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2022 (2) TMI 1020 - HC - Companies LawDisqualification of Directors - cessation of office as directors - non-filing balance sheets and annual returns for a continuous period of three years from the year 2014-15 - Section 164 (2) of Companies Act - HELD THAT:- To leave the responsibility of filing balance sheet and annual returns on an accountant of company is not only irresponsible but amounts to wilful negligence. It is difficult to accept that, the petitioners are diligent enough in filing Income Tax and GST returns but not Balance Sheets and Annual Returns. The illness of the petitioner No.2 cannot be a reason for not filing return for a continuous period of three years. No proof of evidence of such illness has been disclosed in the petition. It is essentially to deter conduct of this nature that Section 164 (2) and 167 (1)(a) have been introduced and applied under the Companies Act, 2013. Hence even on facts the petitioners have not made out any case for relief. Whether the petitioners were entitled to any prior notice before disqualification under Section 164 (2)? - HELD THAT:- It has been held in the case of NARESH KUMAR PODDAR VERSUS UNION OF INDIA, THROUGH SECRETARY, MINISTRY OF CORPORATE AFFAIRS AND ANOTHER [2021 (1) TMI 258 - CALCUTTA HIGH COURT] by a Co-ordinate Bench at Paragraph 25 thereof that since the disqualification under Section 164 (2) and 167 (1)(a) is automatic, by operation of law and leaving no discretion on the authorities, the question of application of principle of natural justice particularly prior hearing does not and cannot arise. In GAUTAM MEHRA VERSUS UNION OF INDIA [2021 (1) TMI 350 - CALCUTTA HIGH COURT], Co-ordinate Bench has also held at Paragraph 92 and 93 that Section 164 (2) and 167 (1) (a), do not call for any prior notice or hearing. The object and purpose of Section 164(2) and 167(1) is indeed laudable. It is aimed at ensuring good governance and maintenance of high standards of probity and protection of the interest of Shareholders. Transparency in the activities of Companies is very vital for ensuring an enduring business atmosphere in an economy - This Court is of the view that the object and purposes of Section 164 and 167, as amended is to ensure probity and the highest standard of governance in Companies both public and private. A failure to file balance sheet and the annual returns for three consecutive years amounts to deliberate and wilful negligence. The public at large dealing with such companies cannot be put to the uncertainty, whim and fancy of recalcitrant directors. After all the requirements and compliances mandated under the Companies Act, are not only for the benefit of the shareholders of a particular company but also for the public at large, which rely upon such compliances, in assessing the conduct of and in deciding their relations with such companies. This Court is also of the view that the provisions of the 2013 Act have an overriding effect on the Companies (Appointment and Qualifications of Director) rules of 2014. The said rules can, therefore, not have any manner of application or confer in right on the petitioners, insofar as their disqualification as directors - On the power of the ROC to deactivate the DIN of the petitioners it would be necessary to go into whether the provisos to the two Section 164(2) and 167(1), introduced subsequently by amendment. It is, therefore, held that deactivation of the DIN of the petitioners is not automatic - the DIN of the petitioners shall be revived subject to the company having filed DR-9 within prescribed or extended time. The said DIN shall not be applied to entitle the petitioners to act as directors in any other company. Petition allowed.
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