Madras High Court
K.Gunasekar vs Union Of India on 13 December, 2021
W.P. Nos. 25777 and 25779 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 13.12.2021
CORAM
THE HONOURABLE MR.JUSTICE M.DHANDAPANI
W.P.Nos. 25777 and 25779 of 2021
and
WMP.Nos. 27229 to 27231 and 27233 of 2021
W.P. No. 25777 of 2019:-
K.Gunasekar ... Petitioner
Vs.
1.Union of India
Represented by its
Ministry of Corporate Affairs
Shastri Bhawan, Dr. Rajendra Prasad Road
New Delhi – 110 001.
2.Registrar of Companies
Tamilnadu, Chennai
Block No.6, B Wing II Floor
Shastri Bhawan 26
Haddows Road
Chennai – 600 006. ... Respondents
Prayer: Petition filed under Article 226 of the Constitution of India to
issue a Writ of Certiorarified Mandamus, calling for the records of the
second respondent relating to the impugned order of disqualification under
Section 164 (2) dated 13.12.2019, read with the undated list in so far as
the petitioner herein is concerned and quash the status ''Disqualified under
Section 164(2)'' against his Director Identification Number (DIN No.
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W.P. Nos. 25777 and 25779 of 2021
1484936) as illegal, arbitrary and devoid of merits and consequently,
direct the Respondents herein to permit the petitioner to get reappointed as
Director of any company or appointed as Director in any company or to
act as Director in any Active Company without any hindrance.
For Petitioner : Mr.Kumarpal R.Chopra
For Respondents : No appearance
W.P. No. 25779 of 2019:-
Soundarajan Santhakumar ... Petitioner
Vs.
1.Union of India
Represented by its
Ministry of Corporate Affairs
Shastri Bhawan, Dr. Rajendra Prasad Road
New Delhi – 110 001.
2.Registrar of Companies
Tamilnadu, Chennai
Block No.6, B Wing II Floor
Shastri Bhawan 26
Haddows Road
Chennai – 600 006. ... Respondents
Prayer: Petition filed under Article 226 of the Constitution of India to
issue a Writ of Certiorarified Mandamus, calling for the records of the
second respondent relating to the impugned order of disqualification under
Section 164 (2) dated 13.12.2019, read with the undated list in so far as
the petitioner herein is concerned and quash the status ''Disqualified under
Section 164(2)'' against his Director Identification Number (DIN No.
https://www.mhc.tn.gov.in/judis
W.P. Nos. 25777 and 25779 of 2021
5119678) as illegal, arbitrary and devoid of merits and consequently,
direct the Respondents herein to permit the petitioner to get reappointed as
Director of any company or appointed as Director in any company or to
act as Director in any Active Company without any hindrance.
For Petitioner : Mr.Kumarpal R.Chopra
For Respondents : No appearance
COMMON ORDER
The prayer made in these writ petitions is to issue a writ of
certiorarified mandamus calling for the records of the 2nd respondent
relating to the impugned order dated 13.12.2019 uploaded on the website
of the 1st respondent insofar as the petitioner herein is concerned (DIN
Nos.1484936 and 5119678), quash the same as illegal, arbitrary and
devoid of merit and consequentially direct the respondents herein to
permit the petitioners to get re-appointed as Directors of any other
company without any hindrance.
2. According to the petitioners, 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, their names
were also mentioned. (DIN Nos: 1484936 and 5119678). In other words,
the second respondent, by including the name of the petitioners, has
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W.P. Nos. 25777 and 25779 of 2021
disqualified them as Directors 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 petitioners are also the Directors, due to which, they are
prohibited from being appointed or reappointed as director in any other
company for a period of 5 years. Stating that the action so taken by the
second respondent is arbitrary and unreasonable, the petitioners have filed
these writ petitions 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
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W.P. Nos. 25777 and 25779 of 2021
(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)
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
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W.P. Nos. 25777 and 25779 of 2021
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
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
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W.P. Nos. 25777 and 25779 of 2021
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
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, these writ
petitions stand 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
sk
M.DHANDAPANI,J.
https://www.mhc.tn.gov.in/judis
W.P. Nos. 25777 and 25779 of 2021
sk
To
1.The Ministry of Corporate Affairs
Shastri Bhawan, Dr. Rajendra Prasad Road
New Delhi – 110 001.
2.The Registrar of Companies
Tamilnadu, Chennai
Block No.6, B Wing II Floor
Shastri Bhawan 26
Haddows Road
Chennai – 600 006.
W.P.Nos. 25777 and 25779 of 2021
13.12.2021
https://www.mhc.tn.gov.in/judis
