Madras High Court
Suresh Babu Chintapalli vs Union Of India on 6 July, 2021
W.P.No.13864 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated : 06.07.2021
Coram
The Honourable Mr.Justice R.MAHADEVAN
W.P.No.13864 of 2021
and W.M.P.Nos.14729 & 14730 of 2021
Suresh Babu Chintapalli ...Petitioner
Versus
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,
Chennai - 600 006. ...Respondents
Writ Petition filed under Article 226 of the Constitution of India
praying for issuance of a writ of certiorarified mandamus calling for the
records of the second respondent relating to the impugned order dated
13.12.2019 uploaded and hosted on the website of the first 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 of any Company or
appointed as Director in any company without any bar or hindrance.
1/6
https://www.mhc.tn.gov.in/judis/
W.P.No.13864 of 2021
For Petitioner : Mr.K.Vijayaragavan
For Respondents : Mr.Siddharth,
Central Govt. Standing Counsel
ORDER
The present writ petition has been filed seeking a writ of
certiorarified mandamus calling for the records of the second respondent
relating to the impugned order dated 13.12.2019 uploaded and hosted on the
website of the first respondent, in so far as the petitioner herein is
concerned, quash the same and for consequential relief.
2. According to the petitioner, 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, his name was also mentioned as item no.849 (DIN
No: 1670182). In other words, the second respondent, by including the
name of the petitioner, has disqualified him as Director under Section
164(2)(a) of the Companies Act, 2013 for non-filing of financial statements
or annual returns for continuous period of three financial years by the
defaulting companies on whose board, the petitioner is also a Director, due
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W.P.No.13864 of 2021
to which, he is 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 petitioner has
filed the present writ petition 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 W.P.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 W.P.No.13616 of 2018 etc. batch (Khushru Dorab Madan v. Union
of India) which were dismissed by order dated 27.01.2020. The said 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.
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W.P.No.13864 of 2021
batch (Meethelaveetil Kaitheri Muralidharan v. Union of India, 2020
SCC OnLine Mad 1958 : (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 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.
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W.P.No.13864 of 2021
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 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, this writ petition
stands allowed, in the terms as indicated in the judgment in Meethelaveetil
Kaitheri Muralidharan's case. No costs. Consequently, connected
miscellaneous petitions are also closed.
06.07.2021
mrr
Index : Yes/No
https://www.mhc.tn.gov.in/judis/
W.P.No.13864 of 2021
R.MAHADEVAN, J.,
mrr
To
1.The Ministry of Corporate Affairs,
Shastri Bhawan, Dr.Rajendra Prasad Road,
New Delhi - 110 001.
2.The Registrar of Companies,
Tamil Nadu, Chennai,
Block No.6, 'B' Wing 2nd Floor,
Shastri Bhawan,
Chennai - 600 006.
W.P.No.13864 of 2021
06.07.2021
https://www.mhc.tn.gov.in/judis/
