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2020 (10) TMI 595 - HC - Companies LawDisqualifications for appointment of a Directors - Deactivation of DIN - whether a prior notice is required before disqualifying a director under Section 164(2) of CA 2013? - HELD THAT:- When Section 164(2) of CA 2013 is read with Rule 14 of the AQD Rules, it appears that, if Form DIR-9 is filed, the Registrar of Companies could rely on the names and addresses of directors that were provided by the Defaulting Company. Such reliance may not, however, be bereft of controversy especially when neither statute nor rule sets out the criteria for the preparation of such list. In any event, in all the cases at hand, such a list was not provided because the Defaulting Company did not file DIR-9. In such case, Rule 14(3) provides for resort to Section 2(60) of CA 2013 - it is evident that the statutory prescription is generic except with regard to the managing director and whole-time director and, consequently, insufficient to fix responsibility and attribute the default to a specific set of directors. As a corollary, an enquiry would be necessary. However, the scope of enquiry under Section 164(2) would vary from that under Section 164(1). In specific, the first question under Section 164(2) would be whether the company concerned has defaulted in fulfilling the obligations specified in Clauses (a) or (b). As regards Section 164(2)(a), the learned ASGI contended that this determination would be fairly straight forward. While this contention has some basis, such determination may not necessarily be devoid of challenge as would be evident from the following. As per the proviso to Section 96 (1) of CA 2013, the first annual general meeting (AGM) may be held by a company within nine months from the last date of the preceding financial year and the subsequent AGM's within six months from the last date of the preceding financial year. The time limit for filing the financial statements runs from the date of AGM and Section 137(1) of CA 2013 provides that the same should be filed within 30 days from the date of the AGM. Consequently, the prescribed time limit for filing the financial statements would vary depending on the date of AGM and, as a corollary, the date of default in filing the financial statements would also vary, including with reference to whether it is the first AGM or a subsequent AGM. It could become even more complicated if the AGM is not held as the time limits would run from the last date prescribed for holding the AGM in such situation. As regards the annual return, as per Section 92(4) of CA 2013, it is required to be filed within sixty days of the AGM. Once again, the date of default would vary depending on the date of AGM as also if the AGM is not held. 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 - 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. The publication of the list of disqualified directors by the ROC and the deactivation of the DIN of the Appellants is hereby quashed - Appeal allowed.
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