2020 (11) TMI 805 - HC - Companies Law

Court rules RoC lacks power to deactivate DINs upon director disqualification under Companies Act. Appeals allowed, DINs to reactivate.

The Division Bench in the case analyzed the RoC's powers to disqualify directors under the Companies Act, 2013 and the validity of deactivating Director ... Direction to respondents to permit the petitioners to get reappointed as Directors of any Company or appointed in any other Company without any hindrance - Section 164(2)(a) of the Companies Act, 2013 - HELD THAT:- The Hon'ble Division Bench in MEETHELAVEETIL KAITHERI MURALIDHARAN, KAMAL ANEESMOHAMED, SATHISH KUMAR GOPAL, GOVINDASAMY BALASUBRAMANIAM, PAARI SENTHIL KUMAR, PAARI DHANALAKSHMI, VERSUS UNION OF INDIA, THE REGISTRAR OF COMPANIES TAMIL NADU, CHENNAI, [2020 (10) TMI 595 - MADRAS HIGH COURT] dealt with the powers of the RoC in the light of Sections 164 and 167(1) of the Companies Act, 2013 and Rule 14 of the Companies (Appointment and Qualifications of Directors) Rules, 2014 and also has elaborately considered as to whether the RoC is entitled to deactivate the Director Identification Number (DIN) by referring to the Rules 19, 10 and 11 of the said 2014 Rules and held that the publication of the list of disqualified directors by the ROC and the deactivation of the DIN of the Appellants is hereby quashed. Petition allowed. Issues:Challenge to disqualification of directors under Companies Act, 2013 - RoC's powers to disqualify directors - Validity of deactivation of Director Identification Number (DIN).Analysis:The writ petitions challenged the orders disqualifying directors under Section 164(2)(a) of the Companies Act, 2013. The RoC had issued notifications disqualifying directors on various dates. Previous challenges to such notifications were successful, as seen in the case of Bhagavan Das Dhananjaya Das V. Union of India, where the court set aside the notifications/orders. However, a subsequent notification dated 17.12.2018 faced dismissal by the court despite reference to the earlier judgment. The matter was then taken up in a batch of writ appeals, which were dealt with by a Division Bench in Meethelaveetil Kaitheri Muralidharan V. Union of India. The Division Bench analyzed the powers of the RoC under Sections 164 and 167(1) of the Companies Act, 2013, along with Rule 14 of the Companies (Appointment and Qualifications of Directors) Rules, 2014.The Division Bench highlighted the provisions related to Director Identification Number (DIN) in the rules and the Act. It emphasized that the rules did not provide for deactivation of DIN upon disqualification under Section 164(2) of the Act. The judgment clarified the scenario where a director of a Defaulting Company would vacate office in other companies due to disqualification but would retain office in the Defaulting Company. The court concluded that the RoC lacked the authority to deactivate DIN, as it would contradict the relevant sections of the Companies Act, 2013. The appeals were allowed, quashing the orders of disqualification and deactivation of DIN. The court directed the reactivation of DIN for the respective directors within 30 days.The judgment emphasized that while the directors' DINs would be reactivated, the RoC could still initiate action for disqualification after an enquiry to attribute specific defaults to directors. The decision aligned with the earlier judgment in Meethelaveetil Kaitheri Muralidharan's case. Consequently, the writ petitions were allowed, following the terms of the mentioned judgment, with no costs imposed. The connected miscellaneous petitions were closed based on the resolution of the issues at hand.