Originally posted by : Ankur Garg
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Dear Ankur,

Pl. advise on the following practical difficulty in the scenario given by you.

Say.. I currently have max 12 directors as per my articles.

Now I appoint 1 (One) Additinal Director without the approval of central government and then go for filing the Form 24 with MCA seeking increase in number of directors.

The problem is that, there is restriction in the form that the number of directors as on the date of the Application cannot be more than the number permitted under the articles. So I will not be able to file the Form and seek CG approval. Pl. refer to point 3 and 4 of the form. Point 4 can never be more than Point 3.

Request your suggestions on the same. I hope you will not say that additional director is not to be counted for Point 4.

Originally posted by : Ankur Garg
	No dear Akhil you are not wrong in anyway but this is simply a contradiction created by law and as per my discussion with Mr. Deepak Gajrani, (eminent law expert and faculty in Delhi) 6 years back. But i will refer Rammiya and figure out something and let you know. Best Regards

Respected Ankur Sir,

Your precious reply is most awaited.

Originally posted by : Akhil Gupta
	Dear Ankur Garg Sir,   I agree to your point with a doubt that, till date (may be I am wrong) I assumes the purpose of inserting a proviso to a Section is to restrict the applicability of the provisions of the effect of that Section.   It is highly appreciated if you please clear my misunderstaing of interpretating the proviso.   Thanx in advance

 Dear Ankur Sir,

I was also of the same view as above that proviso to any Section restricts its applicability and Section applies but subject to fulfillment of the proviso to the respective Section.

But it would be a great favour if you would further clarify this.

Thanks,

Mitali

Dear Deepak Sir,

I haven’t check form-24. Further it would be very difficult to match the interpretation of law with MCA E-forms which are sometimes lacking and not compatible with language of law. Initially the situation was very bad but now most of the E-forms have been repaired by MCA.

For example as per section 220(1)(a) three copy of balance sheet are required to be filed with ROC but through E-forms we are filing only one copy?????

One more example if we appoint someone as additional director and file form-32, ROC records shows the person as additional director. Now if before regularisation of person we appoint him as MD and file form 32, now ROC records show him as MD.

Now if at the time of AGM when we regularize him ---we have to select “director” in form-32 and ROC system update the status as Director instead of MD. Now the problem with E-form is that---the person is MD and system is showing him as a director.

One more thing you have mentioned that:

Now I appoint 1 (One) Additional Director without the approval of central government and then go for filing the Form 24 with MCA seeking increase in number of directors.

Here I’d like to say that when you are appointing 1 (One) Additional Director without the approval of central government then why to go for filing of Form 24 with MCA seeking increase in number of directors.

Agree E-forms are must now but at the same time it is very difficult to interpret language of law which was approved by legislature in 1956 on the basis of E-forms introduced 3-4 years back. 

Regards

Dear Akhil,

I have checked Rammiya and the minutes of discussion with Deepak Gajrani Sir and both are based on similar interpretation and supporting my view but with a substantial condition. Though I was well aware about this condition from the very beginning but the same is not reflecting in my previous reply and create unnecessary confusion regarding my reply. Excuse me for that.

Exact language used in Rammiya is:

Note_1 Page No: 2631

“The Board’s power to appoint Additional Director under section 260 is not, it has to be noted, affected in any way or to any extent by the provisions of sections 255, 258 and 259.”

Note_2 Page No: 2631

“If, before the board exercises its power of appointing Additional Director, the company in general meeting, in exercise of its powers, has already appointed the maximum number fixed by the articles, there will be no scope for the appointment of any Additional Directors by the board as the maximum cannot be exceeded except in accordance with section 259.”

Now as per my interpretation based on Rammiya and Deepak Gajrani if:

Situation:1

Maximum permissible in the article was ==== 12 directors

Existing Director on board ===== 12 directors (10 regular directors appointed in general meeting and 2 additional director appointed by board u/s 260).

Here in this situation to appoint 13^th director as additional director no need to go for central govt. approval. Reason being === same reason ===section 260 overrule section 259. Here kindly check Note_2 Page No: 2631 given above especially the words “the company in general meeting”. However before regularizing this additional director in the AGM you have to obtain Central Government approval u/s 259. Here all 12 directors were not appointed by general meeting hence for the appointment of 13^th director CG approval not required. (Here in this condition Note_2 Page No: 2631 not complied).

One more thing to share here is almost 4 years back CG simply returns our application stating that no approval required u/s 258 and 259. At that time the combination of board was 8 regular directors and 4 additional directors. However no specific reason was mentioned by CG in their letter but as per my understanding the reason was quite obvious. But I can’t force this situation to anyone else except myself.

Situation:2

Maximum permissible in the article was ==== 12 directors

Existing Director on board ===== 12 directors (All 12 are regular directors appointed in general meeting).

Here in this situation to appoint 13^th director as additional director you have to obtain approval of central govt. approval. Reason being === Simply check Note_2 Page No: 2631 given above especially the words “the company in general meeting”.

Conclusion:

If there are already 12 directors appointed by the general meeting, 13^th director can only be appointed with CG approval.

However if out of 12 directors 10 are regular and 2 are additional director then to appoint 13^th director as additional director no need to go for CG approval. My interpretation is based on Note_2 Page No: 2631 given in Rammiya (also mentioned above) and discussion with Mr. Deepak Gajrani. My previous reply was surely lacking regarding this distinction. However you are totally free to follow your own interpretation.

Thanks

MORE SITUATIONS

Situation:3

Maximum permissible in the article was ==== 12 directors

Existing Director on board ===== 10 directors (All 10 are regular directors appointed in general meeting).

Proposed no. of regular director===3 (Say Mr. A, B and C)

Here you can appoint Mr. C as a regular director subject to the approval of central govt.

For the appointment of above 3 directors in one shot following 3 conditions are required to be fulfilled:

1. Post approval of central govt.

2. Ordinary resolution u/s 258 for increase

3. Alteration in article by passing special resolution u/s 31 with form-23 u/s 192(4)(a)

Here in this situation to appoint 13^th director as a regular director you have to obtain approval of central govt. approval.

Situation:4

Maximum permissible in the article was ==== 12 directors

Existing Director on board ===== 10 directors (All 10 are regular directors appointed in general meeting).

Proposed no. of additional director===3 (Say Mr. A, B and C)

Here you can appoint Mr. C as an additional director on 13^th place without the approval of central govt. because section 260 overrules section 259. However before regularizing Mr. C in the AGM you have to obtain Central Government approval u/s 259.

Here in this situation to appoint 13^th director as a regular director you have to obtain approval of central govt. approval.

Thanks

interpretation of section 260, see this link

/forum/interpretation-of-section-260--96219.asp