AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (1) TMI 27
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.... With R/SPECIAL CIVIL APPLICATION NO. 6594 of 2018 R/SPECIAL CIVIL APPLICATION NO. 6824 of 2018 And R/SPECIAL CIVIL APPLICATION NO. 9281 of 2018 For The Petitioner : MR SALIL M THAKORE(5821), MR PP MAJMUDAR, MR PRATIK Y JASANI, MR DHAVAL SHAH, MR SS IYER, MR MRUGESH JANI, MR AS VAKIL, MR MONNAL DAVAWALA, MR MR BS SOPARKAR, MRS SANGEETA PAHWA, MR JAYENDRA M SHAH, Ms NATASHA SUTARIA, MR RAHEEL S. PATEL for NANAVATY ADVOCATES, MR SD MOTWANI, MR VS PANDYA, MR JAIMIN DAVE AND MR VIJAL P DESAI For The Respondent : MR DEVANG VYAS(2794) AND MR KSHITIJ M AMIN CAV JUDGMENT 1. The basic challenge in all this batch of petitions is, to the action of the respondent No.1 Ministry of Corporate Affairs ((hereinafter referred to as "MCA"), Union of India in publishing the list dated 12.9.2017 of Directors associated with "struck off companies" under Section 248 of the Companies Act, 2013 (hereinafter referred to as "the Act of 2013") on the Website of the Ministry of Corporate Affairs, Government of India, to the extent, the said list shows the status of the petitioners as "disqualified" Directors. The petitioners have also challenged the action of the respondents in deactivating their DINs (D....
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.....2017, the question of filing financial statements and annual returns did not arise, and therefore, the question of disqualification as contemplated under Section 164(2)(a) of the Act of 2013 also did not arise. However, the names of the petitioners were included in the list of disqualified Directors associated with the "struck off companies", dated 12.9.2017 published on the Website of the Ministry of Corporate Affairs. The DINs i.e. Director Identification Numbers of both the petitioners were also disabled though the petitioners had not incurred any disqualification. As a result thereof, the petitioners were unable to utilize their DINs for filing the documents so far as the other non-defaulting companies in which they were the Directors were concerned. The petitioners, therefore, have filed the petition. 2.3 The petition has been resisted by the respondents by filing the reply challenging the very maintainability of the petition contending inter alia that the petitioners had stood disqualified by operation of law and upon fulfillment of the essential criteria contained in Section 164(2)(a) read with Section 167(1)(a) of the Act of 2013. The company had failed to file annual ret....
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....aulting companies, except the companies whose names were struck off under Section 248(2) of the Act of 2013, subject to the order of NCLT under Section 252 on the applications seeking revival of struck off companies filed during the period of the scheme. Thus, according to the respondents, the petitioners having failed to avail the benefits of the said scheme also, and the Court having no jurisdiction to cure the disqualification incurred by the petitioners on account of the operation of law, the petition deserved to be dismissed. 2.5 It appears that the Court vide the order dated 26.12.2017 had passed an interim order staying the order of the respondents disqualifying the petitioners to act as the Directors of the company or any other company. The said interim order is continued till this date. 3. The factual position of the other petitions may be summarized as under:- 4. Heard the learned Sr. Advocate Mr.Pahwa, learned Advocate Mr.A. S. Vakil, learned Advocate Mr.Sahil Thakore, learned Advocate Mr.Iyer,learned Advocate Mr.J. R. Dave, learned Advocate Mr.Monnal Davawala and other learned Advocates for the petitioners and the learned ASG Mr.Devang Vyas with learned Advocate Mr.K....
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.... interpretation, which is just, fair and sensible should be made and not an interpretation, which results in drastic consequences. (vi) When a Company is struck off, it ceases to exist and the question of filing documents with ROC would not arise, nor any obligation to hold AGM would arise. The obligation to file returns and financial statements arise only if there is obligation to hold an AGM and if the company is struck off the AGM could not be held. (vii) Section 403 of the Act of 2013 would be applicable to the Section 94(4) and Section 137(1) of the said Act, as the word "document" used in Section 403 would cover the documents as contemplated under Section 2(36) of the said Act. In this regard, reliance is placed on the decision of the Supreme Court in case of State Bank of Patiala thro. GM Vs. Commissioner of Income Tax, Patiala, reported in (2015) 15 SCC 483 and the Judgement of the Queen's Bench Division in case of Gough Vs. Gough. (viii) Even if it is presumed for the sake of argument that a disqualification is attracted in case of the petitioners, they can not be disqualified in continuing as Directors in non-defaulting companies. Section 167(1)(a) targets continuan....
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....his regard, reliance is placed on the decisions of the Supreme Court in case of A. K. Kraipak and Ors. Vs. Union of India, reported in AIR 1970 SC 150, in case of Dharampal Sathyapal Limited Vs. Deputy Commissioner of Central Excise and Ors., reported in 2015(8) SC 519 and in case of Shriyans Prasad Jain Vs. Income Tax Officer and Ors., reported in 1993(4) SCC 727. 6. Learned ASG Mr.Devang Vyas for the respondent authorities has made the following submissions:- (i) Section 164 of the Act of 2013 corresponds to the Section 274 of the erstwhile Companies Act 1956 and Section 167 of the Act of 2013 corresponds to the Section 283 of the Act of 1956. Hence, from the conjoint reading of the said provisions, it is clear that for the defaults covered under Section 164, the person would disqualify himself from being Director of any company as also would become ineligible for reappointment or appointment as Director in any other company for five years. (ii) Section 92 of the Act of 2013 corresponds to Sections 169, 160, 161, and 162 of the Act of 1956, which pertained to filing of annual returns. The said provision applies to every company. Section 164(2)(a) would include filing of fina....
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....he legislature with regard to the same being applicable only to the public companies. (vii) Disqualification happens pursuant to the operation of law and the Section only enumerates the disqualification as a consequence statutorily provided for noncompliance with Section 164. Thus, the vacation of office is by operation of law where no hearing is contemplated. 7. At the outset, it may be noted that the petitioners in all the petitions have broadly challenged the action of the respondents in publishing the list dated 12.9.2017 of Directors associated with the "struck off companies" under Section 248, whereby the status of the petitioners has been shown as "disqualified" with effect from 1.11.2016 to 31.10.2021. However, it is further required to be noted that most of the petitions lack basic facts with regard to the status of the company of which they were Directors and now shown as "struck off". The petitioners have not even bothered to annex the copies of the relevant pages under challenge from the portal of the Ministry of Corporate Affairs. In most of the petitions only a copy of the relevant page of the impugned list showing the status of the concerned company and the Direct....
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....imperfect statement". 35. It is well settled that a prerogative remedy is not a matter of course. In exercising extraordinary power, therefore, a Writ Court will indeed bear in mind the conduct of the party who is invoking such jurisdiction. If the applicant does not disclose full facts or suppresses relevant materials or is otherwise guilty of misleading the Court, the Court may dismiss the action without adjudicating the matter. The rule has been evolved in larger public interest to deter unscrupulous litigants from abusing the process of Court by deceiving it. The very basis of the writ jurisdiction rests in disclosure of true, complete and correct facts. If the material facts are not candidly stated or are suppressed or are distorted, the very functioning of the writ courts would become impossible." 8. In the instant petitions, it was incumbent on the part of each of the petitioners to place on record the full and correct facts necessary for deciding the issues involved, more particularly about the status of the company prior to the publication of the impugned list, their own status as the Directors of the concerned company, about the resignation, if any given by them, and ....
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.... had become nonfunctional since last many years. 10. So far as the provisions contained in Section 248 are concerned, Sub-section (5) thereof provides that on the expiry of the time mentioned in the notice issued in the prescribed manner, the Registrar may strike off the name of the company from the register of the companies and on the publication of the notice thereof in the official gazette, the company stands dissolved. As per Section 250, such company which has stood dissolved under Section 248, ceases to operate as a company and the certificate of incorporation issued to it, is deemed to have been cancelled from such date, except for the purpose of realizing the amount due to the company and for repayment or discharge of liabilities or obligations of the company. Meaning thereby, even if the company is struck off and stands dissolved under Section 248, it could still realize the amount due to the company, as also it is obliged to discharge the liabilities or obligations of the company. Hence, in the opinion of the Court, even if the company is struck off and has stood dissolved under Section 248 of the Act of 2013, it is liable to discharge its liabilities and obligations, mo....
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....d such failure to pay or redeem continues for one year or more, shall be eligible to be reappointed as a director of that company or appointed in other company for a period of five years from the date on which the said company fails to do so. (3) A private company may by its articles provide for any disqualifications for appointment as a director in addition to those specified in subsections (1) and (2): Provided that the disqualifications referred to in clauses (d), (e) and (g) of subsection (1) shall not take effect- (i) for thirty days from the date of conviction or order of disqualification; (ii) where an appeal or petition is preferred within thirty days as aforesaid against the conviction resulting in sentence or order, until expiry of seven days from the date on which such appeal or petition is disposed off; or (iii) where any further appeal or petition is preferred against order or sentence within seven days, until such further appeal or petition is disposed off." 13. As per Rule 14 of the said Rules of 2014, the Director is required to inform the company concerned about his disqualification, if any, under Sub-section (2) of Section 164 in the prescribed form ....
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....neral meeting of the company within 30 days of the date of annual general meeting in such manner, with such fees or additional fees as may be prescribed within the time specified under Section 403. 18. Section 403 envisages filing of documents required to be submitted, filed, registered or recorded, any fact or information required to register under the Act, to be submitted, filed, registered or recorded within the time specified in the relevant provisions on the payment of the prescribed fees, and as per the first proviso thereof within 270 days from the date by which it should have been submitted on the payment of additional fees as prescribed. As per second proviso to Section 403(1), any such document, fact or information could be submitted, filed or recorded after the said period of 270 days on payment of additional prescribed fees, however, the same would be without prejudice to any other legal action or liability under the Act. 19.From the conjoint reading of Sections 92, 96, 137 and 403, it is discernible that the company is statutorily obliged to file a copy of the annual returns within 60 days and copy of financial statements within 30 days from the date on which the ann....
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....therein, to be reappointed as a director of that company or appointed in other company. As such, there is no procedure required to be followed by the respondent authorities for declaring any person or Director ineligible or disqualified under the said provision. A person would be ineligible to be appointed as Director, if he falls in any of the Clauses mentioned in Sub-section (1) and the person is or has been a Director in a company, and the company makes defaults as contemplated in Clause (a) of (b) of Sub-section (2) thereof, he would be ineligible to be reappointed in the said defaulting company and appointed in any other company. The ineligibility is incurred by the person/director by operation of law and not by any order passed by the respondent authorities, and therefore, adherence of principles of natural justice by the respondents is not warranted in the said provision, as sought to be submitted by learned Advocates for the petitioners. As such, as per Rule 14 of the said Rules of 2014, the Director has to inform the company in Form DIR-8 and the company has to inform the Registrar in Form DIR-9, when its director incurs disqualification under Section 164(2) of the Act. Ho....
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....n 164(2)(a) would be 2013-14, 2014-15, and 2015-16, could not be accepted, as it would tantamount to giving effect to the Section 164(2)(a) retrospectively. 22.It cannot be gainsaid that every statue is prima facie prospective, unless it is expressly or by necessary implication made to have retrospective operation. As this juncture, it would be useful to reproduce the general principles concerning retrospectivity, as narrated by the Supreme Court in case of Commissioner of Income Tax (Central)-I, New Delhi Vs. Vatika Township Private Limited, reported in (2015) 1 SCC 1 :- "General Principles concerning retrospectivity: 27. A legislation, be it a statutory Act or a statutory Rule or a statutory Notification, may physically consists of words printed on papers. However, conceptually it is a great deal more than an ordinary prose. There is a special peculiarity in the mode of verbal communication by a legislation. A legislation is not just a series of statements, such as one finds in a work of fiction/non fiction or even in a judgment of a court of law. There is a technique required to draft a legislation as well as to understand a legislation. Former technique is known as legislati....
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....ike to point out, for the sake of completeness, that where a benefit is conferred by a legislation, the rule against a retrospective construction is different. If a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators object, then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. This exactly is the justification to treat procedural provisions as retrospective. In Government of India & Ors. v. India Tobacco Association, the doctrine of fairness was held to be relevant factor to construe a statute conferring a benefit, in the context of it to be given a retrospective operation. The same doctrine of fairness, to hold that a statute was retrospective in nature, was applied in the case of Vijay v. State of Maharashtra & Ors. It was held that where a law is enacted for the benefit of community as a whole, even in the absence of a provision the statute may be held to be retrospective in nature. However, we are confronted with any such situati....
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....Act, it would be without object unless construed retrospective. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended. The language 'shall be deemed always to have meant' is declaratory, and is in plain terms retrospective. In the absence of clear words indicating that the amending Act is declaratory, it would not be so construed when the preamended provision was clear and unambiguous. An amending Act may be purely clarificatory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect and, therefore, if the principal Act was existing law which the Constitution came into force, the amending Act also will be part of the existing law." The above summing up is factually based on the judgments of this Court as well as English decisions. 33. A Constitution Bench of this Court in Keshavlal Jethalal Shah v. Mohanlal Bhagwandas & Anr., while considering the nature of amend....
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.... Navigation Co. Ltd., this Court held that as the liability to pay tax is computed according to the law in force at the beginning of the assessment year, i.e., the first day of April, any change in law affecting tax liability after that date though made during the currency of the assessment year, unless specifically made retrospective, does not apply to the assessment for that year." 23.So far as the issue involved in the present petitions is concerned, as discussed earlier, no disqualification was attached to the directors of private companies for not filing the annual returns and the financial statements by the concerned companies under the Act of 1956. Such provision of disqualification for the director of a company - public or private company, has been incorporated for the first time in Section 164(2) of the Act of 2013. Such being the case, the said provision has to be construed as having prospective effect. If retrospective effect is given to it, that would destroy, alter and affect the right of the Directors of private company existing under the Act of 1956. It is also a settled legal position that Section 6 of the General Clauses Act, saves a right accrued and/or a liabili....
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....a period of five years from 1.11.2016 to 31.10.2021, therefore, appears to be not only premature, but untenable at law. 26. Of course, such disqualification as contemplated under Section 164 would take place automatically on any of the eventualities as mentioned therein taking place, and therefore, would be incurred by operation of law. As rightly submitted by Mr.Vyas, as such no declaration is required to be made or any action required to be taken or any order required to be passed by any authority under the Act. However, the action of the respondents in publishing the impugned list on 12.9.2017 of the Directors associated with the "struck off companies" under Section 248, showing the concerned Directors of the companies, including the petitioners as disqualified for a period of five years from 1.11.2016 to 31.11.2021 by no stretch of imagination is justified, and could not be said to be in consonance with the provisions contained in Section 164(2) of the Act of 2013. Neither the replies filed by the respondents to the petitions contain any explanation, nor Mr.Vyas in his submissions was able to explain as to how the petitioners could be shown as disqualified Directors for the pe....
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....and posts the information on its website, if any. Rule 16 provides that where a Director resigns from his office, he shall within a period of 30 days from the date of resignation forward to the Registrar a copy of his resignation along with reasons for resignation in Form DIR-11 along with the requisite fees. Every company is also obliged to keep at its registered office a register of its Directors and key managerial personnel containing the requisite particulars thereof. Having regard to the provisions contained in Section 168 read with Rules 15, 16 and 17, it clearly transpires that when a Director resigns from his office, by giving notice in writing to the company, the company is required to intimate the Registrar within 30 days of such notice, in Form DIR-12, and that the company is also required to place such resignation in the report of the Directors to be laid in the immediately following general meeting of the company. The Director is also required to forward a copy of his resignation to the Registrar within 30 days in Form DIR-11. Such resignation shall take effect from the date on which the notice is received by the company or the date, if any, specified by the Director i....
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....ancellation or surrender or deactivation of DIN. Accordingly, the Central Government or Regional Director or any authorized officer of Regional Director may, on being satisfied on verification of particulars of documentary proof attached with an application from any person, cancel or deactivate the DIN on any of the grounds mentioned in Clause (a) to (f) thereof. The said Rule 11 does not contemplate any suo motu powers either with the Central Government or with the authorised officer or Regional Director to cancel or deactivate the DIN allotted to the Director, nor any of the clauses mentioned in the said Rule contemplates cancellation or deactivation of DIN of the Director of the "struck off company" or of the Director having become ineligible under Section 164 of the said Act. The reason appears to be that once an individual, who is intending to be the Director of a particular company is allotted DIN by the Central Government, such DIN would be valid for the lifetime of the applicant and on the basis of such DIN he could become Director in other companies also. Hence, if one of the companies in which he was Director is "struck off", his DIN could not be cancelled or deactivated ....