Madras High Court
Singarayar Dhinesh vs Union Of India on 20 July, 2021
W.P.No.11227 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated : 20.07.2021
Coram
The Honourable Mr.Justice R.MAHADEVAN
W.P.No.11227 of 2021
and
W.M.P.Nos.11881 & 11882 of 2021
Singarayar Dhinesh
...Petitioner
Versus
1.Union of India
Rep. by its Secretary
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 - 600 034.
...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
01.11.2018 uploaded in the website of the first respondent in so far as the
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W.P.No.11227 of 2021
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 and to act as Director in other companies.
For Petitioner : Mr.K.Anandharaja
For Respondents : Ms.A.Anuradha,
Asst. 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 01.11.2017 uploaded in 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.840 (DIN No: 06845440).
In other words, the second respondent, by including the name of the
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W.P.No.11227 of 2021
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 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
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W.P.No.11227 of 2021
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. 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
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W.P.No.11227 of 2021
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.
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
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W.P.No.11227 of 2021
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 closed.
20.07.2021
mrr
Index : Yes/No
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W.P.No.11227 of 2021
To
1.The Secretary
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, 26, Haddows Road,
Chennai - 600 034.
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W.P.No.11227 of 2021
R.MAHADEVAN, J.
mrr
W.P.No.11227 of 2021
20.07.2021
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