Additional Directors equally responsible for company affairs as Regular Directors: Calcutta High Court

The Calcutta High Court recently observed that additional directors of a company appointed under Section 161 (1) of the Companies Act, 2013 are equally liable for the company’s affairs, just as regular directors of the company [Surendra Kumar Singhi v. Registrar of Companies, West Bengal & Anr.]..Referring to the relevant provisions under the Companies Act, Justice Shampa Dutt (Paul) noted that an additional director has the same powers, responsibilities and duties as other directors.."Additional directors are on equal footing, in terms of, of power, rights, duties, and responsibilities, as other directors are … The responsibility of an Additional Director being the same as that of a director (but [different] from an independent director) they remain responsible, as the statute provides for the same,” the judgment stated..The primary difference between the two categories lay in the manner of their appointment and the term of office, the Court noted. While additional directors are appointed on a temporary basis, they carry the same powers, obligations and limitations as a (regular) director, the Court observed..“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,” the Court added..The Court made the observations while dismissing a discharge plea preferred by the former director of a company. .The said company's directors had been accused of failing to fully disclose and/ or explain certain adverse remarks made in an auditors’ report with respect to the Financial Year 2013-14. All the other directors accused had pleaded guilty and paid the fine imposed as punishment..However, the petitioner contended that he was innocent. Pertinently, he told the Court that he was appointed as an independent director from June 2, 2014 onwards and that he was not involved in the preparation of or discussion on the relevant financials of the company ending March 2013, which were carried out prior to his appointment..The petitioner also pointed out that even the Union Ministry of Corporate Affairs (MCA) had categorically instructed the authorities concerned that unnecessary criminal proceedings should not be filed against independent directors..The Court, however, took note of the opposing party’s submission that the MCA records only indicated that the petitioner was an “additional director” from June 2, 2014 and that he was a regular director from September 30, 2014 till his resignation in December 2016..Going by these records, the petitioner was an additional director when the financial statements under scrutiny were signed i.e. September 5, 2014, the Court was told. In other words, his status of being an additional director/ director in an independent capacity was not reflected in the MCA portal..Whereas the petitioner highlighted that he had only given his consent to be appointed as an independent director, it was also observed that the petitioner had not filed any complaint with the MCA about the wrong information maintained on its portal..In this backdrop, the Court opined that evidence has to be adduced during trial to decide whether the petitioner was an independent director or an additional director at the time of filing the report under scrutiny. .The plea for discharge was, therefore, dismissed with the High Court observing that "to quash the proceedings by exercising this Courts inherent powers would amount to an abuse of the process of Court and would also amount to serious miscarriage of justice.”.Advocate Sandipan Ganguly appeared for the petitioner while advocate Dipankar Dandapath appeared for the opposite parties. .[Read Judgment]