2020 (8) TMI 701 - HC - Companies Law

Directors' disqualification challenge dismissed under Companies Act, 2013

SANJAY KUMAR SHARMA AND ANR., TACHO KABAK Versus UNION OF INDIA AND ANR., REGISTRAR OF COMPANIES (ROC) GUWAHATI

The court dismissed the petition challenging directors' disqualification under Section 164(2)(a) of the Companies Act, 2013, for failure to file financial ... Disqualification of Director - Section 164(2)(a) of the Companies Act, 2013 - HELD THAT:- In the instant case, the petition is devoid of any material which may indicate as to a legal right in favour of the petitioners against being removed as a disqualified director or to restore the Director Identification Number (DIN) and Digital Signature Certificate (DSC) of the petitioners so as to enable the Court to determine their legal right, if any. In the circumstance, we are of the view it would be appropriate for the petitioners to make a representation before the Registrar of Companies, Guwahati being the respondent No.2 as regards their claim for continuing with the Director Identification Number (DIN) and Digital Signature Certificate (DSC) as well as to exclude their name from the list of disqualified directors. Upon such representation being made, the Registrar of Companies shall pass a detailed reasoned order as regards the entitlement of the petitioners to continue with the Directors Identification Number (DIN) and Digital Signature Certificate (DSC) and to get themselves removed from the list of disqualified directors. It is provided that the petitioners shall file such applications, if so advised, within a period 7 days from today. Till the expiry of 7 days from today, the respondent authorities shall unfreeze the Directors Identification Number (DIN) and Digital Signature Certificate (DSC) issued in favour of the petitioners. However, if such application is not filed, the continuation of the order to unfreeze their Directors Identification Number (DIN) and Digital Signature Certificate (DSC) shall remain withdrawn and the Registrar of Companies shall be at liberty to take any action against the petitioners. In the event, application is filed the order to unfreeze the Directors Identification Number (DIN) and Digital Signature Certificate (DSC) shall continue till the Registrar of Companies may pass a reasoned order. Petition disposed off. Issues:Directors disqualification under Section 164(2)(a) of the Companies Act, 2013.Analysis:The petitioners, as directors of a company, were issued Director Identification Numbers (DIN) but were disqualified under Section 164(2)(a) for the company's failure to file financial statements for three consecutive years. The petition sought a writ to challenge their disqualification and unfreeze their DIN and Digital Signature Certificate (DSC). The court considered the principles of issuing a writ in the nature of mandamus, emphasizing the need for a legal right, violation by the respondents, and a request for remedy. The court highlighted the importance of establishing a legal right for granting such a writ.The court found the petition lacking material to establish a legal right against disqualification or for reinstating the DIN and DSC. It directed the petitioners to make a representation before the Registrar of Companies to address their claims and seek removal from the list of disqualified directors. The Registrar was instructed to provide a reasoned decision within 15 days of receiving the application, allowing the petitioners to present their case. The court ordered the unfreezing of DIN and DSC for 7 days to facilitate the application process. Failure to file an application would result in the continuation of disqualification, with the Registrar empowered to take further action.The judgment disposed of the writ petition, outlining the process for the petitioners to seek relief by making a representation before the Registrar of Companies. The court emphasized the need for establishing a legal right to challenge disqualification under Section 164(2)(a) and instructed the Registrar to provide a reasoned decision within a specified timeframe. The temporary unfreezing of DIN and DSC was contingent upon the petitioners filing an application within the stipulated period, failing which disqualification would resume.