brought the Indian corporate
  laws in tune with the global corporate law best
  practices. The various changes introduced in the
  Act of, 2013 will have a lasting impact on the
  way business is conducted by companies in this
  country.
• With the advent of an atmosphere of
  liberalisation, many new provisions were
  introduced in the Act of 2013 to make it easy to
  do business in India, whether for domestic
  players or for foreign companies investing in
  Indian companies. One such change which was
  formally introduced in the Act of 2013 was the
  enabling power of directors of a company to
  participate in its Board meetings via
  video-conferencing. The Act of 2013, thus,
  allowed and permitted Board Meetings to be held
  and conducted through the medium of
  video-conferencing and also enabled company
  Directors desirous of participating in Board
  Meetings through video-conferencing and
  intimating the company in advance of such an
  intent.

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• Participation in Board Meetings Through
  Video-Conferencing Allowed a Boon for Foreign
  Directors and Indian Directors Alike
• 2. In 2014, the Ministry of Corporate Affairs
  notified the Rules governing such participation
  through video-conferencing in the form of the
  Companies (Meeting of the Board and its Powers)
  Rules, 2014 ('Board Meeting Rules'). The said
  Rules, which were notified on 31st March, 2014,
  lay down the parameters for companies to be
  complaint while conducting and convening Board
  Meetings through video-conferencing and other
  audio-visual mode.
• Board Decisions that cannot be allowed to be
  taken via Video-Conferencing
• 3. With an intention of balancing the scales of
  power and to prevent abuse thereof, Rule 4 of the
  Board Meeting Rules prohibits and does not permit
  certain important corporate decisions to be taken
  by means of video-conferencing. Rule 4 makes it
  clear that the following matters shall not be
  dealt with in any Board Meeting held through
  video-conferencing or through other audio-visual
  means
• (a) The approval of annual financial statements
  of the Company
• (b) The approval of the Report of the Board of
  Directors of the Company
• (c) The approval of the prospectus
• (d) The Audit Committee Meetings for
  consideration of accounts and
• (e) The approval of the matter relating to
  amalgamation, merger, demerger, acquisition and
  takeover.

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• While the aforesaid recent changes were intended
  to facilitate the meetings of the Board of
  Directors of the companies to be conducted
  through video-conferencing, already litigations
  have ensued in this regard. The recently
  constituted National Company Law Tribunal (NCLT)
  had the occasion to deal with such an issue and
  its interpretation given vide NCLT New Delhi
  Bench order dated 22nd June, 2016 in the case
  of Rupak Gupta v. U.P. Hotels Ltd. 2016 71
  taxmann.com 158 (NCLT - New Delhi) (in short
  Rupak Gupta order) will have a far reaching
  impact on the functioning of meetings of Board of
  Directors of companies in India. The main
  question that was answered in the said ruling was
  whether company Directors can attend Board
  Meetings of the company via video-conferencing
  without prior intimation given at the beginning
  of the calendar year conveying such intention of
  participation through video-conferencing.
• Brief Facts of the Case Rupak Gupta v.
  U.P.Hotels Ltd.
• 4. In the said Rupak Gupta's case, (supra) the
  applicant and his mother were continuing as
  Directors of the Respondent-Company. Owing to
  their travel plans overseas, they were desirous
  of participating in the Company's Board Meeting
  to be held on 4th June, 2016 via video-conferencin
  g. However, the Joint Managing Director of the
  respondent Company denied the applicant and his
  mother the right to participate in the said Board
  meeting via video-conferencing and albeit,
  certain important decisions were taken in that
  Board Meeting, including the appointment of an
  Independent Director of the company and also the
  appointment of the Company Secretary of the
  company.

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