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2020 (1) TMI 1212 - HC - Companies LawDisqualification of Directors - Deactivation of DIN - Striking off the name of the Company from the Register of the Companies - non filing of annual returns for a continuous period of three years - Section 248(1) of the Companies Act 2013 - vires of the proviso under Section 167(2)(a) of the Act which was inserted to the Companies (Amendment Act 2017) - HELD THAT:- The Companies Act 2013 had come into effect from 12.09.2013. It had brought about sweeping changes with respect to the filing of Annual Returns and Financial Status, brining strict compliance thereof. The equivalent provision to Section 164 of the 2013 Act was Section 274 of the Companies Act 1956. One important change which had been brought about was that under Section 274 of http://www.judis.nic.inthe Company Act 1956, it was provided that there would be disqualification with respect to Directorship of 'Public' companies and it would be attracted when annual returns and financial statements were not filed. In the Act of 2013, disqualification was attracted even for Directors of all Companies, not just public companies, and disqualification was attracted for non filing of financial statements or annual returns. The provisions are clear. There is no scope for ambiguity for the same. This Court had not been called to give a ruling on the vires of Section 164(2)(a). According to this provision, if a person, who is a Director of a Company which had not filed financial statements or annual returns for a continuous period of three financial years, then he/she was not eligible to be reappointed as a Director on that Company or can be appointed in other Company for a period of five years - A proviso was inserted in Section 167(1)(a) with effect from 07.05.2018, which stated that if disqualification is incurred then the office of Director shall become vacant in all other companies where the individual was a Director. The vires of this proviso was questioned and challenged before a Division Bench of this Court. In the present batch of writ petitions, the three financial years, 2014-15, 2015-16 and 2016-17 have been completed. The Companies have not filed the annual returns / financial statements. They have defaulted in such filing of annual returns / financial statements. The Act very clearly states that if there is such a default then the Directors would be disqualified. This Court cannot extend the time for filing of annual returns or financial statements. When a period of time is stipulated in a statute, it has to be strictly interpreted. In the earlier batch, leverage was granted because the annual general meeting should be called within a period of six months namely on or before 30th September of each succeeding year and thereafter a further period of 30 days / 60 days is given to file the annual returns. Here the three financial years had come to an end. The said period of six months had also been completed - There cannot be any alternate interpretation of the said provision. It is clear – crystal clear. Issuance of notice would be of no avail since only one conclusion is possible. The principle of natural justice cannot be stretched to extreme limits when issue of notice would be an empty formality. The law is clear. The three financial years are 2014-2015; 2015-2016 and 2016-2017. If annual returns are not filed for the said three consecutive years, then disqualification is the only option available. The other provisions relating to penalty /punishment relied on by the petitioners would be attracted when for a single year annual returns/financial statements are not filed. But when they are not filed for three consecutive years then the Directors are automatically disqualified. An irrational interpretation cannot be given that the Director Identification Number can still attach itself to the individual even after he resigns, or is disqualified from the post of Directorship or vacates the office. Consequently, when a Director is disqualified, it follows that the DIN should be deactivated. In the present writ petition, the three financial years 2014-2015, 2015-16 and 2016-17 have been completed and since annual returns / financial statements have not been filed, disqualification automatically follows and when disqualification is incurred, deactivation of Director Identification Number also automatically follows. The DIN number can exist only during the life time of post of Directorship and not for the entire life of the individual. Issuing a prior notice would be of no avail and would only be an empty formality since the provision of law is clear on this aspect. There are no merits in the petition - petition dismissed.
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