Arisith Ganuba Sah Vijay Sah vs Union Of India
2021 Latest Caselaw 774 Mad

                                                                          W.P. Nos.598 and 600 of 2021

                                   IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                                DATED : 11.01.2021

                                                       CORAM

                               THE HONOURABLE MR.JUSTICE ABDUL QUDDHOSE

                                           W.P. Nos.598 and 600 of 2021
                                                       and
                                        WMP Nos.663, 665, 669 and 670 of 2021


                     Arisith Ganuba Sah Vijay Sah ....    Petitioner in
                                                          WP No.600 of 2021
                     Arisith Ganuba Sah Balaji Sah ....   Petitioner in
                                                          WP No.598 of 2021


                                                 Vs.

                     1.Union of India,
                     Rep.by its
                     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 both WPs

https://www.mhc.tn.gov.in/judis/ W.P. Nos.598 and 600 of 2021

Common Prayer : Writ Petitions 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 17.12.2018 uploaded and hosted on 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 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 in both WPs : Mr.K.Vijayaraghavan For Respondents in both Wps : Ms.Anuradha ACGSC

COMMON ORDER

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 order dated 17.12.2018 passed by the second respondent on the

ground that without affording opportunity to the petitioners, the said order

has been passed.

https://www.mhc.tn.gov.in/judis/ W.P. Nos.598 and 600 of 2021

2. Heard Mr.K.Vijayaraghavan, learned counsel for the petitioners

and Ms.Anuradha, learned ACGSC accepts notice for the respondents.

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

final disposal at the time of admission itself.

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

the impugned order dated 17.12.2018 has been passed in violation of the

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

law.

5. The issue raised in these writ petitions 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 :

https://www.mhc.tn.gov.in/judis/ W.P. Nos.598 and 600 of 2021

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 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.

https://www.mhc.tn.gov.in/judis/ W.P. Nos.598 and 600 of 2021

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.

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.Babu Silks Private Ltd.

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 order dated 17.12.2018 passed by the

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

https://www.mhc.tn.gov.in/judis/ W.P. Nos.598 and 600 of 2021

Silks 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 these

writ petitions are allowed. No costs. Consequently, connected

Miscellaneous Petitions are closed.

11.01.2021

Note:In view of the present lock down owing to COVID- 19 pandemic, a web copy of the order may be utilized for official purposes, but, ensuring that the copy of the order that is presented is the correct copy, shall be the responsibility of the Advocate/litigant concerned.

Index: Yes/ No Internet: Yes/No Speaking Order/Non-speaking Order vsi2

To

1. The Ministry of Corporate Affairs Union of India Shastri Bhawan Dr. Rajendra Prasad Road New Delhi.

2. Registrar of Companies Block No.6, B Wing, II Floor Shastri Bhawan 26 Haddows Road Chennai 600 006.

https://www.mhc.tn.gov.in/judis/ W.P. Nos.598 and 600 of 2021

ABDUL QUDDHOSE, J.

vsi2

W.P. Nos.598 and 600 of 2021

11.01.2021

https://www.mhc.tn.gov.in/judis/