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NCLT upholds director’s right to participate in board meeting through video-conferencing

2. Introduction Technology Meets Trade 1
Introduction Technology Meets Trade 1. The Companies Act, 2013 ('the Act of 2013') ushered in a new era in the corporate law regime in India and has brought the Indian corporate laws in tune with the global corporate law best practices. The various changes introduced in the Act of, 2013 will have a lasting impact on the way business is conducted by companies in this country. With the advent of an atmosphere of liberalisation, many new provisions were introduced in the Act of 2013 to make it easy to do business in India, whether for domestic players or for foreign companies investing in Indian companies. One such change which was formally introduced in the Act of 2013 was the enabling power of directors of a company to participate in its Board meetings via video-conferencing. The Act of 2013, thus, allowed and permitted Board Meetings to be held and conducted through the medium of video-conferencing and also enabled company Directors desirous of participating in Board Meetings through video-conferencing and intimating the company in advance of such an intent.
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3. Participation in Board Meetings Through Video-Conferencing Allowed: a Boon for Foreign Directors and Indian Directors Alike 2. In 2014, the Ministry of Corporate Affairs notified the Rules governing such participation through video-conferencing in the form of the Companies (Meeting of the Board and its Powers) Rules, 2014 ('Board Meeting Rules'). The said Rules, which were notified on 31st March, 2014, lay down the parameters for companies to be complaint while conducting and convening Board Meetings through video-conferencing and other audio-visual mode. Board Decisions that cannot be allowed to be taken via Video-Conferencing 3. With an intention of balancing the scales of power and to prevent abuse thereof, Rule 4 of the Board Meeting Rules prohibits and does not permit certain important corporate decisions to be taken by means of video-conferencing. Rule 4 makes it clear that the following matters shall not be dealt with in any Board Meeting held through video-conferencing or through other audio-visual means: (a) The approval of annual financial statements of the Company; (b) The approval of the Report of the Board of Directors of the Company; (c) The approval of the prospectus; (d) The Audit Committee Meetings for consideration of accounts; and (e) The approval of the matter relating to amalgamation, merger, demerger, acquisition and takeover.
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4. While the aforesaid recent changes were intended to facilitate the meetings of the Board of Directors of the companies to be conducted through video-conferencing, already litigations have ensued in this regard. The recently constituted National Company Law Tribunal (NCLT) had the occasion to deal with such an issue and its interpretation given vide NCLT New Delhi Bench order dated 22nd June, 2016 in the case of Rupak Gupta v. U.P. Hotels Ltd. [2016] 71 taxmann.com 158 (NCLT - New Delhi) (in short Rupak Gupta order) will have a far reaching impact on the functioning of meetings of Board of Directors of companies in India. The main question that was answered in the said ruling was whether company Directors can attend Board Meetings of the company via video-conferencing without prior intimation given at the beginning of the calendar year conveying such intention of participation through video- conferencing. Brief Facts of the Case: Rupak Gupta v. U.P.Hotels Ltd. 4. In the said Rupak Gupta's case, (supra) the applicant and his mother were continuing as Directors of the Respondent-Company. Owing to their travel plans overseas, they were desirous of participating in the Company's Board Meeting to be held on 4th June, 2016 via video-conferencing. However, the Joint Managing Director of the respondent Company denied the applicant and his mother the right to participate in the said Board meeting via video- conferencing and albeit, certain important decisions were taken in that Board Meeting, including the appointment of an Independent Director of the company and also the appointment of the Company Secretary of the company.
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