Top auto ex­ec­u­tives find them­selves in dis­qual­i­fied di­rec­tors list, win HC re­lief


Agroup of se­nior ex­ec­u­tives in big au­tomak­ers ap­proached the Delhi high court for re­lief af­ter find­ing them­selves in the list of di­rec­tors dis­qual­i­fied by the min­istry of cor­po­rate af­fairs (MCA). The court stayed the MCA di­rec­tive in an in­terim or­der on Tues­day.

Pawan Goenka, man­ag­ing di­rec­tor of Mahin­dra & Mahin­dra Ltd, Srini­vasan Sandilya, non-ex­ec­u­tive chair­man of Eicher Mo­tors Ltd, and Vinod Dasari, man­ag­ing di­rec­tor of Ashok Ley­land Ltd, are all di­rec­tors in a firm called As­so­ci­a­tion of In­dian Au­to­mo­bile Man­u­fac­tur­ers. This is a sec­tion 25 com­pany; such firms, un­der the Com­pa­nies Act, are those formed for pro­mot­ing com­merce, art, sci­ence etc and are not for profit.

Since the firm did not file any fi­nan­cial re­sults for the past three years, its di­rec­tors, which also in­cludes Vishnu Mathur, the di­rec­tor gen­eral of So­ci­ety of In­dian Au­to­mo­bile Man­u­fac­tur­ers (Siam), were named in the MCA list of over 100,000 di­rec­tors. Any dig­i­tal sig­na­tures by th­ese di­rec­tors on an­nual re­ports, fi­nan­cial re­sults and other com­pany doc­u­ments will not be ac­cepted by the Regis­trar of Com­pa­nies (ROC).

In a pe­ti­tion be­fore the Delhi high court, lawyers rep­re­sent­ing th­ese auto ex­ec­u­tives ar­gued that the ban di­rec­tive was passed with­out is­su­ing a show-cause no­tice.

“The pe­ti­tion has been filed stat­ing that sec­tion 164(2)(a) ap­plies to di­rec­tors of a com­pany which has not filed re­turns for three years. The sec­tion pre­vents th­ese di­rec­tors to be reap­pointed as di­rec­tors of the com­pany or di­rec­tors of any other com­pany. The sec­tion does not pro­vide for im­me­di­ate dis­qual­i­fi­ca­tion. Even the stric­tures on th­ese di­rec­tors seem to have been ap­plied ret­ro­spec­tively,” said Satwinder Singh, a part­ner at Vaish As­so­ci­ates, which rep­re­sented th­ese di­rec­tors.

Spokesper­sons for Ashok Ley­land and Mahin­dra de­clined to com­ment. Queries emailed to Eicher were not an­swered.

The pe­ti­tion will be heard next on 1 Novem­ber, and MCA has been asked to file a re­ply on the pe­ti­tion.

"Such kind of bar is bound to be chal­lenged and it is good that peo­ple are ap­proach­ing courts for re­lief. The is­sue is that a set of au­to­mated data has been used to ef­fect a mass ban on di­rec­tors with­out ap­pli­ca­tion of mind. How­ever, just a hand­ful of di­rec­tors seek­ing in­di­vid­ual re­lief will not help the oth­ers who do not have the where­withal to ap­proach the courts for re­lief," said San­deep Parekh, founder of law firm Fin­sec Law Ad­vi­sors.

Even in the case of As­so­ci­a­tion of In­dian Au­to­mo­bile Man­u­fac­tur­ers, it is a ‘tech­ni­cal­ity’ that has re­sulted in ac­tion on its di­rec­tors, said a per­son with di­rect knowl­edge of the mat­ter on con­di­tion of anonymity. “The com­pany had pretty much be­come de­funct and all its ac­tiv­i­ties have been trans­ferred and are be­ing car­ried out by So­ci­ety of In­dian Au­to­mo­bile Man­u­fac­tur­ers (Siam). The com­pany was kept go­ing as some of the as­sets were yet to be trans­ferred to Siam,” this per­son said.

A spokesper­son for Siam de­clined to com­ment.

Mint had re­ported on 10 Oc­to­ber that as many as 500 pub­licly traded com­pa­nies have been hit due to the MCA di­rec­tive. Stock ex­changes Na­tional Stock Ex­change of In­dia Ltd and BSE Ltd are send­ing out no­tices to th­ese firms seek­ing clar­i­fi­ca­tion on their sus­pended di­rec­tors.


(From left) Mahin­dra’s Pawan Goenka, Ashok Ley­land’s Vinod Dasari and Eicher Mo­tors’s Srini­vasan Sandilya.

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