Former Director Removed from Defaulting List by High Court; Ruling Against SEBI

The High Court ruled in favor of the petitioner, a former Non-Executive Director erroneously listed as a defaulting director of a 'Vanishing Company.' Despite SEBI revoking adverse directions against him, respondent no.1 persisted in listing him as defaulting. The court found no basis to hold him accountable, directing his removal from the defaulting director list. However, respondent no.1 could issue a separate show cause notice if they believed he was an officer in default. Each party was responsible for their costs, resolving the issue.

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Issues:
Petitioner reflected as defaulting director of a 'Vanishing Company' despite evidence of resignation and absolution of allegations.

Analysis:
The petitioner, a market analyst with extensive experience, was erroneously listed as a defaulting director of a 'Vanishing Company' by respondent no.1. The petitioner joined the company as a Non-Executive Director in 1993 and resigned in 1995. Annual returns confirmed his resignation, and SEBI issued show cause notices due to the company's non-compliance with listing agreements. A criminal case was filed against the company, leading to its classification as a vanishing company in 2016. The petitioner contested this classification, emphasizing his limited role as a non-executive director during the alleged defaults.

SEBI accepted the petitioner's representation, revoking the adverse directions against him. Despite this, respondent no.1 continued to list the petitioner as a defaulting director. The petitioner's grievance was further validated when a court in Ahmedabad rejected a complaint against the petitioner under the Companies Act in 2018. The petitioner's name remained on the defaulting director list due to the Ministry of Corporate Affairs' actions, as confirmed by a letter from the Deputy Registrar of Companies.

Upon review, the High Court found no basis to hold the petitioner as a defaulting director of a vanishing company. Consequently, the court directed respondent no.1 to remove the petitioner's name from the defaulting director list. However, the court allowed respondent no.1 to issue a separate show cause notice if they believed the petitioner was an officer in default, providing an opportunity for the petitioner to respond. The judgment concluded with each party bearing their own costs, bringing closure to the matter.

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