Section 37 of The Small Industries Development Bank of India Act, 1989
- (1)No act or proceeding of the Board or of any committee of the Small Industries Bank shall be questioned on the ground merely of the existence of any vacancy in, or defect in the constitution of, the Board or the committee, as the case may be.
- (2)No act done by any person acting in good faith as a Director shall be deemed to be invalid merely on the ground that he was disqualified to be a Director or that there was any other defect in his appointment.
Summary
- Decisions made by the board of directors remain completely valid even if there is an empty seat on the board at the time of the vote.
- Actions taken by a committee are still legally binding even if there was a mistake in how the committee was put together.
- If a director does something in good faith (meaning honestly and with good intentions), their actions remain valid even if it is later discovered they were not actually qualified to be a director or their appointment was defective.
Practical examples
FAQ
1. If a committee was formed incorrectly, are all its past decisions cancelled?
No, the decisions remain valid despite mistakes in how the committee was put together.
2. What happens if a director was secretly disqualified but approved a loan anyway?
As long as the director acted honestly and in good faith, the loan approval is still valid.
3. Does a missing board member stop the board from doing business legally?
No, empty seats or vacancies do not invalidate the legal actions of the board.
Test yourself
Q1.Under Section 37 of The Small Industries Development Bank of India Act, 1989, what happens if the Board makes a decision but there is a vacancy on the Board at the time?
Q2.According to Section 37 of The Small Industries Development Bank of India Act, 1989, how does a defect in the appointment of a Director affect the acts done by that Director?
Q3.Under Section 37 of The Small Industries Development Bank of India Act, 1989, which of the following grounds is explicitly blocked from being used to question a proceeding of a committee of the Bank?
Q4.Under Section 37 of The Small Industries Development Bank of India Act, 1989, who is protected if they perform an act in good faith while holding office despite a disqualification?