Writ petition allowed for director disqualification due to annual return default under Companies Act

The court found the writ petition maintainable due to the inefficacy of civil remedies in cases of default in filing annual returns by Directors of a Yogam under Section 164(2) of the Companies Act, 2013. It held that Directors failing to file annual returns for consecutive years would be disqualified for reappointment for five years. The court directed the Inspector General of Registration to decide on the petitioner's representation within three months, ensuring affected parties have a hearing and can submit additional documents or pleadings if necessary.

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Issues Involved:
1. Maintainability of the writ petition.
2. Default in filing annual returns by the Directors of the Yogam.
3. Automatic disqualification of the Directors under Section 164(2) of the Companies Act, 2013.

Detailed Analysis:

1. Maintainability of the Writ Petition:
The court considered whether the writ petition under Article 226 of the Constitution of India is maintainable. The petitioner argued that civil remedies are not efficacious due to the time-consuming nature of civil proceedings, which typically exceed the five-year disqualification period under Section 164(2). The court found that given the inefficacy of civil remedies, a writ petition is maintainable in appropriate cases.

2. Default in Filing Annual Returns:
The petitioner alleged that the Yogam did not file annual returns from 2006 onwards, leading to the disqualification of its Directors under Section 164(2) of the Companies Act, 2013. The respondents countered that they had attempted to file annual returns, but delays were caused by the unavailability of records and ongoing litigations. The court examined the evidence, including letters and orders from various authorities, and found that while some attempts were made to file returns, there were no effective steps taken to file annual returns/financial statements from 2013-14 to 2015-16. Consequently, the Directors who held office during this period would be disqualified for reappointment for the next five years.

3. Automatic Disqualification of the Directors:
The court examined Sections 152(3), 152(4), 164, and 167 of the Companies Act, 2013. Section 164(2) disqualifies a Director of a company that has not filed financial statements or annual returns for three consecutive years from being reappointed for five years. Section 167 mandates that the office of a Director becomes vacant upon incurring any disqualification under Section 164. The court noted that disqualification under Section 164(2) is automatic and does not require an administrative decision.

4. Specific Disqualification of Respondents 4 to 7:
The court found insufficient pleadings to declare respondents 4 to 7 disqualified under Section 164(2), except for the 4th respondent, who was presumed to have been the General Secretary during the relevant period. The court emphasized that disqualification affects the rights of Directors to hold office not only in the defaulted company but also in other companies. Therefore, it would be improper to declare disqualification without sufficient pleadings and without including all potentially disqualified Directors as parties to the petition.

Conclusion:
The court disposed of the writ petition by directing the 2nd respondent-Inspector General of Registration to consider and decide on the petitioner’s Ext.P4 representation within three months. The petitioner and the Directors of the Yogam likely to be affected by the decision were to be given an opportunity of hearing before a final decision. The parties were also allowed to produce additional documents and make further pleadings if desired.

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