Natarajan Athimuthan vs Union Of India
2021 Latest Caselaw 5610 Mad

Citation : 2021 Latest Caselaw 5610 Mad
Judgement Date : 3 March, 2021

Madras High Court

Natarajan Athimuthan vs Union Of India on 3 March, 2021

W.P. Nos.4999 and 5004 of 2021

IN THE HIGH COURT OF JUDICATURE AT MADRAS

DATED : 03.03.2021

CORAM

THE HONOURABLE MR.JUSTICE ABDUL QUDDHOSE

W.P. Nos.4999 and 5004 of 2021
and
WMP Nos.5572, 5575, 5577 and 5579 of 2021

Natarajan Athimuthan .... Petitioner in W.P. No.4999 of 2021
Athimuthan Amutha .... Petitioner in W.P. No.5004 of 2021
Vs.
1. Union of India,
Ministry of Corporate Affairs,
Shastri Bhawan,
Dr. Rajendra Prasad Road,
New Delhi - 110 001.

2. The Registrar of Companies,
Tamilnadu, Chennai
Block No.6, B Wing 2nd Floor,
Shastri Bhawan 26,
Haddows Road
Chennai - 600 006. .... Respondents in
both WPs

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 order dated 18.12.2018 uploaded in
the website of the 1st respondent in so far as the petitioners herein vide DIN

1/6

https://www.mhc.tn.gov.in/judis/
W.P. Nos.4999 and 5004 of 2021

No.02229869 and 02229852 are concerned, quash the same as illegal,
arbitrary and devoid of merit and consequentially direct the respondents
herein to permit petitioners to get reappointed as Directors of any Company
or appointed as Directors in any company without any hindrance.
For Petitioner : Mr.Karunamoorthy
For Respondents : Mr.K.Ramamoorthy
Central Govt. Standing Counsel

ORDER

Mr.K.Ramamoorthy, learned Central Government Standing Counsel

accepts notice for the respondents.

2. 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 18.12.2018 passed by the second

respondent on the ground that without affording opportunity to the

petitioners, the said orders have been passed.

3. Heard Mr.S.Karunamoorthy, learned counsel for the petitioner and

Mr.K.Ramamoorthy, learned Central Government Standing Counsel for the

respondents.

https://www.mhc.tn.gov.in/judis/ W.P. Nos.4999 and 5004 of 2021

4. By consent of both the parties, this writ petition is taken up for

final disposal at the time of admission itself.

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

the impugned order dated 18.12.2018 has been passed in violation of the

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

in law.

6. 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 :

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

https://www.mhc.tn.gov.in/judis/ W.P. Nos.4999 and 5004 of 2021

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.

https://www.mhc.tn.gov.in/judis/ W.P. Nos.4999 and 5004 of 2021

7. 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.Aathees Wetcsting Material Private Limited.

8. 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 case also.

9. Accordingly, the impugned orders dated 18.12.2018 passed by the

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

M/s.Aathees Wetcsting Material Private Limited. under Section 164(2) (a)

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.