SAT ruling likely to facilitate the appointment of Independent Directors

In a significant ruling related to the appointment of an independent director by Nectar Life Sciences, the Securities Appellate Tribunal (SAT) has ruled against the Securities and Exchange Board of India (SEBI) and NSE. The SAT clarified that a special resolution is not necessary for appointing a director above the age of 75 to fill casual vacancies created by the death of an ID. After the death of non-executive ID SS Chauhan on November 22, 2020, the company appointed Ajit Singh Dhillon, who was over 75 years old, as an additional ID to fill the vacancy. However, Dhillon resigned from the board before the shareholders could pass a resolution, and the NSE directed the company to pay a penalty for non-compliance. The SAT ruled that the regulation that necessitates a special resolution in a shareholder meeting for appointing an individual over 75 years of age, is not applicable while filling up a casual vacancycreated by the death of a director. The appointment of a person as a director does not require a special resolution as a qualifying condition. The casual vacancy created by the death of a director must be filled by the board within three months and approved by the shareholders in the next general meeting.