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IN THE HIGH COURT OF JUDICATURE AT CALCUTTA
Rajasekhar Mantha, J.
Satya Narayan Banik And Others - Appellant
Vs.
Union Of India And Others - Respondent
W.P.A. No. 8450 of 2021
Decided On : 11-02-2022
Disqualification - Directors - Section 164, 167 - The Court held that the disqualification of the petitioners as directors of M/s. Hahnemann International Pvt. Ltd. was justified under Section 164 (2) and 167 (l)(a) of the Companies Act, 2013. The court also discussed the applicability of the 'Company's Fresh Start Scheme of 2020' and the deactivation of the Director Identification Numbers (DIN) of the petitioners. The court upheld the constitutional vires of Section 164 (2) and 167 (l)(a) and the companies introduced subsequently, and held that the provisions of the 2013 Act have an overriding effect on the Companies (Appointment and Qualifications of Director) rules of 2014. The court also clarified that deactivation of the DIN of the petitioners is not automatic and directed the revival of the DIN subject to the company having filed DR-9 within the prescribed or extended time.
Fact of the Case:
The writ petitioners were disqualified as directors of M/s. Hahnemann International Pvt. Ltd. under Section 164 (2) for not filing balance sheets and annual returns for a continuous period of three years from the year 2014-15. The petitioners challenged the disqualification on the grounds of not being permitted to avail the benefit of the 'Company's Fresh Start Scheme of 2020', denial of principles of Natural Justice, and unauthorized deactivation of their Director Identification Numbers (DIN).
Finding of the Court:
The court found that the petitioners' reasons for failing to file annual returns and balance sheet were frivolous and amounted to wilful negligence. The court also held that the disqualification under Section 164 (2) and 167 (l)(a) is automatic and does not require prior notice or hearing. The court upheld the constitutional vires of Section 164 (2) and 167 (l)(a) and the companies introduced subsequently, and directed the revival of the DIN of the petitioners subject to compliance with filing Form DR-9.
Issues: The issues involved in the case were the disqualification of the petitioners as directors, the applicability of the 'Company's Fresh Start Scheme of 2020', denial of principles of Natural Justice, and the deactivation of the Director Identification Numbers (DIN) of the petitioners.
Ratio Decidendi: The court held that the disqualification of the petitioners as directors under Section 164 (2) and 167 (l)(a) was justified and automatic, and did not require prior notice or hearing. The court also upheld the constitutional vires of the relevant sections and clarified that the deactivation of the DIN of the petitioners is not automatic. The court directed the revival of the DIN subject to compliance with filing Form DR-9.
Final Decision: The writ petition was allowed to the limited extent indicated, and the DIN of the petitioners was directed to be revived subject to compliance with filing Form DR-9. There was no order as to costs.
ORDER :
Rajasekhar Mantha, J.
The writ petitioners are aggrieved by cessation of office as directors of one M/s. Hahnemann International Pvt. Ltd. The disqualification happened by operation of Section 164 (2) for not filing balance sheets and annual returns for a continuous period of three years from the year 2014-15. The ROC has also deactivated the Director Identification Number of the petitioners for which the petitioners are aggrieved by. The petitioners have advanced a three-fold argument challenging such disqualification.
(ii) That the petitioners were not afforded a prior hearing before the disqualification as a directors and were hence denied principles of Natural Justice.
(iii) The Registrar of Companies is not authorized to deactivate their Director Identification Numbers (DIN) of the and that such activation of DIN pursuant to the disqualification is not automatic.
2. A large number of decisions have been cited by Mr. Rajarshi Dutta, Learned counsel for the petitioner, Viz. M. K. Meethelaveetil Kaitheri Muralidharan Vs. Union of India, Represented by its Secretary, Ministry of Corporation Affairs and Another of a Division Bench of Madras High court reported in 2020 SCC OnLine Madras 2958; Jai Shankar Agrahari Vs. Union of India reported in 2020 SCC OnLine Allahabad 24 and Imraj Ali Molla Vs. Union of India & Ors. reported in 2020 SCC OnLine Calcutta 669.
3. Counsel for the respondents Mr. Avinash Kankani and Mr. Siddhartha Lahiri argued that the petitioners have not claimed that they are directors of any other companies hence the effects of Section 167 (l)(a) cannot prejudice the petitioners. It is argued that the excuses given by the petitioners for non-filing of balance sheet and annual returns from the year ending 31st March 2015 are not convincing. The reason given by the petitioners is that they had left the job of filing returns and balance sheet to one Moinak Kundu, an accountant of their company. The said accountant did not file the same despite having filed Income Tax and GST returns. The petitioners have not disclosed any action taken against the said Moinak Kundu in this regard. The illness of the petitioner No. 2 is also cited as a ground for not filing the annual returns and balance sheet from the year ending 2015.
4. As for the company's fresh start scheme of 2020, it is submitted by the Mr. Kankani and Mr. Lahiri that the scheme was enforced until 31st December, 2020. By a further circular dated 15th January, 2021 and the Ministry of Corporate Affairs has clarified that the fresh start scheme of 2020 was no longer applicable for filing under the Companies Act, 2013. Reliance is placed by Counsel for the Respondents on a decision of Gautam Mehra Vs. Union of India & Ors. being judgement dated 15th October, 2020 passed by a Co-ordinate Bench in WPA No. 22790 of 2019 and Naresh Kumar Poddar Vs. Union of India, through Secretary, Ministry of Corporate Affairs and Anr. Dated 5th January, 2020 in WPO No. 493 of 2019. The respondents also relied upon in the case of G. Vasudevan Vs. Union of India passed by a Division Bench of Madras High Court reported in 2019 SCC Online Madras 9631 and the case of Yashodhara Shroff Vs. Union of India being a Single Bench decision of Karnataka High Court reported in 2019 SCC OnLine Karnataka 682.
5. This Court has heard the counsel for the parties at length. The reason given by the petitioners for failing to file annual returns and balance sheet after the year ended on 31st March, 2005, is rather frivolous. A director is a responsible officer of the company and is expected to act with diligence and urgency.
6. To leave the responsibility of filing balance sheet and annual returns on an accountant of company is not only irresponsible but amounts to wilful negligence. It is difficult to accept that, the petitioners are diligent enough
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