TMI Blog2019 (1) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... s along with the publication of the impugned list of Directors of struck off companies under Section 248, also was not legally tenable. Section 164(2) of the Act of 2013, which had come into force from 1.1.2014 would have prospective and not retrospective effect. The defaults contemplated under Section 164(2)(a) with regard to non-filing of financial statements or annual returns for any continuous period of three financial years would be the defaults to be counted from the financial year 2014-15 only and not 2013-14. The respondents could not have treated the Directors as disqualified/ineligible for a period of five years from 1.11.2016 to 1.11.2021, while publishing the impugned list under Section 248 of the Act of 2013.Even if the Registrar removes the name of a company from the register of companies, and even if such company would stand dissolved under Section 248, the statutory liabilities/obligations of such struck of company and its Directors would still remain to be discharged, in view of Section 250 of the said Act of 2013. The respondents could not have deactivated the DINs allotted to the Directors under Section 154 of the said Act, except under the circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssociated with struck off companies under Section 248 of the Companies Act, 2013 (hereinafter referred to as the Act of 2013 ) on the Website of the Ministry of Corporate Affairs, Government of India, to the extent, the said list shows the status of the petitioners as disqualified Directors. The petitioners have also challenged the action of the respondents in deactivating their DINs (Directors Identification Numbers) as a consequence of the publication of the said list. There being common questions of law and facts involved in all the petitions, they were finally heard together at the admission stage with the consent of the learned Advocates for the parties and are being disposed of this common order. 2. For the sake of convenience, the facts of the lead matter Special Civil Application No.22435 of 2017 are narrated herein under. 2.1 The petitioners of Special Civil Application No.22435 of 2017 - the Directors of Kalashree Investment Private Limited (hereinafter referred to as the said Company ), have mainly prayed for the following reliefs:- A) That the Hon ble Court be pleased to issue a writ of or in the nature of mandamus or any other appropriate writ, order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, have filed the petition. 2.3 The petition has been resisted by the respondents by filing the reply challenging the very maintainability of the petition contending inter alia that the petitioners had stood disqualified by operation of law and upon fulfillment of the essential criteria contained in Section 164(2)(a) read with Section 167(1)(a) of the Act of 2013. The company had failed to file annual returns and financial statements during the last three consecutive years and it was the duty of the Directors of the companies to make statutory compliance within the time prescribed under the Act. There was also violation on the part of the petitioners to comply with Rule 14(3) of the Companies (Appointment of Directors) Rules, 2014 (hereinafter referred to as the Rules of 2014 ), which required them to file Form DIR-8 with the companies and in turn the company to file the Form DIR-9 with the Registrar of Companies. The disqualification of the petitioners was the consequence of the continuous violation on the part of the company to file their statutory returns and under the circumstances, there was no question of following the principles of natural justice. The respondent No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s continued till this date. 3. The factual position of the other petitions may be summarized as under:- 4. Heard the learned Sr. Advocate Mr.Pahwa, learned Advocate Mr.A. S. Vakil, learned Advocate Mr.Sahil Thakore, learned Advocate Mr.Iyer,learned Advocate Mr.J. R. Dave, learned Advocate Mr.Monnal Davawala and other learned Advocates for the petitioners and the learned ASG Mr.Devang Vyas with learned Advocate Mr.Kshitij Amin for the respondents. Submissions:- 5. The learned Advocates for the petitioners submitted as under:- (i) The list of disqualified Directors published on the Website of the Ministry of Corporate Affairs, Government of India dated 12.9.2017 was in violation of the principles of natural justice as no opportunity was given to the petitioners before publishing the said list showing the status of the petitioners as disqualified Directors. (ii) Section 164(2) of the Act of 2013 came into force with effect from 1.4.2014 and can apply only prospectively and can not retrospectively. In this regard reliance is placed on the decision of the Supreme Court in case of Keshavan Madhava Menon Vs. The State of Bombay, reported in AIR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the decision of the Supreme Court in case of State Bank of Patiala thro. GM Vs. Commissioner of Income Tax, Patiala, reported in (2015) 15 SCC 483 and the Judgement of the Queen s Bench Division in case of Gough Vs. Gough . (viii) Even if it is presumed for the sake of argument that a disqualification is attracted in case of the petitioners, they can not be disqualified in continuing as Directors in non-defaulting companies. Section 167(1)(a) targets continuance as Director in the same company and not continuance in the non-defaulting companies. The proviso to Clause-A of Sub-section (1) of Section 167 was added by the amendment, which came into force in January 2018 and would not be applicable to the Companies which are already struck of prior to the amendment in 2018. The decision of the Bombay High Court in respect of availing the benefits of the scheme could not be made applicable to the facts of the present case. (ix) Reliance is placed on the decision of the Madras High Court in case of Bhagavan Das Dhananjaya Das Vs. Union of India and Anr. (W. P. No.25455 of 2017) delivered on 3.8.2018, to buttress their submissions. (x) As regards SCA No.3367 of 2018, it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, it is clear that for the defaults covered under Section 164, the person would disqualify himself from being Director of any company as also would become ineligible for reappointment or appointment as Director in any other company for five years. (ii) Section 92 of the Act of 2013 corresponds to Sections 169, 160, 161, and 162 of the Act of 1956, which pertained to filing of annual returns. The said provision applies to every company. Section 164(2)(a) would include filing of financial statements and annual returns falling due after 1.4.2014, which would include annual returns for the year 2013-14 as well. The Section inter alia provides that annual returns for any continuous period of three financial years would thus include the annual returns that fell due after 1.4.2014. Hence, if the filing of financial statements and annual returns for any continuous three years after 1.4.2014 is considered, the same would come to annual returns for the year 2013-14, 2014-15, and 2015-16 and the default would start after 1.4.2017. (iii) Keeping in mind the resultant disqualification, the Company Law Settlement Scheme 2014 was floated vide the Circular dated 12.8.2014, which came int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.2016 to 31.10.2021. However, it is further required to be noted that most of the petitions lack basic facts with regard to the status of the company of which they were Directors and now shown as struck off . The petitioners have not even bothered to annex the copies of the relevant pages under challenge from the portal of the Ministry of Corporate Affairs. In most of the petitions only a copy of the relevant page of the impugned list showing the status of the concerned company and the Directors has been annexed, which in the opinion of the Court could not be said to be a complete document to challenge the same in the writ petition invoking the extraordinary jurisdiction under Article 226 of the Constitution of India. It is needless to say that every petition must contain basic facts and particulars, and the certified/true copies of the complete documents under challenge, failure thereof otherwise would entail dismissal of petition on that ground alone. The very basis of the writ jurisdiction rests on the disclosure of true, complete and correct facts. In this regard, a very pertinent observations made by the Supreme Court in case of Prestige Lights Ltd. Vs. State Bank of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial facts are not candidly stated or are suppressed or are distorted, the very functioning of the writ courts would become impossible. 8. In the instant petitions, it was incumbent on the part of each of the petitioners to place on record the full and correct facts necessary for deciding the issues involved, more particularly about the status of the company prior to the publication of the impugned list, their own status as the Directors of the concerned company, about the resignation, if any given by them, and if given whether the requisite procedure was followed by them and the company as required to be followed under the Act and Rules. For example, SCA No.4492 of 2018 does not contain any facts. Only provisions of law and legal submissions have been stated in the petition. Needless to say that application of law would depend on facts of each case. As observed by the Supreme Court in the afore- stated decision, the applicant should make full and fair disclosure of all material facts facts, not law, as the Courts know nothing about the facts of the case. Such petitions deserve to be dismissed at the threshold, however, since all the petitions were heard simultaneously, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the amount due to the company and for repayment or discharge of liabilities or obligations of the company. Meaning thereby, even if the company is struck off and stands dissolved under Section 248, it could still realize the amount due to the company, as also it is obliged to discharge the liabilities or obligations of the company. Hence, in the opinion of the Court, even if the company is struck off and has stood dissolved under Section 248 of the Act of 2013, it is liable to discharge its liabilities and obligations, more particularly the statutory obligations. 11. However, the moot questions that fall for consideration are whether the status of the Directors of the struck off companies could have been shown as disqualified for a period of five years as shown in the impugned list dated 12.9.2017 and whether their DINs could have been deactivated by the respondents, as a consequence thereof ? 12. In order to advert to the said questions, it would be useful to refer to some of provisions of the Act of 2013 and the Rules of 2014, made thereunder. The provision pertaining to disqualification of Director in the Act of 2013 is Section 164, which reads as under:- 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... qualification; ( ii) where an appeal or petition is preferred within thirty days as aforesaid against the conviction resulting in sentence or order, until expiry of seven days from the date on which such appeal or petition is disposed off; or ( iii) where any further appeal or petition is preferred against order or sentence within seven days, until such further appeal or petition is disposed off. 13. As per Rule 14 of the said Rules of 2014, the Director is required to inform the company concerned about his disqualification, if any, under Sub-section (2) of Section 164 in the prescribed form DIR-8, before he is appointed or reappointed. Similarly the company is also required to file form DIR-9 to the Registrar in case of defaults specified in Sub-section (2) of Section 164, during the relevant financial years. 14. Section 167 of the Act of 2013 pertains to the vacation of office of director. Clause (a) of Sub-section (1) of Section 167 states that the office of a director shall become vacant in case he incurs any of the disqualifications specified in Section 164. Recently the said Section 167 has been amended by the Companies (Amendment) Act, 2017, published ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which it should have been submitted on the payment of additional fees as prescribed. As per second proviso to Section 403(1), any such document, fact or information could be submitted, filed or recorded after the said period of 270 days on payment of additional prescribed fees, however, the same would be without prejudice to any other legal action or liability under the Act. 19.From the conjoint reading of Sections 92, 96, 137 and 403, it is discernible that the company is statutorily obliged to file a copy of the annual returns within 60 days and copy of financial statements within 30 days from the date on which the annual general meeting is held, and that the AGM has to be held once in the financial year and within six months from the date of closing of financial year, latest before the expiry of 15 months of the last AGM. Hence, if the AGM of previous year is held on 31st March, the next AGM has to be held latest by 30th September of the next year and the annual returns could filed within 60 days and financial statements within 30 days of holding of the last AGM, i.e. latest by 30th of November and 3oth of October respectively. Further, the first proviso to Section 403(1) al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appointed in the said defaulting company and appointed in any other company. The ineligibility is incurred by the person/director by operation of law and not by any order passed by the respondent authorities, and therefore, adherence of principles of natural justice by the respondents is not warranted in the said provision, as sought to be submitted by learned Advocates for the petitioners. As such, as per Rule 14 of the said Rules of 2014, the Director has to inform the company in Form DIR-8 and the company has to inform the Registrar in Form DIR-9, when its director incurs disqualification under Section 164(2) of the Act. However, the question still remains to be examined as to whether the respondents could have shown the status of the petitioners as disqualified in the impugned list? 21. As per Clause (a) of Sub-section (2) of Section 164, 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 a Director of that company or appointed in any other company for a period of five years from the date on which the said company fails to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in (2015) 1 SCC 1 :- General Principles concerning retrospectivity: 27. A legislation, be it a statutory Act or a statutory Rule or a statutory Notification, may physically consists of words printed on papers. However, conceptually it is a great deal more than an ordinary prose. There is a special peculiarity in the mode of verbal communication by a legislation. A legislation is not just a series of statements, such as one finds in a work of fiction/non fiction or even in a judgment of a court of law. There is a technique required to draft a legislation as well as to understand a legislation. Former technique is known as legislative drafting and latter one is to be found in the various principles of Interpretation of Statutes . Vis vis ordinary prose, a legislation differs in its provenance, layout and features as also in the implication as to its meaning that arise by presumptions as to the intent of the maker thereof. 28. Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e justification to treat procedural provisions as retrospective. In Government of India Ors. v. India Tobacco Association , the doctrine of fairness was held to be relevant factor to construe a statute conferring a benefit, in the context of it to be given a retrospective operation. The same doctrine of fairness, to hold that a statute was retrospective in nature, was applied in the case of Vijay v. State of Maharashtra Ors. It was held that where a law is enacted for the benefit of community as a whole, even in the absence of a provision the statute may be held to be retrospective in nature. However, we are confronted with any such situation here. 31. In such cases, retrospectivity is attached to benefit the persons in contradistinction to the provision imposing some burden or liability where the presumption attaches towards prospectivity. In the instant case, the proviso added to Section 113 of the Act is not beneficial to the assessee. On the contrary, it is a provision which is onerous to the assessee. Therefore, in a case like this, we have to proceed with the normal rule of presumption against retrospective operation. Thus, the rule against retrospective operation i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, it would not be so construed when the preamended provision was clear and unambiguous. An amending Act may be purely clarificatory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect and, therefore, if the principal Act was existing law which the Constitution came into force, the amending Act also will be part of the existing law. The above summing up is factually based on the judgments of this Court as well as English decisions. 33. A Constitution Bench of this Court in Keshavlal Jethalal Shah v. Mohanlal Bhagwandas Anr. , while considering the nature of amendment to Section 29(2) of the Bombay Rents, Hotel and Lodging House Rates Control Act as amended by Gujarat Act 18 of 1965, observed as follows: 8. ...The amending clause does not seek to explain any preexisting legislation which was ambiguous or defective. The power of the High Court to entertain a petition for exercising revisional jurisdiction was before the amendment derived from Section 115, Code of Civil Procedure, and the legislature has by the amending Act attempted to explain the meaning o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rlier, no disqualification was attached to the directors of private companies for not filing the annual returns and the financial statements by the concerned companies under the Act of 1956. Such provision of disqualification for the director of a company public or private company, has been incorporated for the first time in Section 164(2) of the Act of 2013. Such being the case, the said provision has to be construed as having prospective effect. If retrospective effect is given to it, that would destroy, alter and affect the right of the Directors of private company existing under the Act of 1956. It is also a settled legal position that Section 6 of the General Clauses Act, saves a right accrued and/or a liability incurred, under the repealed Act, whenever any Act is repealed. Learned Advocates for the petitioners have also rightly relied upon the decision of the Supreme Court in case of Dilip Kumar Sharma and Ors. Vs. State of M. P. (supra) and in case of Tolaram Relumal and Anr. Vs. The State of Bombay (supra), in which it has been held inter alia that when two interpretations are possible, one favouring the subject ought to be made applicable especially in case of pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order required to be passed by any authority under the Act. However, the action of the respondents in publishing the impugned list on 12.9.2017 of the Directors associated with the struck off companies under Section 248, showing the concerned Directors of the companies, including the petitioners as disqualified for a period of five years from 1.11.2016 to 31.11.2021 by no stretch of imagination is justified, and could not be said to be in consonance with the provisions contained in Section 164(2) of the Act of 2013. Neither the replies filed by the respondents to the petitions contain any explanation, nor Mr.Vyas in his submissions was able to explain as to how the petitioners could be shown as disqualified Directors for the period from 1.11.2016 to 31.11.2021, when even according to him, the provisions contained in Section 164(2) were applied prospectively, and the default would start after 1.4.2017. The Court, therefore, is of the opinion that the impugned list published on 12.9.2017 by the respondent No.1 deserves to be quashed and set aside. 27. In that view of the matter, the other issue with regard to some of the petitioners having tendered their resignations and having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntaining the requisite particulars thereof. Having regard to the provisions contained in Section 168 read with Rules 15, 16 and 17, it clearly transpires that when a Director resigns from his office, by giving notice in writing to the company, the company is required to intimate the Registrar within 30 days of such notice, in Form DIR-12, and that the company is also required to place such resignation in the report of the Directors to be laid in the immediately following general meeting of the company. The Director is also required to forward a copy of his resignation to the Registrar within 30 days in Form DIR-11. Such resignation shall take effect from the date on which the notice is received by the company or the date, if any, specified by the Director in the notice, whichever is later. In none of the petitions, except SCA No.3831 of 2018, where the petitioners have claimed to have resigned, the Court finds any details as to whether the concerned company and the concerned petitioner Director had, in fact, intimated the Registrar as required under the said Rules and whether such resignation was incorporated in the report of the Directors laid in the general meeting of the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her with the Central Government or with the authorised officer or Regional Director to cancel or deactivate the DIN allotted to the Director, nor any of the clauses mentioned in the said Rule contemplates cancellation or deactivation of DIN of the Director of the struck off company or of the Director having become ineligible under Section 164 of the said Act. The reason appears to be that once an individual, who is intending to be the Director of a particular company is allotted DIN by the Central Government, such DIN would be valid for the lifetime of the applicant and on the basis of such DIN he could become Director in other companies also. Hence, if one of the companies in which he was Director is struck off , his DIN could not be cancelled or deactivated as that would run counter to the provisions contained in the Rule 11, which specifically provides for the circumstances under which the DIN could be cancelled or deactivated. 31. In that view of the matter, the Court is of the opinion that the action of the respondents in deactivating the DINs of the petitioners - Directors along with the publication of the impugned list of Directors of struck off companies under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs as disqualified/ineligible for a period of five years from 1.11.2016 to 1.11.2021, while publishing the impugned list under Section 248 of the Act of 2013. ( iv) Even if the Registrar removes the name of a company from the register of companies, and even if such company would stand dissolved under Section 248, the statutory liabilities/obligations of such struck of company and its Directors would still remain to be discharged, in view of Section 250 of the said Act of 2013. ( v) The respondents could not have deactivated the DINs allotted to the Directors under Section 154 of the said Act, except under the circumstances mentioned in Rule 11 of the said Rules of 2014. 34. In view of the above, the impugned list dated 12.9.2017 of the Directors associated with the struck off companies under Section 248 published by the respondent No.1 is quashed and set aside. The respondents are directed to activate the respective Director Identification Numbers of the petitioners forthwith, if not activated so far. However, it is clarified that the respondents shall be at liberty to take legal action against the petitioners for any statutory default or non-compliance, in accorda ..... X X X X Extracts X X X X X X X X Extracts X X X X
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