Ram Singh is a shareholder of Alexandra India Ltd. The Board of directors of the company are of the view that the conduct of Ram Singh has been detrimental to the interest of the company. Further, the Board also noted th

A controversy has 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 will be 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 38, 58, 48, 235 & 241 of the Companies Act, 2013 respectively having the same impact as earlier provisions. Further, according to Section 6 of the Companies Act, 2013, the Act shall override the Memorandum and Articles of Association and any provisions contained in these documents repugnant to the provisions of the Companies Act, 2013 shall be void. Therefore, 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. The Supreme Court in the case of Bajaj Auto Ltd. v. N.K. Firodia [1971] 41 Com Cases 1 has laid down the law as to the conditions on the basis of which directors could refuse a person to be admitted as a member of the company. The principles laid down by the Supreme Court in this case, even though pertain to the refusal by a company to the admission of a person as a member of the company, are applicable even with greater force to a case of expulsion of an existing member. 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. If Ram Singh a files a suit against the company or the directors he will certainly win the case, as expulsion of a member is illegal and void as per the Companies Act 2013.