2021 (3) TMI 1467 - HC - Companies Law

Court Reverses Director's Disqualification Due to Lack of Notice, Orders DIN Reactivation and Further Inquiry.

Subramaniam Krishnaraj Versus The Registrar of Companies, Coimbatore and Union of India, Delhi

The Court set aside the impugned order disqualifying the petitioner as Director under Section 164(2)(a) of the Companies Act, 2013, due to the lack of ... Disqualification of the petitioner as Director under Section 164(2)(a) of the Companies Act, 2013 - failure to submit financial statements or annual returns for three financial years consecutively - challenge to impugned order on the ground that without affording opportunity to the petitioner, the said order has been passed - violation of principles of natural justice - HELD THAT:- The issue raised in this writ petition was considered by the Hon'ble Division Bench of this Court in the case of Meetgelaveetil Kaitheri Muralidharan Versus Union of India & Another [2020 (10) TMI 595 - MADRAS HIGH COURT], where it has been 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'. The case on hand stands on the same footing. In the instant case, also, no notice was given to the petitioner before disqualifying him as Director of M/s. Triton Textiles Private Limited. The ratio laid down by the Hon'ble Division Bench of this Court applies to the facts of the instant case also - the impugned order dated 26.11.2016 passed by the second respondent disqualifying the petitioner as Director of M/s. Triton Textiles Private Limited under Section 164(2)(a) of the Companies Act, 2013 is hereby set aside - Petition allowed. Issues:Challenge to disqualification of petitioner as Director under Section 164(2)(a) of the Companies Act, 2013 for not submitting financial statements or annual returns for three consecutive years without prior notice.Analysis:The writ petition challenges the disqualification of the petitioner as Director under Section 164(2)(a) of the Companies Act, 2013, for failing to submit financial statements or annual returns for three consecutive financial years. The petitioner contests the order dated 26.11.2016 passed by the second respondent, alleging that it was issued without affording the petitioner an opportunity. Both parties consented to the final disposal of the Writ Petition at the admission stage itself. The petitioner's counsel argued that the impugned order violated the provisions of the Companies Act, 2013, rendering it legally flawed.The Court referred to a previous Division Bench order dated 09.10.2020 in a related case, which clarified the rules governing the Director Identification Number (DIN) and the implications of disqualification under Section 164(2) of the Companies Act, 2013. The Division Bench held that the Registrar of Companies (ROC) lacked the authority to deactivate the DIN of disqualified directors, as such deactivation would contradict the statutory provisions. The judgment emphasized that the disqualified directors' DINs must be reactivated within 30 days of the court order. The ROC was permitted to initiate further action regarding disqualification after conducting an inquiry to attribute specific defaults to directors. The Court applied the principles established in this precedent to the present case, where the petitioner was disqualified without prior notice, mirroring the circumstances addressed in the previous judgment.Consequently, the Court set aside the impugned order disqualifying the petitioner as Director of a specific company under Section 164(2)(a) of the Companies Act, 2013. The decision aligned with the earlier Division Bench ruling, and the writ petition was allowed without costs. The Court directed the reactivation of the petitioner's DIN and closed all connected miscellaneous petitions in this matter.