2018 (5) TMI 331 - HC - Companies Law

Court Clarifies Challenges on Disqualification Notices and Company Name Striking

Prem Paul Verma And Anr. Versus Union of India And Ors.

The court addressed challenges raised by former directors regarding disqualification notices issued under Section 164(2)(a) of the Companies Act, 2013, ... Disqualification as Director u/s 164(2)(a) of the Companies Act, 2013 - entitlement to avail the CODS-2018 Scheme enabling such defaulters to seek removal of the disqualification - Held that:- So far as the deposits under the CODS- 2018 Scheme are concerned, the same have to be made by and on behalf of the Company concerned. As such, the payment or deposit by any one director shall be treated to have been made for and on behalf of the company. Other directors would not be required to duplicate the payments even though they may have filed separate writ petitions. In case any of the petitioners have made deposits of any amount, in any form, i.e. say by demand drafts or otherwise, with the Registrar of Companies, in purported compliance of the requirements of the CODS-2018 Scheme, such petitioners are not required to duplicate the payment or make deposits in this court. In case such payments have not been accepted by the by the Registrar of Companies so far, appropriate orders regarding revalidation/substitution of the drafts/instruments can be made at the time of final disposal. We, therefore, direct that an individual counter affidavits dealing with the factual averments in this writ petition shall be filed separately within a period of six weeks as prayed. The full details of the issuance and service of the notice(s) shall be placed on record with copies of the supporting documents Issues:1. Disqualification of directors under Section 164(2)(a) of the Companies Act, 2013.2. Striking off the name of the company under Section 248(1) of the Companies Act, 2013.3. Violation of principles of natural justice in disqualification and striking off actions.4. Retrospective application of provisions of the Companies Act, 2013.5. Compliance with notice issuance requirements under Section 248(1) and Rule 3(2) of the Companies (Removal of Names of Companies from the Registrar of Companies) Rules, 2016.6. Adjudication of legal submissions and importance of Sections 164 and 248 of the Companies Act, 2013.7. Condonation of Delay Scheme, 2018 (CODS Scheme, 2018) and its requirements.8. Acceptance of returns under the CODS-2018 Scheme in e-format.9. Extension of filing date under the CODS-2018 Scheme due to holidays.10. Requirement for filing compliances under the CODS-2018 Scheme as hard copies.11. Deposit of charges under the CODS-2018 Scheme with the Registry and compliance with the Scheme.12. Treatment of deposits under the CODS-2018 Scheme made by one director on behalf of the company.13. Filing of individual counter affidavits and production of original records by the respondents.14. Listing for further hearing on 24th July, 2018.Analysis:1. The petitioners, former directors of companies under the Indian Companies Act, 1956, challenged disqualification notices issued under Section 164(2)(a) of the Companies Act, 2013, due to defaults in filing returns for three financial years. They sought quashing of the disqualification notices.2. Apart from the disqualification, the Registrar of Companies struck off the name of a company under Section 248(1) of the Companies Act, 2013, leading to further legal challenges by the petitioners regarding the violation of natural justice principles.3. The petitioners contested the retrospective application of the Companies Act, 2013, arguing that the actions taken by the Registrar of Companies were akin to penalties and infringed on natural justice principles, citing relevant Supreme Court pronouncements.4. The petitioners raised concerns about the compliance with notice issuance requirements under Section 248(1) and Rule 3(2) of the Companies (Removal of Names of Companies from the Registrar of Companies) Rules, 2016, emphasizing procedural lapses.5. The court acknowledged the importance of adjudicating the legal submissions related to Sections 164 and 248 of the Companies Act, 2013, highlighting the significance of these provisions in the functioning of the Act.6. The court addressed the Condonation of Delay Scheme, 2018 (CODS Scheme, 2018), outlining the requirements for seeking removal of disqualification and restoration of directorship, including fee payments and submission of deficient returns.7. Challenges arose regarding the acceptance of returns under the CODS-2018 Scheme in e-format, especially for companies whose names were struck off, leading to practical difficulties in compliance.8. Due to holidays affecting the filing deadline under the CODS-2018 Scheme, an extension was granted to ensure fairness and allow the petitioners to avail themselves of the scheme's benefits.9. The court directed the petitioners to file compliances under the CODS-2018 Scheme as hard copies, ensuring preservation and compliance with the scheme's requirements for restoration of directorship.10. To facilitate compliance with the CODS-2018 Scheme, the court mandated the deposit of charges with the Registry and specified procedures for payments, emphasizing adherence to the scheme's guidelines.11. The treatment of deposits made by one director on behalf of the company under the CODS-2018 Scheme was clarified to avoid duplication of payments by multiple directors, streamlining the compliance process.12. Provisions were made for addressing any prior deposits made with the Registrar of Companies, ensuring that such payments would be considered compliant if accepted, with provisions for rectification if necessary.13. Further procedural steps were outlined, including the filing of individual counter affidavits, production of original records by the respondents, and the listing of the case for further hearing on a specified date.14. The court scheduled the next hearing for 24th July 2018, indicating the progression of the case and the need for continued legal proceedings.