The Board of directors of Shagun Ltd. has, for a considerable period, observed that Sampat, a member of the company, has been indulging in activities detrimental to the interests and reputation of the company. The Articl

Expulsion of a Member A controversy had arisen as to whether a public limited company had powers to insert an article in its Articles of Association relating to expulsion of a member by the Board of Directors of the company where the directors were of the view that the activities or conduct of such a member was detrimental to the interests of the company. The Department of Company Affairs (now, Ministry of Corporate Affairs) clarified that an article for expulsion of a member is opposed to the fundamental principles of the Company Jurisprudence and is ultra vires the company, the reason being that such a provision against the provisions of the Companies Act relating to the rights of a member in a company, the powers of the Central Government as an appellate authority under Section 111 of the Act and the powers of the Court under Sections 107, 395 and 397 of the Companies Act, 1956. These sections correspond to sections 58, 48, 235 and 241 of the Companies Act, 2013 respectively. According to Section 6 of the Companies Act, 2013, the Act overrides the Memorandum and Articles of Association and any provision contained in these documents repugnant to the provisions of the Companies Act, is void. The Department of Company Affairs (now MCA) has, therefore, clarified that any assumption of the powers by the Board of Directors to expel a member by alteration of Articles of Association shall be illegal and void. As, under Article 141 of the Constitution, the law declared by the Supreme Court is binding on all courts within the territory of India, any provision pertaining to the expulsion of a member by the management of a company which is against the law as laid down by the Supreme Court will be illegal and ultra vires. In the light of the aforesaid position, it is clarified that assumption by the Board of Directors of a company of any power to expel a member by amending its articles of association is illegal and void. [Circular: Letter No. 32/75, dated 1.11.1975]. Conclusion: Hence, the provision in the Articles empowering the board to expel the member from the membership is void ab initio. The decision taken by the board to expel Sampat, a member is therefore invalid under the Companies Act.