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Wadia Group scion Ness Wadia need not fret about losing his board positions in his various Group firms as a fallout of his getting a two-year jail term in Japan for drug possession. This is because a sentence awarded by a court outside India and put in a suspended state will not trigger director disqualification in Indian companies as per Indian legal provisions, say corporate law experts.
In the case of Wadia, the two-year prison sentence was suspended for five years by the Japanese authorities. Experts say, unless the suspension (of the sentence) is revoked, he (Ness Wadia) is fully competent to discharge his duty as director in various boards of Indian companies.
Gaurav Dani, Founding Partner, IndusLaw, a law firm, said: “Under the Indian companies law, a conviction beyond six months disqualifies a person to be a director in an Indian company. However, in the circumstances that such sentence is suspended, a person can continue to remain a director.”
Another interesting point is that the Indian company law provisions relating to disqualification of directors alludes to Courts — which in Indian company law definition covers only Indian courts.
Aseem Chawla, Managing Partner, ASC Legal, a law firm, said: “The conviction for disqualification of directorship as per Section 164 and vacation of office of directorship in terms of section 167 of the Companies Act refers to the conviction by the Courts etc. The definition of Courts as enlisted under the scheme of the Companies Act is Indian courts”.
Meanwhile, a corporate governance professional had a different take on the issue.
This professional highlighted that press reports have conveyed the information of “suspended sentence” (in the Ness Wadia case) which one would infer to be after conviction in respect of a crime.
In such an instance, it would be appropriate if the person so named chooses on his own to stay away from the position of a director of a company as otherwise he would have to be removed under Companies Act provisions on account of his disqualification, according to this professional.
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