2021 (7) TMI 1046 - HC - Companies Law

Court Modifies Order for Director's ID Reactivation Amid Management Dispute

The court recalled and modified the order to re-activate the Directors Identification Number (DIN) of the writ petitioner but upheld the Registrar of ... Recall of order - applicant was not impleaded as a party to the writ petition, for which the points raised in the recall application could not be properly represented before the court - re-activation of the Directors Identification Number (DIN) - HELD THAT:- In the present case, the challenge in the writ petition was that the DIN of the writ petitioner could not be deactivated since the writ petitioner had complied with the requirements to be complied with by the directors by filing annual reports and financial statements of the concerned financial years. However, it is specifically admitted in paragraph no. 18 of the writ petition that the petitioner is taking appropriate steps in respect of the marking of the respondent no. 4, that is, the Tirupathi Properties & Investment Private Limited as having management dispute. Thus, the marking of the company as having management dispute was not the subject-matter of the writ petition but that of an appropriate challenge before a different forum. A perusal of the Master Circular dated February 10, 2012 makes it clear that Clause 3 thereof is independent of Clause 2, the latter merely contemplating the requirement of the company to mandatorily file the attachment relating to cause of cessation along with Form 32 of the ROC concerned, irrespective of the ground of cessation - Clause 3 of the Circular still remains in force and restrains the ROC from approving/registering/recording the documents filed by the company and the directors and from making those available in the registry for public viewing if there is an existing management dispute. In fact, since such marking of the company-in-question as having management dispute still continues, independent of the re-activation of the writ petitioner’s DIN, the portion of the order under recall, whereby the order of the ROC dated June 24, 2016 was set aside, was beyond the scope of the writ petition and the dispute involved therein - although the portion of the order under recall, by which the deactivation of the writ petitioner’s DIN was set aside, was justified since there was due compliance of the liabilities of the writ petitioner as director of the company-in-question, the latter portion of the order under recall, setting aside the operation of the order dated June 24, 2016 of the ROC, was in contravention of the Circular dated February 10, 2012 and, thus, bad in law. Since the review applicant was not impleaded as a party to the writ petition, there was no opportunity for the said applicant to point out the aforesaid flaw in the order under recall and/or any scope of arguing the question as raised in the review application at the relevant juncture, the portion of the order under recall setting aside the order dated June 24, 2016 is required to be recalled/set aside - deactivation of the DIN of Garima Rungta, the writ petitioner, is set aside and such DIN is re-activated. Application allowed. Issues:1. Recall of an Order dated March 8, 2021 passed in WPA No. 6697 of 2020.Analysis:Issue 1: Recall of the OrderThe applicant sought the recall of an order that re-activated the Directors Identification Number (DIN) of the writ petitioner. The applicant argued that the order under recall not only re-activated the DIN but also set aside an earlier order by the Registrar of Companies (ROC) regarding the non-approval of documents due to a management dispute. The applicant contended that the portion of the order setting aside the ROC's decision was beyond the scope of the writ petition. The Circular dated February 10, 2012, was referred to, which stipulated that in case of a management dispute, documents filed by the company and contesting directors would not be approved or available for public viewing until the dispute is resolved. The court found that while the re-activation of the DIN was justified, setting aside the ROC's order was in contravention of the Circular and, therefore, bad in law. The court allowed the recall application, setting aside the part of the order related to the ROC's decision but maintained the re-activation of the DIN. The writ petitioner was permitted to discharge her duties as a director, but the bar on approval/registration/recording of documents remained until the management dispute was settled.In conclusion, the court recalled and modified the order to re-activate the DIN of the writ petitioner but upheld the ROC's decision regarding the non-approval of documents due to the ongoing management dispute. The court clarified that the writ petitioner could fulfill her directorial duties but the documents' approval and availability in the registry were subject to the resolution of the management dispute.