AI Drafter 
TaxTMI 
TaxTMI 
2020 (1) TMI 1212
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....408, 4412, 4415, 4420, 4425, 4456, 4553, 4555, 4559, 4564, 4581, 4611, 4613, 4651, 4662, 4665, 4669, 4666, 4672, 4674, 4703, 4763, 4768, 4798, 4802, 4805, 4852, 4853, 4854, 4859, 4947, 4950, 4953, 4971, 5169, 5351, 5371, 5380, 5406, 5433, 5442, 5450, 5453, 5464, 5466, 5472, 5477, 5570, 5595, 5695, 5725, 5765, 5766, 5783, 5787, 5791, 5806, 5813, 5815, 5843, 5915, 5917, 5924, 5930, 5928, 6016, 6104, 6156, 6183, 6196, 6200, 6229, 6236, 6282, 6313, 6365, 6367, 6414, 6424, 6459, 6465, 6466, 6502, 6508, 6529, 6537, 6535, 6541, 6546, 6568, 6581, 6643, 6654, 6772, 6933, 6947, 7023, 7072, 7122, 7152, 7157, 7160, 7340, 7511, 7512, 7589, 7610, 7701, 7704, 7706, 7710, 7712, 7718, 7749, 7809, 7814, 7817, 7818, 7861, 7939, 7947, 7941, 7951, 7981, 7995, 8001, 8003, 8005, 8009, 8062, 8013, 8109, 8225, 8234, 8263, 8283, 8292, 8314, 8323, 8329, 8338, 8349, 8437, 8454, 8457, 8465, 8553, 8580, 8586, 8554, 8621, 8661, 8664, 8667, 8670, 8676, 8680, 8679, 8683, 8715, 8717, 8723, 8752, 8783, 8788, 8795, 8848, 8989, 9032, 9034, 9043, 9046, 9162, 9186, 9193, 9197, 9251, 9262, 9266, 9282, 9308, 9361, 9367, 9370, 9364, 9368, 9434, 9621, 9629, 9639, 9646, 9677, 9704, 9714, 9751, 9757, 9777, 9786, 9901, 9919, 9....
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....06, 21908, 21909, 21910, 22116, 22118, 22214, 22255, 22262, 22306, 22315, 22375, 22743, 22747, 22751, 22748, 22753, 22756, 22790, 22961, 23022, 23144, 23137, 23349, 23353, 23357, 23426, 23429, 23456, 23551, 24461, 24597, 24610, 24621, 24644, 24649, 24743, 24746, 24776, 24797, 24809, 24440, 24990, 24993, 25002, 25004, 25058, 25918, 25925, 25940, 26142, 26252, 26254, 26261, 26302, 26319, 26337, 26340, 26404, 26411, 26413, 26423, 26433, 26441, 26526, 26538, 26556, 26565, 26567, 26619, 26624, 26691, 26796, 26810, 26845, 26847, 26849, 26932, 27045, 27179, 27180, 27181, 27308, 27442, 27463, 27467, 27590, 27625, 27627, 27628, 27631, 27632, 27702, 27706, 27771, 27935, 27938, 27995, 28050, 28069, 28075, 28078, 28083, 28157, 28159, 28167, 28252, 28414, 28454, 28455, 28459, 28463, 28651, 28656, 28660, 28881, 28912, 28914, 28975, 29054, 29418, 29464, 29467, 29470, 29673, 29677, 30035, 30037, 30250, 30393, 30394, 30644, 30646, 30732, 30736, 30752, 30757, 30761, 30766, 30770, 30938, 30948, 31294, 31296, 32403, 32409, 10757, 12167, 12173, 17532, 18249, 32589, 32594, 32614, 32720, 32764, 32947, 32949, 33057, 34001, 34004, 34010, 34354, 34358, 34396, 18877, 18878, 33513, 33807, 33829, 33880, 34030,....
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.... in the list. By virtue of such disqualification, the petitioner was prohibited from being appointed or reappointed as a Director in any other Company. The petitioner claimed that he had not been given notice prior to such disqualification. Moreover, the Director Identification Number of the petitioner was also deactivated. It is under these circumstances that the Writ Petition had been filed. 6. The writ petitioners in all the other writ petitions also suffered the same fate. They all stood disqualified from the Company in which they were Directors wherein annual returns had not been filed for a continuous period of three years and as a consequence thereof, they had to vacate office in all the other companies where they held the office of Directorship. Their Director Identification numbers were also deactivated. 7. Heard extensive arguments advanced on behalf of the petitioners. 8. Mr.Aravind Pandian, learned Senior Counsel who led the arguments, questioned the act of the respondents on the following grounds:- (1) Lack of Jurisdiction; (2) Failure to issue notice before disqualification; (3) Impermissibility to deactivate the Director Identifica....
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....nt dated 16.01.2020 of a Division Bench Judgment of the Allahabad High Court in Writ C.No. 12498 of 2019 batch Jai Shankar Agrahari and others Vs. Union of India and Other. 13. All the learned counsels, who advanced arguments substantially supported the stand taken by Mr.P.H.Aravind Pandian. In addition, referrence was drawn to Section 92 which relates to Annual Returns, Section 137 which relates to Financial Statements and also to Section 403 of the Act. The learned counsels also pointed out the provisions of Section 248 and Section 252 of the Act. They stated that the Registrar of Companies has no jurisdiction to either pass the orders of disqualification or to deactivate the Director Identification Number and also primarily holding out that notice should have been given prior to such steps being taken urged the Court allow the Writ Petitions. Reference was also drawn to Rule 11 and Rule 14 of the Companies (Appointment and Qualification of Directors) Rules 2014 and to Rule 5 of the Company (Registration Offices and Fees) Rules 2014. 14. Mr.G.Rajagopalan, learned Additional Solicitor General, refuted the arguments put forth on behalf of the petitioners. The learned Solicito....
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....anaging director or the manager; (ii) the company secretary; (iii) the whole-time director; (iv) the Chief Financial Officer (v) such other officer, not more than one level below the directors who is in whole-time employment, designated as key managerial personnel by the Board; and (vi) such other officer as may be prescribed." Section 2(59): "Officer" includes any director, manager or key managerial personnel or any person in accordance with whose directions or instructions the Board of Directors or any one or more of the directors is or are accustomed to act; Section 2(75): "Registrar" means a Registrar, an Additional Registrar, a Joint Registrar, a Deputy Registrar or an Assistant Registrar, having the duty of registering companies and discharging various functions under this Act. Section 92: "Annual Return". It is as follows:- "92. Annual return.-(1) Every company shall prepare a return (hereinafter referred to as the annual return) in the prescribed form containing the particulars as they stood on the close of the financial year regarding- (a) its registered office, principal bus....
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....t holding the annual general meeting, with such fees or additional fees as may be prescribed, within the time as specified, under section 403. (5) If a company fails to file its annual return under sub-section (4), before the expiry of the period specified under section 403 with additional fees, the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lakhs rupees and every officer of the company who is in default shall be punishable with imprisonment for a term whichmay extend to sixmonths or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both. (6) If a company secretary in practice certifies the annual return otherwise than in conformity with the requirements of this section or the rules made thereunder, he shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees. " Section 129 of the Act relates to Financial Statement. It is as follows:- "129. Financial statement.- (1) The financial statements shall give a true and fair view of the state of affairs of t....
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.... Provided further that the Central Government may provide for the consolidation of accounts of companies in such manner as may be prescribed. (4) The provisions of this Act applicable to the preparation, adoption and audit of the financial statements of a holding company shall, mutatis mutandis, apply to the consolidated financial statements referred to in subsection (3). (5) Without prejudice to subsection (1), where the financial statements of a company do not comply with the accounting standards referred to in sub-section (1), the company shall disclose in its financial statements, the deviation from the accounting standards, the reasons for such deviation and the financial effects, if any, arising out of such deviation. (6) The Central Government may, on its own or on an application by a class or classes of companies, by notification,exemptany classor classes of companies from complying with any of the requirements of this section or the rules made thereunder, if it is considered necessary to grant such exemption in the public interest and any such exemption may be granted either unconditionally or subject to such conditions as may be specified i....
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....atory statement for such appointment, annexed to the notice for the general meeting, shall include a statement that in the opinion of the Board, he fulfils the conditions specified in this Act for such an appointment. (6) (a) Unless the articles provide for the retirement of all directors at every annual general meeting, not less than two-thirds of the total number ofdirectors of a public company shall- (i) be persons whose period of office is liable to determination by retirement of directors by rotation; and (ii) save as otherwise expressly provided in this Act, be appointed by the company in general meeting. (b) The remaining directors in the case of any such company shall, in default of, and subject to any regulations in the articles of the company, also be appointed by the company in general meeting. (c) At the first annual general meeting of a public company held next after the date of the general meeting at which the first directors are appointed in accordance with clauses (a) and (b) and at every subsequent annual general meeting, one-third of such of the directors for the time being as are liable 101 to retire by rotation, or if....
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....shall make an application for allotment of Director Identification Number to the Central Government in such form and manner and along with such fees as may be prescribed. [provided that the Central Government may prescribe any identification number which shall be treated as Director Identification number for the purposes of this Act and in case any individual holds or acquires such identification number, the requirement of this section shall not apply or apply in such manner as may be prescribed.] Section 154: Allotment of Director Identification Number.- The Central Government shall, within one month from the receipt of the application under section 153, allot a Director Identification Number to an applicant in such manner as may be prescribed. Section 164: Disqualifications for appointment of director.- (1) A person shall not be eligible for appointment as a director of a company, if - (a) he is of unsound mind and stands so declared by a competent court; (b) he is an undischarged insolvent; (c) he has applied to be adjudicated as an insolvent and his application is pending; (d) he has been convicted....
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....terests of the company, its employees, the shareholders, the community and for the protection of environment. (3) A director of a company shall exercise his duties with due and reasonable care, skill and diligence and shall exercise independent judgment. (4) A director of a company shall not involve in a situation in which he may have a direct or indirect interest that conflicts, or possibly may conflict, with the interest of the company. (5) A director of a company shall not achieve or attempt to achieve any undue gain or advantage either to himself or to his relatives, partners, or associates and if such director is found guilty of making any undue gain, he shall be liable to pay an amount equalto that gain to the company. (6) A director of a company shall not assign his office and any assignment so made shall be void. (7) If a director of the company contravenes the provisions of this section such director shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees. Section 167: Vacation of office of director.- (1) The office of a director shall become vacant in....
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....3) Where all the directors of a company vacate their offices under any of the disqualifications specified in subsection (1), 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 the general meeting. (4) A private company may, by its articles, provide any other ground for the vacation of the office of a director in addition to those specified in sub-section (1). Section 248: Power of Registrar to remove name of company from register of companies.- (1) Where the Registrar has reasonable cause to believe that- (a) a company has failed to commence its business within one year of its incorporation; [or] 2* * * * * (c) a company is not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company under section 455, he shall send a notice to the company and all the directors of the company, of his intention to remove the name of the company from the register of compan....
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....anagement, and of every member of the company dissolved under subsection (5), shall continue and may be enforced as if the company had not been dissolved. (8) Nothing in this section shall affect the power of the Tribunal to wind up a company the name of which has been struck off from the register of companies. " Section 403: Fee for filing, etc.- (1) Any document, required to be submitted, filed, registered or recorded, or any fact or information required or authorised to be registered under this Act, shall be submitted, filed, registered or recorded within the time specified in the relevant provision on payment of such fee as may be prescribed: Provided that any document, fact or information may be submitted, filed, registered or recorded, after the time specified in relevant provision for such submission, filing, registering or recording, within a period of two hundred and seventy days from the date by which it should have been submitted, filed, registered or recorded, as the case may be, on payment of such additional fee as may be prescribed: Provided further that any such document, fact or information may, without prejudice to any other legal action or liabil....
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....ocuments and pay such annual fee as may be prescribed to the Registrar to retain its dormant status in the register and may become an active company on an application made in this behalf accompanied by such documents and fee as may be prescribed. (6) The Registrar shall strike off the name of a dormant company from the register of dormant companies, which has failed to comply with the requirements of this section." 18. Rule 11 of the Companies (Appointment and Qualification of Directors) Rules 2014 is as follows:- "11. Cancellation or surrender or Deactivation of DIN.- The Central Government or Regional Director (Northern Region), Noida or any officer authorised by the Regional Director may, upon being satisfied on verification of particulars or documentary proof attached with the application received 11alongwith fee as specified in Companies (Registration Offices and Fees) Rules, 2014 from any person, cancel or deactivate the DIN in case - (a) the DIN is found to be duplicated in respect ofthe same person provided the data related to both the DIN shall be merged with the validly retained number; (b) the DIN was obtained in a wrongful manner or by fraudulent means....
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....the officers in default. (4) Upon receipt of the Form DIR-9 under sub-rule (2), the Registrar shall immediately register the document and place it in the document file for public inspection. (5) Any application for removal of disqualification of directors shall be made in Form DIR-10. " 20. The powers and duties of Registrars had been given in the Companies (Registration Offices and Fees) Rules 2014. Rule 5 relating to Powers and Duties of Registrars is as follows:- "5. Powers and duties of Registrars.- (1) The Registrars shall exercise such powers and discharge such duties as are conferred on them by the Act or the rules made thereunder or delegated to them by the Central Government, wherever the power or duty has been conferred upon the Central Government by the Act or the rules made there under. (2) Whenever according to the Act, any function or duty is to be discharged by the Registrar, it shall, until the Central Governmentotherwise directs, be done by the Registrar , or in his absence, by such person as the Central Government may for the time being authorise: Provided that in the event of the Central Government altering the constitution ....
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.....No. 32763 of 2019 [ G.Vasudevan Vs. Union of India and others had after examining the scope, object and sweep of the proviso, had finally stated as follows:- "28. A perusal of the above extract from the judgment of the Hon'ble Karnataka High Court in Yashodhara Shroff Vs. Union of India (supra), reveals that the Court has found that the proviso to Section 167(1)(a) must be interpreted in ordinary terms and would apply to the entirety of Section 164 including sub-section 2. The Court has further held that this proviso can be justified on two grounds. Firstly, it has been reiterated that the exclusion of Directors from vacating their posts in the defaulting company while doing so in all other companies where they hold Directorship has been done in order to prevent the anomalous situation wherein the post of Director in a company remains vacant in perpetuity owing to automatic application of Section 167(1)(a) to all newly appointed Directors. Secondly, the underlying object behind the proviso to Section 167(1)(a) is seen to be the same as that of Section 164(2) both of which exist in the interest of transparency and probity in governance. Owing to these justifications, t....
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....re struck down both on the ground that the provision was prospective in nature and three financial years had not been completed and notice had not been given prior to disqualification. When due respects the facts in the Writ Petitions on hand is different. 27. In the present batch of writ petitions, the three financial years, 2014-15, 2015-16 and 2016-17 have been completed. The Companies have not filed the annual returns / financial statements. They have defaulted in such filing of annual returns / financial statements. The Act very clearly states that if there is such a default then the Directors would be disqualified. This Court cannot extend the time for filing of annual returns or financial statements. When a period of time is stipulated in a statute, it has to be strictly interpreted. In the earlier batch, leverage was granted because the annual general meeting should be called within a period of six months namely on or before 30th September of each succeeding year and thereafter a further period of 30 days / 60 days is given to file the annual returns. Here the three financial years had come to an end. The said period of six months had also been completed. The further ....
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....379), Chinnappa Reddy, J. followed Ridge vs. Baldwin and set aside the order of supercession of the New Delhi Metropolitan Committee rejecting the argument that there was no prejudice though notice was not given. The proceedings were quashed on the ground of violation of principles of natural justice. But even in that case certain exceptions were laid down to which we shall presently refer. 23. Chinnappa Reddy, J. in S.L.Kapoor's case [(1980) 4 SCC 379], laid two exceptions (at p.395) namely, " if upon admitted or indisputable facts only one conclusion was possible", then in such a case, the principle that breach of natural justice was in itself prejudice, would not apply. In other words if no other conclusion was possible on admitted or indisputable facts, it is not necessary to quash the order which was passed in violation of natural justice. Of course, this being an exception, great care must be taken in applying this exception. 24. The principle that in addition to breach of natural justice, prejudice must also be proved has been developed in several cases. In K.L. Tripathi Vs. State Bank of India ( 1984(1) SCC 43), Sabyasachi Mukherji, J. ( as he then was....
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....ional Bank and Others]: "In an industrial dispute referred to by the Central Government which has an allIndia implication, individual workman cannot be made parties to a reference. All of them are not expected to be heard. The Unions representing them were impleaded as parties. They were heard. Not only the said Unions were heard before the High Court, as noticed hereinbefore from a part of the judgment of the High Court, they had preferred appeals before this Court, Their contentions had been noticed by this Court. As the award was made in presence of the Unions, in our opinion, the contention of Respondents that the award was not binding on them cannot be accepted. The principles of natural justice were also not required to be complied with as the same would have been an empty formality. The court will not insist on compliance of the principles of natural justice in view of the binding nature of the award. Their application would be limited to a situation where the factual position or legal implication arising thereunder is disputed and not where it is not in dispute or cannot be disputed. If only one conclusion is possible, a writ would not issue only because there was ....
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....is term 'life' can only mean that the life of the DIN can exist only for till the life of the office of Directorship survives and not for the entire life of the individual Director. Holding that an individual who was a Director in a company and had been allotted DIN and would be able to hold on to it till his life, even though he relinquishes the office of Directorship, defines logic. The Director Identification Number can be exist only during the period when an individual holds office of Directorship. It may be reactivated when the individual resumes the office of Directorship. During his/her lifetime only on Director Identification Number can be allotted. 35. An irrational interpretation cannot be given that the Director Identification Number can still attach itself to the individual even after he resigns, or is disqualified from the post of Directorship or vacates the office. Consequently, when a Director is disqualified, it follows that the DIN should be deactivated. 36. I am concious of the fact that I have followed the ratio laid down in Bhagavan Das Dhananjaya Das (supra) struck down the notification issued in the year 2017. On facts, the impugned notifications....