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2021 (1) TMI 317 - HC - Companies LawDisqualification to act as the Directors/office bearers of respondent - seeking restraint on respondent from functioning as Directors of respondent - whether the writ petition is maintainable, whether the Directors of the Yogam have defaulted in filing annual returns and whether there is an automatic disqualification of the Directors of the Yogam for re-appointment as the Directors of the Yogam? - HELD THAT:- Section 164(2) makes it clear that no person who is or has been a Director of a company which has not filed financial statements or annual returns for any continuous period of three financial years shall be eligible to be reappointed as Directors of that company for a period of five years from the date on which the said company fails to do so. Section 167 mandates that the office of a Director shall become vacant in case a Director incurs any of the disqualifications specified in Section 164 - The Companies Act, 2013 does not provide for any administrative procedure for disqualification of Directors by operation of Section 164(2). Respondents 3 to 7 also admit that no application to declare that the office has been vacated, can be entertained by the Company Court. According to respondents 3 to 7, the remedy available is through civil court. The disqualification for reappointment prescribed by Section 164(2) of the Companies Act, 2013 is for a period of five years. As initiation of civil proceedings and final culmination of the proceedings after appeals provided under the Code of Civil Procedure, 1908, ordinarily takes more than five years, this Court finds that civil remedy is not an efficacious alternate remedy and consequently a writ petition under Article 226 of the Constitution of India will be maintainable in appropriate cases. Whether the Directors of the 3rd respondent-Yogam have defaulted in filing annual returns and are disqualified to hold office by operation of Section 164(2) of the Companies Act? - HELD THAT:- Section 164(2)(a) makes it clear that a Director of a company which has not filed financial statements or annual returns for any continuous period of three financial years shall not be eligible to be reappointed as a Director of that company or appointed in other company, for a period of five years from the date on which the said company fails to do so. Section 167(1)(a) mandates that the office of a Director shall become vacant in case he incurs any of the disqualifications specified in Section 164. It is evident from the said provisions that disqualification of such Directors occurs by operation of law and is automatic and an administrative decision is not required in that regard. Whether any of the Directors of the 3rd respondent-Yogam have incurred the disqualification due to non-filing of annual returns/financial statements for a continuous period of three years? - HELD THAT:- It is evident from the pleadings that the annual returns of the Yogam from the year 2006-'07 to 2016-'17 were filed paying the penalty imposed by the Non-trading Company Registrar, Kerala only after 24.09.2020. The amended provisions of the Companies Act came into force with effect from 12.09.2013. Therefore, if financial statements/annual returns for the years 2013-'14, 2014-'15 and 2015-'16 were not filed, such of the Directors who were in office during the period will be disqualified for reappointment as Directors in the Yogam for the next five years. Whether respondents 4 to 7 in the writ petition are liable to be declared as having incurred the disqualification under Section 164(2) of the Companies Act, 2013, by this Court? - HELD THAT:- There is no positive assertion anywhere in the writ petition that respondents 4 to 7 were Directors of the Company during the three consecutive years since 2013-'14, except in the case of the 4th respondent - Disqualification of Directors for reappointment or appointment in any Company is a serious matter affecting rights of Directors to hold office of the Director not only in the defaulted company but also in other companies. Therefore, it will not be advisable and would indeed be improper to declare that respondents 4 to 7 are disqualified for reappointment in the Yogam, in view of Section 164(2) of the Companies Act, 2013 in the absence of sufficient pleadings. Furthermore, there are other Directors of the Yogam also, as is evident from the cause title shown in Ext.P4 complaint, who are not parties to this writ petition, who may also be disqualified for reappointment as Directors in the Yogam. In the circumstances, this Court finds that it will not be appropriate to declare that respondents 4 to 7 are disqualified to be reappointed as Directors of Yogam, in this writ petition. The petitioner has approached the 2 nd respondent filing Ext.P4 petition seeking to remove the disqualified Directors of the Yogam, including respondents 4 to 7, in the light of Section 164(2) of the Companies Act, 2013 - the writ petition is disposed of directing the 2nd respondent to consider and take a decision on Ext.P4 petition submitted by the writ petitioner, within a period of three months.
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