Madras High Court
Arcot Mudaliandamudaliar vs Union Of India on 27 July, 2021
W.P.No.15368 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 27.07.2021
CORAM:
THE HON'BLE MR.JUSTICE R.MAHADEVAN
W.P.No. 15368 of 2021
and W.M.P.Nos.16251 and 16252 of 2021
Arcot Mudaliandamudaliar
Munuswamy Mudaliar ... Petitioner
Vs
1. Union of India
Represented by its Secretary
Ministry of Corporate Affairs,
Shastri Bhawan,
Dr.Rajendra Prasad Road,
New Delhi – 110 001.
2. The Registrar of Companies
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
praying for a writ of certiorarified mandamus calling for the records of the
second respondent relating to the impugned order dated 17.12.2018
uploaded in the website of the first respondent insofar as the petitioner
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W.P.No.15368 of 2021
herein is concerned, quash the same as illegal, arbitrary and devoid of merit
and consequentially direct the respondents herein to permit the petitioner to
get re-appointed as Director of any Company or appointed as Director in any
Company without any hindrance.
For Petitioner : Mr.R.Inbaraju
For R1 : Ms.A.Anuradha
Additional Central Govt. Standing Counsel
For R2 : Mr.G.Krishnaraja
Govt. Advocate
ORDER
The prayer made in this writ petition is to issue a Certiorarified
Mandamus, calling for the records of the second respondent relating to the
order dated 17.12.2018 uploaded in the website of the first respondent,
insofar as the petitioner is concerned and 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 01.11.2016, in
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W.P.No.15368 of 2021
which, his name was also mentioned as item no.11957 (DIN No: 1106741).
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 to which, he is prohibited
from being appointed or reappointed as director in any other company for a
period of 6 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 WP.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
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W.P.No.15368 of 2021
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 WP.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 2958 : (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
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W.P.No.15368 of 2021
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
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W.P.No.15368 of 2021
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 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
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W.P.No.15368 of 2021
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, the 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.
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Index : yes/no
Internet : yes/no
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To
1. Union of India
Represented by its Secretary
Ministry of Corporate Affairs,
Shastri Bhawan,
Dr.Rajendra Prasad Road,
New Delhi – 110 001.
2. The Registrar of Companies
Block No.6, B Wing 2nd floor
Shastri Bhawan
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W.P.No.15368 of 2021
26, Haddows Road
Chennai-600 006.
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W.P.No.15368 of 2021
R.MAHADEVAN, J.
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