TaxTMI 
TaxTMI 
2019 (1) TMI 27
X X X X Extracts X X X X
X X X X Extracts X X X X
....L CIVIL APPLICATION NO. 647 of 2018 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uck off from the register of companies and dissolved on 21.6.2017, 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)....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of Delay Scheme 2018", to give one time opportunity to such defaulting 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 pet....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... State of Madhya Pradesh Vs. Narmada Bachao Andolan and Anr., reported in (2011) 7 SCC 639 to submit that an 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 peti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ut giving opportunity of hearing, and when the respondent authorities have to follow a fair procedure consistent with the principles of natural justice. In this 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, 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed that a person shall not be capable of being appointed as Director of the company if the contingencies enumerated in Clause (a) to (g) were attracted. There was no distinction sought to be drawn by the 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 pag....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e facts, and the penalty by which the Court enforces that obligation is that if it finds out that the facts have not been fully and fairly stated to it, the Court will set aside, any action which it has taken on the faith of the 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ocedure laid down in Section 248 of the said Act by the Registrar. On the contrary in all cases, it appears from the memo of petitions that the concerned companies had either not commenced their businesses right from their incorporation or 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... company which- (a) has not filed financial statements or annual returns for any continuous period of three financial years; or (b) has failed to repay the deposits accepted by it or pay interest thereon or to redeem any debentures on the due date or pay interest due thereon or pay any dividend declared and 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ovided that not more than 15 months should elapse between the date of one annual general meeting of a company and that of a next. 17. Similarly, as per Section 137, it is obligatory on the part of the company to file a copy of the financial statements, including consolidated financial statement, if any, along with all the documents, duly adopted at the annual general 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 additiona....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e said Section 164, it transpires that Subsection (1) thereof speaks about the ineligibility or disqualification of a person to be appointed as a director in future, whereas Sub-section (2) speaks about the ineligibility of the director, who is already working as a director or has worked as a director in the past, in the company which has committed defaults as mentioned 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 ju....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nancial years contemplated in the said provision would be 2014-15, 2015-16, and 2016-17 only. The submission of Mr.Devang Vyas for the respondents that filing of documents due after 1.4.2014 would include the documents to be submitted for the year 2013-14 as well, and therefore, failure to file the documents continuously for three financial years for the purposes of Section 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion in a former legislation or to explain a former legislation. We need not note the cornucopia of case law available on the subject because aforesaid legal position clearly emerges from the various decisions and this legal position was conceded by the counsel for the parties. In any case, we shall refer to few judgments containing this dicta, a little later. 30. We would also like 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 retrosp....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 'it is declared' is not conclusive that the Act is declaratory for these words may, at times, be used to introduced new rules of law and the Act in the latter case will only be amending the law and will not necessarily be retrospective. In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is 'to explain' an earlier 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 retrosp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pectively and retrospective operation should not be given to a statute so as to affect, alter or destroy an existing right or create a new liability or obligation unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only.'" 36. In the case of C.I.T., Bombay v. Scindia Steam 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 403 was not availed of. Under the circumstances, the Director would incur disqualification or would become ineligible to be reappointed as a Director of a company or appointed in other company for a period of five years, for the defaults under Clause (a) of Subsection (2) of Section 164, only after 30th of October or 30th of November, as the case may be, of the year 2017. Hence, the impugned list dated 12.9.2017 showing the petitioners as disqualified for 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, in....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... section 167, the promoter or, in his absence, the Central Government shall appoint the required number of directors who shall hold office till the directors are appointed by the company in general meeting." 28. The Rules of 2014 also provide for the procedure to be followed in case where the Director resigns from a company. Rule 15 thereof requires that the company shall, within 30 days from the date of receipt of notice of resignation from a Director, intimate the Registrar in Form DIR-12 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cribed. Section 155 prohibits any individual, who has already been allotted a DIN under Section 154 from applying for or obtaining or possessing another DIN. Rules 9 and 10 of the said Rules of 2014 prescribe the procedure for making application for allotment and for the allotment of DIN, and further provide that the DIN allotted by the Central Government under the said Rules would be valid for the lifetime of the applicant and shall not be allotted to any other person. 30.Rule 11 provides for cancellation 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 "struc....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the purpose of the said provision would be financial years 2014-15, 2015-16 and 2016-17 only, and not 2013-14, 2014- 15, and 2015-16. In any case, due to deactivation of the DINs, the concerned Directors were unable to take benefits of the said scheme also. Hence, the said scheme could not be pressed into service for justifying the publication of the impugned list. 33. The upshot of the aforesaid discussion and findings may be summarized as under:- (i) Section 164(2) of the Act of 2013, which had come into force from 1.1.2014 would have prospective and not retrospective effect. (ii) The defaults contemplated under Section 164(2)(a) with regard to non-filing of financial statements or annual returns for any continuous period of three financial years would be the defaults to be counted from the financial year 2014-15 only and not 2013-14. (iii) The respondents could not have treated the Directors as disqualified/ineligible for a period of five years from 1.11.2016 to 1.11.2021, while publishing the impugned list under Section 248 of the Act of 2013. (iv) Even if the Registrar removes the name of a company from the register of companies, and eve....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and permit to use the DIN on For setting aside the impugned list Patel resigned in 2533086 February, 2017 5 2383/ Bijal Sea and Me "Struck Yes, 2018 Dharmeshbha i Desai Projects Ltd. Pvt. 00292319 6 2384/ 2018 Dharmeshbha Sea WEL and company did not 22.2.2018 file returns since incorporation peted in 2 resigned 2014 Me "Struck off" i Vinodbhai Projects Pvt. Desai 00292502 Ltd. - Yes, 22.2.2018 on Status of the petitioner as company did not file returns incorporation petitioner since on Status of the petitioner as disqualified Director be removed disqualified Director be removed resigned in 2014 7 3165/ 2018 Llewellyn Lincoln Axe Import and Export Pvt. Ltd. Rozario "Struck off" petitioner resigned in 2008 Yes, 23.2.2018 02074355 on Remove the name of the petitioner from the impugned list of disqualified Directors 8 3367/ Rajesh Moonshine Films "Struck off" Yes, on Set aside the action 2018 Jadavbhai Pvt. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al & Ors. Pvt. Ltd. 00481676; 00481732; 03092322 "Struck off" company did not Textile Park (I) file returns since incorporation, as not commenced its operation/business WE later restored No AT Directors petitioner to DIN and to access Website Set the impugned list of aside disqualified Directors as order "Active" by dated 25.4.2018 of NCLT. Arsh Terpene and Catalytsts Pvt. 16 6594/ 2018 Anil Shantilal Parekh & Ltd. Ors. 01831985; 17 21344/ 2018 18 9281/ 2018 01832017 "Struck off" company did not file returns since incorporation, not commenced its operation/business petitioners resigned in 2009 "Struck off" Anil Bhikabhai Virani 00279789 M/s. Parceria Real Estate company Developers Ltd. Kuljeetsing U S h Handlers Ujjalsingh Ltd. Pvt. file No Set aside the impugned list disqualified of and to on the dated and - Yes did not 27.11.2017 returns petitioner resigned in 2010 Cargo "Struck off" Pvt. company file Directors ....