TMI Blog2019 (6) TMI 1076X X X X Extracts X X X X X X X X Extracts X X X X ..... be appointed as director of any other company for a period of five years. But under Section 164(2) of the Act, a director of a defaulting company cannot be re-appointed as a director of a defaulting company for a period of five years. The prescription of a two-fold consequence cannot be held to be manifestly arbitrary as the Parliament in its wisdom has prescribed the same having regard to the objects sought to be achieved which have been elaborately stated by the Bombay High Court as well as Gujarat High Court and which are reiterated. The only aspect that requires further consideration is the expression is or has been a director of a company . On a reading of Section 164(2)(a) of the Act, it is clear that a person who is a director of the company when the default occurs i.e., when for any continuous period of three financial years, financial statements or annual returns are not filed would be faced with the consequences mentioned under the Section. But there has been a debate at the Bar over the expression has been a director of a company . Petitioners counsel contended that the expression has been cannot extend to a person who is a director of a defaulting company pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l statements or annual returns are not filed by a company for three continuous financial years. Similarly, when there is a failure to repay the debentures accepted by a company or to pay interest thereon or to redeem debentures on the due date or to pay interest due thereon or to pay any dividend declared and such failure to pay or redeem continues for one year or more the ineligibility for re-appointment applies. When such facts are apparent and show a failure by the company, for whatsoever reason or cause, the director of such a company sustains a disqualification in the form of an ineligibility - But it is only concerned with there being violation of Section 164(2)(a) or (b) of the Act, as the Act considers the same to be a serious lapse on the part of the company and it affects the directors of such a company. The disqualification is by operation of law on an emerging and coming into existence of a set of facts. There is no legal infirmity in the said provision as there is no violation of principles of natural justice and Article 14 of the Constitution is not violated. Accordingly, point No.2 is answered against the petitioners. Whether Section 164(2)(a) of the Act has re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of office of a director under Section 164(2) of the Act. Under the proviso to Section 167(1)(a) of the Act, the director of a defaulting company continues to hold the office of Director despite disqualification, his DIN cannot be cancelled. On the issue of cancellation of DIN, reference was made to Companies (Appointment and Qualification of Directors) Rules, 2014. Under Rule 14, the consequences of disqualification of directors under Section 164(2) of the Act are mentioned. That every director shall inform to the company concerned about his disqualification under sub-section (2) of Section 164 of the Act in Form DIR-8 before he is appointed or re-appointed. Further, whenever a company fails to file the financial statements or annual returns, or fails to repay any deposit, interest, dividend, or fails to redeem its debentures, as specified in sub-section (2) of section 164, the company shall immediately file Form DIR-9, to the Registrar furnishing therein the names and address of all the directors of the Company during the relevant financial year. That cancellation or surrender or deactivation of DIN is stipulated in Rule 11. It is contended that Rule 11 does not permit can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2017,51769/2017, 49124/2017, 53237-53238/2017, 5609856099/2017, 56394/2017, 29857/2018, 27756/2018,29425/2018, 23905/2018, 26089-26090/2018, 27599-27600/2018, 27598/2018, 27891/2018, 26851-26852/2018, 27297-27298/2018, 27459-27461/2018,28185/2018, 25635/2018, 25637/2018, 2662426625/2018, 27926/2018, 27927/2018, 27564/2018,11324/2018, 11656/2018, 27890/2018, 27601/2018,26060-26061/2018, 25194/2018, 25203/2018,13756/2018, 29593-29597/2018, 25706/2018,56374/2017, 56393/2017, 48347/2017, 52952/2017, 51765-51766/2017, 48364-48365/2017, 5360453606/2017, 30800/2018, 30732-30734/2018, 27548-27549/2018, 31035/2018, 28620/2018, 31575/2018,31576/2018, 24976/2018, 31172/2018, 25036/2018 25298/2018, 30070/2018, 54337/2018 56001/2018,14468/2018, 15841/2018, 15938-15940/2018, 17242-17243/2018, 17328/2018, 17329/2018, 17330/2018,17427/2018, 17429/2018, 17456/2018, 18384/2018, 19712-19713/2018, 21999-22000/2018, 2200122002/2018, 22003-22004/2018, 22005/2018, 22006-22007/2018, 22008/2018, 22010/2018, 22011/2018,22122-22123/2018, 22124-22125/2018, 2248322484/2018, 22485-22486/2018, 22491-22492/2018,22494-22495/2018, 22499/2018, 22500-22501/2018,22512-22513/2018, 22515-22516/2018, 22517/2018,22706 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel for the petitioners and learned Additional Solicitor General of India and other counsel for Union of India and respondents, and perused the pleadings and statement of objections filed on behalf of the respondents. 2. The Petitioners herein were directors of either public companies or private companies or both and they are all aggrieved by their disqualification as directors as per the list issued by the respondents. Part - 2 Bird s eye view of the controversy: 3. In these writ petitions, some of the petitioners have assailed the vires of Section 164(2)(a) of the Companies Act, 2013 (hereinafter referred to as the Act for the sake of brevity) as well as Section 54 of the Companies (Amendment) Act, 2017 (hereinafter referred to as the Amendment Act, 2017 ) by which a proviso has been inserted to clause (a) of sub-section (1) of Section 167 of the Act as well as Section 167(1)(a) itself. In all these writ petitions, the List published by the respondent authority (Ministry of Corporate Affairs) to the effect that the petitioners have been disqualified from being directors of their respective companies for the respective five yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pondicherry Design Company Pvt. Ltd. 164(2)(a) 00272346 Connected With 1 49012/2018 Yes S. 164(2)(a) Proviso to S. 167(1)(a) 1/11/2016 to 31/10/2021 M/s. Bangalore Hi- Tech Weaving Park Ltd. 164(2)(a) 2377082 2 49989- 49991/2018 No 1/11/2016 to 31/10/2021 1.Interstuhl Seatings (India) Pvt. Ltd.. [Petr Nos.1 to 3] 2.Suncity Karnataka Developers Pvt. Ltd. [Petr Nos.2 3] 164(2)(a) 00220454 (Petr-1) 00245107 (Petr-2) 00244162 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 31/10/2021 M/s. Fortune Frontiers Retail Pvt. Ltd. 164(2)(a) 1755323 9 50809- 50810/2018 No 1/11/2016 to 31/10/2021 1.Trimurthy Power Pvt. Ltd. Company (Petr Nos.1 2) 2.Sagar Power (Neerukatte) Pvt. Ltd. (Petr Nos.1 2) 164(2)(a) 00559449 (Petr-1) 02741405 (Petr-2) Sl. No. Writ Petition No. Whether Constitutional validity challenged? Date and period of Disqualificati on Name of the defaulting company in which petitioner/s is/are director/s Disqualificati on Under Section DIN Number ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 824081 17 52460/2018 Yes S.164(2)(a), 167(1)(a) Proviso to S.167(1)(a) 1/11/2016 to 31/10/2021 M/s Adroitech Designing and Services Pvt. Ltd. 164(2)(a) 1129651 18 52610/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 Silver Events and Media Solutions Pvt. Ltd. 164(2)(a) 3118211 19 52611/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 M/s Circle Source Software Technologies Pvt. Ltd. 164(2)(a) 610624 20 52612/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 M/s Circle Sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/2021, 1/11/2016 to 31/10/2021 1.Kantech Agro Pvt. Ltd. (Petr Nos. 1 2) 2.Achala Energy Systems Pvt. Ltd. (Petr Nos. 1 2) 164(2)(a) 01121234 (Petr-1) 01121313 (Petr-2) Sl. No. Writ Petition No. Whether Constitutional validity challenged? Date and period of Disqualificati on Name of the defaulting company in which petitioner/s is/are director/s Disqualificati on Under Section DIN Number Main Case Con. Case 5 52720- 52721/2017 Yes S.164(2)(a) 1/11/2016 to 31/10/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 164(2)(a) 00045060 11 55942/2017 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 1.Sunkabir Mobisolutions Pvt. Ltd. 164(2)(a) 364568 12 55949/2017 Yes S.164(2)(a) 1/11/2014 to 31/10/2019 1.M/s Euromarket Consult Services (India) Pvt. Ltd. 164(2)(a) 349450 13 55950/2017 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 1.M/s Euromarket Consult Services (India) Pvt. Ltd. 164(2)(a) 2096579 14 56178- 56179/2017 Yes S.164(2)(a) 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Industries Pvt. Ltd. 164(2)(a) 24386 Sl. No. Writ Petition No. Whether Constitutional validity challenged? Date and period of Disqualificati on Name of the defaulting company in which petitioner/s is/are director/s Disqualificati on Under Section DIN Number Main Case Con. Case 3.M/s Tocol Aerospace Pvt. Ltd. 4.M/s.candor International School Pvt. Ltd. 21 3132/2018 Yes S.164(2)(a) 1/11/2014 to 31/10/2019 M/s.Epuron Renewable Ener ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. 164(2)(a) 1239867 29 5465/2018 No 1/11/2014 to 31/10/2019 M/s BCIL Little Acre Resorts Pvt. Ltd. 164(2)(a) 2676065 30 5639/2018 No 1/11/2016 to 31/10/2021 Triad Enterprise Consulting Services Pvt. Ltd. 164(2)(a) 864658 31 5640/2018 No 1/11/2016 to 31/10/2021 Triad Enterprise Consulting Services Pvt. Ltd. 164(2)(a) 1680646 32 5813/2018 Yes S.164(2)(a) 1/11/2014 to 31/10/2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Yes S.164(2)(a) 1/11/2016 to 31/10/2021 E-Merge Waste Management Solutions Pvt. Ltd. 164(2)(a) 25456 38 9531 10113-116/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 1.VDB AGRO Farms Pvt. Ltd. (Petr Nos.1 to 5) 164(2)(a) 01657095 (Petr-1) 01657135 (Petr-2) 01298669 (Petr-3) 02287392 (Petr-4) 02285795 (Petr-5) 39 9786/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 M/S.L.S Distributors Pvt. Ltd. 164(2)(a) 2628612 40 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 31/10/2020 1.Fifth Quadrant Business devpt. Pvt. Ltd. 2. 360 Online Management Consulting Pvt. Ltd. 164(2)(a) 2094244 47 13075/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 M/S.DATSI IT Solutions Pvt. Ltd. 164(2)(a) 2719517 48 13205- 13206/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 Sky Star Hospitality Pvt. Ltd. (Petr Nos.1 2) 164(2)(a) 00225439 (Petr-1) 00225450 (Petr-2) 49 13303/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 Chourasia Trading Pvt. Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Petr-2) 54 13531/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 1.Accupack Cartons Pvt. Ltd. 2.Marzdi Finance and Investments Pvt. Ltd. 164(2)(a) 480679 55 13773/2018 Yes S.164(2)(a) 1/11/2014 to 31/10/2019 M/s Health 24x7 Services India Pvt. Ltd. 164(2)(a) 2325879 56 13784- 13792/2018 No 1/11/2016 to 31/10/2021 1.M/s.Acetec Holdings Pvt. Ltd. (Pet.1and 3) 2.M/s.Design Shift Arch products Pvt. Ltd. (Pet. 1 and 8) 3.M/s.Canmin Resources ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1-11-2016 to 31-10-2021 Tuning Fork Technologies Pvt. Ltd. 164(2)(a) 2785546 4 11509/2018 13263/2018 No 01-11-2016 to 31-10-2021 1.SAS Skytech Engineering Projects Pvt. Ltd. 2.Gooseberry Hotels and Resorts Pvt. Ltd. (Petr Nos.1 2) 164(2)(a) 5157270 (Petr-1) 706694 (Petr-2) Sl. No. Writ Petition No. Whether Constitutional validity challenged? Date and period of Disqualificati on Name of the defaulting company in which petitioner/s is/are director/s Disqualificati on Under Section DIN Number ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. (Vfml) 5. Metal Cutters (Mysore) Pvt. Ltd. 164(2)(a) 116353 12 3275/2018 No 01-11-2016 to 31-10-2021 Staal Alliage Trading Pvt. Ltd. 164(2)(a) 3553233 13 52350/2017 No 01-11-2014 to 31-10-2019 Tag Media Network Pvt. Ltd. 164(2)(a) 1888830 14 10187/2018 Yes, Proviso to Sec.164(2), 164(3), 167(1)(a), 167(1)(f)Provisions of Part III of the Indian Constitution 01-11-2015 to 31-10-2020 Thinkspan Technologies Pvt. Ltd. 164(2)(a) 01802769 15 56364 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Name of the defaulting company in which petitioner/s is/are director/s Disqualificati on Under Section DIN Number Main Case Con. Case 01984445 (Petr-2) 21 15797/2018 YES. Proviso to Sec.164(2), 164(3), 167(1)(a), 167(1)(f) 1/11/2014 to 31/10/2019 1.C.S Resorts Pvt. Ltd. 2. OPG Systems Engineering Pvt. Ltd. 164(2)(a) 280090 22 4669/2018 No 1/11/2014 to 31/10/2019 1.CAS Consultants Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8205/2018 Yes S.164(2)(a) 01-11-2014 to 31-10-2019 KOIOS Softtech Pvt. Ltd. 164(2)(a) 3219243 30 6854/2018 No 1/11/2016 to 31/10/2021 Nakoda Construction Pvt. Ltd. 164(2)(a) 299476 31 27876- 27877/2018 No 01-11-2014 to 31-10-2019 1.Quetzel Designs (India) Pvt. Ltd. (Petr Nos.1 2) 164(2)(a) 1770264 (Petr-1) 1783285 (Petr-2) 32 28554/2018 Yes S.164(2)(a) 01-11-2016 to 31-10-2021 Regal Machine Tools Pvt. Ltd. 164(2)(a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Petr-2) 36 52904- 52906/2017 Yes S.164(2)(a) 01-11-2016 to 31-10-2021 1.Teekays Plantation India Ltd. (Petr Nos.1 to 3) 2.Teekays Furniture Solutions Pvt. Ltd. (Petr Nos.1 to 3) 3.Teekays Prime Properties India Ltd. (Petr Nos.1 to 3) 164(2)(a) 1513013 (Petr-1) 728036 (Petr-2) 1512269 (Petr-3) 37 53707/2017 No 1/11/2016 to 31/10/2021 Devanesh Agro Development Pvt. Ltd. 164(2)(a) 1488855 38 54766/2017 Yes S.164(2)(a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 49124/2017 Yes S.164(2)(a) 1/11/2015 to 31/10/2020 Bright Horizons Child Care Services Pvt. Ltd. 164(2)(a) 18155 45 53237- 53238/2017 Yes S.164(2)(a) 1/11/2015 to 31/10/2015 Bright Horizons Child Care Services Pvt. Ltd. ( Pet.Nos.1 to 3) 164(2)(a) 3508545 (Petr-1) 3508551 (Petr-2) 18155 (Petr-3) 46 56098- 56099/2017 No 1/11/2016 to 31/10/2021 Mulder Trading Pvt. Ltd. (Pet.No.1 and 2) 164(2)(a) 00233146 (Petr-1) 00237723 (Petr-2) 47 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 164(2)(a) 2853403 52 26089- 26090/2018 No 01-11-2014 to 31-10-2019 Vagmi Electromech Technologies Pvt. Ltd. (Petr Nos.1 2) 164(2)(a) 00194914 (Petr-1) 02114101 (Petr-2) 53 27599- 27600/2018 Yes S.164(2)(a) 01-11-2016 to 31-10-2021 Adithyasri Infrastructure Pvt. Ltd. (Petr Nos.1 2) 164(2)(a) 01630052 (Petr-1) 00425112 (Petr-2) 54 27598/2018 Yes S.164(2)(a) 01-11-2016 to 31-10-2021 1.Clintrac International Pvt. Ltd. 164(2)(a) 2980 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 62 26624- 26625/2018 Yes S.164(2)(a) 01-11-2016 to 31-10-2021 Tenxperts Technologies Pvt. Ltd. (Petr Nos.1 2) 164(2)(a) 2586853 (Petr-1) 02586411 (Petr-2) 63 27926/2018 No 01-11-2016 to 31-10-2021 Celebration Software Development Park Pvt. Ltd. 164(2)(a) 3474437 64 27927/2018 No 01-11-2016 to 31-10-2021 Celebration Software Development Park Pvt. Ltd. 164(2)(a) 3430989 65 27564/2018 No 01-11-2014 to 31-10-2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r-1) 1801958 (Petr-2) 71 25194/2018 YES. Proviso to Sec.164(2), 164(3), 167(1)(a), 167(1)(f) 01-11-2014 to 31/10/2019 Mahal Network Pvt. Ltd. 164(2)(a) 2592710 72 25203/2018 No 01-01-2014 to 31-10-2019 Urban Blocks Solutions Pvt. Ltd. 164(2)(a) 1690684 73 13756/2018 Yes S.164(2)(a) 01-11-2014 to 31-10-2019 Lorvin Impex Pvt. Ltd. 164(2)(a) 1160334 74 29593-597/2018 Yes S.164(2)(a) 01-11-2016 to 31-10-2021 1.TeleLogix Techonologies Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 017 No 01-11-2014 to 31-10-2019 Outcomes Clinical Research (India) Pvt. Ltd. (Petr Nos.1 2) 164(2)(a) 601883 (Petr-1) 893778 (Petr-2) 82 53604-606/2017 Yes S.164(2)(a) 01-11-2016 to 31-10-2021 Sovereign Developers and Infrastructure Ltd. (Petr Nos.1 to 3) 164(2)(a) 1594320 (Petr-1) 1594396 (Petr-2) 5259231 (Petr-3) 83 30800/2018 No 01-11-2016 to 31-10-2021 Mplast Moulding Solutions Pvt. Ltd. Co. 164(2)(a) 2468123 Sl. No. Writ Petition No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1-10-2021 Parmarth Labs Pvt. Ltd. 164(2)(a) 1765663 90 24976/2018 No 01-11-2016 to 31-10-2021 1.Tidel Silk Technologies Ltd. 2.Blue River Entertainment Pvt. Ltd. 3.Renaissance Clinical and Translational Science Institute (LLP) 164(2)(a) 2757599 91 31172/2018 Yes S.164(2)(a) 01-11-2016 to 31-10-2021 1.Vamsi Infrastructure Project Company Pvt. Ltd. 2.Vamsicon Projects Pvt. Ltd. 164(2)(a) 3297468 92 25036/2018 25298/2018 No 01-11-2015 to 31-10-2020 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 164(2)(a) 264788 (Petr-1) 1151950 (Petr-2) 63 17328/2018 YES. Proviso to Sec.164(2), 164(3), 167(1)(a), 167(1)(f) 1/11/2015 to 31/10/2020 1.Markwell Entertainments Pvt. Ltd. 2.Advaith Biotech Pvt. Ltd. 3.Markwell Properties Pvt. Ltd. 164(2)(a) 1784797 Sl. No. Writ Petition No. Whether Constitutional validity challenged? Date and period of Disqualificati on Name of the defaulting company in which petitioner/s is/are director/s Disqualificati on Under Section DIN Number ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 31/10/2021 BCIL Little Acre Resorts Pvt. Ltd. 164(2)(a) 1986202 70 19712- 19713/2018 No 1/11/2014 to 31/10/2019 1/11/2016 to 31/10/2021 1/11/2016 to 31/10/2021 1/11/2014 to 31/10/2019 1/11/2014 to 31/10/2019 1/11/2014 to 31/10/2019 1/11/2014 to 31/10/2019 1/11/2015 to 31/10/2020 1.Peppermint India Projects Pvt. Ltd. 2.Peppermint Hospitality India private limited 3.Peppermint Real Estates private Ltd. 4.Wonderdine Cuisines Pvt. Ltd. 5.Peppermint Luxury Hotels Pvt. Ltd. 6.Sqiggle works Design Pvt. Ltd. 7.Madhatters Foods Pvt. Ltd. 8.Peppermint Hebbal Hotels ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Petr-2) Sl. No. Writ Petition No. Whether Constitutional validity challenged? Date and period of Disqualificati on Name of the defaulting company in which petitioner/s is/are director/s Disqualificati on Under Section DIN Number Main Case Con. Case 76 22008/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 GBMT Structural Steel manufacturing Industries Pvt. Ltd. 164(2)(a) 2927288 77 22010/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 DATSI IT Solutions Pvt. Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Petr Nos.1 2) 164(2)(a) 02575875 (Petr-1) 02575915 (Petr-2) 83 22491- 22492/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 1.Vikat Hotels Pvt. Ltd. 2.Apple Hospitality Pvt. Ltd. 164(2)(a) 01209747 (Petr-1) 02376902 (Petr-2) 84 22494- 22495/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 LSVK Housing Finance Pvt. Ltd. (Petr Nos.1 2) 164(2)(a) 00061651 (Petr-1) 00944809 (Petr-2) 85 22499/2018 Yes S.164(2)(a) 1/11/2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Writ Petition No. Whether Constitutional validity challenged? Date and period of Disqualificati on Name of the defaulting company in which petitioner/s is/are director/s Disqualificati on Under Section DIN Number Main Case Con. Case 92 22801/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 M/s.Aparna Power Ltd. 164(2)(a) 340613 93 22819- 22821/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 1.Altivo Information Technologies Pvt. Ltd. 2. Gopalan Investments Pvt. Ltd. 3.Gopalan Minerals and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/11/2016 to 31/10/2021 1. Sai Leela Power Pvt. Ltd. (Petr-1, 2 and 3) 2.Sai Ranvita Power Projects Pvt. Ltd. (Petr-2 and 3) 3.Sai Rutvika Power Pvt. Ltd. (Petr-2 and 3) 4.Sai Aksha Power Project Pvt. Ltd. (Petr-2 and 3) 5.Sai Keerthi Power Projects Pvt. Ltd. (Petr-1) 164(2)(a) 02828823 (Petr-1) 01242916 (Petr-2) 01243223 (Petr-3) 95 23524/2018 No 19/09/2016 to 31/10/2021 Classic Coffee and Species Pvt. Ltd. 164(2)(a) 276973 96 23894/2018 No 1/11/2016 to 31/10/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Con. Case 101 25683- 25684/2018 No 1/11/2014 to 31/10/2019 K.Raheja Hotels and Estates Pvt. Ltd. (Petr Nos.1 2) 164(2)(a) 28044 (Petr-1) 29010 (Petr-2) Connected With 1 25930- 25931/2018 No 1/11/2016 to 31/10/2021 Rodeo Drive Holdings Pvt. Ltd. (Petr Nos.1 2) 164(2)(a) 1050126 (Petr-1) 1050082 (Petr-2) 2 25928/2018 No 1/11/2016 to 31/10/2021 Creative Indus Construction and Infra Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 31947- 31948/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 1.M/s Suffixtree Technologies Pvt. Ltd. 2.M/s. Iteanz Consultancy Pvt. Ltd. (Petr Nos.1 2) 164(2)(a) 02338064 (Petr-1) 03522757 (Petr-2) 10 31992/2018 No. 1/11/2016 to 31/10/2021 1.Vishwapriya Mines and Minerals Pvt. Ltd. 2.RMV Developers Pvt. Ltd. 164(2)(a) 1691102 11 31994/2018 No. 1/11/2016 to 31/10/2021 1.Sheshadri Mining Co.Pvt. Ltd. 2.Mariyappa Mines and Minerals Pvt. Ltd. Co., 3.VSJ Relators Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )(a) 1/11/2016 to 31/10/2021 M/s Recycle Cartridge Pvt. Ltd. 164(2)(a) 2421278 17 32348/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 1.M/s ECF Products India Pvt. Ltd. 2.M/s React Media Pvt. Ltd. 164(2)(a) 1739631 18 33081/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 M/s.Sree Anjanadri Iron and Alloys Pvt. Ltd. 164(2)(a) 1997854 19 31511- 31513/2018 No 1/11/2016 to 31/10/2021 Dravid Soft (India) Pvt. Ltd. (Petr Nos.1 to 3) 164(2)(a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Casto Castings India Ltd. 164(2)(a) 2132513 3 27893/2018 No 1/11/2014 to 31/10/2019 Natural Street Pvt. Ltd. 164(2)(a) 3630712 4 32881/2018 Yes S.164(2)(a) 1/11/2015 to 31/10/2020 Meme Media Pvt. Ltd. 164(2)(a) 2058667 5 33080/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 M/s Sri Anjanadri Iron and Alloys Pvt. Ltd. 164(2)(a) 1670503 6 33933/2018 No 1/11/2016 to 31/10/2021 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/11/2015 to 31/10/2020 1/11/2016 to 31/10/2021 1/11/2016 to 31/10/2021 Gallery Mermaid Interior Concepts Pvt. Ltd. Kwik Media Solutions Pvt. Ltd. 3.Mermaid Fabric and Art Solutions Pvt. Ltd. 164(2)(a) 2516195 13 29962/2018 No 1/11/2016 to 31/10/2021 M/s Ampelion Networks Pvt. Ltd. 164(2)(a) 694137 14 36624/2018 No 1/11/2015 to 31/10/2020 Nature Garden Fruits Impex Pvt. Ltd. 164(2)(a) 340682 15 36613/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ea Holdings Pvt. Ltd. 3.Karuturi Farm Fresh Products Pvt. Ltd. 4.Karuturi Greens And Marketing Pvt. Ltd. 164(2)(a) 01645561 (Petr-1) 01645602 (Petr-2) 104 29165/2018 Yes S.164(2)(a) 1/11/2014 to 31/10/2019 Neuro Products (India Pvt.) Ltd. 164(2)(a) 152263 105 38722/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 1/11/2016 to 31/10/2021 1.Shiridi Business ventures Pvt. Ltd. 2.Sweet Neem Publications Pvt. Ltd. 3.Ascent Real EAssets Pvt. Ltd. 4.Elements Constructions Pvt. Ltd. 5.Sacred Ash Health Care and Pharmaceuticals Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/11/2016 to 31/10/2021 Ayee Edu Tech Pvt. Ltd. 164(2)(a) 2495927 7 39347/2018 Yes S.164(2)(a) 1/11/2015 to 31/10/2020 1.Valmeeka Hotels Pvt. Ltd. 2.Gallery Mermaid Interior Concepts Pvt. Ltd. 3.Mermaid Fabric and Art Solutions Pvt. Ltd. 4.Kwik Media Solutions Pvt. Ltd. 164(2)(a) 2589206 8 39348- 39349/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 1.People Connect Solutions Pvt. Ltd. 2.Sudhir Management Services and Finance Consultant Pvt. Ltd. 164(2)(a) 2519967 (Petr-1) 2590586 (Petr-2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /11/2014to 31/10/2019 1.Huthur Airways Pvt. Ltd. 164 (2)(a) 820570 17 43851/2018 No 1/11/2016 to 31/10/2021 Kamal Farms India Pvt. Ltd. 164 (2)(a) 1829410 18 43859/2018 No 1/11/2016 to 31/10/2021 1.Kamal Farms India Pvt. Ltd. 2. Golden Hatcheries Pvt. Ltd. 164 (2)(a) 1865406 19 43860/2018 No 1/11/2016 to 31/10/2021 1.Kamal Farms India Pvt. Ltd. 2. Golden Hatcheries Pvt. Ltd. 164 (2)(a) 1829374 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. Protein Family Entertainment Centres Pvt. Ltd. Annapurna Protein Family Entertainment Centre Pvt. Ltd. Rhiti MSD- N Motor Sport India Pvt. Ltd. N9 Sports and Leisure Holdings Pvt. Ltd. 164 (2)(a) 337385 (Petr-1) 337429 (Petr-2) 23 40760/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 1. Colossuss Electric Company Pvt. Ltd. 164 (2)(a) 6539032 24 25707/2018 No 1/11/2016 to 31/10/2021 N. Square Innovations Pvt. Ltd. 164 (2)(a) 1832501 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32 46208/2018 Yes S.164(2)(a) 01-11-2016 to 31-10-2021 Pradhan Hospitality Services Pvt. Ltd. 164(2)(a) 3010409 33 47819- 47821/2018 No 1/11/2015 to 31/10/2020 Benda Infrastructure Development Ltd. (Petr Nos.1 2) 164(2)(a) 3080933 (Petr-1) 3085239 (Petr-2) 34 29233/2018 No 1/11/2016 to 31/10/2021 Mplast Moulding Solutions Pvt., Ltd. 164(2)(a) 2829219 106 38913/2018 Yes S.164(2)(a) 1/11/2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy a director of a public company which, - (A) has not filed the annual accounts and annual returns for any continuous three financial years commencing on and after the first day of April, 1999; or (B) has failed to repay its deposit or interest thereon on due date or redeem its debentures on due date or pay dividend and such failure continues for one year or more: Provided that such person shall not be eligible to be appointed as a director of any other public company for a period of five years from the date on which such public company, in which he is a director, failed to file annual accounts and annual returns under sub-clause (A) or has failed to repay its deposit or interest or redeem its debentures on due date or pay dividend referred to in clause (B). (2) The Central Government may, by notification in the Official Gazette, remove - (a) the disqualification incurred by any person in virtue of clause (d) of sub-section (1), either generally or in relation to any company or companies specified in the notification; or (b) the disqualification incurred by any person in virtue of clause (e) of sub-section (1). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udication, sentence or order ; (b) where any appeal or petition is preferred within the thirty days aforesaid against the adjudication, sentence or conviction resulting in the sentence, or order until the expiry of seven days from the date on which such appeal or petition is disposed of; or (c) where within the seven days aforesaid, any further appeal or petition is preferred in respect of the adjudication, sentence, conviction, or order, and the appeal or petition, if allowed, would result in the removal of the disqualification, until such further appeal or petition is disposed of. (2A) Subject to the provisions of subsections (1) and (2), if a person functions as a director when he knows that the office of director held by him has become vacant on account of any of the disqualifications, specified in the several clauses of sub-section (1), he shall be punishable with fine which may extend to five thousand] rupees for each day on which he so functions as a director. (3) A private company which is not a subsidiary of a public company may, by its articles, provide that the office of director shall be vacated on any grounds in addition to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surers, manager or other officer who was exercising any power of management, and of every member of the company, shall continue and may be enforced as if the company had not been dissolved; and (b) nothing in this sub-section shall affect the power of the Court to wind up a company the name of which has been struck off the register. (7) If a company, or any member or creditor thereof, feels aggrieved by the company having been struck off the register, the Court, on an application made by the company, member or creditor before the expiry of twenty years from the publication in the Official Gazette of the notice aforesaid, may, if satisfied that the company was, at the time of the striking off, carrying on business or in operation or otherwise that it is just that the company be restored to the register, order the name of the company to be restored to the register; and the Court may, by the order, give such directions and make such provisions as seem just for placing the company and all other persons in the same position as nearly as may be as if the name of the company had not been struck off. (8) Upon a certified copy of the order under sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany or body corporate is made up: Provided that on an application made by a company or body corporate, which is a holding company or a subsidiary of a company incorporated outside India and is required to follow a different financial year for consolidation of its accounts outside India, the Tribunal may, if it is satisfied, allow any period as its financial year, whether or not that period is a year: Provided further that a company or body corporate, existing on the commencement of this Act, shall, within a period of two years from such commencement, align its financial year as per the provisions of this clause; x x x 92. Annual return.- (1) Every company shall prepare a return (hereinafter referred to as the annual return) in the prescribed form containing the particulars as they stood on the close of the financial year regarding- (a) its registered office, principal business activities, particulars of its holding, subsidiary and associate companies; (b) its shares, debentures and other securities and shareholding pattern; (c) its indebtedness; (d) its members and debenture-holders al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-section (4), before the expiry of the period specified under section 403 with additional fees, the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lakhs rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both. (6) If a company secretary in practice certifies the annual return otherwise than in conformity with the requirements of this section or the rules made thereunder, he shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees. x x x 96. Annual general meeting.- (1)Every company other than a One Person Company shall in each year hold in addition to any other meetings, a general meeting as its annual general meeting and shall specify the meeting as such in the notices calling it, and not more than fifteen months shall elapse between the date of one annual general meeting of a company and that of the next: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose- (a) in the case of an insurance company, any matters which are not required to be disclosed by the Insurance Act, 1938 (4 of 1938), or the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999); (b) in the case of a banking company, any matters which are not required to be disclosed by the Banking Regulation Act, 1949 (10 of 1949); (c) in the case of a company engaged in the generation or supply of electricity, any matters which are not required to be disclosed by the Electricity Act, 2003 (36 of 2003); (d) in the case of a company governed by any other law for the time being in force, any matters which are not required to be disclosed by that law. (2) At every annual general meeting of a company, the Board of Directors of the company shall lay before such meeting financial statements for the financial year. (3) Where a company has one or more subsidiaries, it shall, in addition to financial statements provided under subsection (2), prepare a consolidated financial statement of the company and of all the subsidiaries in the same form and manner as that of its own which shall also be laid before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the financial statement shall include any notes annexed to or forming part of such financial statement, giving information required to be given and allowed to be given in the form of such notes under this Act. x x x 131. Voluntary revision of financial statements or Board s report. - (1) If it appears to the directors of a company that- (a) the financial statement of the company; or (b) the report of the Board, do not comply with the provisions of section 129 or section 134 they may prepare revised financial statement or a revised report in respect of any of the three preceding financial years after obtaining approval of the Tribunal on an application made by the company in such form and manner as may be prescribed and a copy of the order passed by the Tribunal shall be filed with the Registrar: Provided that the Tribunal shall give notice to the Central Government and the Income-tax authorities and shall take into consideration the representations, if any, made by that Government or the authorities before passing any order under this section: Provided further that such revised financial statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der is in force; (f) he has not paid any calls in respect of any shares of the company held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call; (g) he has been convicted of the offence dealing with related party transactions under section 188 at any time during the last preceding five years; or (h) he has not complied with sub-section (3) of section 152. (2) No person who is or has been a director of a company which- (a) has not filed financial statements or annual returns for any continuous period of three financial years; or (b) has failed to repay the deposits accepted by it or pay interest thereon or to redeem any debentures on the due date or pay interest due thereon or pay any dividend declared and such failure to pay or redeem continues for one year or more, shall be eligible to be re-appointed 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. (3) A private company may by its articles provide for any disqualifications for appointm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o one year or with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees, or with both. (3) Where all the directors of a company vacate their offices under any of the disqualifications specified in sub-section(1), the promoter or, in his absence, the Central Government shall appoint the required number of directors who shall hold office till the directors are appointed by the company in the general meeting. (4) A private company may, by its articles, provide any other ground for the vacation of the office of a director in addition to those specified in sub-section (1). 9. The Act was amended with effect from May, 2018. The amendments relevant for this case are in respect of Sections 164 167. The Companies (Amendment) Act, 2017 [No.1 of 2018]: x x x *Section 52. In Section 164 of the Principal Act.- (i) In sub-section (2), the following proviso shall be inserted, namely:- Provided that where a person is appointed as a director of a company which is in default of clause (a) or clause (b), he shall not incur the disqualification for a period of six months fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n verification of particulars or documentary proof attached with the application received along with fee as specified in Companies (Registration Offices and Fees) Rules, 2014 from any person, cancel or deactivate the DIN in case (a) the DIN is found to be duplicated in respect of the same person provided the data related to both the DIN shall be merged with the validly retained number; (b) the DIN was obtained in a wrongful manner or by fraudulent means; (c) of the death of the concerned individual; (d) the concerned individual has been declared as a person of unsound mind by a competent Court; (e) if the concerned individual has been adjudicated an insolvent: Provided that before cancellation or deactivation of DIN pursuant to clause (b), an opportunity of being heard shall be given to the concerned individual; (f) on an application made in Form DIR-5 by the DIN holder to surrender his or her DIN along with declaration that he has never been appointed as director in any company and the said DIN has never been used for filing of any document with any authority, the Central Government may deactivate such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 274. Disqualifications of directors.- (1) A person shall not be capable of being appointed director of a company, if he has been found to be of unsound mind by a Court of competent jurisdiction and the finding is in force; he is an undischarged insolvent; he has applied to be adjudicated as an insolvent and his application is pending; he has been convicted by a Court of any offence involving moral turpitude and sentenced in respect thereof to imprisonment for not less than six months, and a period of five years has not elapsed from the date of expiry of the sentence; he has not paid any call in respect of shares of the company held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call; or an order disqualifying him 164. Disqualifications for appointment of director.- (1) A person shall not be eligible for appointment as a director of a company, if - he is of unsou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an order disqualifying him for appointment as a director has been passed by a court or Tribunal and the order is in force; he has not paid any calls in respect of any shares of the company held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call; he has been convicted of the offence dealing with related party transactions under section 188 at any time during the last preceding five years; or he has not complied with sub-section (3) of section 152. (2) 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; or has failed to repay the deposits accepted by it or pay interest thereon or to redeem any debentures on the due date or pay interest due thereon or pay any dividend declared and such failure to pay or redeem continues for one year or more, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) The office of a director shall become vacant in case- he incurs any of the disqualifications specified in section 164; he absents himself from all the meetings of the Board of Directors held during a period of twelve months with or without he is found to be of unsound mind by a Court of competent jurisdiction; he applies to be adjudicated an insolvent; he is adjudged an insolvent; he is convicted by a Court of any offence involving moral turpitude and sentence in respect thereof to imprisonment for not less than six months; he fails to pay any call in respect of shares of the company held by him, whether alone or jointly with others, within six months from the last date fixed for the payment of the call unless the Central Government has, by notification in the Official Gazette, removed the disqualification incurred by such failure; he absents himself from three consecutive meetings of the Board of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clauses (d), (e) and (j) of sub-section (1), the disqualification referred to in those clauses shall not take effect - for thirty days from the date of the adjudication, sentence or order ; where any appeal or petition is preferred within the thirty days aforesaid against the adjudication, sentence or conviction resulting in the sentence, or order until the expiry of seven days from the date on which such appeal or petition is disposed of; or where within the seven days aforesaid, any further appeal or petition is preferred in respect of the adjudication, sentence, conviction, or order, and the appeal or petition, if allowed, would result in the removal of the disqualification, until such further appeal or petition is disposed of. (2A) Subject to the provisions of sub-sections (1) and (2), if a person functions as a director when he knows that the office of director held by him has become vacant on account of any of the disqualifications, specified in the several clauses of subsection (1), he shall be punishable with fine which may extend to five thousand] rupees for each day on which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, or does not within one month after sending the second letter receive any answer, he may publish in the Official Gazette, 248. Power of Registrar to remove name of company from register of companies.- (1) Where the Registrar has reasonable cause to believe that- a company has failed to commence its business within one year of its incorporation or; [Omitted] a company is not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company under section 455 , he shall send a notice to the company and all the directors of the company, of his intention to remove the name of the company from the register of companies and requesting them to send their representations along with copies of the relevant documents, if any, within a period of thirty days from the date of the notice. (2) Without prejud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company registered under section 8 . A notice issued under sub-section (1) or sub- section (2) shall be published in the prescribed manner and also in the Official Gazette for the information of the general public. At the expiry of the time mentioned in the notice, the Registrar may, unless cause to the contrary is shown by the company, strike off its name from the register of companies, and shall publish notice thereof in the Official Gazette, and on the publication in the Official Gazette of this notice, the company shall stand dissolved. The Registrar, before may be enforced as if the company had not been dissolved; and (b) nothing in this subsection shall affect the power of the Court to wind up a company the name of which has been struck off the register. If a company, or any member or creditor thereof, feels aggrieved by the company having been struck off the register, the Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... registered office, or if no office has been registered, to the care of some director, the managing agent, secretaries and treasurers, manager or other officer of the company, or if there is no director, managing agent, secretaries and treasurers, manager or officer of the company whose name and address are known to the Registrar, may be sent to each of the persons who subscribed the memorandum, addressed to him at the address mentioned in the memorandum. (9) A notice to be sent under this section to a liquidator may be addressed to the liquidator at his last known place of business. 252. Appeal to Tribunal.- (1) Any person aggrieved by an order of the Registrar, notifying a company as di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he register of companies, and the Tribunal may, by the order, give such other directions and make such provisions as deemed just for placing the company and all other persons in the same position as nearly as may be as if the name of the company had not been struck off from the register of companies. 11. At the outset, a comparison of Section 274 of 1956 Act with Section 164 of the Act could be made and similarly, a comparison of Section 283 of the 1956 Act with Section 167 of the Act could be made. (a) On a comparison of Section 274 of 1956 Act with Section 164 of the Act, what emerges is, subsection (1) of Section 274 of 1956 Act as well as subsection (1) of Section 164 of the Act deal with the grounds for disqualification or basis of disqualification of a person for being appointed as a director of a Company. Clauses (a) to (f) of Section 274 (1) and clauses (a) to (h) of Section 164 (1) are almost in pari materia and apply to directors of both public as well as private companies. It is submitted by learned co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be reappointed as a director of such a company, whereas under the Act he cannot be so re-appointed as a director of even the defaulting company as well as any other company for a period of five years from the date on which the defaulting company has failed to comply with Section 164(2)(a) of the Act. (c) Further under Section 274(3) of the 1956 Act, a private company which is not a subsidiary of a public company may, by its articles, provide that a person shall be disqualified for appointment as a director on grounds in addition to those specified in Section 274(1). Under Section 164(3) of the Act, a private company may, by its articles, provide for any disqualification for appointment as a director in addition to those specified in sub-sections (1) and (2) of Section 164 of the Act. Under the Act, it is immaterial whether a private company is or is not a subsidiary of a public company. 12. It would not be out of place to also note the differences between Section 275 of 1956 Act and Section 165 of the Act. Section 165 of the Act deals with the maximum number of public companies in which a person can hold office as a director. Under Section 275 of 1956 Act, a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parts. Section 164(1)(a) to (h) deals with the disqualifications which affect a director personally, while Section 164(2)(a) and (b) are disqualifications which visit a director on account of a default committed by the company in which he is a director. But, according to Section 167(1)(a) of the Act, if there is disqualification of a director under Section 164, which comprises of sub-sections (1), (2) and (3) then the office of such a director would become vacant. (b) The comparison does not end, as by amendment made to Section 167(1)(a) of the Act by virtue of the Amendment Act, 2017, a proviso has been added. As per the proviso, if a director incurs disqualification under sub-section (2) of Section 164 of the Act, the office of the director shall become vacant in all the companies where he is a director except the companies which is in default under that sub-section. In other words, by the proviso, a director of a defaulting company as per Section 164 (2) of the Act, would not vacate his office as director of the defaulting company, but he would vacate the office of director in all other companies in which he is a director. (c) In this regard, it would also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Section 164(1) of the Act states that a person shall not be eligible for appointment as a director of a company on account of the circumstances stated in Clauses (a) to (h) of the Act thereof, such as unsoundness of mind, being convicted by a court of any offence, an order of disqualification for appointment as a director being passed by a court or tribunal, or such other grounds. He contended that Section 164(2) of the Act relates to ineligibility to be appointed as a director of a company which has not filed financial statements or annual accounts for any continuous period of three financial years or has failed to repay the deposits accepted by it or pay interest thereon or to redeem any debentures on the due date or pay interest due thereon or pay any dividend declared and such failure to pay or redeem continues for a period of one year or more. That the ground of disqualification for reappointment as a director of a defaulting company or appointment in any other company for a period of five years, is not directly attributable to a director of a defaulting company, but the consequence is vicarious on account of the default committed by the company. That the said consequence i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the consequence far exceeds the mischief sought to be remedied and hence, it is manifestly arbitrary and disproportionate. 20. In this regard, my attention was drawn to Section 274(1)(g) of the 1956 Act and Section 164(2) of the Act. Similarly, a comparison was made between Section 283 of 1956 Act with Section 167 of the Act, by contending that the disqualification of a director by virtue of Section 274(1)(g) of the 1956 Act did not result in vacation of the office of a director under Section 283 of the said Act. But, under Section 167(1)(a) of the Act, a director would have to vacate his office as a director in all other companies except the defaulting company in the context of Section 164(2) of the Act. In the context of the aforesaid provisions, learned senior counsel contended that the consequence of the default made by the company being so serious and disproportionate, the provision namely Section 164(2) of the Act and the proviso to Section 167(1)(a) of the Act are manifestly arbitrary and in violation of Articles 14 and 19(1)(g) of the Constitution and the same may be struck down. 21. It was further contended that in the absence of any hearing before a dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any period prior thereof. 24. Learned senior counsel also contended that under Section 403 of the Act, there is provision for extension of time by two hundred and seventy (270) days for filing of annual returns. That even if the disqualification of a director of a company occurs on account of the default of a company by operation of law, there is no prior hearing thereof, or at least a post-decisional hearing could have been provided under the Act, which is not so. Therefore, Section 164(2)(a) of the Act has to be declared as being in violation of Article 14 of the Constitution. 25. Learned senior counsel drew my attention to the judgment of the Madras High Court on a similar controversy and contended that paragraph Nos.23 to 29 of the said judgment are relied upon. He submitted that Sections 164(2) and 167(1)(a) of the Act are hit by the doctrine of proportionality on account of the grave consequences that they have on the career of a person as a director of a company. He further submitted that once a director is disqualified by operation of law, then automatically, the Director Identification Number (DIN) gets cancelled. He drew my attention to Rule 11 of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reckoned for the purpose of determining three continuous years, when there is non-filing of annual returns. He submitted that this Court may interpret Section 164(2)(a) of the Act in such a manner so as to save it from the vice of unconstitutionality. In support of his submissions, he inter alia placed reliance on the following three decisions namely: 1. Sahara India (Firm), Lucknow vs. Commissioner of Income Tax, Central-I and Another, [(2008) 14 SCC 151], (Shara India); 2. D.K.Yadav vs. J.M.A. Industries Limited, [(1993) 3 SCC 259], (D.K.Yadav). 29. Sri S.Vivekananda, learned counsel appearing for the petitioners in Writ Petition No.55702 of 2017, 49062 of 2017 and other matters drew my attention to the fact that the petitioner therein resigned as director on 10.01.2013. That the Act came into force with effect from 01.04.2014. Even then the petitioner has been disqualified for a period of five years from 01.11.2015 to 31.10.2020. That the three continuous years of default under Section 164(2)(a) of the Act must be construed prospectively and not include any period prior to 01.04.2014. The said provision cannot have a retrospective effect/ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 403 of the Act has not been taken into consideration. He further submitted that prior to disqualification of a director, no hearing has been provided and even a representation made has not yet been considered. Placing reliance on paragraph 25 of the judgment of the Madras High Court, he submitted that the Writ Petition Nos.44839 of 2018 and 46210 of 2018 may be allowed. 31. Sri Uday Shankar, learned counsel appearing for petitioners in Writ Petition Nos.52952 of 2017, 613 of 2018 and other cases also contended that Section 164(2)(a) of the Act has been implemented by the respondents with retrospective effect which is unconstitutional. That under Section 274(1)(g) of the 1956 Act, the disqualification was limited to a public company and it did not extend to a private company, that too it was with effect from 13.12.2000, though it had an express retrospective effect from 01.04.1999. But, now Section 164(2)(a) of the Act, without having any express intent, has been given a retrospective effect or retrospective operation by the respondent-authorities which is bad in law. 32. He further compared Section 283 of the 1956 Act with Section 167 of the Act to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lidity of the proviso has been challenged in Writ Petition No.50103 of 2018 but not in Writ Petition Nos.15616617 of 2018. He submitted that if the object of the proviso is to curtail a mischief, then the medicine is worse than the disease. That merely because of a default committed by a company, the director of such a company cannot be tarnished with the same brush vis- -vis other companies wherein he is a director and which are not in default. That the consequence of a default under Section 164(2) of the Act is by a legislative sword without there being any hearing, which is illegal, as disqualification entails a serious consequence for a director. He next submitted that those directors who are disqualified with effect from 01.11.2016 up to 31.10.2021, have been so disqualified for a period of five years by taking into consideration three years being the material period of non-filing of annual returns even prior to 01.04.2014 when the Act was not in force, which is not in accordance with the settled principles of law as it gives a retrospective operation to the provision which is illegal. 35. He further submitted that there are cases where the names of the directors are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC 728], [Saghir Ahmad]; 2. B.P. Sharma vs. Union of India Others, [(2003) 7 SCC 309] [B.P.Sharma]; 3. State of Gujarat vs. Mirzapur Moti Kureshi Kassab Jamat and others, [(2005) 8 SCC 534], [Mirzapur Moti Kureshi]; Submissions of Respondents: 38. Sri Prabhuling K.Navadagi, learned Additional Solicitor General appearing for Union of India and other respondents at the outset drew my attention to the Scheme of the Act revolving around Sections 164(2) and 167 of the Act and made his submissions with reference to the statement of objections filed in the matter. He contended that the Act was preceded by a Bill which was referred to a Parliamentary Committee headed by Dr.J.J.Irani and the Act has certain objects and features which have been introduced for the first time with the object of bringing about transparency in standard of corporate governance in sync with international standards. 39. He submitted that Section 2(20) of the Act defines a Company to mean a company incorporated under the Act or under any previous company law. That the expression previous company law is defined under Section 2(67) of the Act which also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is prospective in operation. That any person who intends to be a director of a company with effect from 01.04.2014 must have possessed eligibility criteria on and from that date. That the prescription of eligibility criteria having regard to an antecedent period i.e., a period prior to 01.04.2014 does not vitiate any provision of law. He submitted that taking into consideration an antecedent period, i.e., a period prior to coming into force of the Act is permissible, when it comes to construing the eligibility of a person to be appointed as a director. In this regard, my attention was drawn to the latter portion of Section 164(2) of the Act, which prescribes the eligibility for reappointment of a director of a defaulting company or of any other company. That even under Section 274(1)(g) of the 1956 Act, such a provision existed. He submitted that retrospectivity would impact a provision if the rights acquired by a director are adversely affected retrospectively, i.e., prior to 01.04.2014. That, no director has been disqualified for a period prior to 01.04.2014. That the disqualification is only after that date. Therefore, any period prior to 01.04.2014 could be taken into consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act is a reasonable restriction imposed in public interest vide Article 19(6) of the Constitution. He further contended that the disqualification being only for a period of five years and not a permanent one the provision is not vitiated as being disproportionate. That the disqualification does not occur on account of the non-filing of annual returns in a single year or for that matter for two consecutive years. That disqualification visits the director of a defaulting company only after three years i.e., on the third consecutive year of non-filing. That even if a director is disqualified to be reappointed as a director or has to vacate his office, it does not prevent him from continuing as a share holder of a company. Hence, there is no unreasonableness or arbitrariness in the provision. He further submitted that the principles of natural justice do not apply when the consequences are on account of operation of law and that there is no vested right in a person to be a director of a company. 45. Learned ASG referred to A.P.Dairy Development Corporation Federation Vs. B.Narasimha Reddy, (2011) 9 SCC 286 (A.P.Dairy) and submitted that even when there is freedom of ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n occurred, but amendment has been enforced from May 2018. He contended that as the DIN is struck off, the Condonation Scheme also does not apply. That the judgment of the Calcutta High Court cannot be a precedent as it only expresses a prima facie view at an interlocutory stage and it is not a final order. 48. Sri Dhyan Chinnappa, learned senior counsel contended that the expression he incurs under Section 167(1)(a) of the Act refers to a disqualification arising only under Section 164(1) of the Act. That the proviso cannot enlarge the scope of Section 167(1)(a) of the Act so as to incorporate something new into the main provision. That vacating of office in companies other than the defaulting company by a director of a defaulting company was originally not envisaged under Section 167(1)(a) of the Act, but it is included by way of a proviso inserted by way of Amendment Act, 2017 enforced from 07th May 2018. Since Section 164(1) of the Act concerns a permanent disqualification, Section 167(1)(a) of the Act, which deals with vacating of office is also to be read in that context i.e., incurring a permanent disqualification. That Section 164(2) of the Act deals with only a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1)(a) of the Act are, there is no response by the Union of India or any other respondent. 53. Smt. Gayathri Shridharan submitted that the deactivation of DIN is contrary to proviso to Section 167(1)(a) of the Act, as a disqualified director continues to be a director of the defaulting company. Therefore, DIN cannot be cancelled, as compliances under the Act becomes impossible. That there is no provision for deactivation of the DIN nevertheless it has been done by the respondent authorities, which is contrary to the provisions of the Act. She relied upon Godhra Electricity Co. Ltd. and another vs. State of Gurjarat and Another, [(1975) 1 SCC 199], (Godhra Electricity) and J.S.Yadav vs. State of Uttar Pradesh and another, [(2011) 6 SCC 570], (J.S.Yadav), in support of her submissions that the contractual rights of a director are violated on account of the implementation of Section 164(2) of the Act and proviso to Section 167(1)(a) of the Act. She also contended that Section 164(2)(a) of the Act uses the expression has been and not had been and therefore, the provisions of the Act must be accordingly interpreted and therefore, past directors who are not directors duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is unreasonable and/or arbitrary as per Article 14 of the Constitution? (4) Whether there has been any illegal exercise of power by the concerned respondent-authority in publishing the List of Directors, including the names of petitioners as disqualified directors, under Section 164(2)(a) of the Act? (5) Whether Section 167(1)(a) of the Act is ultra vires Article 14 and/or Article 19(1)(g) of the Constitution as being manifestly arbitrary? (6) Whether proviso to Section 167(1)(a) of the Act is ultra vires Articles 14 and/or 19(1)(g) of the Constitution as being manifestly arbitrary? (7) What order? 57. The aforesaid points shall be considered and answered in seriatim. Part - 7 Preliminary Aspects of the Matter: 58. It is not in dispute that the petitioners in these writ petitions were all holding the position of directors either in public limited companies or in private limited companies or both, as the case may be, and are all aggrieved by being disqualified by operation of Section 164(2)(a) of the Act for a period of five years, the details of which are mentioned in the table above. It is als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k; regulatory overlap; framework for small enterprises and institutional structure. The Expert Committee submitted its report on Company Law on 31.05.2005 to the Hon ble Minister for Company Affairs. It is noted that the Act has incorporated recommendations made by various Committees and after a rigorous review process in the Parliament, after the Bill was first tabled in the year 2009, the Parliamentary Standing Committee of Finance examined the Bill twice, during which, extensive public consultations were also held. The notifications of the provisions of the Companies Act, 2013 has been made in a phased manner with 283 out of 470 provisions being enforced on 01.04.2014. The Act has introduced significant changes in the Company law in India, especially in relation to the accountability, disclosure, investors protection and corporate governance. 60. Sri Raghuram Cadambi, learned senior counsel appearing for Sri C.K.Nandakumar, has drawn my attention to the Company Directors Disqualification Act, 1986 of the United Kingdom which is an Act to consolidate certain enactments relating to the disqualification of persons from being directors of companies, and from being othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nel, with regard to any acts of omission or commissions by a company is circumscribed. (b) Section 150 of the Act deals with appointment of directors while Section 151 deals with appointment of directors elected by small share holders. Section 152(3) of the Act states that no person shall be appointed as a director of a company unless he has been allotted the Director Identification Number (DIN) under Section 154 of the Act. Subsection 6 of Section 152 of the Act states that unless the articles provide for the retirement of all directors at every annual general meeting, not less than twothirds of the total number of directors of a public company shall (i) be persons whose period of office is liable to determination by retirement of directors by rotation; and (ii) save as otherwise expressly provided in this Act, be appointed by the company in general meeting. The remaining directors in the case of any such company shall, in default of, and subject to any regulations in the articles of the company, also be appointed by the company in general meeting. After the first annual general meeting of a public company held after the date of the general meeting at which the firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escribed in Section 168 and 169 respectively of the Act. The maintenance of registers containing the particulars of its directors and key managerial personnel as may be prescribed is contemplated in Section 170 of the Act. Part - 8 Re. Point No.1: Whether Section 164(2)(a) of the Act is ultra vires Articles 14 and/or 19(1)(g) of the Constitution being manifestly arbitrary or on the principle of proportionality? 62. The rival arguments on this point have been narrated above. 63. A comparison of Section 274(1)(g) of the 1956 Act with Section 164(2) of the Act has already been made. To briefly revisit the same for the purpose of answering point No.1, it is noted that Section 274(1)(g) of the 1956 Act was inserted by virtue of an amendment made on 13.12.2000, but having effect from 01.04.1999. The said sub-clause concerned a director of a public company only. It did not disqualify a director of any private company, whereas Section 164(2) of the Act applies to a director of a company which includes a private company as well which is for the first time. Thus, Section 164(2) applies to a private company also. Since Section 274(1)(g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication of a director of a company. In other words, the contention was that the expression has been cannot extend to a person who was a director of a defaulting company prior to the three material years or to a director who has joined the company subsequent to the three material years leading to the default and has since ceased to be a director. 66. Further, it was submitted that both under Section 274(1)(g) of the 1956 Act as well as under Section 164(2) of the Act, the disqualification vis- -vis re-appointment as a director of any other company for a period of five years is identical. But, under Section 164(2) of the Act, the disqualification also extends to re-appointment as a director of a company which has defaulted for a period of five years. In other words, all the directors of a defaulting company would have to be changed once the default occurs and their term ends. 67. On a consideration of the aforesaid arguments, it is observed that Section 274(1)(g) of the 1956 Act is a precursor to Section 164(2) of the Act. The question to be considered is, whether, Section 164(2) of the Act is manifestly arbitrary as it is contended that it is in violation of Arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fundamental rights or any other right of the petitioners therein in any manner and the petition was dismissed as being devoid of merit. 69. Similarly, in Sourashtra Cement Limited, a Division Bench of the Gujarat High Court considered a challenge to the constitutional validity of Section 274(1)(g) of the 1956 Act as amended by the Companies (Amendment) Act, 2000 with effect from 13.12.2000. The Gujarat High Court noted that the purpose of Section 274(1)(g) of the 1956 Act was to disqualify certain persons from directorship in public companies so as to protect the investors from mismanagement, ensure compliance in filing annual accounts and annual returns. The purpose of the said provision was not to punish those who were disqualified but to save the community from consequences of mismanagement and also to prescribe standards of corporate managership and to protect the public against future conduct by persons whose past record as directors had shown a great danger to creditors and others. Thus, the object of insertion of Clause (g) to Section 274(1) of the 1956 Act, according to the Gujarat High Court, was to ensure proper governance of companies, transparency in worki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure that there is proper governance and investors' money is protected. (7) The amendment is not violative of Article 14. (8) Amendment to Section 274(1)(g) has been made primarily in larger public interest to protect large number of investors, particularly small and poor investors who had invested their life time savings with these companies and in majority of the case neither principal amount nor interest is paid. 71. The Gujarat High Court nevertheless considered additional submissions made and upheld the constitutional validity of the said provision by holding that it has been enacted in larger public interest. While saying so, it observed that the object of the provision was that the whole Board of Directors may act vigilantly and that the affairs of the company are managed in such manner that ultimately the deposits are repaid and/or debentures are redeemed. Otherwise, no company would try to improve their affairs and ultimately try to protect the interest of the investors. That the object of the provision is not to punish those who are so disqualified only but to save the community from the consequences of mismanagement and to protect the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 164(2) of the Act are for the very reasons already stated by the Bombay High Court as well as Gujarat High Court. They are in order to protect investors from mismanagement, infuse good corporate governance, regulation of corporate affairs and to protect the interest of investors and ensure compliance in filing the annual accounts and annual returns, which are a means of disclosure to all stock-holders. 74. In this regard, what is to be noted is the fact that the disqualification does not visit the director of a defaulting company when the financial statement or annual returns are not filed in the very first year itself. It is only when, for a continuous period of three financial years, when the company does not file annual statements or annual returns that the disqualification impacts its director. Similarly, under Section 164(2)(b) of the Act, the reason for disqualification being more serious, the disqualification would visit when there is failure to repay the deposits or redeem any debentures for a period continuous for one year or more. Under Section 274(1)(g) of the 1956 Act, the disqualification was only with regard to a director of a defaulting company being inel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal Airport Authority of India, [(1979) 3 SCC 489], (Ramana Dayaram), it was observed that wherever there is arbitrariness in State action, whether it be of the legislature or of the executive or of an authority under Article 12, Article 14 immediately springs into action and strikes down such State action. The concept of reasonableness and non-arbitrariness pervades the entire constitutional scheme and is a golden thread which runs through the whole fabric of the Constitution. In Mithu vs. State of Punjab, [(1983)2 SCC 277] (Mithu), a Constitution Bench of the Supreme Court struck down Section 303 of the Indian Penal Code, 1860, by which a mandatory sentence of death was imposed on life convicts who commit murder in jail. In Sunil Batra vs. Delhi Administration, [(1978)4 SCC 494] (Sunil Batra), Section 30(2) of the Prisoners Act was read down when a challenge was made regarding a prisoner under sentence of death being confined in a cell apart from all other prisoners, (under solitary confinement). Thus, in the aforesaid cases, Article 14 was referred to in the context of constitutional invalidity of statutory law as the same could be struck down if found to be arbitrary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and equitable treatment. Positively speaking, it should conform to norms which are rational, informed with reason and guided by public interest. At the same time, the Hon ble Supreme Court has cautioned that a Court considering the validity of a legislation must be mindful that a legislation does not become unconstitutional merely because there is another view or because there is another method which may be considered to be as good or even more effective, like any issue of social, or even economic policy. That the Courts cannot substitute their views on what the policy is, vide Dr.Subramanian Swamy vs. Director, Central Bureau of Investigation, [(2005) 2 SCC 317] (Dr.Subramanian Swamy ). 84. Manifest arbitrariness, according to the Hon ble Supreme Court, must be something done by the legislature capriciously, irrationally and/or without adequate determining principle. Also, when something is excessive and disproportionate, such legislation would be manifestly arbitrary. Applying the aforesaid test, the Hon ble Supreme Court in Shayara Bano, by a majority held that Triple Talaq being an incident and irrevocable form of divorce, was manifestly arbitrary as the marital t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government by Notification in the Official Gazette appointed different dates for enforcement of various provisions of the Act. Sections 164 to 168 of the Act (both inclusive) have been enforced with effect from 01.04.2014. 86. According to the Report of SEBI Committee on Corporate Governance headed by Sri N.R.Narayana Murthy submitted on 08.02.2003, Corporate Governance is about ethical conduct in business. Ethical leadership is good for business as the organisation is seen to conduct its business in line with the expectations of all stake-holders namely, customers, employees, investors, vendor partners, government and society. Corporate governance is beyond the realm of law and stems from the culture and mindset of management, and cannot be regulated by legislation alone. What legislation can and should do, is to lay down a common framework the form to ensure standards. The substance will ultimately determine the credibility and integrity of the process. Substance is inexorably linked to the mindset and ethical standards of management. One of the best corporate governance practices is for the management to act as trustees of the share-holders at large and prev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arket finance) were persuaded to comply with corporate governance norms that most investors around the world understood in order for the securities offerings to be successfully marketed overseas. Companies therefore had to depart from where they received investments. Since, a large portion of such foreign investment came from the developed world (primarily the U.S. and U.K.), it became convenient for companies to adopt standards with which investors from those countries were familiar. 1All securities offerings to the public required the approval of the Controller of Capital Issues [hereinafter CCI ], which effectively micro-managed offering including by reviewing the details such as price at which securities were to be offered rather than leaving those to the market forces to determine.], The office of the CCI was abolished in 1992 by the Capital Issues (Control) Repeal Act, 1992. Furthermore, SEBI effected a series of capital market reforms in the late 1990s streamlining the public offering process. Significant measures include the introduction of the book-building process for price discovery, dematerialization of securities (and the consequent availability of scriples ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mechanism involving both the Ministry of Company Affairs and SEBI. However, a lot requires to be done to prevent such phenomenon. We feel that such preventive action should begin with registration itself and should be sustained through a regime that requires regular and mandatory filing of statutory documents. With introduction of electronic filing, this process would become convenient to companies as well as the stakeholders. Behaviour resulting in non-filing of documents or incorrect disclosures should be dealt with strictly. 14.2 Information provided at the time of registration should determine the addresses of the company as well as its directors. It should be the duty of the Company to intimate any change of address within a fixed time period. 14.3 There should also be a system of random scrutiny of filings of corporates to be carried out by the registration authorities with heavy penalties for the companies found inadequate in their disclosures and filings. 14.4 Inter agency coordination should be enabled to track down the persons behind such companies to bring them to book. Law should be amended to make them disgorge their illgotten gains by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des that a person is disqualified for being appointed as a director in other companies for a period of five years, if such person is a director of a public company which has failed to repay its deposits or interest thereon on due date or redeem its debentures on due date or pay dividend and such failure continues for one year or more. This disqualification should be retained. 19.4 In case of sick companies which have defaulted on payment of deposits/debentures etc., it is necessary to re-constitute its Board of Directors for the purpose of rehabilitation of such companies. The new directors who join boards of such companies are likely to attract the disqualification under the present Section 274(1)(g) of the Companies Act. In order to encourage qualified professionals to join Boards of such companies, it is necessary to amend Section 274(1)(g) of the Companies Act to provide that such disqualification would not be applicable for new directors joining the boards of such sick companies which have failed to repay their deposits, debentures etc. 90. The Hon ble Supreme Court in N.Narayanan vs. Adjudicating Officer, Securities and Exchange Board of India, [(2013) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act though as per Section 274(1)(g) of 1956 Act, there was only one consequence viz., that a director of a defaulting company could not be appointed as director of any other company for a period of five years. But under Section 164(2) of the Act, a director of a defaulting company cannot be re-appointed as a director of a defaulting company for a period of five years. The prescription of a two-fold consequence, in my view, cannot be held to be manifestly arbitrary as the Parliament in its wisdom has prescribed the same having regard to the objects sought to be achieved which have been elaborately stated by the Bombay High Court as well as Gujarat High Court and which are reiterated. The prescription of a two-fold consequence is neither arbitrary nor manifestly arbitrary. The additional reasons for stating so could also be gathered while considering the validity of the Section from the point of view of proportionality, which aspect has also been discussed under point No.1. 92. Further, it was brought to my notice that the object of providing for stringent provisions under Section 164(2) of the Act is in order to identify directors of shell companies which are not engage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son who is a director of a defaulting company prior to the three material years. There is force in the said contention. The expression has been is not equivalent to the expression was . The phrase has to be interpreted to mean a person was a director during the period of three years i.e., continuous period of three financial years during which financial statements or annual returns were not filed and who may have since ceased to be a director. Even if such a director has subsequently ceased to be a director after the default has occurred, he would be disqualified. In other words, the expression has been is incorporated in the provision to overcome a situation where directors of the company could resign immediately before or soon after the default occurs so as to escape the consequences mentioned in the Section. In other words, if a person has been a director of a company which for a continuous period of three financial years has not filed financial statements or annual returns and has since resigned or ceased to be a director, such a person would also be visited with the disqualification. Therefore, the expression has been also refers to a person who ceases to be a director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s keeping in mind the purpose which they were intended to serve . The legislature and the administrative authority are, however, given an area of discretion or a range of choices but as to whether the choice made infringes the rights excessively or not is for the Court to determine. That is what is meant by proportionality. (b) In Modern Dental College and Research Centre and others vs. State of Madhya Pradesh and others, [(2016)7 SCC 353], the doctrine of proportionality was applied in the context of Article 19(6) of the Constitution by quoting Proportionality: Constitutional Rights and Their Limitation (Cambridge University Press 2012) , by Aharon Barak, former Chief Justice, Supreme Court of Israel. It was noted that there are sub-components of proportionailtiy which need to be satisfied. That a limitation of constitutional right will be constitutionally permitted if: (i) it is designated for a proper purpose; (ii) the measures undertaken to effectuate such a limitation are rationally connected to the fulfillment of that purpose; (iii) the measures undertaken are necessary in that there are no alternative measures that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny, must ensure that the company does not default either under Section 164(2)(a) or (b), as the case may be. Further, the ineligibility to be reappointed is not in the nature of a disqualification as under Section 164(1) of the Act, but only results in a temporary suspension for a period of five years which is in order to ensure compliances as stipulated under Section 164(2) of the Act. Moreover, under Section 164(1) of the Act, the material period resulting in the ineligibility is three years and not immediate which, in my view, is a reasonable period. Thus, Section 164(2)(a) of the Act resulting in an ineligibility for a director after a lapse of three consecutive financial years cannot be held to be capricious or a disproportionate repercussion, lacking in reasonableness or any rationale. A director who is part of a company, which is in default as per Section 164(2)(a) of the Act cannot be perpetuated in the same position by the company. If a remedy is not provided in a manner as provided under Section 162(2) of the Act, the mischief of committing a default would continue and it would appear as if the law permeates such a default by, not only being passive, but rather approving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concept of independent directors and to make the directors report more informative including several disclosures to be made. In light of the above objects to be achieved, Section 164(2) of the Act has been so provided. 103. I am of the view that the said provision is not ultra vires Article 14 and/or Article 19(1)(g) of the Constitution. Point No.1 is accordingly answered. Part - 9 Re. Point No.2: Whether Section 164(2)(a) of the Act is in violation of principles of natural justice and hence ultra vires Article 14 of the Constitution as it does not envisage any hearing prior to disqualification or post-disqualification? 104. This point concerns the fact that the disqualification under Section 164(2) of the Act is by operation of law and without envisaging any hearing, either a pre or post-decisional hearing and hence according to the petitioners, is in violation of principles of natural justice. In this regard, several decisions have been cited at the Bar. 105. The crux of the matter according to the petitioners is that a director of a defaulting company is visited with disqualification without being given an opport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while considering such eligibility, the question as to whether a person has suffered any disqualification on account of any of the circumstances stated in Section 164(1) or (2) of the Act would have to be considered. According to the ASG, when the Section is viewed from the aforesaid perspective, the requirement of hearing as per the principles of natural justice pales into insignificance. It is emphasized that Section 164 of the Act applies only when a person has to be considered for appointment as a director of a company or whether he is eligible to be re-appointed as a director of a company in default. That, when the disqualification occurs by operation of law, the principles of natural justice would not apply. 109. However, by contrast, the contention of the learned senior counsel for the petitioners is not from the point of view of eligibility to be appointed as a director of any company for a period of five years, which is a consequence of disqualification, but the fact that when Section 164(2) of the Act is read along with Section 167(1)(a) of the Act, the serious consequences of disqualification are enlarged. In this regard, it was contended on behalf of the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rissa vs. Dr.Binapani Dei [AIR 1967 SC 1269] even an administrative order which involves civil consequences must be made consistently with the rules of natural justice. Civil consequences cover infraction of not merely property or personal rights but of civil liberties, material deprivations and nonprimary damages. In its comprehensive connotation, everything that affects a citizen in his civil life inflicts a civil consequence. vide State of Himachal Pradesh vs. Raja Mahendra Pal [(1999) 4 SCC 43]. 111. A.K.Kraipak vs. Union of India [AIR 1970 SC 150] is a celebrated decision which has demolished the conceptualistic distinction between an administrative and a quasi-judicial function in the context of natural justice. It is, no doubt, true that when a person has to be removed from an office, elected or a statutory body, principles of natural justice have to be followed. Similarly, under the AntiDefection law, a Member of the Legislature who defects from his party loses his membership of the House. Whether a Member had defected or not and thereby become subject to the disqualification or not, is a matter to be decided by the Speaker of the House. It has been hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Mansoor Ali Khan, [(2000) 7 SCC 529, at 540] , the Hon ble Supreme Court held that where they have admitted undisputed facts, where only one view is possible, natural justice need not be applied. [Source: Principles of Administrative Law by M.P.Jain S.N.Jain, 7th Edition (2011)]. 114. In this context, it would also be useful to identify and classify the nature of the provision of Section 164(2) of the Act. In Administrative Law, an action is classified as legislative, administrative and quasi-judicial i.e., by adjudication. Different procedures are observed for making different kinds of orders. The procedural difference depends upon the nature of the order to be passed. However, there are difficulties in distinguishing a legislative function from other types of functions. A function may be characterized as a legislative function or as an administrative function depending upon the manner in which such power is exercised. In United States of America two tests have been propounded to identify legislative functions: one test depends upon the element of applicability, i.e., legislative function is normally directed towards the formulation of requirements having a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... few persons may be regarded as legislative. Thus, in the following cases denial of natural justice has been upheld by Courts as the function was considered to be legislative. E.g. a notification issued by the Cane Commissioner prohibiting power crushers and khandsari units from making their units in any reserved areas for a sugar mill for a few months with a view to increase sugar production vide Laxmi Khandsari vs. State of U.P. [AIR 1981 SC 873]; a notification issued by the Government extending the limits of the Town Area Committee vide The Tulsipur Sugar Co. Ltd. vs. Notified Area Committee [AIR 1980 SC 882]; price fixation in Union of India vs. Cynamide India Ltd. [1987 SC 1802]; declaration of an area as a dry area in S.M. Mallewar others vs. State of Maharashtra [AIR 1993 Bombay 237]. The distinction is that where a number of persons are affected and if the principles of natural justice is to be observed, it would not be possible to take timely action. Further, when the administration is discharging a function by following the prescription in the statute and on the occurrence of the circumstances mentioned in the provision if a result ensues, in such an ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egard the discussion on point No.1 above is relevant and apposite. There may be a plethora of reasons for non-compliance of Section 164(2) of the Act, the section is not concerned with those reasons, justification or explanations leading to non-compliance of Section 164 (2)(a)or(b). The existence of the circumstances mentioned under Section 164(2)(a)or(b) of the Act are sufficient for the directors of defaulting company to be visited with an ineligibility for re-appointment albeit, vicariously. 120. Thus, when the ineligibility for being appointed as a director of the defaulting company or in all the companies is for a period of five years from the date of the default is by operation of law, there is no necessity to give a prior hearing or comply with the provisions of audi alteram partem before such consequences visit a director of such a company. The ineligibility is in the nature of suspension of a director for a period of five years. Therefore, in my view, the need to hear a director of a company before the ineligibility to be reappointed as a director of a company in default or to be appointed in any other company on account of default of a company in which he is a di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber did not pay his annual subscription in advance in the month of December and in case of his failure to pay subscription before the end of March of any year, he automatically ceased to be a member of the Society therein, was contrary to Section 2(b) of the Karnataka Societies Registration Act, 1960. In order to save the Rule from the vice of unreasonableness and arbitrariness, it was held that it would be open to the alleged defaulterordinary member, to point out to the society relevant grounds or defence before the year in question ran out, and if his defence was accepted by the authorities concerned of the society, then his membership would not be hit by the provisions of Rule 7(A). The Hon ble Supreme Court stated that if an opportunity would be given to the defaulting member to show sufficient cause for non-payment of dues and once such a case is made out by a defaulting member to the satisfaction of the society then he would not have incurred automatic cessation of his membership for that year. 124. It was also thus contended by the learned senior counsel that at least a post-disqualification hearing must be provided under Section 164(2) of the Act after a director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority under Section 269-UD must be read into the provisions of Chapter XX-C and that there was nothing in the language of Section 269-UD or any other provision in the said Chapter which would negate such an opportunity of being heard is given. If such a requirement was not read into the provisions of the said Chapter, it would be open for challenge on the ground of violation of Article 14 on the ground of non-compliance with principles of natural justice. By holding so, the vires of the said provision was upheld. 126. The aforesaid judgment is also not applicable to the present case as in the aforesaid case, an order had to be made giving reasons before taking action under Section 269-UD of the Income Tax Act, 1961. But under the Act, the ineligibility to be reappointed or appointed as a director, as the case may be, is by operation of law. It affects the entire class of directors of all defaulting companies. It does not affect an individual director or any particular company as such. It is also not necessary to pass any administrative order disqualifying a director of a defaulting company. As already observed it is by operation of law as per the intention of Parliament. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether in every case where the assessing officer issues a direction under Section 142(2)(a) of the Income Tax Act, 1961, the assessee has to be heard before such an order is passed. After referring to the development of law on the principles of natural justice, it was held that Section 142(2)(a) of the said Act led to serious civil consequences and therefore, even in the absence of express provision for affording an opportunity of a pre-decisional hearing to an assessee, the requirement of observance of principles of natural justice had to be read into the said provision. In the said case, it was held that the proceedings before an assessing officer are deemed to be judicial proceedings. 129. In Institute of Chartered Accountants of India vs. L.K.Ratna others [(1986) 4 SCC 537], the question inter alia, was whether a member of the Institute of Chartered Accountants of India was entitled to a hearing by a Council of the Institute after the Disciplinary Committee had submitted its report to the Council of its enquiry into allegations of misconduct against the member. It was held that a member accused of misconduct was entitled to a hearing by the Council when, on rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, including the names of petitioners as disqualified directors, under Section 164(2)(a) of the Act? 132. The aforesaid points are inter-linked and shall be considered and answered together. 133. As already noted, Section 274(1)(g) of the 1956 Act dealt with disqualification of a director only of a public company on account of circumstances stipulated therein. As a result, a director of such a company in default was not eligible to be appointed as a director of any other public company for a period of five years from the date on which such public company, in which he is a director, failed to comply with sub-clauses (a) and (b) of Section 274(1)(g) of the 1956 Act. But under Section 164(2) of the Act, a director of a company, which is in default either under sub-clause (a) or (b) thereof would be ineligible to be re-appointed as a director in the defaulting company and also appointed as a director of any other company. The crux of the matter vis- -vis Section 164(2)(a) of the Act is with regard to the argument that Section 164(2)(a) of the Act, having a retrospective effect is unreasonable and arbitrary as per Article 14 of the Constitution. The said argument is w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be revised by the Commissioner of Income Tax (Central-I), New Delhi and the order dated 09.09.2003 passed by the assessing officer by which he had given effect to the order of CIT (Appeals) and in the process did not charge any surcharge. That order was cancelled as being erroneous and prejudicial to the interests of the Revenue. The assessee therein had filed an appeal before the Income Tax Appellate Tribunal (ITAT) against the said order. The ITAT by order dated 23.06.2006 allowed the appeal, against which the Revenue had approached the High Court of Delhi by way of an appeal filed under Section 260-A of the said Act. The appeal was dismissed by the Delhi High court, against which the matter was before the Hon ble Supreme Court. The Delhi High Court had taken a view that the proviso inserted to Section 113 of the Income Tax Act, 1961 by the Finance Act, 2002 was prospective in nature and the surcharge as leviable under the aforesaid proviso could not be made applicable to the block assessment in question of an earlier period i.e., from 01.04.1989 to 10.02.2000 in the said case. The question was whether the proviso to Section 113 of the Act was clarificatory in nature and thereby ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date when the Income Tax Act, 1961 came into force. In the said case, it was held that if the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only. (c) Similarly, in C.I.T., Bombay vs. Scindia Steam Navigation Co. Ltd. [1962 (1) SCR 788], it was held that as the liability to pay tax is computed according to the law in force at the beginning of the assessment year, i.e., the first day of April, any change in law affecting tax liability after that date though made during the currency of the assessment year, unless specifically made retrospective, does not apply to the assessment for that year. (d) Learned Senior Counsel, Sri Udaya Holla, appearing for the petitioners in Writ Petition Nos.25683-684 of 2018 and connected cases placed reliance on the judgment of the House of Lords in the case of L Office Cherifien Des Phosphates and Another vs. Yamashita Shinnihon Steamship Co. Ltd. [(1994) 1 All.E.R. 20], wherein on the question as to whether a provision has retrospectivity, it has been observed as under: Parliament was presumed when enacting legislation not to have intend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is prima facie prospective in nature unless it is expressly made to have retrospective operation. A new law ought to regulate what is to follow, not the past, contained in the principle of presumption of prospectivity of a statute. Reference was made to Govind Das wherein Halsbury Laws of England (III Edition) was cited and observed that if the enactment is expressed in a language which is fairly capable of either interpretation, it ought to be construed as prospectively only. That retrospective operation should not be given to a statute so as to affect, alter or destroy an existing right or create a new liability or obligation unless that effect cannot be avoided without doing violence to the language of the enactment. Reference was also made to Vatika Township and Jayam and Co. vs. CVAT, [(2016) 15 SCC 125], wherein reliance was placed on R.C.Tobaco (P) Ltd. vs. Union of India, [(2005) 7 SCC 725]. In the latter case, the Hon ble Supreme Court stated the broad legal principles while testing a retrospective statute in the following manner: (i) A law cannot be held to be unreasonable merely because it operates retrospectively; (ii) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of membership of a housing society, a person owned a residential house or a plot of land for the construction of residential house in any of the approved or unapproved colonies or other localities in the National Capital Territory of Delhi, in his own name or in the name of his spouse or any of his dependent children, on lease-hold or free-hold basis or on the basis of power of attorney or on agreement for sale. The question considered therein was, whether Rule 25 of the Rules was retrospective or not, as the alleged basis for disqualification was purchase of property prior to the adoption of the Rules; whether the same could be a basis of ineligibility for membership of a cooperative society when the said rule was enforced. It was held that a statute does not become a retrospective one because a part of the requisites for its action is drawn from a time antecedent to its passing. The Hon ble Supreme Court held that all that Rule 25(2) of the Rules did was that it operated in future, though the basis for taking action is the factum of acquiring a plot in the past. Thus, by virtue of Rule 25(2), a member was deemed to have ceased to be a member of the society, but the ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Union of India and others [(2013) 7 SCC 653] (Lily Thomas), wherein Section 8(4) of the Representation of the People Act, 1951 (for short RP Act ) was assailed on the ground that it was ultra vires the Constitution. Section 8 of the aforesaid Act deals with the disqualification on conviction for certain offences, in the context of being chosen as, and for being, a Member of either House of Parliament or of the Legislative Assembly or Legislative Council of a State. Sub-section (1) of Section 8 and sub-section (2) thereof deal with offences under the Acts specified therein and conviction for the offences under any of the Acts leading to disqualification. Sub-section (3) of Section 8 of the RP Act deals with conviction for any offences and for any other offences as per the stipulation contained therein leading to disqualification. Section 8(4) of the RP Act states that notwithstanding anything contained in sub-section(1), sub-section(2) or sub-section(3), a disqualification under either sub-section shall not, in the case of a person, who on the date of the conviction, is a Member of Parliament or the Legislature of a State, take effect until three months have elapsed from that dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interpreted to mean as one who has continued to be a director till the date of commencement of the Act. The expression has failed to repay its deposits was observed to be in present perfect tense, which suggested that the failure started even before the commencement of the Act. According to the Calcutta High Court, if the language was intended to refer to a future event or occurrence, then the words has failed to deposit or is already a Director would not have been employed in the subsection. It was further observed that the amending Act was enacted to protect the interest of deposit holders by prohibiting the entry of tainted directors against possible act of misappropriation and/or breach of trust, meaning thereby to curb the wrong deeds, mis-deeds to be perpetrated by wrongful act or omission by the same directors. In order to check and prevent public wrong the moment it is discovered, which is part of good governance in any form of Government by legislative or executive action, the amendment to 1956 Act had been introduced. It was further observed by the Calcutta High Court that if the aforesaid words were to be treated for future occurrence, then the amendment portion c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delineate on the concept of retrospectivity. The normal rule is presumption against retrospective operation of a provision of a statute. The said rule is a fundamental rule of law to the effect that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication. According to the Hon ble Supreme Court in State Bank s Staff Union vs. Union of India, [AIR 2005 SC 3446], the Parliament or the legislature has the power to legislate retrospective statutes. But when a challenge is made to a retrospective legislation, it is necessary to note the distinction between retrospective and retroactive laws. E.A. Driedger, in Statutes: Retroactive Retrospective Reflections [(1978), 56 Can. Bar Rev. 264] (Driedger), has arrived at the following definitions: (i) A retroactive statute is one that operates as of a time prior to its enactment, but a retrospective statute is one that operates for the future only. It is prospective, but it imposes new results in respect of a past event. (ii) A retroactive statute operates backward, but a retrospec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering the qualifications of a director, it is necessary to ascertain as to whether a person has been a director of a company which has violated Section 164(2) of the Act, in that the annual returns or statements have not been filed by such a company for a continuous period of three financial years. According to learned ASG, while reckoning the three financial years, it could be a period either prior to 01.04.2014 or subsequent thereto. It makes no difference. Once for a continuous period of three financial years, a company has failed to file annual returns or statements would result in the director of that company being visited with an ineligibility of being re-appointed as a director of that very company or of any other company for a period of five years. 147. But, the contra contention of learned counsel for the petitioners is that, while reckoning the continuous period of three years, no financial year prior to 01.04.2014 can be taken into consideration. That having regard to the stringent, almost penal consequences which follow under Section 164(2) of the Act, the continuous period of three financial years must commence from 01.04.2014 only. It is their contention that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read with Section 167(1)(a) of the Act are as enumerated above. Whereas, the consequences under Section 274(1)(g) read with Section 283 of 1956 Act were less severe and almost minimal. 151. In the circumstances, it is observed that if the three years period is referable to a period prior to the enforcement of the Act i.e., prior to 01.04.2014, then Section 274(1)(g) would apply. This is having regard to Section 465 of the Act which is the repeal and saving provision. Further if the continuous three financial years is with effect from 01.04.2014 onwards, then the provisions of the Act would apply. But if the continuous period of three financial years during which financial statements or annual returns are not filed by any company, which is the basis for disqualifying the director of a company encompasses a period prior to 01.04.2014 as well as subsequent to 01.04.2014, it is held that the period prior to 01.04.2014 cannot be reckoned for the purpose of applying the disqualification under the said provision along with a period subsequent thereto. If for example, the three continuous period of three financial years are with effect from 01.04.2013 onwards, then it will be up t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bitrary action on the part of the respondents in disqualifying the petitioners as directors on 01.11.2016 by taking into consideration a period prior to 01.04.2014 as part of continuous period of three financial years during which the financial statements or annual returns have not been filed by the company. In the said judgment it has been observed that the provision considered therein would have retrospective effect if the Act provided that anything done before the Act came into force or before the order was made should be void or voidable, or if a penalty was inflicted for having acted in a particular way before the Act came into force or before the order was made or if a disqualification to be imposed for the future which in no way affects anything done by the appellant in the past. 155. The aforesaid decisions no doubt state that the respective rules considered therein were prospective and they did not have any retrospective effect inasmuch as they only took into consideration action drawn from a time antecedent to the passing of the rule and did not apply to any period prior to its enforcement. The said cases are applicable to a case of disqualification of a director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alification or an ineligibility as stated under Section 164(2) of the Act when his case for re-appointment as a director of the defaulting company or in any other company is to be considered. In such an illustration also Section 164(2) has a prospective operation whether in respect of a public company or a private company. Thus, with effect from 01.04.2014 onwards if for three continuous financial years, there is non-compliance of Section 164(2)(a) of the Act, the disqualification would occur by operation of law. 157. But, the difficulty arises in those cases where the continuous period of three financial years spell over a period prior to enforcement of the Act i.e., 01.04.2014 and a period subsequent thereto, during which period of three continuous financial years a company would not have filed its annual statements or returns. What would be the position in such a case? It is noted that in most of the cases herein, the disqualification has been notified on 01.11.2016 and the ineligibility is up to 01.11.2021. That means, three continuous financial years prior to that date has been reckoned during which period there has been non-compliance of Section 164(2) of the Act. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 283 of the 1956 Act, there was no vacation of the office of such a director. But under the Act, a director of a defaulting company becomes ineligible to be re-appointed as a director of the defaulting company as well as any other company. Moreover, in terms of the proviso to Section 167(1)(a) of the Act, such a director would have to vacate office as a director in all companies where he is a director other than the defaulting company. The cumulative effect of the consequences being greater than under the 1956 Act, in my considered view, even in respect of a public company while reckoning three financial years during which annual returns or financial statements have not been filed, no period prior to 01.04.2014 could be considered while reckoning the continuous period of three financial years i.e., commencing from prior to the commencement of the Act and ending after the coming into force of the Act. 160. It is necessary to reiterate and distinguish the aforesaid position from the disqualification of a director of a public company under the provisions of Section 274(1)(g) of the 1956 Act which would have occurred prior to the enforcement of the Act. In such an event, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This is because when the material period of three continuous financial years is to be reckoned, no period prior to 01.04.2014 can be taken into consideration as and when such a period commenced the new law with different consequences were not envisaged. This is different from applying the new law to an event which is a past, concluded one prior to the enforcement of the new law as the same could be taken into consideration. In such a case, the law is being applied retroactively and not retrospectively, which is permissible. 162. The learned ASG has relied upon the interim order of the Calcutta High Court in the case of Nabendu Dutta wherein Section 274(1)(g) of the 1956 Act came up for consideration. Under the said provision, the expression was is already a director . The expression has failed to repay its deposits was observed to be in present perfect tense with reference to the date of commencement of the amendment. In the said context, it was held that immediately after the amendment being enforced, the said provision would be effective and that if there was any disqualification under Section 274(1)(g) of the 1956 Act, it would result in consequences as stipulated un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 31.10.2021 could not have published by taking into consideration a period prior to 01.04.2014 as well subsequent thereto while computing continuous period of three financial years under Section 164(2)(a) of the Act. Part 11 Re. Point Nos.5 6: (5) Whether Section 167(1)(a) of the Act is ultra vires Article 14 and/or Article 19(1)(g) of the Constitution as being manifestly arbitrary? (6) Whether proviso to Section 167(1)(a) of the Act is ultra vires Articles 14 and/or 19(1)(g) of the Constitution as being manifestly arbitrary? 166. The aforesaid points shall be considered together. As already noted, a disqualification incurred by a director of a public company under Section 274(1)(g) of the 1956 Act, did not result in vacating of the office of the director under Section 283 of the said Act, either in the defaulting company or any other company in which he was functioning as a director. But, under Section 167(1)(a) of the Act, a director who has incurred disqualification under Section 164 of the Act would also have to vacate his office as a director. However, by virtue of the Amendment Act, 2017 and by the insertion of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also, which would lead to a situation where the entire Board of Directors would have to vacate office resulting in the company not having any Board at all! In this context, my attention was drawn to clauses (b) to (h) of Section 167(1) of the Act, wherein even without incurring a disqualification, the office of the director would become vacant for the reasons, such as, on account of the absence of the director from all the meetings of the Board of Directors held during a period of twelve months with or without seeking leave of absence of the Board; if he acts in contravention of the provisions of Section 184 of the Act relating to entering into contracts or arrangements in which he is directly or indirectly interested; if he fails to disclose his interest in any contract or arrangement in which he is directly or indirectly interested, in contravention of the provisions of Section 184 of the Act; if he becomes disqualified by an order of a court or the Tribunal; he is convicted by a court for any offence, whether involving moral turpitude or otherwise and sentenced in respect thereof to imprisonment for not less than six months; (provided that the office shall be vacated by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other companies in which he is a director, as there is no nexus between the directorship of a defaulting company and directorship in all other companies, where there is no default. It was contended that by a proviso, a distinction could not have been made, insofar as Section 164(2) of the Act is concerned. That a proviso cannot enlarge the scope of the main provision. That Section 167(1)(a) of the Act does not extend to Section 164(2) at all. In this context, it was contended that the reason as to why Section 167(1)(a) has to be restricted to only disqualification incurred under Section 164(1) of the Act is because a director who is disqualified under Section 164(1)(a) to (h) of the Act cannot continue to remain in office on account of the very nature of the disqualification and hence, Section 167(1)(a) of the Act has to be read only in the context of Section 164(1)(a) to (h) of the Act as such a director would have to vacate office in all companies. This is having regard to the basis or grounds for incurring a disqualification under Sections 164(1)(a) to (h) of the Act, namely on account of the director being declared by a competent court to be of unsound mind; or he is an un-disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as any disqualification which has occurred under the provision of 1956 Act would not, on the coming into force of 2013 Act, result in vacating the office of the director as Section 167(1)(a) of the Act cannot have a retrospective operation. But, insofar as any disqualification which takes place subsequent to the enforcement of the Act, the same would result in a two-fold consequence. What is stated in Section 164(2) of the Act is a long term consequence. But, the short term consequence is that the director of a defaulting company has to vacate his office as director. In this regard, it has been contended that the vacation of office of a director is per se a harsh consequence and is disproportionate to the object sought to be achieved and therefore, Section 167(1)(a) must be struck down as being arbitrary and being in violation of Articles 14 and 19(1)(g) of the Constitution. 173. However, I do not find that the said provision is arbitrary inasmuch as a director who suffers disqualification as per Section 164(2) of the Act cannot be re-appointed as a director of the defaulting company as well as any other company for a period of five years. The said consequence stems imme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a line of argument is also in consonance with the fact that under Section 283 of the 1956 Act, a director who incurred disqualification under Section 274(1)(g) of the 1956 Act did not have to vacate the office of the director. In fact, on other hand, a reading of Section 283(1)(a) to (l) of the 1956 Act would clearly indicate that the director would have to vacate the office on the grounds mentioned under Section 274(1)(a) to (f) of the 1956 Act, which are almost in pari materia with Section 164(1)(a) to (h) of the Act. 175. Further, it is noted that Section 167(1)(a) of the Act is also distinct from Section 167(1)(b) to (h) of the Act, which deal with the conduct of a director vis- -vis a company. Therefore, it is deduced by petitioners that Section 167(1)(a) of the Act per se refers to only Section 164(1) of the Act, which are grounds for disqualification personal to a director and which grounds are distinct from Section 164(2). Hence, the latter provision which would not result in the director who has incurred disqualification on account of the default committed by the company to vacate office of the said company or of other companies in which he is a director. It is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction or stultification of statutory objective, the language may be modified sufficiently to avoid such disadvantage and no further. 179. Further, when Section 167(1)(a) of the Act is juxtaposed with Section 167(1)(b) to (h) of the Act, it would imply that the disqualification is only in respect of the office of a director of that particular Board of Directors wherein a person has incurred disqualification or has committed acts of omission or commission. While a disqualification incurred by a director under Section 164(1)(a) to (h) would result in that particular director vacating the office in all companies where he is a director. In other words, he has to vacate office of director in the company, which is in default as well as in all other companies as ineligibility to be appointed occurs in all the above companies. Hence, vacating the office of a director who has incurred the disqualification in all other companies where he is a director would arise is the argument of respondents. Therefore, such a director would have to vacate office in the defaulting company as well as in all other companies. 180. If indeed by the proviso, a director who is disqualified, by v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Board. Such a company cannot function at all! Keeping in mind the said aspect, even under Section 283 of the 1956 Act, disqualification of a director under Section 274(1)(g) of the said Act did not result in vacating of office in the defaulting company. But, Section 167(1)(a) also encompasses Section 164(2) of the Act. The reasons are already stated while considering point No.1 but it can be emphasized further with reference to a judgment of the Hon ble Supreme Court. 183. The Hon ble Supreme Court in N.Narayanan vs. Adjudicating Officer, Securities and Exchange Board of India, [(2013)12 SCC 152], (N.Narayanan) has observed as under: 30. Responsibility is cast on the Directors to prepare the annual records and reports and those accounts should reflect a true and fair view . The over-riding obligation of the Directors is to approve the accounts only if they are satisfied that they give a true and fair view of the profits or loss for the relevant period and the correct financial position of the company. 31. A company though a legal entity cannot act by itself, it can act only through its Directors. They are expected to exercise the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the short term effect is vacating of office of a director. While the directors of a company, which is in default under Section 164(2) of the Act, would not vacate their office as per the proviso to Section 167(1)(a) of the Act on account of the said disqualification, nevertheless have to vacate their office as directors in all other companies even where there is no default in those companies. In other words, whether the provision is unreasonable having no nexus to the object sought to be achieved is the pertinent question to be answered. 187. At the outset, it would be relevant to delineate on the scope and object of a proviso to the provision. (a) The normal function of a proviso is to except something out of the provision or to qualify something enacted therein which, but for the proviso, would be within the purview of the provision. As a general rule, a proviso is added to an enactment to qualify or create an exception to what is in the enactment and ordinarily, a proviso is not interpreted as stating a general rule. In other words, a proviso qualifies the generality of the main enactment by providing an exception and taking out as it were, from the main enac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an exception or qualifying what has been stated before. In other words, if the substantive enactment is worded in the form of a proviso, it would be an independent legislative provision concerning different set of circumstances than what is worded before or what is stated before. Sometimes, a proviso is to make a distinction of special cases from the general enactment and to provide it specially. (d) At this stage, the construction or interpretation of a proviso could be considered. In Ishverlal Thakorelal Almaula vs. Motibhai Nagjibhai [AIR 1966 SC 459], while dealing with the Bombay Tenancy and Agricultural Lands Act, 1948, the Hon ble Supreme Court held, that a proper function of a proviso is to except or qualify something enacted in the substantive clause, which but for the proviso, would be within that clause. In Kaviraj Pandit Durga Dutt Sharma vs. Navaratna Pharmaceutical Laboratories [AIR 1965 SC 980], while considering proviso to Section 6 of Trade Marks Act, 1940, it was observed that it would not be a reasonable construction for any statute, if a proviso which in terms purports to create an exception and seeks to confer certain special rights on a particula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make the enactment workable; (3) it may be so embedded in the Act itself as to become an integral part of the enactment and thus acquire the tenor and colour of the substantive enactment itself; and (4) it may be used merely to act as an optional addenda to the enactment with the sole object of explaining the real intendment of the statutory provision. (f) The approach to the construction and interpretation of a proviso are enunciated in the following cases. In M.Pentiah others vs. Muddala Veeramallappa others, [AIR 1961 SC 1107], it was observed that while interpreting a section or a proviso, if the choice is between two interpretations, the narrower of which would fail to achieve the manifest purpose of the legislation, one should avoid a construction which would reduce the legislation to futility and should rather accept the bolder construction based on the view that Parliament would legislate only for the purpose of bringing about an effective result. In Superintendent Remembrancer of Legal Affairs to Govt. of West Bengal vs. Abani Maity, [AIR 1979 SC 1029], the Apex Court observed that the statute is not to be interpreted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontinue as directors of the defaulting company but they would vacate office in all other companies. He submitted that the said position is envisaged even under Section 167(1)(a) of the Act and therefore, the proviso only clarifies that the directors of the defaulting company would not vacate office in the defaulting company in order to ensure that the defaulting company is not left without any director. 192. By way of reply, learned counsel for the petitioners relied upon the following decisions touching upon the rule against retrospectivity in the context of an amendment made to a provision: (a) In Union of India vs. Tushar Ranjan Mohanty, [(1994) 5 SCC 450], the Hon ble Supreme Court declared that when an amendment has a retrospective operation and takes away vested rights, it is unreasonable, arbitrary and violative of Article 14 of the Constitution. (b) Similarly, in P.D. Aggarwal vs. State of U.P., [(1987) 3 SCC 622], it was held that amendment to Rules which have a retrospective operation and take away the vested rights are arbitrary and not reasonable and such retrospective amendments are subject to judicial scrutiny. (c) In J.S. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioners herein retrospectively, as the said proviso has been enforced from May 2018 and the petitioners have all been disqualified prior to that date requires consideration. 195. I find considerable force in the argument of petitioners counsel as, on 01.11.2016, when the petitioners were disqualified, while they had to vacate the office of the director, it necessarily referred to the defaulting company under Section 164(2) of the Act. But, realizing the fact that if all the directors in the defaulting company had to vacate office, then such Board of Directors would be bereft of directors and would lead to an absurd situation, the proviso was inserted to the effect that a director of a defaulting company shall not vacate office of the director in the defaulting company. Therefore, the said portion of the proviso could be construed to be clarificatory in nature and therefore, would have a retrospective effect. 196. But, while saying so, the proviso also states that a director of a defaulting company would vacate office of the director in all other companies in which he is a director. The same was not envisaged under Section 167(1)(a) of the Act prior to insertion o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny continues to hold the office of Director despite disqualification, his DIN cannot be cancelled. On the issue of cancellation of DIN, reference was made to Companies (Appointment and Qualification of Directors) Rules, 2014. Under Rule 14, the consequences of disqualification of directors under Section 164(2) of the Act are mentioned. That every director shall inform to the company concerned about his disqualification under sub-section (2) of Section 164 of the Act in Form DIR-8 before he is appointed or re-appointed. Further, whenever a company fails to file the financial statements or annual returns, or fails to repay any deposit, interest, dividend, or fails to redeem its debentures, as specified in sub-section (2) of section 164, the company shall immediately file Form DIR-9, to the Registrar furnishing therein the names and address of all the directors of the Company during the relevant financial year. 199. That cancellation or surrender or deactivation of DIN is stipulated in Rule 11. It is contended that Rule 11 does not permit cancellation of or deactivation of DIN on account of disqualification of a director under Section 164(2) of the Act at all. That DIN could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 64(2)(a) referring to annual return and financial statement , the time limit to file annual return under Section 92(4) of 2013 Act is sixty days from Annual General Meeting or the last date on which Annual General Meeting ought to have been held, hence, the time limit to file balance sheet under Section 137(1) of the 2013 Act is again thirty days from Annual General Meeting. Therefore, in view of these legal position, the disqualification could get triggered off only on or after 30.10.2017 only, if any company fails to file annual forms for three financial years. Importantly, it is to be borne in mind that even beyond that time limit, additional time limit of 270 days was available by virtue of the then first proviso to Section 403. (d) Although there is no statute or provision expressly spelling out the observance of the principles of natural justice against disqualification of directors, as the legal right of the petitioners to continue as director in other company or to be reappointed in any other company, which are scrupulously following the provisions of the Companies Act, have been deprived of, the principles of natural justice should have been adhered to by iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porate life of the directors to the extent of disqualifying them to hold the directorship in the other companies, the said provision is liable to be read down, hence, Section 164(2)(a) is read down to the extent it disqualifies the directors in other companies which are scrupulously following the requirements of law, making it clear that no directors in other companies can be disqualified without prior notice. (g) However, it is made clear beyond any pale of doubt that the mischief of removal of the names of the companies by the Registrar of Companies and the disqualification of the directors in the defaulting company will go together, as it is inseparable, and the Registrar of Companies need not give fresh notice to the directors for their disqualification from the dormant company, if there is a failure to file the financial statement or annual return for any continuous period of three financial years as per Section 164(2)(a). 30. For all the aforementioned reasons, the impugned orders are set aside and the writ petitions shall stand allowed. Consequently, all the connected writ miscellaneous petitions are closed. However, there shall be no order as to costs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 accordance with law. 35. All the petitions stand allowed accordingly. 205. I respectfully agree with paragraphs (i), (ii), (iii), (v), while Point No.(iv) is not relevant for the purpose of these cases. However, I have observed that Section 164(2)(a) of the Act has retro-active effect. 206. The only other aspect that remains for consideration is with regard to those writ petitions which have been filed by petitioners assailing the order passed under Section 248 of the Act, as a result of which the companies have been struck off from the list of Companies. Any challenge to the said order could be made under Section 252 of the Act. In the circumstances, those writ petitions are entertained reserving liberty to the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of the circumstances stated therein and the same is in order to achieve probity, accountability, and transparency in corporate governance. (b) That Article 164(2)(a) of the Act applies by operation of law on the basis of the circumstances stated therein, the said provision does not envisage any hearing, neither predisqualification nor post- disqualification and this is not in violation of the principles of natural justice and hence, is not ultra vires Article 14 of the Constitution. (c) That Section 164(2)(a) of the Act does not have a retrospective operation and is therefore, neither unreasonable nor arbitrary, in view of the interpretation placed on the same. (d) That there has been an arbitrary exercise of power by the respondent authority in disqualifying the petitioners as directors of public companies by taking into consideration the period prior to 01.04.2014 as well as subsequent thereto for the purpose of reckoning the continuous period of three financial years. It is observed that even in respect of public companies, having regard to the nature of the consequences envisaged under Section 164(2) of the Act as compared to Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her, the amendment to Section 167(1)(a) of the Act, by insertion of the proviso is by virtue of the Amendment Act, 2017 is subsequent to the date on which the petitioners were disqualified, which in most cases is 01.11.2016 or at any rate prior to May 2018. That the said proviso has only a prospective effect and cannot have a retrospective operation. Thus, in respect of the petitioners who were disqualified prior to the date of enforcement of the amended provision, that portion of the proviso namely office of the director shall become vacant in all the companies is not applicable to those petitioners. Hence, the petitioners herein, (who may have also been granted interim orders by this Court) continue to hold office as directors in the defaulting company as well as all other companies. This is in consonance with the interpretation placed on the proviso and petitioners would not vacate the office in all other companies in which they are directors as the proviso does not apply to the petitioners who were all disqualified prior to 07th May 2018, as the amendment, by way of an insertion of proviso, has only a prospective operation. (k) It is clarified that the operation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04.2014 only i.e., the disqualification has occurred under the provisions of the 1956 Act in respect of the public companies, the writ petitions are dismissed; (iii) If the disqualification of the directors is based by taking into consideration three continuous financial years subsequent to 01.04.2014, irrespective of whether the petitioners are directors of public companies or private companies, they stand disqualified under the Act; (iv) Where the disqualification of the petitioners is based by taking into consideration any financial year prior to 01.04.2014 in respect of private companies, such disqualification being bad in law, the writ petitions are allowed to the aforesaid extent only; (v) The Writ Petitions, wherein the challenge is also made to the vires of Section 164(2)(a), and/or 167(1)(a) and/or proviso to Section 167(1)(a) of the Act, are dismissed to the aforesaid extent; (vi) The respondents are directed to restore the DIN of those directors whose disqualification has been quashed by this Court; (vii) Those petitioners who have challenged only the striking off of the companies in which they are directors have an ..... 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