Resignation of trustees

Resignation of three trustees, Dinshaw Tamboly, Maneck Engineer and Burjor Antia, followed by the resignation of Minoo Shroff, chairman of the board of trustees of the Bombay Parsi Punchayet (BPP) in June last and the subsequent withdrawal of their resignations have created a great controversy in the community and have now become a subject matter of litigation. Legal aspects of the matter are briefly dealt with below.

By their letter dated June 19, 2006 addressed to the chairman of the BPP three trustees forthwith tendered their resignations as trustees of the BPP. These resignations were thus duly communicated to the chairman. Soon thereafter on June 20, 2006 the chairman himself tendered his resignation as chairman of the BPP to Dinshaw Mehta and Dadi Engineer, continuing trustees of the BPP. It is said that a copy of his letter of resignation was sent to the charity commissioner, Maharashtra state. It is stated that resignations were submitted by four trustees (including the chairman) primarily due to ideological differences with their co-trustee Dinshaw Mehta.

It is gathered that the BPP trust deed of 1884 and the scheme of election do not say anything about the resignation of trustees. In the absence of any provision in these instruments the matter would be governed by general principles of law applicable to trusts.

It is well settled that in the absence of any restriction imposed by law, a resignation takes effect from the time it is communicated to the appropriate party and acceptance of resignation is not necessary. There is no restriction imposed by law regarding resignation of trustees.

In the present case resignations of four trustees (including the chairman) were duly communicated to the appropriate parties as mentioned above. It is not necessary to communicate resignations to the board of trustees and to obtain their approval or acceptance of the same. Once resignations are duly communicated they become effective in law and can be enforced.

On communication of their resignations four trustees (including the chairman) became functus officio. Their term expired and came to an end and they have no further official authority. They are not entitled to exercise any powers as trustees, nor entitled to attend any board meetings thereafter. Any action taken by them (e.g. rejoining the board and exercising powers as trustees) is not valid and effective in law. On communication of trustees’ resignations their term is deemed to have come to an end on the days their resignations were duly communicated to the appropriate parties. Four trustees (including the chairman) have thereafter no right to withdraw their resignations and rejoin the board and act as trustees and the chairman as purported to be done by them in the present case.

In this connection principles of the corporate law regarding resignation of directors may be referred to by way of analogy in the matter. There is no provision in the Companies Act, 1956 regarding the resignation of a director. Even in the absence of any provision in the Act or in the articles of association of a company a director may at any time resign from office and his resignation submitted to the company takes effect from the time it is submitted. It is not necessary that his resignation should be accepted by the board or the company in general meeting. Whereby the articles a director is empowered to resign at any time, his resignation takes effect independently of its acceptance by other directors or the company. A director who has submitted his resignation will be deemed to have resigned from the date of its communication. Resignation once duly submitted cannot be withdrawn except with the consent of the company.

These principles of corporate law regarding resignation of directors are akin to general principles of law regarding resignation of trustees referred to above and may be referred to by way of guidance in the matter.

It is gathered that the matter is now being agitated in a court of law and before other judicial or quasi-judicial authorities (e.g. charity commissioner), leading thereby to a cumbersome, long drawn and expensive litigation. This is certainly not in the larger interests of the community. Every effort should be made to avoid litigation. Prudence requires that four trustees (including the chairman) forthwith resign and fresh elections be held soon, consistently with the provisions of the BPP trust deed of 1884 and the scheme of election, avoiding at the same time any impasse in the working of the board of trustees.

RUSTOM S. GAE

New Delhi