Case: Sridhar Sundararajan Vs. Ultramarine &amp; Pigments Limited &amp; Another

2. Brief facts which are relevant for the purpose of deciding this appeal are asFor the purpose of convenience, parties shall be referred to as Plaintiff and Defendant.4. Appellant is the original Plaintiff. Respondent No.1 is the original Defendant No.1. Respondent No.2 is the original Defendant No.2 who was appointed as Chairman and Managing Director (MD) of the 1stOn 1st August, 2012 the 2nd Defendant was reappointed as Chairman and Managing Director of the 1stOn 1st April 2014, Companies Act was amended and by the Amendment Act of 2013, a new clause was introduced in Section 196(3)(a). By virtue of the said amendment videOn the other hand, it was contended by the learned Counsel appearing on behalf of Respondent No.2/Original Defendant No.2 that the said amendment could not operate retrospectively. The learned Single Judge accepted the contention of Defendant No.2 and dismissed the Notice of Motion. Hence, the appeal.

Court's reasoning:
In our view, ratio of the said judgment would squarely apply to the facts of the present case. The Apex Court has therefore held that the language in which the provision is couched is plain, simple and unambiguous and does not admit of more than one meaning viz that after the commencement of the Amendment Act, no person who has suffered disqualification can be appointed or continue in appointment as Managing Director of the Company. Respondent No.2, in this case, was appointed as Chairman and Managing Director of Respondent No.1Company on 13/08/1990. The amendment came into force on 01/04/2014. He completed the age of 70 years on 11/11/2014 and therefore, from that date, he was disqualified from continuing as Managing Director, unless he fulfilled the requirements of the proviso viz that the Company has to continue his appointment by a special resolution and, secondly, that the resolution must state the reason why the continuation is necessary. The said disqualifications which are mentioned in clauses (a) to (d) cannot be fractured or split or dissected to mean that disqualifications (b) to (d) would operate instantly but clause (a) viz appointment or continuation of Managing Director beyond the age of 70 years would operate in a different manner than the remaining clauses (b) to (d). The learned Single Judge, therefore, in our view, has clearly erred in dissecting the said section in two parts and by holding that clause (a) would operate differently than clauses (b) to (d). The said observation is contrary to the ratio laid down by the Apex Court in Rama Narang (supra).16. We do not agree with the submission of Mr. Seervai, the learned Senior Counsel appearing on behalf of Respondent No.2 that ratio of the judgment in Rama Narang (supra) would not apply to the present case. We also do not find force in the submission of Mr. Seervai, the learned Senior Counsel for Respondent No.2 that Section 196(3)(a) would not apply to the Managing Directors who had been appointed before 01/04/2014 (which is the date on which the the amended section 196(3)(a) was brought into force) as it would otherwise retrospectively affect the vested right of such Managing Directors and, secondly, that there is presumption against legislation operating retrospectively.17. In our view, Mr. Aspi Chinoy, the learned Senior Counsel appearing on behalf of the Appellant has correctly submitted that the amended Section as a matter of public policy contains mandatory prohibition/bar against any Company from continuing the Managing Director in employment once he has attained the age of 70 years. The language of section 196(3)(a) is plain, simple and unambiguous and it applies to all the Managing Directors who have attained the age of 70 years and the Section does not make any distinction between the Managing Directors who have been appointed before 01/04/2014 and those after 01/04/2014. The moment therefore Managing Director attains the age of 70 years, disqualification mentioned in Section 196(3) (a) would operate immediately. In our view, it is not open now to alter its clear terms by a process of interpretation for excluding the Managing Directors appointed prior to 01/04/2014 from the purview of prohibition contained in Section 196(3). The disqualifications which have been mentioned in section 196(3) are introduced as a matter of public policy and they contain mandatory prohibition/bar for continuing the Managing Director in employment, once he has attained the age of 70 years. It is well settled position in law that while interpreting any provision it is not open for the Court to add to or delete words from the provision or change the plain statutory language of the provision.The learned Single Judge relied on the judgment of the Apex Court in P. Suseela (supra) and in para 9 observed that the observations of the Apex Court in para 15 of the said judgment would be applicable to the factsof the present case. The learned Single Judge observed that since the second Defendant was already a Chairman and Managing Director of the 1st Defendant when he turned 70, the 2013 Act could not operate as an immediate termination of his appointment, as that would give a retrospective application to the 2013 Act.20. In our view, the learned Single Judge has clearly erred in applying the ratio of the Judgment in P. Suseela (supra) to the facts of this case. In P. Suseela, by virtue of the power vested under the Act, Regulations were framed and an additional minimum eligibility criteria was introduced, apart from existing criteria for the appointment of Lecturers. The Apex Court in para 15 has observed that till the Appellants were actually appointed to the post of Lecturer/Assistant Professor, no vested right was created in any of the Appellants. It held that, at the fmost, the Appellants could contend that they have a right to be considered for the post of Lecturer/Assistant Professor and, secondly, it held that this would not mean that Regulations laying down such minimum eligibility criteria would be retrospective in operation.21. In our view, the learned Single Judge has erred in holding that ratio of the said judgment is applicable to the facts of the present case. It has to be borne in mind that by virtue of the Amendment Act of 2013, which came into force on 01/04/2014, one additional disqualification was added to the list of disqualifications which were in existence under the old Act under Section 267. Since a new clause was added as further disqualification for appointment or continuation as Managing Director of the Company, it would operate not only at the stage of appointment but also would operate in the case of a person who has already been appointed and attained the age of 70 years and such a person, therefore, by virtue of disqualification, had no right to be continued as Managing Director, unless a special resolution was passed by the Company. There is no question therefore of the retrospective application of the provision. Since Section 196(3)(a) would apply prospectively, whoever attains the age of 70 after the Amendment Act came into force would cease to function as Managing Director by operation of statute. Ratio of the said judgments therefore on the retrospective application, which have been relied upon by the learned Senior Counsel appearing on behalf of Respondent No.2 viz. in K.S. Paripoornan vs. State of Kerala and others (1994) 5 SCC 493) (parasCommissioner of Income Tax, U.P. vs. M.S. Shah Sadiq and Sons (1987) 3 SCC 516  ) (Para 15), J.S. Yadav vs. the State of Uttar Pradesh and another (2011) 6 SCC 570  ) (paras9) and other judgments relating to retrospective application of the statute will not apply to the facts of the present case.In J.S. Yadav (supra), facts were that the appellant was a member of the State Human Rights Commission. The provision requiring seven years experience as a District Judge was brought into force after his appointment. The Apex Court held that he had vested right to complete his tenure. In our view, ratio of the said judgment would not apply to the facts of the present case. A distinction will have to be made between addition of eligibility criteria to the existing provision and addition of disqualification to continue in that post after the initial appointment.22. In the present case, prior to 2013 Amendment Act, appointment after the age of 70 years was not permissible subject to proviso but after the Amendment Act came into force, this was added as disqualification for further continuation of a person after he attained the age of 70 years. In a case therefore where the appointment is already made and thereafter eligibility criteria is changed then, in that event, it could be said that the vested right is created in a person who is already appointed prior to the amendment and additional eligibility criteria could not be applied retrospectively. However, in a case where additional disqualification is added to the Section then in such a case, after disqualification is incurred after his initial appointment, he would cease to continue as Managing Director since the disqualification would operate as cesession or discontinuation to work as Managing Director. In our view, the learned Single Judge has failed to note this distinction between the disqualification which is added after the appointment and the eligibility criteria which is added after his appointment. In the former case, disqualification would operate even after the appointment but in the latter case, it would operate prospectively. The judgments in P. Suseela (supra) and J.S. Yadav (supra) therefore would not apply to the facts of the present case. For the same reasons, Section 6(c) of the General Clauses Act 1897 will not be applicable in the present case.23. The last submission made by Mr. Seervai, the learned Senior Counsel for Respondent No.2 was that executive interpretation of the said section supported the interpretation placed by the Respondent No.2 on Section 196(3)(a). Reliance was placed on a Circular issued by Government of India, Ministry of Industry (Department of Company Affairs), in the context of the Companies (Amendment) Act, 1988 clarifying that the conditions specified in Schedule XIIIof the 1956 Act were required to be satisfied only at the time of appointment. It further observed that if the appointee, after appointment, did not satisfy any of the said conditions, it would not debar the person concerned from continuing in office for the full tenure of his appointment. Secondly, reliance was also placed onof 2013 Act which is also in pari materia with Schedule XIII of 1956 Act which speaks about the conditions to be fulfilled for the appointment of managing or full time Director or Manager without the approval of the Central Government. It was submitted that Clause (c) ofof 2013 Act is exactly the same as Section 196(3)(a) and therefore it was submitted that Section 196(3)(a) would apply only in cases of appointment.24. In our view, again, the said submission is without any substance. As mentioned hereinabove, prior to the amendment, section 196(3)(a) was a part of section 269 which mentioned the eligibility criteria for appointment of Managing Director and, in that context, the Circular dated 13/04/1989 was issued. After the amendment, however, since the said clause has been incorporated in the list of disqualifications, the meaning which was given earlier i.e. prior to the amendment to Schedule XIII of 1956 Act, cannot be given now to disqualification which is added in Section 196(3)(a). It will not be possible therefore to say that section 196(3)(a) would operate separately from other sections viz. Section 196(3)(b) to (d). Section 196(3)(a) to (d) mentions various disqualifications which prohibit appointment or continuation of Managing Director as a matter of public policy.25. In other words, if appointment to the post of Managing Director is made after coming into force of the Amendment Act, 2013 ona person who is above the age of 70 years cannot be appointed on account of disqualification, subject to fulfillment of the proviso. On the other hand, if he was already appointed prior towhen he was below the age of 70 years, on account of operation of statute, disqualification, whenever incurred after the Amendment Act, would operate automatically, subject to proviso i.e. special resolution being passed by the Company.