Madras High Court

Srinivasan Subramanian vs Union Of India on 17 December, 2021

                                                                      W.P.Nos.35699 and 35702 of 2019

                                    IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                                    DATED : 17.12.2021

                                                           CORAM

                                    THE HONOURABLE MR.JUSTICE M.DHANDAPANI

                                         W.P.Nos.35699 and 35702 of 2019
                                                       And
                                  W.M.P.Nos.36617, 36618, 36621 and 36622 of 2019


                     Srinivasan Subramanian                    ... Petitioner in W.P.35699/2019
                     Subramanian Rathna                        ... Petitioner in W.P.35702/2019

                                                             Vs.

                     1.Union of India
                       Represented by its
                       Ministry of Corporate Affairs,
                       Shastri Bhavan,
                       Dr.Rajendra Prasad Road,
                       New Delhi – 110 001.

                     2.Registrar of Companies
                       Tamil Nadu, Chennai
                       Block No.6, B Wing 2nd Floor,
                       Shastri Bhavan 26,
                       Haddows Road,
                       Chennai – 600 006.                      ... Respondents in both W.Ps.

Common Prayer:

Petitions 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 dated 17.12.2018

uploaded in the website of the first respondent in so far as the

https://www.mhc.tn.gov.in/judis W.P.Nos.35699 and 35702 of 2019

petitioners are concerned, quash the same as illegal, arbitrary and

unconstitutional and to consequentially direct the Respondents herein

to permit petitioners to get re-appointed as Director of the Company.

For Petitioners : Mr.S.Kumaran For Respondents : Mr.K.Ramanamoorthy CGC

COMMON ORDER The petitioners have filed these writ petitions seeking issuance of

Writ of Certiorarified Mandamus calling for the records of the second

respondent relating to the impugned order dated 17.12.2018 uploaded

in the website of the first respondent in so far as the petitioners are

concerned, quash the same as illegal, arbitrary and unconstitutional

and to consequentially direct the Respondents herein to permit

petitioners to get re-appointed as Director of the Company.

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 with effect from

01.11.2018 in which, their name was also mentioned. In other words,

the second respondent, by including the name of the petitioners, has

disqualified them as Director under Section 164(2)(a) of the

Companies Act, 2013 for non-filing of financial statements or annual

https://www.mhc.tn.gov.in/judis W.P.Nos.35699 and 35702 of 2019

returns for continuous period of three financial years by the defaulting

companies on whose board, the petitioners are also 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 the present 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 (Khushru Dorab Madan v. Union

of India) which were dismissed by order dated 27.01.2020. The said

https://www.mhc.tn.gov.in/judis W.P.Nos.35699 and 35702 of 2019

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 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

https://www.mhc.tn.gov.in/judis W.P.Nos.35699 and 35702 of 2019

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 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

https://www.mhc.tn.gov.in/judis W.P.Nos.35699 and 35702 of 2019

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, the writ petitions

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

Meethelaveetil Kaitheri Muralidharan's case. No costs.

Consequently, the connected miscellaneous petitions are closed.

17.12.2021 pri

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

https://www.mhc.tn.gov.in/judis W.P.Nos.35699 and 35702 of 2019

1.The Union of India Represented by its Ministry of Corporate Affairs, Shastri Bhavan, Dr.Rajendra Prasad Road, New Delhi – 110 001.

2.Registrar of Companies Tamil Nadu, Chennai Block No.6, B Wing 2nd Floor, Shastri Bhavan 26, Haddows Road, Chennai – 600 006.

https://www.mhc.tn.gov.in/judis W.P.Nos.35699 and 35702 of 2019

M.DHANDAPANI,J.

pri