DIRECTOR - II

Director is the creation of the Companies Act. Presently we have two Acts governing the country. So there is confusion. Even Authorities supposed to be enforcing the law do not know that certain sections of the Companies Act,2013 are not applicable. Orders are being passed based on them thinking that it can get away easily this way. What we see is that we have laws. Too many I think. Lesser number of laws would make things better for both the enforcing agencies and those required to follow them. Parliament passed the Companies Act,2013. Twenty one rules have been announced by Ministry of Corporate Affairs(`MCA'). Result total confusion. The Act says one thing and the rules say something else. Result the Act had to be amended in 2015. For the meaning of `Executive Director' who is also a Director we have to read the rules not the Act. It was possibly realised by  MCA that the Act does not define Executive Director so they put in the term, `Executive Director' in one of the rules. We claim to have a robust legal system in force for corporate governance.  Again S 2 of the Companies Act,2013 does not define `Corporate' yet we have a Ministry of Corporate Affairs (`MCA'). The various provisions of the Act  have led to  `drivers, hawkers & vendors' as `directors in BoB scam' ( The Times of India dated 23/11/2013). The numerous sections on directors,DIN, DSC, KYC could not check such a situation. It is not bad to have `drivers, hawkers & vendors' on the Board of companies but they should not be exploited for the the personal gain of others. The law is here to check such situations but instead it has encouraged the induction of such persons on the Board. of companies causing scams to occur. Why should, `dirvers, hawkers & vendors' be made to suffer The law which encourages the educated to utilise the weak for destruction of the society and the economy needs to be re-looked. If MCA has laid down criteria for appointment without knowing whether the person being appointed Director knows what he is supposed to do as Directors. Every thing to check exploitation of the economically weak by the those strong is ignored. To be a clerk in a standard company one has to be interviewed after a written test in most cases but to be a Director of a company no such test or interview is required. One can be elected to Parliament irrespective of qualification so also is in the case of Director of a company. For a company if you have money you can form a company and be appointed a Director of the company and appoint whomever the person thinks fit. So powerful is the strength of money that all provisions of law fail. We have everything for governance in law but we do not anything to check the loopholes in governance. The fact is Directors of companies in India need training. But none is there to voice this.

It reminds me of a situation. A court case was going on. I went to serve a Court Order on the defendant. I found that the receptionist of the company was an Advocate. Later it was found that the Director of the company was a peon and promoters were outside the country having caused financial scandal. Total paradox.  The Companies Act,2013 was made effective in September,2013 and there were debates and discussions on the Act, there was amendment to the act and on 23/11/2015 it is reported that `drivers, hawkers & vendors made directors in BoB scam'. This brings out the weakness in the legal system. This grey area in the Companies Act,2013 needs to be reviewed. Solution to the system is not restricting such class of persons from being appointed directors but in the words of Swami Vivekananda who realised and said that everything can be corrected through education. If adult education can be accepted then in the interest of the the commercial world and the economy education of Directors of companies should be promoted. This can be covered in CSR programmes. Strong companies can contribute for Director education We cry for innovation and expect companies with drivers, hawkers and vendors to promote innovation. We boast of a robust economy but more than 50 per cent of the population do not know the distinction of patent, trade mark, copyright and geographical indications. About 98 per cent of the populatin know that patent and geographical indications are the same. Yet we are having Nifty and Sensex and carry stories in the front pages. It can be said that India still has a motor car civilisation built on a bullock cart economy. That is why such paradox. We do not have the commitment to admit the grave lacuna prevailing.

Taking about entrepreneurship. Mr Ratu Bhadhs an MBA from a premier IIM of the country after a successful stint with corporates, collaborted with a foreign group for setting up operations in India . A company was incorporated in India. Mr Bhads was designated Managing Director without shareholding and was the only Indian on the Board. The foreign entity nominated two of their personnel on the Board of the company. Operations started and due to major fault of the foreign partners, the company could not take of .The company's funds dried up and Mr Bhadhs could not operate. Employees left. The foreign entity was informed .They ignored all issues raised. The burden came on Mr Bhads who did not own any share in the company. After things became worse, he submitted his resigntion as Managing Director of the company. There was none to receive his resignation. E-forms required to be filed  with the Registrar of Companies (RoC) under the Companies Act could not be filed. Firstly there was no DSC registered of Mr Bhads, with RoC which is compulsory to upload e-forms on the portal of MCA,  accordingly there was none to file his resignation to the  RoC.  The foreign directors had DSC registered in their names. So the e-form  DIR 12 required to be filed with the RoC being intimation regarding Mr Bhads resignation was not filed. Further Mr Bhad could not file  e-form DIR 11  as his DSC is not registered with RoC. Mr Bhads has written several letters to RoC but of no avail. RoC remained silent for years. So Mr Bhads continues to be a Director of  the company even after resigning. Law on resignation is very clear. If  a Director resigns he is no more a Director.  None including RoC has released him as Director of the company even after resigning. Mr Bhads continues to be a Director as per MCA records. So Mr Bhads has been turned into a slave of the company with RoC watching the show. Even the Police Station knows that Mr Bhads has resigned but MCA disowns the information that Mr Bhads has resigned from the company as no e-from DIR 12 has been filed by the company. RoC is a silent spectator. Perhaps law is drafted to make it a sleeping regulator. Mr Bhads continues to receive statutory notices as per the various statutes including the Companies Act. E-form DIR 12 has not been filed by the company so he continues to be a Director. The non-filing  of the said e-form is a technical error and cannot be considered an error at all as decided in the State of Orissa Case ( ITR 1972).So what is the use of the Companies Act,2013. It would have been better if we continued with the Companies Act, 1913 like the Indian Penal Code, 1860 and the Criminal Procedure Code, 1873. With the new provisions the framers of the law have made life difficult instead of making it easier. So at times I think that if I wanted to fight someone without stress I should pray for him to become a Director of a company.  Even after three years of wandering Mr Bradhs including the Police Station and Court, he continues to be shakles running from pillar to post and has already about seven cases to fight in the departments lower and high courts. The Companies Act, 2013 cannot provide and answer. Yet the country boasts of it.There is talk on corporate governance and sustainability.There are seminars and conferences on the subject often.

The Companies Act, 2013 has provisions for Registered Office. The RoC checks all deeds, tax receipts for admitting an address as the Registered Office address but the RoC cannot do anything if the Leave and Licence Agreement or Lease Agreement or Rent Deed expires. The Registered Office continues to have the address as its Registered Office and the poor landlord has to bear the onslaught of the Official Liquidator even after the tenure of Leave and License,.lease or rent has expired. Since declaration in e-form 22 is not altered,  RoC has no answer to this . The Act is silent on such a practical situation. Mr Bhads is also facing the legal music as composed by the Companies Act and rules and is running from pillar to post. Mr Brads a rare bread of Bengali entrepreneurs never utters of entrepreneurship again only looking at the Al mighty for the help he requires . Company law prevalent in the country cannot help him. Mr Bhads like all Bengalis prefers to be an employee as he has a family to support.   

So this is the Companies Act, 2013, part of the Companies Act, 1956 in force in India and we expect a booming economy with prefect competition prevailing in the market. There is the Competition Act, 2002 to watch the market also. The question is what is the use of  such laws for ordinary citizens if they are meant to punish only without any means for support of  sufferer.

I asked Mr Bhads if he would like to start as an entrepreneur all over again. He told me at least not this life. Even if he is compelled to do something again he would like to do it without the Companies Act around.  I told him that there was the Limited Liability Partnership Act,2008 governing LLPs and is different from the Companies Act. Though the Act was regulated through MCA 21, it has a different portal now. He wanted to know more about the Act so I suggested the book, `Introduction to LLP' by Anant & Anant consisting of 856 pages. He told me at once he would avoid LLP also. He told me that he wanted to follow an Act which was complete by itself and for any solution he should get the solution from the Act itself and not pray to Al Mighty for the solution.