Zubetha Begum vs Union Of India
2021 Latest Caselaw 3100 Mad

Citation : 2021 Latest Caselaw 3100 Mad
Judgement Date : 9 February, 2021

Madras High Court

Zubetha Begum vs Union Of India on 9 February, 2021

                                                                                     W.P. No.31195 of 2017

                                   IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                                DATED : 09.02.2021

                                                       CORAM

                               THE HONOURABLE MR.JUSTICE ABDUL QUDDHOSE

                                              W.P. No.31195 of 2017
                                                       and
                                          WMP Nos.34237 and 34238 of 2017



                     Zubetha Begum                                          ....     Petitioner
                                                 Vs.

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


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

                     Prayer : Writ Petition filed under Article 226 of the Constitution of India
                     to issue a Writ of Certiorarified Mandamus calling for the records of the 2nd
                     respondent relating to the impugned order dated 08.09.2017 read with the
                     updated list dated 01.11.2017 uploaded and hosted on the website of the 1st

                     1/7


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                                                                                   W.P. No.31195 of 2017

                     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 in any
                     Company or appointed as Director in any company without any bar or
                     hindrance.
                                   For Petitioner       : Mr.Kumarpal R.Chopra
                                   For Respondents : Mr.V.Venkataswamy Babu
                                                          Senior Panel Counsel


                                                           ORDER

Mr.V.Venkataswamy Babu, learned Senior Panel Counsel accepts

notice for the respondents.

2. This writ petition has been filed challenging the disqualification of

the petitioner as Director under Section 164(2)(a) of the Companies Act,

2013 on the ground that he has not submitted financial statements for three

consecutive financial years. The petitioner has challenged the impugned

order dated 08.09.2017 passed by the second respondent on the ground that

without affording opportunity to the petitioner, the said order has been

passed.

3. Heard Mr.Kumarpal R.Chopra, learned counsel for the petitioners

and Mr.V.Venkataswamy Babu, learned Senior Panel counsel appearing for

the respondents.

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4. By consent of both the parties, this writ petition is taken up for

final disposal at the time of admission itself.

5. It is also contended by the learned counsel for the petitioner that

the impugned order dated 08.09.2017 has been passed in violation of the

provisions of the Companies Act, 2013 and therefore the said order is bad in

law.

6. The issue raised in this writ petition was considered by the Hon'ble

Division Bench of this Court by its order dated 09.10.2020 in W.A. No.569

& Ors. of 2020 in the case of Meetgelaveetil Kaitheri Muralidharan

Versus Union of India & Another and in paragraphs 36 and 38, it has

been held as follows :

36. 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

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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 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.

38. 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

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taking into account the observations and conclusions herein. No costs. Consequently, connected miscellaneous petitions are closed.

7. The case on hand stands on the same footing. In the instant case,

also, no notice was given to the petitioner before disqualifying her as

Director of M/s.Smart Fresh Products Private Ltd.

8. For the foregoing reasons, the ratio laid down by the Hon'ble

Division Bench of this Court, dated 09.10.2020 in W.A. No.569 & batch

applies to the facts of the instant cases also.

9. Accordingly, the impugned order dated 08.09.2017 passed by the

second respondent disqualifying the petitioner as Director of M/s.Smart

Fresh Products Private Ltd., under Section 164(2) (a) of the Companies Act,

2013 is hereby set aside in the terms indicated in the aforesaid judgment and