2020 (9) TMI 750 - HC - Companies Law

Court grants urgent relief to directors by reactivating DINs & DSCs for Companies Fresh Start Scheme

The court addressed the disqualification of directors under Section 164(2)(a) of the Companies Act, the cancellation of their DINs and DSCs, the ... Removal of name of the Petitioner from the impugned “List of Disqualified Directors” prepared by the Respondents - change of status of the Petitioner in the records of the Respondents No.1 and 2 from “disqualified directors” - disqualified directors under Section 164(2)(a) of the Companies Act, 2013 - HELD THAT:- In the case of MUKUT PATHAK & ORS., YOGESH KHANTWAL, AARTI KHANTWAL, AND VINEET WADHWA VERSUS UNION OF INDIA AND ANR. [2019 (11) TMI 319 - DELHI HIGH COURT], this Court has come to a categorical conclusion that the proviso to Section 167(1)(a) of the Act, which came into force w.e.f. 07.05.2018, cannot be applied retrospectively. In the present case, admittedly, the Company itself stood struck off the register on 30.06.2017 and was restored only on 22.10.2019, and the default on its part as also that of the petitioners took place prior to 30.06.2017. This implies that the ratio of the decision in Mukut Pathak (supra) is squarely applicable to the facts of this case since it specifically clarifies that any Company or Directors committing defaults under Section 164(1) of the Act before 07.05.2018 cannot invite application of the proviso to Section 167(1)(a) of the Act and a necessary corollary thereof is that their DINs and the DSCs cannot be cancelled either. In view the fact that the petitioners, in order to apply for the CFSS, need to file their statutory returns on/by 30.09.2020, the respondents are directed to reactivate the DINs and the DSCs of the petitioners within three days from today so that they can do the needful to apply for the Scheme - Petition allowed. Issues:1. Disqualification of directors under Section 164(2)(a) of the Companies Act, 2013.2. Cancellation of Director Identification Numbers (DINs) and Digital Signature Certificates (DSCs).3. Application of the proviso to Section 167(1)(a) of the Act retrospectively.4. Petition seeking relief for reactivation of DINs and DSCs to avail the Companies Fresh Start Scheme 2020 (CFSS).Issue 1: Disqualification of directors under Section 164(2)(a) of the Companies Act, 2013:The petitioners were disqualified as directors of a company due to non-filing of statutory returns, leading to their names being included in the 'List of Disqualified Directors.' The disqualification was for a period of five years, from 01.11.2016 to 31.10.2021, as per Section 164(2)(a) of the Act. The restoration of the company's name by the National Company Law Tribunal (NCLT) did not automatically lift the disqualification of the petitioners.Issue 2: Cancellation of Director Identification Numbers (DINs) and Digital Signature Certificates (DSCs):The cancellation of the petitioners' DINs and DSCs was a consequence of their disqualification as directors under Section 164(2)(a) of the Act. This cancellation hindered their ability to comply with the NCLT's directions for filing requisite documents to restore the company's name and to avail the benefits of the Companies Fresh Start Scheme 2020 (CFSS).Issue 3: Application of the proviso to Section 167(1)(a) of the Act retrospectively:The petitioners argued that the cancellation of their DINs and DSCs was done without legal authority as the proviso to Section 167(1)(a) of the Act, which allows such cancellations, cannot be applied retrospectively. The court referred to a previous judgment that clarified the non-retrospective application of this provision and held that the cancellation of DINs and DSCs in this case was not valid.Issue 4: Petition seeking relief for reactivation of DINs and DSCs to avail the Companies Fresh Start Scheme 2020 (CFSS):The petitioners sought the reactivation of their DINs and DSCs to participate in the CFSS, which provided an opportunity for defaulting companies to file overdue documents without additional fees. The urgency arose from the impending deadline of 30.09.2020 to avail of the scheme. The court allowed the petition, directing the reactivation of the DINs and DSCs within three days to enable the petitioners to apply for the CFSS before the deadline.In conclusion, the judgment addressed the disqualification of directors under the Companies Act, the cancellation of their DINs and DSCs, the non-retrospective application of relevant legal provisions, and the urgent relief sought by the petitioners to participate in the CFSS. The court granted the requested relief by ordering the reactivation of the DINs and DSCs to facilitate the petitioners' compliance with statutory requirements and scheme deadlines.