Madras High Court
Nagarajan Prakash vs Union Of India on 2 November, 2021
WP No. 23590 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 02.11.2021
CORAM
THE HONOURABLE MR. JUSTICE R. MAHADEVAN
W.P.No. 23590 of 2021
and
W.MP. Nos.24834 & 24836 of 2021
Nagarajan Prakash .. Petitioner
Versus
1. Union of India
Represented by its Secretary
Ministry of Corporate Affairs
ShastriBhawan, Dr.Rajendra Prasad Road
New Delhi – 110 001
2. Registrar of Companies
Block No.6, B-Wing
2nd Floor, Shastribhavan Building
Chennai, Tamil Nadu 600 034 .. Respondents
Prayer: 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 2nd respondent relating to the impugned order dated 01.11.2017,
which is uploaded in the website of the 1st respondent insofar as the petitioner
(DIN: 06445360) herein and quash the same as illegal, arbitrary and devoid of
merit and consequently direct the respondents herein to permit petitioner to get
re-apppointed as Director of said company or appointed as Director in any
company without any hindrance.
For Petitioner : Mr.N.Mohan
For Respondents : Mr.J.Madanagopal Rao
Central Government Standing Counsel
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WP No. 23590 of 2021
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 01.11.2017 which was 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 01.11.2017, in
which, his name was also mentioned as item no. 5193 (DIN No: 06445360).
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. On account of the inclusion of
the petitioner's name, 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.
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WP No. 23590 of 2021
3. Today, when the writ petition is 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 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
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WP No. 23590 of 2021
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
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WP No. 23590 of 2021
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 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."
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WP No. 23590 of 2021
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.
02.11.2021
Index : Yes/No
dhk
To
1. Union of India
Represented by its Secretary
Ministry of Corporate Affairs
ShastriBhawan, Dr.Rajendra Prasad Road
New Delhi – 110 001
2. Registrar of Companies
Block No.6, B-Wing
2nd Floor, Shastribhavan Building
Chennai, Tamil Nadu 600 034
https://www.mhc.tn.gov.in/judis
WP No. 23590 of 2021
R. MAHADEVAN, J.
dhk
WP No. 23590 of 2021
02.11.2021
https://www.mhc.tn.gov.in/judis
