Delhi HC issues notice in challenge to Section 177(9), 177(10) Companies Act for not mandating constitution of vigil mechanism

The Delhi High Court has issued notice in a petition seeking a direction to strike down Section 177(9) and Section 177(10)of the Companies Act, 2013 insofar as they do not mandatorily require all companies to constitute a vigil mechanism. (Manoj Kumar Garg vs UOI).Consequently, Rule 7(1) and Rule 7(4) of the Companies (Meetings of Board and its Powers) Rules, 2014 are also challenged..Notice to the Central Government was issued by a Division Bench of Chief Justice DN Patel and Justice Prateek Jalan. .The Petitioner, Manoj Kumar Garg, claims to be a whistleblower who brought to surface various corrupt, illegal and illicit practices going on in his employer-company. .Following the disclosure, an internal investigation was initiated but the Petitioner became a victim of retaliation by the senior management. Several systemic reprisals ultimately culminated in the Petitioner's unlawful termination..The Petitioner has asserted that the regime of a vigil mechanism/whistle-blower mechanism as contemplated under the Companies Act, 2013 is not desirable and suffers from several constitutional flaws. .It is stated that the exclusion of similarly placed employees of private limited companies and public limited companies, which do not fall within the enumerated categories in Rule 7 of the 2014 Rules, from the protection of a vigil mechanism is in violation of Article 14. ."..there is no rational basis to justify the categories enumerated in Rule 7 of the 2014 Rules, in so far as the need to protect the values of probity and fair dealing in corporate affairs cannot be limited to only the companies enumerated therein, and the same is an obligation that would apply to all companies registered under the Companies Act, 2013.", the petition reads. .The Petitioner further argues that the discretion afforded to the companies under Section 177(10) is overly broad and contemplates no checking mechanism to examine the effectiveness of the mechanism put into place by the company. .The Petitioner has separately instituted a civil suit against the employer-company, however, he claims to be "compelled to pay an enormous ad valorem court fee". .Therefore, the Petitioner has also assailed Section 4 of the Court Fees Act, 1870 insofar as it precludes the discretion of the High Courts in terms of making exemptions for suits involving a public interest. .The matter would be heard next on November 11. .The Petitioner was represented by Advocates Tishampati Sen, Riddhi Sancheti, Aarti Kumar, Abhisree Saujanya..Read the Order: