Issues in Appointment of Director in a Government Company

Indian Government as promoters considered as worst while complying corporate law and governance. What procedure government follows while appointing an additional director?

They have an internal order as per wishes of controlling department or ministry to appoint a person in a company. Such order may be routine promotion order, selection by a particular Selection committee (or board) or worst a political appointment. Suddenly late in evening a person may come to corporate office of a company with his appointment order as managing director of a company. Such person usually has less than one week time to take charge of his new office. Day to day management of the company has no power but comply with order of powerful promoter called government, which in turn make corporate law of the land.

As per procedure, board meeting may be scheduled to next one and half month later. Any Director or secretary of company practically may not called board meeting to obey powerful promoter. Even quorum may not present in a meetings called in such haste. Secretary may study the Companies Act 2013 to find out Rule 8 of the Companies (Meetings of Board and its Powers) Rules 2014 ruling out appointment or removal of key managerial personnel may be exercised by the Board only by means of resolution passed at the meeting of the Board.

Should such appointee wait to take charge until a resolution passed in board meeting? What is position of the Government Order appointing such managing director? Which is date of appointment for the purpose of Company Law forms MR – 1 and DIR – 12?  What is date of Resolution for purpose of Company Law Form MGT – 14?

For Example Government issue an order dated 1^st day of August 2014 appointing incumbent with effect from 7^th day of August 2014 and promoting present managing director of the company to a another government company. The Board Meeting of company is already scheduled for 10^th day of September 2014 for which date consent from all directors of company have been taken by the secretary of the company.

Now, what should happen when company file Form MGT – 14 on 15^th day of September 2014 showing date of resolution as 10^th day of September 2014 and 16^th day of September Form MR – 1 and DIR 12 filed showing date of appointment as 7^th day of August 2014 attaching Board resolution dated 10^th day of September 2014 for which MGT – 14 has already been filed.

Is there any non – compliance of Law by the government company?

What are options for Registrar of Companies to put query on the form filed by the company? Should these forms be rejected?

Now, What was differences in law and procedure in such situation under the Companies Act 1956?