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2021 (8) TMI 660 - HC - Companies LawDisqualification of directors - directors failed to file financial statements or annual returns for a continuous period of three years - Section 164(2) of Companies Act - HELD THAT:- Under Section 164(2) of the new legislation i.e., Act 18 of 2013, no such distinction between a ‘private company’ or a ‘public company’ is made and as per the said provision goes to show that no person who is or has been a director of a ‘company’, fails to file financial statements or annual returns for any continuous period of three financial years, will not be eligible for appointment as a director of a company. As already noted, the said provision, came into force with effect from 01.04.2014. Coming to the facts on hand, the 2nd respondent has disqualified the petitioners under Section 164(2)(a) of the Act 18 of 2013, for not filing financial statements or annual returns, for period prior to 01.04.2014. The action of the 2nd respondent runs contrary to the circular issued by the Ministry of the Corporate Affairs, and he has given the provisions of Act 18 of 2013, retrospective effect, which is impermissible. Section 164(2)(a) of the Act is a deeming provision and the disqualification envisaged under the said provision comes into force automatically by operation of law on default and Legislature did not provide for issuance of any prior notice, but the respondents notified disqualification even before it incurred, and deactivated DINs, which is illegal arbitrary and against provisions contained in Section 164(2)(a) of the Act. Deactivation of DINs - HELD THAT:- Clauses (a) to (f) of Rule 11, provides for the circumstances under which the DIN can be cancelled or deactivated. The said grounds, are different from the ground envisaged under Section 164(2)(a) of the Act. Therefore, for the alleged violation under Section 164 of the Act, DINs cannot be cancelled or deactivated, except in accordance with Rule 11 of the Rules. This Court having considered the said submissions is of the considered view that the new amending law also contemplates levying of ₹ 100/- per each day of default and which permits the regularizing the delay of the petitioners. Therefore, this Court is not inclined to accept the said contention of the learned Assistant Solicitor General for the respondents - the deactivation of the DINs of the petitioners for alleged violations under Section 164 of the Act, cannot be sustained. The impugned orders in the writ petitions to the extent of disqualifying the petitioners under Section 164(2)(a) of the Act and deactivation of their DINs, are set aside, and the 2nd respondent is directed to activate the DINs of the petitioners, enabling them to function as Directors other than in strike off companies - Petition allowed.
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