Director appointed in general meeting not assuming office

No casual vacancy arises if a director appointed by the company in general meeting does not

assume office (e.g., resigns or dies before assuming office). There is no question of someone vacating any office if he had never assumed that office. The

words” director appointed by the company in general meeting” used in Section 262(1) must be read with the words following, i.e., “is vacated before his

term of office will expire” - M.K. Srinivaan v. W.S. Subsrahamanya Ayyar [1932] 2 Compo Cas. 147.

(c) Alternate Director (Sec. 313). The Board of Directors of a company may, if so authorised by its Articles or by a resolution passed by the company in

general meeting, appoint an alternate director to act for a director dug his absence for a period of not less than three months from the State in which

meetings of the Board are ordinarily held.

An alternate director is not an agent of the original director.

Tenure. An alternate director shall not hold office as such for a period longer than that permissible to the original director in whose place he has been

appointed and shall vacate office if and when the original director returns to the State in which meetings

of the Board are ordinarily held. .

The Department of Company Affairs has clarified that the alternate Director vacates his office whether or not the original Director attends the Board

meetings on his return to the State-Letter No. 6/16(313)/68-PR, dated 5.2.1968.

4. Appointment of Directors by Third Parties

The Articles may empower a third party, e.g., a vendor of a business to the company to appoint directors (British Murac Syndicate vs. Alperton Rubber

Co.), Similarly, a banking company or a financial institution which has advanced loans to the company may appoint their nominees on the Board. However,

if the company refuses to accept a nominee of the third party, can the third party claim specific performance? Perrins and Jeffreys in their Company Law

observe, “It is doubtful whether the Court will grant either specific performance or an injunction in such case, and probably the third party’s only remedy in

case of breach is an action for damages, since the Court is loath to force on a company directors of whom the members do not approve.”