New Delhi: Capital markets regulator Sebi has asked the government to amend the Companies Act to ensure that a director declared by it as a disqualified person should immediately vacate the position, a plea triggered by defaulter businessman Vijay Mallya’s reluctance to do so.
Under the Companies Act, the office of a director becomes vacant in case of he or she being disqualified by an order of a court or a tribunal, among other reasons, but there is no explicit mention of an order by the Securities and Exchange Board of India (Sebi), which is mandated with regulation of thousands of listed firms in India. In a proposal, Sebi has now proposed that the Companies Act should also clearly mention that a person should vacate the office of a director if it orders his or her disqualification.
Officials said the Finance Ministry is in agreement with Sebi on the proposed amendment and has asked the regulator to get it approved by its board and subsequently forward it to the Corporate Affairs Ministry, which is the nodal ministry for the Companies Act. In its proposal, Sebi has referred to its interim order dated January 25, 2017, through which the regulator had barred Mallya and six others from holding directorship in any listed company till further directions.
The Sebi order followed a probe into alleged illegal fund diversions at United Spirits Ltd, an erstwhile firm of business group headed by Mallya which he had later sold to global liquor giant Diageo. Mallya and others were also barred from the securities markets in the same order. However, Mallya did not comply with the order by not stepping down as a director of United Breweries Ltd, another listed company of his group, for months.
