Madras High Court
R.Sivakumar vs Union Of India on 27 January, 2022
W.P.No.29325 of 2018
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED 27.01.2022
CORAM
THE HONOURABLE MR.JUSTICE KRISHNAN RAMASAMY
W.P.No.29325 of 2018
and
W.M.P.Nos.34270 & 34271 of 2018
R.Sivakumar ... Petitioner
Vs.
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,
Block No.6, B-Wing, 2nd floor,
Shastri Bhawan, 26 Haddows Road,
Chennai – 600 006. ... Respondents
PRAYER : Petition filed Under Article 226 of the Constitution of India
praying to issue a Writ of Certiorarified Mandamus, calling for the
records of the 2nd respondent relating to the impugned order of
disqualification dated 01.11.2017 uploaded in the website of the 1st
respondent in so far as the petitioner herein is concerned and quash the
same as illegal, arbitrary and devoid of merit and consequentially direct
the respondents herein to remove the name of the petitioner from the list
of disqualified directors and permit the petitioner to get reappointed as
Director of any company or appointed as Director in any company.
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W.P.No.29325 of 2018
For Petitioner : Mr.M.Vijay Mehanath
for M/s.AAV Partners
For Respondents : No appearance
ORDER
This Writ Petition has been filed to issue a Writ of Certiorarified
Mandamus, calling for the records of the 2nd respondent relating to the
impugned order of disqualification dated 01.11.2017 uploaded in the
website of the 1st respondent in so far as the petitioner herein is concerned
and quash the same as illegal, arbitrary and devoid of merit and
consequentially direct the respondents herein to remove the name of the
petitioner from the list of disqualified directors and permit the petitioner
to get reappointed as Director of any company or appointed as Director in
any company.
2. When the matter is taken up for hearing, the learned counsel for
the petitioner submits that the issue involved in the present writ petition is
with regard to the disqualification of Directors for the year 2017 and the
said issue is squarely covered by the judgment of this Court, in the case of
“Bhagavan Das Dhananjaya Das Vs. Union of India and another”
reported in (2018) 6 MLJ 704. The operative portion of the judgment in
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W.P.No.29325 of 2018
paragraph 29, is extracted as hereunder :-
“29. In fine,
(a) When the New Act 2013 came into effect from 1.4.2014, the
second respondent herein has wrongly given retrospective effect and
erroneously disqualified the petitioner-directors from 1.11.2016 itself
before the deadline commenced wrongly fixing the first financial year
from 1.4.2013 to 31.3.2014.
(b) By virtue of the new Section 164(2)(a) of the 2013 Act using the
expression for any continuous period of three financial years and in
the light of Section 2(41) defining financial year as well as their own
General Circular No.08/14 dated 4.4.2014, the first financial year
would be from 1.4.2014 to 31.3.2015, the second financial year
would be from 1.4.2015 to 31.3.2016 and the third financial year
would be from 1.4.2016 to 31.3.2017, whereas the second
respondent clearly admitted in paras 15 and 22 of the counter
affidavit that the default of filing statutory returns for the financial
years commenced from 2013-14, 2014-15 and 2015-16 i.e., one year
before the Act 2013 came into force. This is the basic incurable legal
infirmity that vitiates the entire impugned proceedings.
(c) By virtue of the first proviso to Section 96(1) of the 2013 Act,
Annual General Meeting for the year ending on 31.3.2017 can be
held within six months from the closing of financial year i.e.,
30.9.2017, additionally in the light of Section 164(2)(a) referring to
annual return and financial statement, the time limit to file annual
return under Section 92(4) of 2013 Act is sixty days from Annual
General Meeting or the last date on which Annual General Meeting
ought to have been held, hence, the time limit to file balance sheet
under Section 137(1) of the 2013 Act is again thirty days from
Annual General Meeting. Therefore, in view of these legal position,
the disqualification could get triggered off only on or after 30.10.2017
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W.P.No.29325 of 2018
only, if any company fails to file annual forms for three financial
years. Importantly, it is to be borne in mind that even beyond that
time limit, additional time limit of 270 days was available by virtue of
the then first proviso to Section 403.
(d) Although there is no statute or provision expressly spelling out the
observance of the principles of natural justice against disqualification
of directors, as the legal right of the petitioners to continue as director
in other company or to be reappointed in any other company, which
are scrupulously following the provisions of the Companies Act, have
been deprived of, the principles of natural justice should have been
adhered to by issuing proper notice to all the directors.
(e) When the disqualification clause was not attracted to the directors
of private companies under the old Act of 1956, the same cannot be
allowed to take a retrospective effect under the new Act, when the
provision of Section 164(2)(a) came into force only from 1.4.2014.
This is also for one more reason that the failure to file the annual
returns has been adequately taken care of by the penal provision
under Section 92, making it clear that every officer of the company
who is in default shall be punishable with imprisonment for a term
which may extend to six months or with fine which shall not be less
than fifty thousand rupees but which may extend to five lakh rupees,
or with both. Again under Section 137, the failure to file the financial
statement visits punishment with imprisonment for a term which may
extend to six months or with fine which shall not be less than one lakh
rupees but which may extend to five lakh rupees, or with both.
Further, under Section 441(4), the default in filing returns or accounts
compoundable by Tribunal or Regional Director or by any officer
authorized by the Central Government.
(f) In view of the above legal position, when the default in filing the
accounts or returns are made as compoundable offence, Section
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W.P.No.29325 of 2018
164(2)(a) providing the disqualification of director of private
company not only in the defaulting company, but also from other
company in which the petitioner is a director, diligently and
meticulously following every provision of law, is certainly
disproportionate to the lapse, as it is only regulatory in nature,
because, notice to be sent under Section 248(1) of the Companies
Act, 2013 by the Registrar of Companies for striking off the name of
the company from the Registrar of Companies on the premise that the
company has not been carrying on any business for a period of two
financial years, is different from the disqualification under Section
164(2)(a), inasmuch as a company can be struck off, if the company
has not been carrying on any business for a period of two financial
years, whereas for disqualification, the criteria is three financial years.
Therefore, in my considered opinion, although the petitioners have
not challenged the provision of Section 164(2)(a), as the respondents
have not followed the principles of natural justice, extinguishing the
corporate life of the directors to the extent of disqualifying them to
hold the directorship in the other companies, the said provision is
liable to be read down, hence, Section 164(2)(a) is read down to the
extent it disqualifies the directors in other companies which are
scrupulously following the requirements of law, making it clear that
no directors in other companies can be disqualified without prior
notice.
(g) However, it is made clear beyond any pale of doubt that the
mischief of removal of the names of the companies by the Registrar
of Companies and the disqualification of the directors in the
defaulting company will go together, as it is inseparable, and the
Registrar of Companies need not give fresh notice to the directors for
their disqualification from the dormant company, if there is a failure
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W.P.No.29325 of 2018
to file the financial statement or annual return for any continuous
period of three financial years as per Section 164(2)(a).”
3. In view of the law laid down by this Court in the above
judgment, the above order will hold good in respect of the present Writ
Petition also. Accordingly, this Writ Petition is allowed on the same
terms. No costs. Consequently, connected miscellaneous petitions are
closed.
27.01.2022
Pns
Internet : Yes / No
Speaking/Non-speaking order
To
1.Ministry of Corporate Affairs,
Union of India,
Bhawan, Dr.Rajendra Prasad Road,
New Delhi – 110 001.
2.Registrar of Companies,
Block No.6, B-Wing, 2nd floor,
Shastri Bhawan, 26 Haddows Road,
Chennai – 600 006.
KRISHNAN RAMASAMY.,J.
https://www.mhc.tn.gov.in/judis
W.P.No.29325 of 2018
Pns
W.P.No.29325 of 2018
and
W.M.P.Nos.34270 & 34271 of 2018
27.01.2022
https://www.mhc.tn.gov.in/judis
