Madras High Court

V.Vigneswaran vs The Registrar Of Companies on 13 December, 2021

                                                                                W.P.No.25733 of 2021
                                                                   and WMP.Nos.27173 & 27174 of 2021

                              IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                              DATED : 13.12.2021

                                                       CORAM

                                  THE HONOURABLE MR.JUSTICE M.DHANDAPANI

                                            W.P.No.25733 of 2021
                                                    and
                                         WMP.Nos.27173 & 27174 of 2021
                    V.Vigneswaran                                                    ... Petitioner

                                                        Vs.
                    1.The Registrar of Companies,
                      AGT Business Park, Avinashi Road,
                      Civil Aerodrome Post, Coimbatore,
                      Tamilnadu.

                    2.Union of India,
                      Through its Secretary,
                      Ministry of Corporate Affairs,
                      5th Floor, A-Wing,
                      'SHASTRI BHAVAN',
                      New Delhi – 110 001.                                        ... Respondents

                    Prayer: Petition filed under Article 226 of the Constitution of India to
                    issue a Writ of Certiorari to call for the record of the 1st respondent
                    relating to the impugned notice dated 07.12.2018 uploaded in the website
                    of the 2nd respondent in so far as the petitioner herein is concerned, quash
                    the same as illegal, arbitrary and devoid of merit and consequentially
                    direct the respondents herein to permit petitioner to get reappointed as
                    Director of Company or appointed as Director in any company without
                    any hindrance.
https://www.mhc.tn.gov.in/judis

                    Page 1 of 8
                                                                                   W.P.No.25733 of 2021
                                                                      and WMP.Nos.27173 & 27174 of 2021

                                           For Petitioner    : Mr.G.Sudhakar

                                                    ORDER

The prayer made in this writ petition is to issue a writ of

certiorarified mandamus calling for the records of the 2nd respondent

relating to the impugned order dated 07.12.2018 uploaded on the website

of the 1st respondent insofar as the petitioner herein is concerned, quash

the same as illegal, arbitrary and devoid of merit and consequentially

direct the respondents herein to permit the petitioner to get re-appointed as

Director of any other company without any hindrance.

2. According to the petitioner, the second respondent released a list

of disqualified directors, who have been disqualified under Section

164(2)(a) of the Companies Act, 2013, as directors in which, his name was

also mentioned. In other words, the second respondent, by including the

name of the petitioner, has disqualified him as Director under Section

164(2)(a) of the Companies Act, 2013 for non-filing of financial

statements or annual returns for continuous period of three financial years

by the defaulting companies on whose board, the petitioner is also a

Director, due to which, he is prohibited from being appointed or

reappointed as director in any other company for a period of 5 years. https://www.mhc.tn.gov.in/judis

W.P.No.25733 of 2021 and WMP.Nos.27173 & 27174 of 2021

Stating that the action so taken by the second respondent is arbitrary and

unreasonable, the petitioner has filed the present writ petition with the

aforesaid prayer.

3.Today, when the matter was taken up for consideration, the

learned counsel appearing for the parties jointly submitted that the issue

involved herein is no longer res integra. Earlier, this Court by order dated

03.08.2018 in WP.No.25455 of 2017 etc. batch, in Bhagavan Das

Dhananjaya Das case reported in (2018) 6 MLJ 704, allowed those writ

petitions and set aside the orders dated 08.09.2017, 01.11.2017,

17.12.2018, etc. passed by the Registrar of Companies, disqualifying the

petitioners therein to hold the office of directorship of the companies

under Section 164(2)(a) of the Companies Act, which came into effect

from 01.04.2014. Thereafter, yet another set of disqualified directors

approached this court by filing WP.No.13616 of 2018 etc. batch

(Khushru Dorab Madan v. Union of India) which were dismissed by

order dated 27.01.2020. The said order of the learned single judge was

challenged by some of the petitioners therein before the Division Bench of

this Court in W.A.No.569 of 2020, etc. batch (Meethelaveetil Kaitheri

Muralidharan v. Union of India, 2020 SCC OnLine Mad 2958 : (2020) https://www.mhc.tn.gov.in/judis

W.P.No.25733 of 2021 and WMP.Nos.27173 & 27174 of 2021

6 CTC 113), which after elaborately dealt with the issue as to whether the

RoC is entitled to deactivate the Director Identification Number (DIN),

allowed those writ appeals on 09.10.2020, the relevant passage of which,

are profitably, extracted below:

"41. As is evident from the above, Rules 9 and 10 deals with the application for allotment of DIN. Rule 10(6) specifies that the DIN is valid for the life time of the applicant and shall not be allotted to any other person. Rule 11 provides for the cancellation or surrender or deactivation of the DIN. It is very clear upon examining Rule 11 that neither cancellation nor deactivation is provided for upon disqualification under Section 164(2) of CA 2013. In this connection, it is also pertinent to refer to Section 167(1) of CA 2013 which provides for vacating the office of director by a director of a Defaulting Company. As a corollary, it follows that if a person is a director of five companies, which may be referred to as companies A to E, if the default is committed by company A by not filing financial statements or annual returns, the said director of company A would incur disqualification and would vacate office as director of companies B to E. However, the said person would not vacate office as director of company A. If such person does not vacate office and continues to be a director of company A, it is necessary that such person continues to retain the DIN. In this connection, it is also pertinent to point out that it https://www.mhc.tn.gov.in/judis

W.P.No.25733 of 2021 and WMP.Nos.27173 & 27174 of 2021

is not possible to file either the financial statements or the annual returns without a DIN. Consequently, the director of Defaulting Company A, in the above example, would be required to retain the DIN so as to make good the deficiency by filing the respective documents. Thus, apart from the fact that the AQD Rules do not empower the ROC to deactivate the DIN, we find that such deactivation would also be contrary to Section 164(2) read with 167(1) of CA 2013 inasmuch as the person concerned would continue to be a director of the Defaulting Company.

42. In light of the above analysis, we concur with the views of the Delhi High Court in Mukut Pathak, the Allahabad High Court in Jai Shankar Agrahari and the Gujarat High Court in Gaurang Balvantlal Shah to the effect that the ROC is not empowered to deactivate the DIN under the relevant rules. In Yashodhara Shroff, the Karnataka High Court upheld the constitutionality of Section 164(2) and proceeded to hold that a prior or post decisional hearing is not necessary. For reasons detailed in preceding paragraphs, we disagree with the view of the Karnataka High Court that prior notice is not required under Section 164(2) of CA 2013.

43. In the result, these appeals are allowed by setting aside the impugned order dated 27.01.2020.

Consequently, the publication of the list of disqualified directors by the ROC and the deactivation of the DIN of the https://www.mhc.tn.gov.in/judis

W.P.No.25733 of 2021 and WMP.Nos.27173 & 27174 of 2021

Appellants is hereby quashed. As a corollary to our conclusion on the deactivation of DIN, the DIN of the respective directors shall be reactivated within 30 days of the date of receipt of a copy of this order. Nonetheless, we make it clear that it is open to the ROC concerned to initiate action with regard to disqualification subject to an enquiry to decide the question of attribution of default to specific directors by taking into account the observations and conclusions herein. No costs. Consequently, connected miscellaneous petitions are closed."

4.Therefore, following the aforesaid decision, the writ petition

stands allowed, in the terms as indicated in the judgment in

Meethelaveetil Kaitheri Muralidharan's case. No costs. Consequently,

connected miscellaneous petitions are closed.

13.12.2021

Speaking Order/ Non Speaking Order Index: Yes/ No Internet: Yes/ No

https://www.mhc.tn.gov.in/judis

W.P.No.25733 of 2021 and WMP.Nos.27173 & 27174 of 2021

1.The Registrar of Companies, AGT Business Park, Avinashi Road, Civil Aerodrome Post, Coimbatore, Tamilnadu.

2.The Secretary, Ministry of Corporate Affairs, 5th Floor, A-Wing, 'SHASTRI BHAVAN', New Delhi – 110 001.

https://www.mhc.tn.gov.in/judis

W.P.No.25733 of 2021 and WMP.Nos.27173 & 27174 of 2021