Deactivation of Directors Identification Numbers (DINs) without following due process of law and absence of statutory provisions for deactivating DINs based on disqualification under the Companies Act, 2013.

JUDGMENT

Sabyasachi Bhattacharyya, J. - The subject-matter of the writ petitions being common, both are taken up for hearing together.

2. The grievance of the petitioners, as directors of several companies, is that their Directors Identification Numbers (DINs) were deactivated by the impugned action of the respondent no.3, the Registrar of Companies (RoCs) without following the due process of law.

3. It is submitted by learned counsel for the petitioners that although only one of the companies was alleged to have committed default, the DIN of the petitioners was deactivated in respect of the other companies, in which they were directors, as well, which was de hors the law.

4. Moreover, even in respect of the defaulting company, the DIN of the petitioners could not be deactivated without giving an opportunity of hearing to the petitioners on the allegations made against them in respect of each company.

5. The disqualification of the company-in-question took place in the year 2014, that is, prior to the 2018 Amendment of the Companies Act, 2013 (hereinafter referred to as "the 2013 Act") and as such, the provisions of the 2018 Amendment would not be applicable thereto.

6. By relying on the provisions of Section 164 of the 2013 Act, learned counsel for the petitioners argues that the disqualification contemplated in the said section was restricted to the defaulting company only and not to the other companies, in which the directors of the defaulting company were also directors.

7. By placing particular reliance on sub-section (2) of Section 164, learned counsel submits that the restriction as to such director was limited to eligibility to be "reappointed" as a director of the defaulting company but envisaged the expression "appointed" in respect of other companies, both for a period of five years from the date of default.

8. Distinguishing thus, learned counsel argues that, in any event, the petitioners' DIN could not be deactivated in respect of the other companies than the alleged defaulting company. The expression "reappointed" ex facie indicates that the petitioner has been a director of the defaulting company while the expression "appointed", relating to other companies, meant fresh appointments. As such, the existing directorship of the concerned persons in the other companies was not touched by the said provision.

9. Learned counsel for the petitioner next argues that, in consonance with the principle of Audi Alteram Partem enshrined in natural justice, the petitioners had to be given a hearing prior to such disqualification as a director, which would prevent such decision from being arbitrary and ex parte. In the present case, however, no hearing was given to the petitioners at all.

10. Learned counsel for the petitioners cites, in this context, a division bench judgment of the Allahabad High Court rendered on January 16, 2020 (unreported) in several matters, including the Jai Shankar Agrahari vs. Union of India and another (unreported). It was held therein, inter alia, that Section 248 of the 2013 Act does not talk of disqualification which a director would suffer so as to incur disqualification under Section 164(2), read with Section 167 of the said Act. The mere fact of striking off of a company by itself cannot prejudice a director for the purpose of Sections 164(2) and 167(1) of the 2013 Act. A prior notice, it was held, would be necessary to find out whether the alleged disqualification which was incurred by the directors, as alleged by the Registrar of Companies, was an undisputed fact or, if disputed, opportunity to the concerned person was given to establish otherwise.

11. Moreover, if a director, despite knowing about his disqualification, continues to act as a director, he would incur penalty, but the continuance of a person as a director, in office of the director could not be said to be bad in law.

12. It was further held in the said judgment that various High Courts had examined relevant statutory provisions