Madras High Court
Ranganathan Venkata Subramanian vs The Union Of India on 21 December, 2021
W.P.No.17653 of 2018
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 21.12.2021
CORAM
THE HONOURABLE MR.JUSTICE KRISHNAN RAMASAMY
W.P.No.17653 of 2018
and
W.M.P.Nos.20918 & 20919 of 2018
Ranganathan Venkata Subramanian ...Petitioner
Versus
1.The 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, Coimbatore,
Stock Exchange Building, II Floor,
683, Trichy Road, Siganallur,
Coimbatore – 641 005.
Tamil Nadu. ...Respondents
PRAYER: Writ Petition filed under Article 226 of the Constitution of India,
for the issuance of Writ of Certiorarified Mandamus, calling for the records of
the 2nd respondent relating to the impugned order dated 08.09.2017 uploaded
in the website of the 1st respondent in so far as the petitioner herein is
concerned, quash the same as illegal, arbitrary and devoid of merit and
consequently direct the respondents herein to permit petitioner to get
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W.P.No.17653 of 2018
reappointed as Director of any Company or appointed as Director in any
company without any hindrance.
For Petitioner : M/s.C.V.Shailandhran
For R1 & R5 : Mr.J.Madanagopal Rao
*****
ORDER
This Writ Petition has been filed, seeking for issuance of a Writ of
Certiorarified Mandamus, to call for the records of the 2nd respondent relating
to the impugned order dated 08.09.2017 uploaded in the Website of the 1st
respondent in so far as the petitioner herein is concerned, quash the same as
illegal, arbitrary and devoid of merit and consequently direct the respondents
herein to permit petitioner to get re-appointed as Director of any Company or
appointed as Director in any company without any hindrance.
2. When the matter is taken up for hearing, the learned counsel for the
petitioner submits that the issue involved in the present writ petition is with
regard to the disqualification of Directors for the year 2017 and the said issue
is squarely covered by the judgment of this Court, in the case of “Bhagavan
Das Dhananjaya Das Vs. Union of India and another” reported in (2018)
6 MLJ 704. The operative portion of the judgment in paragraph 29, is
extracted as hereunder :-
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W.P.No.17653 of 2018
“29. In fine,
(a) When the New Act 2013 came into effect from 1.4.2014, the second
respondent herein has wrongly given retrospective effect and erroneously
disqualified the petitioner-directors from 1.11.2016 itself before the
deadline commenced wrongly fixing the first financial year from 1.4.2013
to 31.3.2014.
(b) By virtue of the new Section 164(2)(a) of the 2013 Act using the
expression for any continuous period of three financial years and in the
light of Section 2(41) defining financial year as well as their own General
Circular No.08/14 dated 4.4.2014, the first financial year would be from
1.4.2014 to 31.3.2015, the second financial year would be from 1.4.2015
to 31.3.2016 and the third financial year would be from 1.4.2016 to
31.3.2017, whereas the second respondent clearly admitted in paras 15
and 22 of the counter affidavit that the default of filing statutory returns
for the financial years commenced from 2013-14, 2014-15 and 2015-16
i.e., one year before the Act 2013 came into force. This is the basic
incurable legal infirmity that vitiates the entire impugned proceedings.
(c) By virtue of the first proviso to Section 96(1) of the 2013 Act, Annual
General Meeting for the year ending on 31.3.2017 can be held within six
months from the closing of financial year i.e., 30.9.2017, additionally in
the light of Section 164(2)(a) referring to annual return and financial
statement, the time limit to file annual return under Section 92(4) of 2013
Act is sixty days from Annual General Meeting or the last date on which
Annual General Meeting ought to have been held, hence, the time limit to
file balance sheet under Section 137(1) of the 2013 Act is again thirty
days from Annual General Meeting. Therefore, in view of these legal
position, the disqualification could get triggered off only on or after
30.10.2017 only, if any company fails to file annual forms for three
financial years. Importantly, it is to be borne in mind that even beyond that
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W.P.No.17653 of 2018
time limit, additional time limit of 270 days was available by virtue of the
then first proviso to Section 403.
(d) Although there is no statute or provision expressly spelling out the
observance of the principles of natural justice against disqualification of
directors, as the legal right of the petitioners to continue as director in
other company or to be reappointed in any other company, which are
scrupulously following the provisions of the Companies Act, have been
deprived of, the principles of natural justice should have been adhered to
by issuing proper notice to all the directors.
(e) When the disqualification clause was not attracted to the directors of
private companies under the old Act of 1956, the same cannot be allowed
to take a retrospective effect under the new Act, when the provision of
Section 164(2)(a) came into force only from 1.4.2014. This is also for one
more reason that the failure to file the annual returns has been adequately
taken care of by the penal provision under Section 92, making it clear that
every officer of the company who is in default shall be punishable with
imprisonment for a term which may extend to six months or with fine
which shall not be less than fifty thousand rupees but which may extend to
five lakh rupees, or with both. Again under Section 137, the failure to file
the financial statement visits punishment with imprisonment for a term
which may extend to six months or with fine which shall not be less than
one lakh rupees but which may extend to five lakh rupees, or with both.
Further, under Section 441(4), the default in filing returns or accounts
compoundable by Tribunal or Regional Director or by any officer
authorized by the Central Government.
(f) In view of the above legal position, when the default in filing the
accounts or returns are made as compoundable offence, Section 164(2)(a)
providing the disqualification of director of private company not only in
the defaulting company, but also from other company in which the
petitioner is a director, diligently and meticulously following every
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W.P.No.17653 of 2018
provision of law, is certainly disproportionate to the lapse, as it is only
regulatory in nature, because, notice to be sent under Section 248(1) of
the Companies Act, 2013 by the Registrar of Companies for striking off
the name of the company from the Registrar of Companies on the premise
that the company has not been carrying on any business for a period of
two financial years, is different from the disqualification under Section
164(2)(a), inasmuch as a company can be struck off, if the company has
not been carrying on any business for a period of two financial years,
whereas for disqualification, the criteria is three financial years. Therefore,
in my considered opinion, although the petitioners have not challenged the
provision of Section 164(2)(a), as the respondents have not followed the
principles of natural justice, extinguishing the corporate life of the
directors to the extent of disqualifying them to hold the directorship in the
other companies, the said provision is liable to be read down, hence,
Section 164(2)(a) is read down to the extent it disqualifies the directors in
other companies which are scrupulously following the requirements of
law, making it clear that no directors in other companies can be
disqualified without prior notice.
(g) However, it is made clear beyond any pale of doubt that the mischief
of removal of the names of the companies by the Registrar of Companies
and the disqualification of the directors in the defaulting company will go
together, as it is inseparable, and the Registrar of Companies need not give
fresh notice to the directors for their disqualification from the dormant
company, if there is a failure to file the financial statement or annual
return for any continuous period of three financial years as per Section
164(2)(a).”
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W.P.No.17653 of 2018
3. In view of the law laid down by this Court in the above judgment,
the above order will hold good in respect of the present Writ Petition also.
Accordingly, this Writ Petition is allowed on the same terms. No costs.
Consequently, connected miscellaneous petitions are closed.
21.12.2021
Index: Yes/No
Internet: Yes/No
Speaking Order/Non-Speaking Order
sp/jd
To
1.The Ministry of Corporate Affairs,
Union of India,
Shastri Bhawan,
Dr.Rajendra Prasad Road,
New Delhi – 110 001.
2.The Registrar of Companies,
Tamilnadu, Coimbatore,
Stock Exchange Building, II Floor,
683, Trichy Road, Siganallur,
Coimbatore – 641 005.
Tamil Nadu.
https://www.mhc.tn.gov.in/judis
W.P.No.17653 of 2018
KRISHNAN RAMASAMY.J.,
sp/jd
W.P.No.17653 of 2018
21.12.2021
https://www.mhc.tn.gov.in/judis
