Mohammed Sherif Valiyakath vs Union Of India
2021 Latest Caselaw 1947 Mad

Citation : 2021 Latest Caselaw 1947 Mad
Judgement Date : 29 January, 2021

Madras High Court

Mohammed Sherif Valiyakath vs Union Of India on 29 January, 2021

                                                                        W.P. Nos.1569 and 1575 of 2021

                                   IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                                 DATED : 29.01.2021

                                                      CORAM

                               THE HONOURABLE MR.JUSTICE ABDUL QUDDHOSE

                                          W.P. Nos.1569 and 1575 of 2021
                                                       and
                                      WMP Nos.1777, 1779, 1780 and 1781 of 2020


                     Mohammed Sherif Valiyakath
                                Kythakkal          ....      Petitioner in W.P. No.1569 of 2021
                     Khaleel Rahman Adoor Balakila ....      Petitioner in W.P. No.1575 of 2021

                                                       Vs.

                     1.Union of India,
                     Rep.by its Secretary,
                     Ministry of Corporate Affairs,
                     Shastri Bhawan,
                     Dr.Rajendra Pradad 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 in all WPs

https://www.mhc.tn.gov.in/judis/ W.P. Nos.1569 and 1575 of 2021

Common 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 orders dated 01.11.2017, uploaded in the website of the 1st respondent in so far as the petitioners 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 any Company or appointed as Directors in any company without any hindrance.

For Petitioner in both W.P.s : Mr.J.Lenin For Respondents in both W.P.s : Mr.N.Vijayaraman CGSC for R1 and R2

COMMON ORDER Heard Mr.J.Lenin, learned counsel for the petitioners in both Writ

petitions, Mr.N.Vijayaraman, learned CGSC accepts notice for respondents.

2. By consent of both the parties, these writ petitions are taken up for

final disposal.

3. These writ petitions have been filed challenging the

disqualification of the petitioners as Directors under Section 164(2)(a) of

the Companies Act, 2013 on the ground that they have not submitted

financial statements for three consecutive financial years. The petitioners

have challenged the impugned orders dated 01.11.2017 passed by the

https://www.mhc.tn.gov.in/judis/ W.P. Nos.1569 and 1575 of 2021

second respondent on the ground that without affording opportunity to the

petitioners, the said orders have been passed.

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

the impugned orders dated 01.11.2017 have been passed in violation of the

provisions of the Companies Act, 2013 and therefore the said orders are bad

in law.

5. 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

https://www.mhc.tn.gov.in/judis/ W.P. Nos.1569 and 1575 of 2021

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

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

also, no notice was given to the petitioners before disqualifying them as

Directors of M/s.Finserv Technologies Private Limited.

7. 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.

8. Accordingly, the impugned orders dated 01.11.2017 passed by the

second respondent disqualifying the petitioners as Directors of M/s.Finserv

Technologies Private Limited. under Section 164(2) of the Companies Act,

2013 are hereby set aside in the terms indicated in the aforesaid judgment

and these writ petitions are allowed. No costs. Consequently, connected