Whether Additional Director can seek discharge from prosecution for non-compliance particularly when DIR-12 for his regularization as Independent Director was not filed before the ROC?

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Shubham Budhiraja[1]

 

Mr. A was appointed as Additional Director in May 2014. The Board meeting was held in September 2014. Because of non-compliance, ROC initiated prosecution against directors. All directors pleaded guilty except Mr. A.  Mr. A filed an application for discharge but the Trial court refused to discharge Mr. A. The Hon’ble High Court held that: (i) there is no difference between the term director and additional director except for their tenure and the appointing authority, (ii) there is no clarity whether Mr. A was appointed as an Independent Director or otherwise because no Fresh DIR-12 was filed by the company recording his regularization. Hence, this require trial and discharge cannot be granted.[2]

 

 

(i)             That an Additional Director is a director having the same powers, responsibilities and duties as other directors. The only difference between them is regards to their appointing authority and their term of office.

 

(ii)           Though appointed on a temporary basis, an additional director is vested with the same powers of a director. Moreover, they are subject to all obligations and limitations of a director. They are also entitled to seek appointment as a permanent director at the Annual General Meeting. The additional director must utilize his/her powers in the best interest of the company and the shareholders.

 

(iii)         Many people claim that the ROC knows about this director, as the company had already filed DIR 12 at the time of his appointment as additional director. So, following regularization DIR 12 is not required to be filed, which is absolutely a wrong understanding. Since he is now a director, and not an additional director. Therefore, ROC must be informed by filing a new DIR 12 that the additional director has been regularized as a director in the Company.

 

(iv)         In the present case as seen from the documents Mr. A was an Additional Director on the date the board report was filed. To counter the same evidence is required to be adduced during trial so also to decide as to whether he at the relevant time of filing the report was a Director, Additional Director or an Independent Director.

 

(v)           The responsibility of an Additional Director being the same as that of a director (but difficult from an independent director) they remain responsible, as the statute provides for the same.

 

 


[1] Advocate, Delhi High Court [LLB,ACS, BCOM(H)], M:+91-9654055315

[2] CRR 1750 of 2020, Surendra Kumar Singhi Vs Registrar of Companies, West Bengal & Anr, Calcutta High Court, Judgment dated 20/01/2023

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