‘Civic chief, mayor and ruling party leader never appointed valid directors of Smart City co’

Nagpur: Mayor Sandip Joshi and ruling party leader Sandip Jadhav had filed a complaint with Sadar police station, demanding action against municipal commissioner Tukaram Mundhe, alleging violations in his decisions taken as CEO of Smart City special purpose vehicle — Nagpur Smart and Sustainable City Development Corporation Limited (NSSCDCL). Legal and company affairs experts told TOI, Joshi, Jadhav and Mundhe are not ‘valid directors’ of NSSCDCL, and neither is Mundhe the CEO, going strictly by the Companies Act 2013.
Joshi and Jadhav had lodged complaint against Mundhe, chief finance officer Mona Thakur, and accounts officer Amruta Deshkar on June 22. They alleged NSSCDCL board of directors (BoD) had not appointed Mundhe as director and CEO, so his decisions were a violation of norms. They had lodged the complaint in the capacity of nominee directors, and claimed they were inducted by BoD in a meeting on December 31, 2019.
The information with ministry of corporate affairs (MCA) shows Joshi and Jadhav are not nominee directors of NSSCDCL. Jadhav does not have the mandatory Director Identification Number (DIN). Joshi’s DIN is “disqualified by Registrar of Companies (RoC) from November 1, 2016 to October 31, 2021”.
In a legal opinion to TOI, advocate Sahil Dewani said, “Under Companies Act, a DIN is must to be appointed as a director of a company. Without the DIN, and a mandatory declaration that he is ‘not disqualified to become a director’, it is apparent Joshi was disqualified on January 27, 2020,” he said.
Dewani added, “The MCA website master data does not show any of the three as directors or signatories. It also shows the last annual general meeting was conducted on December 31, 2019. Thus, with the mandatory procedure not followed, all three cannot be considered directors.”
A senior chartered accountant made the same observations, on condition of anonymity.
Joshi and Jadhav told TOI, “We are political persons and all these procedures are to be taken care of by officials. But whatever issues we raised are true, and appropriate action against Mundhe is needed.”
Joshi added, “I was ruling party leader from April 2017 till November 2019, so was nominee director. I attended meetings and also signed minutes. No one raised any issues in that period.”
Going by MCA website, Joshi was not a nominee director even during ruling party leader term, as his DIN was disqualified by RoC. Therefore, a question can be raised on all his decisions.
Joshi and Jadhav had alleged Mundhe issued payments to contractors, terminated some employees, revised projects as CEO, which violated the norms.
Refuting the allegations, Mundhe claimed he was ex-officio director of NSSCDCL as soon as he assumed charge as municipal commissioner. He also claimed chairman Pravin Pardeshi directed him to take charge as CEO while accepting the resignation of Ramnath Sonawane on February 13.
Pardeshi did not respond to TOI’s calls and messages for last three days.
However, Mundhe is not registered as director and CEO with MCA. Mundhe’s predecessor Abhijit Bangar is seen as nominee director and Sonawane as CEO (KMP) on MCA.
Joshi and Jadhav have alleged BoD did not induct Mundhe as director and CEO, since no board meeting was held after he assumed charge as municipal commissioner.
Dewani said, “Mundhe cannot be said to be a director as per the Companies Act, since the mandatory procedure appears to be not followed. As for his appointment as CEO, this power can be conferred by the BoD, which appears to have been not done.”
Mundhe also said, “I have an active DIN so I become director and CEO. I even submitted all my documents to the company secretary in time. Only BoD meeting was not held due to Covid-19. A government notification of June 18, 2016, had clarified its decision will overrule article of association and model article of association of any company. Also, another government notification of November 3, 2018, noted municipal commissioner will work as CEO, so I am de facto CEO after Sonawane’s resignation. All decisions taken by me are in larger interest of company and city.”
Dewani said, “Prima facie, the Companies Act being the central legislation, a government resolution (a ‘delegated legislation’), cannot act in contravention to its provisions. In short, provisions of Companies Act need to be followed for a person to become a director.”
This opinion is the same as the one written by NSSCDCL company secretary Bhanupriya Thakur, in a reply to Joshi a few days ago. She said, “Mundhe acting as CEO is not legal. He has taken charge as per remarks of chairman. But he has not been appointed by BoD as meeting could not be conducted due to Covid-19.”
TOI tried to find out why details of the new directors were not reported to MCA as required by law. However, Thakur sent a message that ‘company policy does not permit her to give a statement to the media’. Thakur herself came on board as NSSCDCL company secretary on January 21, 2020, as per the MCA website.
Dewani said, “Although we have nothing to do with the present controversy, the documents show mandatory procedure for appointment of director was not complied with. As for not conducting board meeting due to Covid-19, the Rules of 2014 allow meeting by video conferencing. So, this reason is not justifiable.”