“Karnataka High Court Stays NMDC Director Appointment Process Amid Procedural Concerns

The Karnataka High Court has issued an order to halt the interview process for the position of Director (Production) at National Mineral Development Corporation Limited (NMDC), which was scheduled for June 5. The decision was made by a bench of Justice S.R. Krishna Kumar on June 4, following a petition that raised concerns about the adherence to the proper appointment procedures.

The court has also issued notices to the Union of India through the Public Enterprises Selection Board (PESB), the Ministry of Steel, and NMDC.

The petition was filed by T.K. Srinivasan, a shareholder of NMDC, who contended that NMDC Ltd., being a government company as defined under the Companies Act, 2013, should adhere to specific procedures for the appointment of its directors. Srinivasan argued that the appointment of directors does not fall under Section 152 of the Companies Act, 2013, and raised doubts about the eligibility and qualifications of Satyender Rai, a candidate for the director post.

The petition highlighted that appointing an ineligible, disqualified, or inexperienced person to the director position could potentially result in significant losses for the company, thereby adversely affecting its shareholders. Srinivasan emphasized his standing as a shareholder to challenge what he perceived as illegal and arbitrary actions by the executive bodies involved in the selection process, namely the Public Enterprises Selection Board and the Ministry of Steel.

“I, being one of the shareholders, have locus standi to question the illegal and arbitrary action and procedure that is being resorted to and followed by the executive,” stated Srinivasan in his petition.

The High Court’s intervention underscores the importance of transparency and adherence to due process in the appointment of key positions within public enterprises. The stay on the interview process serves as a reminder of the judiciary’s role in ensuring that executive actions comply with legal and procedural norms.

This development comes as a significant step towards maintaining corporate governance standards and protecting shareholder interests in public sector undertakings. The court’s decision to review the appointment process may prompt a re-evaluation of the criteria and procedures followed by government bodies in selecting top executives for crucial roles.

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