Director's Disqualification Overturned for Lack of Prior Notice Under Companies Act; Writ Petition Allowed.

The HC set aside the impugned order dated 13.12.2019, which disqualified the petitioner as a Director under Section 164(2)(a) of the Companies Act, 2013, due to lack of prior notice. The Court applied principles from a prior decision, emphasizing the necessity of notice before disqualification. The writ petition was allowed without costs, and related miscellaneous petitions were closed.

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Issues:
Challenge to disqualification of petitioner as Director under Section 164(2)(a) of the Companies Act, 2013 due to non-submission of financial statements for three consecutive years without prior notice.

Analysis:
The judgment involves a writ petition challenging the disqualification of the petitioner as a Director under Section 164(2)(a) of the Companies Act, 2013. The petitioner contested the order dated 13.12.2019, arguing that it was passed without affording an opportunity to be heard. The counsel for the petitioner contended that the impugned order violated the provisions of the Companies Act, 2013. The matter was taken up for final disposal with the consent of both parties at the time of admission itself.

The judgment referred to a previous decision by the Hon'ble Division Bench of the Court in a related matter, where it was highlighted that the rules regarding Director Identification Number (DIN) and disqualification under Section 164(2) of the Companies Act, 2013 do not provide for deactivation of DIN upon disqualification. The judgment emphasized that a disqualified director may need to retain the DIN to rectify the default by filing necessary documents, and deactivation of DIN would be contrary to the relevant provisions of the Act. The previous decision set aside the impugned order and quashed the deactivation of DIN, directing reactivation within 30 days, while allowing the concerned authority to initiate action for disqualification after an inquiry.

Applying the principles established in the previous decision to the present case, the Court found that no notice was given to the petitioner before disqualifying them as Directors of the respective companies. Consequently, the Court set aside the impugned order dated 13.12.2019 disqualifying the petitioner as Directors, in line with the earlier judgment. The writ petition was allowed, and no costs were imposed. The connected miscellaneous petitions were closed as a result of the decision.

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