SHRI BARINDER KALSI v. KALSI ENGINEERS PVT. LTD.

Page 6 of 15 CA Nos.116/2021, 117/2021, 118/2021, 119/2021, 120/2021 and 121/2021

In the present CAs, the applicants pray before this Bench to direct the Board of the Company to appoint an Alternate Director in place of Shri Manmohan Singh Kalsi since he is keeping unwell. The applicants are seeking instant directions under Rule 11 of the NCLT Rules, 2016 read with Section 242(4) of the Companies Act, 2013 (in short the 'Act').

2. Applicants are seeking appointment of Alternate Director in place of Shri Manmohan Singh Kalsi (one of the applicants) who is the senior-most in the family as well as in the group companies on the ground that during the pendency of the present petition, he has been keeping unwell and now is bedridden. It is submitted that parties to the application had an amicable settlement since they are closely knitted family but the same failed time and again. It is submitted that Shri Manmohan Singh Kalsi is bedridden therefore, seeing the circumstances and the future of the company, it is necessitated to appoint an Alternate Director in his place so that the functioning of the company shall not halt further.

3. It is averred that the applicants suggest the name of Smt. Maneet Kalsi, daughter-in-law of Shri Manmohan Singh Kalsi to be appointed as an Alternate Director in CA Nos.116/2021, 117/2021 & 120/2021 and Smt. Ravinder Kaur Kalsi, wife of Shri Manmohan Singh Kalsi to be appointed as an Alternate Director in CA Nos.118/2021, 119/2021 & 121/2021. In view of the fact that Shri Manmohan Singh Kalsi is unable to participate in the day-to-day affairs of the company due to his poor CA Nos. 116/2021 & 25/2022 in CP No.45/Chd/Pb/2019

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Page 7 of 15 health and will be taken to another state for his treatment and the same may take more than three months, it is absolutely necessary to appoint an alternate director so that the statutory compliances be made and the functioning of the company should not halt.

4. It is alleged by the Applicants that the illness of Shri Manmohan Singh Kalsi has led to deadlock in the meetings and consequently the respondents do not allow the companies to renew the Credit Limits with their respective Banks therefore, the existence of the Group Companies is at stakes along with thousand employees of the group companies. It is submitted that the Income Tax returns even with the interest and penalty are not filled by the end of this financial year, the same can never be filled under section 139 of Income Tax Act, 1961. It is submitted that the replacement of directors would not lead to change on composition of the Board of Directors and there is no addition of the director.

5. It is submitted by the applicants that there is a difference between appointment of alternate Director as per the provisions of Section 161(2) of the Act, and as sought by the applicants by moving this application. Under Section 161(2) of the Act, the Alternate Director is appointed by the Board of Directors which is absolutely impossible under the given facts and circumstances since there is a deadlock. On the contrary, since the health of Shri Manmohan Singh Kalsi has deteriorated during the pendency of the proceedings and there is a deadlock now to make any appointment as per Section 161(2) of the Act. Therefore, the instant directions are sought under Rule 11 of NCLT Rules, 2016 read with Section 242(4) of the Act. CA Nos. 116/2021 & 25/2022 in CP No.45/Chd/Pb/2019

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Page 8 of 15 6. The averments and reliefs sought by the applicants are denied by the respondents. It is submitted by the respondents that as per Section 161(2) of the Act, the Board of Directors of a company may, if so authorized by its Articles or by a resolution passed by the company in General Meeting, appoint a person to act as an Alternate Director for a Director during his absence for a period of not less than three months from India provided such alternate director shall vacate the office if and when the director in whose place he has been appointed returns to India.

7. It is contended on behalf of respondents that in present case, Shri Manmohan Singh Kalsi is neither outside India nor even outside the State of Punjab and in such circumstances the conditions prescribed for appointment of an Alternate Director under Section 161(2) of the Act are not met. The appointment of an Alternate Director is specifically governed by Section 161(2) of the Act and accordingly, the applicants cannot rely on a general provision such as Section 242(4) of the Act or inherent powers of this Tribunal to seek appointment of Smt. Maneet Kalsi as an Alternate Director. In any case, Section 242(4) of the Act, which empowers this Tribunal to pass an interim order, cannot be exercised to grant a relief which is final in nature.

8. It is further submitted that the relief sought by way of the present company applications, if granted by this Tribunal, would be impossible to implement inasmuch as under the construct of Section 161(2) of the Act, Alternate Director is required to ipso-facto vacate the office if the absent director returns to India. This would mean that Smt. Maneet Kalsi would automatically vacate her post on appointment since the absent director i.e. Shri Manmohan Singh Kalsi, would be in the country at the time of CA Nos. 116/2021 & 25/2022 in CP No.45/Chd/Pb/2019

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Page 9 of 15 her appointment. Courts/Tribunals should not grant a relief or pass order direction which is not capable of implementation. Thus interim relief is misconceived as it is an attempt to treat directorship like hereditary post, which is not recognized by law.

9. It is alleged that appointment of alternate director is not necessary for undertaking statutory compliances by the company. The present application is merely an attempt to override the interim protection given by this tribunal on 19.03.2019 where the applicants herein had given the undertaking to this Tribunal that they will not disturb the shareholding pattern or constitution of the board of directors till further orders.

10. It is further alleged that, over the years, the applicant families, have tried to usurp control over the Board of Kalsi Group companies and oppress the respondent families by ensuring that they remain in minority on the boards. The Applicants herein have been misusing their majority on the board to mismanage the affairs of the respondent company and indulge in fudging of financial statements there. It is submitted that the appointment of an Alternate Director in place of Shri Manmohan Singh Kalsi is necessary so as to hold meetings make statutory compliances are false and misconceived since even in his absence, there is a quorum to hold such meetings to make such statutory compliances, and the financial statements of the company already stand approved by the board of the company. Accordingly, there is no requirement for the appointment of an Alternate Director in place of Shri Manmohan Singh Kalsi.

CA Nos. 116/2021 & 25/2022 in CP No.45/Chd/Pb/2019

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Page 10 of 15 11. It is averred by the applicants in their rejoinder that respondents are projecting themselves as a minority however, they are holding equal shares as of the Applicants/Respondents. Therefore, the main petition along with the present reply itself is misleading.

12. It is submitted by the applicants in their rejoinder that some of the instances are that on the demand of the respondents, the statutory auditors were changed wherein, the latest Auditor was appointed unanimously by the Board of Directors of the respondent company. Further, the respondents being adamant in halting the progress and process of the Company after the Appointment of Independent Auditor, who was inter alia appointed unanimously, put forward an application before this tribunal to again appoint an Independent Auditor which is baseless and misleading and is only to waste the precious time of this Tribunal along with causing mental harassment to the Applicants.

13. It is further submitted in rejoinder that the respondents demanded the Stock-Lists and Valuation of the Respondent Companies which were further, duly provided by the Applicant/Respondents as well without any prejudice to any of the stakeholders of the Company. Shri Manmohan Singh Kalsi is the Managing Director/Director of the Respondent Companies wherein, a lot of responsibilities are vested upon him in the interest of Respondent Companies and further, the deteriorating health of Shri Manmohan Singh Kalsi is well within the knowledge of the respondents as well since the Respondent Companies is closely held Company. CA Nos. 116/2021 & 25/2022 in CP No.45/Chd/Pb/2019

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Page 11 of 15 14. After careful perusal of the record available and submissions made by the learned counsel for the applicant and the respondents, it is necessary to look into the relevant provision of Section 161 of the Companies Act, 2013 which is reproduced as under:

"Section 161: Appointment of additional director, alternate director and nominee director.

(2) The Board of Directors of a company may, if so authorised by its articles or by a resolution passed by the company in general meeting, appoint a person, not being a person holding any alternate directorship for any other director in the company ¹[or holding directorship in the same company], to act as an alternate director for a director during his absence for a period of not less than three months from India:

Provided that no person shall be appointed as an alternate director for an independent director unless he is qualified to be appointed as an independent director under the provisions of this Act:

Provided further that an alternate director shall not hold office for a period longer than that permissible to the director in whose place he has been appointed and shall vacate the office if and when the director in whose place he has been appointed returns to India:

Provided also that if the term of office of the original director is determined before he so returns to India, any provision for the automatic re-appointment of retiring directors in default of another appointment shall apply to the original, and not to the alternate director." 15. Thus, as per Section 161 of the Act, where Articles of Association conferred power upon the Board of Directors to appoint an alternate Director, it has the

discretion to appoint a person as an alternate Director. In the present case, the

Articles of Association (AoC) of the following Companies at below mentioned paras

state that:-

AoA of Kalsi Pumps Private Limited (CA No.116/2021 in CP No.45/Chd/Pb/2019)

CA Nos. 116/2021 & 25/2022 in CP No.45/Chd/Pb/2019

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Page 12 of 15 "13.The business of the Company shall be managed by the Directors who may pay all expenses incurred in setting up and registering the company and may exercise all such parts of the company as are mentioned in the Companies Act, 1956 or any statutory modification thereof for the time being in force, but by which the Companies Act, 1956 or by these articles are no required to be exercised by the company in General Meeting subject nevertheless to such Regulations not inconsistent with the aforesaid provisions, as may be prescribed by the company in General Meeting, but no such regulation shall invalidate any prior act of the directors which would have been valid if that regulation had not been made. The Director shall be able, subject to the aforesaid provisions and also subject to the provisions of Section 292 of the Companies Act, 1956, to delegate any of their power to anyone or more of the directors or a committee of directors."

19.The Directors shall have powers, from time to time and at any time, to appoint any other person to be Additional Director. Such Additional Director shall hold office till the next Annual General Meeting and shall be eligible for re-election, at such General Meeting.

24. The quorum necessary for the transaction of the business of the Directors shall be in accordance with the provision of Section 287 of the Companies Act,

1956.

25. A resolution in writing signed by a majority of the Directors shall be effective for all purpose as a resolution passed at a meeting of the Directors duly called, held and constituted, subject to the provision of Sections 282 and 292 of the Companies Act, 1956.

AoA of Kalsi Electricals Private Limited (CA No.117/2021 in CP No.42/Chd/Pb/2019)

"38. The board of directors shall have power at any time and from time to time to appoint any person as additional Director to the board in accordance with Section 260 of the Companies Act, 1956." AoA of Kalsi Valves Private Limited (CA No.118/2021 in CP No.43/Chd/Pb/2019)

"38. The board of directors shall have powers at any time and from time

to time to appoint any person as additional Director to the board in accordance with Section 260 of the Companies Act, 1956." AoA of Kalsi Metal Works Private Limited (CA No.119/2021 in CP No.40/Chd/Pb/2019)

CA Nos. 116/2021 & 25/2022 in CP No.45/Chd/Pb/2019

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Page 13 of 15 "38. The board of directors shall have power at any time and from time to time to appoint any person as additional Director to the board in accordance with Section 260 of the Companies Act, 1956.

39. The Directors may appoint any person to act an alternate Director during the latter's absence for a period of not less than three months from the state in which meeting of the directors are ordinarily held, but shall ipso-facto vacate the office if and when the absent Director returns to the state in which meetings of the directors are ordinarily held or the absent Director vacates the office as Director" AoA of Kalsi Engineers Private Limited (CA No.120/2021 in CP No.41/Chd/Pb/2019)

"38. The board of directors shall have power at any time and from time

to time to appoint any person as additional Director to the board in accordance with Section 260 of the Companies Act, 1956.

39. The Directors may appoint any person to act an alternate Director during the latter's absence for a period of not less than three months from the state in which meeting of the directors are ordinarily held, but shall ipso-facto vacate the office if and when the absent Director returns to the state in which meetings of the directors are ordinarily held or the absent Director vacates the office as Director" AoA of Kalsi Pipes Private Limited (CA No.121/2021 in CP No.44/Chd/Pb/2019)

"38. The board of directors shall have power at any time and from time

to time to appoint any person as additional Director to the board in accordance with Section 260 of the Companies Act, 1956." 16. In this case, the Articles of Association contain specific provision for appointing an alternate Director. Before approaching this Tribunal, the applicants could have

taken up this issue in the Board Meetings of the Company. This Bench has not been

informed about any such effort being made by the applicants and the results, if any, of

the same. Furthermore, Section 161 of the Act lays down that an Alternate Director

can be appointed if there is the absence of a director for a period not less than three

CA Nos. 116/2021 & 25/2022 in CP No.45/Chd/Pb/2019

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Page 14 of 15 months from India. In the case in hand, Shri Manmohan Singh Kalsi is in India and his possible absence is still in the realm of the future. During the course of arguments, learned counsel for the applicants could not make out a case for appointing an alternate Director except for stating that the illness of Shri Manmohan Singh Kalsi and the non-cooperation of one group of family in the proceedings of the company is hampering the compliance of statutory notices. Per contra, the other group states that all the statutory compliances can be made within the present structure. Moreover, it is pertinent to mention that the parties to these CAs have also sought among, other things, changes in the directorship structure of the company. Any decision in the present CAs regarding the appointment or otherwise of an alternate Director will have a direct bearing on the prayers made in the main petitions. It will also indirectly affect the tenuous balance ensured by this Tribunal's order dated 19.03.2019 where the applicants herein have given certain undertakings. This Tribunal is conscious of the decisions in the case of Union of India & Ors. v. Modiluft Ltd., (2013) 6 SCC 65 & Raja Khan v. Uttar Pradesh Sunni Central Waqf Board & Anr., (2011) SCC 741

wherein it has been held that if interim relief is same as that of permanent relief, then it is not permissible because no case would be left for adjudication at the time of final hearing. It was further held that in such a situation, the Court shall not grant any interim relief unless the case is fully heard.

17. In view of the discussion foregoing, this Bench is of the considered view that the prayers made by the applicants cannot be acceded to in all these Six applications i.e.

CA Nos. 116/2021 & 25/2022 in CP No.45/Chd/Pb/2019

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Page 15 of 15 CA Nos. 116/2021 in CP No.45/Chd/Pb/2019 CA Nos. 117/2021 in CP No.42/Chd/Pb/2019 CA Nos. 118/2021 in CP No.43/Chd/Pb/2019 CA Nos. 119/2021 in CP No.40/Chd/Pb/2019 CA Nos. 120/2021 in CP No.41/Chd/Pb/2019 CA Nos. 121/2021 in CP No.44/Chd/Pb/2019

18. Consequently, CA Nos.116/2021, 117/2021, 118/2021, 119/2021, 120/2021 and 121/2021 stand dismissed and disposed of accordingly. The Registry is directed to place a copy of this order on record of each application separately. CA Nos. 25/2022, 28/2022, 29/2022, 27/2022, 26/2022 & 24/2022

The present applications are filed for urgent hearing of CA Nos.116/2021,

117/2021, 118/2021, 119/2021, 120/2021 and 121/2021 respectively. Since these files have been taken up for disposal, consequently, all these Six applications for urgent hearing render infructuous and disposed of accordingly.

Sd/- Sd/- (Subrata Kumar Dash) (Harnam Singh Thakur)

Member (Technical) Member (Judicial)

March 17, 2022

ASH-LRA CA Nos. 116/2021 & 25/2022 in CP No.45/Chd/Pb/2019

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