Can a Director Be Removed During Pendency of Oppression and Mismanagement Petition?

In the high-stakes world of corporate governance, disputes often lead to petitions for oppression and mismanagement under Sections 241-242 of the Companies Act, 2013. A critical question arises: Whether a Director can be Removed from Company during the Pendency of Petition for Oppression and Mismanagement by him? This issue pits board powers against shareholder protections and judicial oversight by the National Company Law Tribunal (NCLT). While companies may attempt removals, procedural lapses or oppressive acts can render them invalid, especially amid ongoing litigation. This post analyzes the legal framework, ratification limits, and precedents to guide business owners and directors.

Note: This is general information based on judicial precedents and statutes. Consult a legal professional for advice specific to your situation.

Legal Framework for Director Appointment and Removal

Under Indian corporate law, primarily the Companies Act, 2013, the appointment and removal of directors are governed by the company's Articles of Association and statutory provisions. Typically, shareholders hold the power to remove directors via ordinary resolution under Section 169, subject to special notice requirements (at least 14 days). The Board may also have roles, but delegation must be explicit. Committee of Management, S. M. National Inter College VS State of U. P. - 2021 0 Supreme(All) 1653

Key principles include:- Statutory Basis: Removal requires compliance with Sections 115 (special resolutions) and 169. For public companies, directors have a right to be heard under similar safeguards. DATO SHUN LEONG KWONG & ANOR vs MENANG CORPORATION (M) SDN BHD & ORS - 2021 MarsdenLR 3495- Delegation Limits: Managing Directors or officers lack inherent authority to remove directors unless empowered by resolution or law. Ultra vires acts are invalid. Hardwari Lal VS Union Of India - 1990 0 Supreme(P&H) 300

The Supreme Court in Haryana Seeds Development Corporation Ltd v. Shri J. K. Aggarwal held that powers of appointment/removal vest in the Board and cannot be delegated unlawfully. Committee of Management, S. M. National Inter College VS State of U. P. - 2021 0 Supreme(All) 1653

Effect of Pending Oppression and Mismanagement Petition

Oppression and mismanagement petitions, filed by aggrieved shareholders or directors, seek relief against prejudicial conduct. During pendency before NCLT, can the company remove the petitioning director?

Generally, tribunals refrain from interfering in day-to-day operations unless the act is oppressive or violates law. For instance, in one case, a board meeting on 07.06.2024 for director removal was challenged as a blatant violation of the rights of the Petitioner as a shareholder and director. The Tribunal noted it cannot interfere with the day-to-day working of the Company, and further cannot pass any order fo.... Mini Baby vs M/s. Ceecon Ready Mix Concrete Private Limited - 2025 Supreme(Online)(NCLT) 2695

However:- Improper procedures, like failing special notice under Section 169(2), invalidate removals. Chekuri Sekhar VS KINNERA COLD STORAGE PRIVATE LIMITED - 2024 Supreme(Online)(NCLT) 1605 - 2024 Supreme(Online)(NCLT) 1605- Resolutions for removal during disputes may be seen as continuing oppression, e.g., resolutions on 17.04.2024 and 05.06.2024 to remove directors from the Patel Group were labeled oppressive. Navinchandra Mangaldas Patel vs FCG Flameproof Control Gears Private Limited - 2025 Supreme(Online)(NCLT) 4414- NCLT may direct reinstatement if removal is unfair, but powers include removal of the managing director, manager or any of the directors of the company under certain clauses. Anuragha Poultries & Breeders Private Limited VS Padmavathi - 2021 Supreme(Mad) 3490 - 2021 0 Supreme(Mad) 3490

Thus, while removal isn't automatically stayed, challenging it within the petition can lead to scrutiny.

Validity of Removal Resolutions and Ratification Rules

Even if attempted during pendency, removals must follow strict procedures:- Procedural Safeguards: Special notice for removal and new appointments; circulation to all eligible members. Circular resolutions exclude director/auditor removals. provision was made by ss 297 - 303 to enable decisions to be made by written circular resolutions save for removal of a director or the auditor of the company. LGB ENGINEERING SDN BHD & ORS vs RAYSTON RESOURCES SDN BHD - 2022 MarsdenLR 1895- Right to be Heard: Essential for public companies. right to be heard for directors of a public company against removal. DATO SHUN LEONG KWONG & ANOR vs MENANG CORPORATION (M) SDN BHD & ORS - 2021 MarsdenLR 3495

Ratification—subsequent approval to validate unauthorized acts—has limits:- Valid only if the act wasn't void ab initio (illegal from start). Hardwari Lal VS Union Of India - 1990 0 Supreme(P&H) 300- Cannot ratify ultra vires acts by unauthorized persons. CA 2016 could not be invoked to 'ratify' the previous resolutions because it would be a retrospective applicat.... LGB ENGINEERING SDN BHD & ORS vs RAYSTON RESOURCES SDN BHD - 2022 MarsdenLR 1895- Conditions: Ratifying body must have original power, full knowledge, and conscious approval. Committee of Management, S. M. National Inter College VS State of U. P. - 2021 0 Supreme(All) 1653

In East and West Insurance Co. Ltd v. Mrs. Kamala Jayantilal Mehta, acts lacking jurisdiction were deemed unratifiable. Hardwari Lal VS Union Of India - 1990 0 Supreme(P&H) 300

Judicial Precedents and NCLT Insights

Courts emphasize competence:- Invalid removals by unauthorized officers are void; no post-facto ratification if ultra vires. Committee of Management, S. M. National Inter College VS State of U. P. - 2021 0 Supreme(All) 1653- Resolutions Nos.1 and 2 for director removal required proper process; tribunals assess reinstatement powers. K PRAMOD VS KANNUR INSTITUTE OF MEDICAL SCIENCE ANDTECHNOLOGY PRIVATE LIMITED - 2023 Supreme(Online)(NCLT) 742

NCLT cases highlight:- Challenges to removals without notice or hearings succeed if oppressive. TEO KIM HUI & ORS vs GOLDEN PLUS HOLDINGS BHD & ANOTHER CASE - 2021 MarsdenLR 1940- COC approvals for related resolutions (e.g., remuneration) occur, but director removals face higher scrutiny. AMIT PAREEK VS - 2023 Supreme(Online)(NCLT) 561- Reconstitution via removal is possible but must comply; non-compliance declares resolutions null. YES Bank Limited VS Madhu Ashok Kapur - 2014 Supreme(Bom) 1080 - 2014 0 Supreme(Bom) 1080

During pendency, attempts like EOGM requisitions for removal may be contested as oppressive acts. Navinchandra Mangaldas Patel vs FCG Flameproof Control Gears Private Limited - 2025 Supreme(Online)(NCLT) 4414

Practical Implications for Companies and Directors

• For Companies: Ensure special notice, hearings, and authority before removal. Avoid during disputes to prevent oppression claims.
• For Directors: Petitioners retain rights; challenge invalid removals via NCLT.
• Ratification Pitfalls: Cannot cure void acts. Resolutions declared null or void by courts cannot be ratified retroactively. Derived from LGB ENGINEERING SDN BHD & ORS vs RAYSTON RESOURCES SDN BHD - 2022 MarsdenLR 1895

Tribunals balance non-interference with fairness, refusing to validate unlawful processes.

Conclusion and Key Takeaways

A director may be removed during a pending oppression and mismanagement petition if procedures are followed, but risks are high. Invalid acts—due to lack of authority, notice, or fairness—cannot be ratified if void ab initio. NCLT precedents underscore strict compliance with Companies Act, 2013, protecting against oppressive removals. Hardwari Lal VS Union Of India - 1990 0 Supreme(P&H) 300Committee of Management, S. M. National Inter College VS State of U. P. - 2021 0 Supreme(All) 1653

Key Takeaways:- Removal requires competent authority and statutory procedure; failures invalidate it.- Pending petitions amplify scrutiny; tribunals may intervene if oppressive.- Ratification fails for illegal/unauthorized acts.- Prioritize governance to avoid litigation.

References:- Hardwari Lal VS Union Of India - 1990 0 Supreme(P&H) 300Committee of Management, S. M. National Inter College VS State of U. P. - 2021 0 Supreme(All) 1653- LGB ENGINEERING SDN BHD & ORS vs RAYSTON RESOURCES SDN BHD - 2022 MarsdenLR 1895Mini Baby vs M/s. Ceecon Ready Mix Concrete Private Limited - 2025 Supreme(Online)(NCLT) 2695K PRAMOD VS KANNUR INSTITUTE OF MEDICAL SCIENCE ANDTECHNOLOGY PRIVATE LIMITED - 2023 Supreme(Online)(NCLT) 742- DATO SHUN LEONG KWONG & ANOR vs MENANG CORPORATION (M) SDN BHD & ORS - 2021 MarsdenLR 3495TEO KIM HUI & ORS vs GOLDEN PLUS HOLDINGS BHD & ANOTHER CASE - 2021 MarsdenLR 1940AMIT PAREEK VS - 2023 Supreme(Online)(NCLT) 561- Navinchandra Mangaldas Patel vs FCG Flameproof Control Gears Private Limited - 2025 Supreme(Online)(NCLT) 4414Chekuri Sekhar VS KINNERA COLD STORAGE PRIVATE LIMITED - 2024 Supreme(Online)(NCLT) 1605 - 2024 Supreme(Online)(NCLT) 1605Anuragha Poultries & Breeders Private Limited VS Padmavathi - 2021 Supreme(Mad) 3490 - 2021 0 Supreme(Mad) 3490- YES Bank Limited VS Madhu Ashok Kapur - 2014 Supreme(Bom) 1080 - 2014 0 Supreme(Bom) 1080

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