The provisions of disqualification under Section 164(2)(a) are applicable prospectively; affected directors are not entitled to a hearing prior to disqualification, and their DIN/DSC cannot be deactivated solely on account of disqualification.

JUDGMENT :

Vibhu Bakhru, J.

1. The petitioners have filed the present petitions, inter-alia, impugning the list of directors stated to have incurred the disqualification under clause (a) of section 164(2) of the Companies Act, 2013 (hereafter ‘the Act’) for default on the part of concerned companies in filing the annual returns and financial statements for the financial years 2014-2016. The said list was published on 15.09.2017 and is hereafter referred to as the impugned list. The petitioners also challenge the list of disqualified directors published subsequently for defaults pertaining to the financial years 2012-2014 and 2013-2015. The petitioners impugn the same to the extent that it includes their name. The petitioners further pray that the respondents be directed to allow the petitioners to use their Digital Signature Certificates (DSC) and Director Identification Number (DIN).

2. The petitioners in the present batch of petitions were directors in various companies. By way of the impugned list, the petitioners have been disqualified from being appointed/ reappointed as directors for a period of five years under Section 164 (2)(a) of the Act. Further, the names of some of the companies, in which the petitioners were holding the office of directors, have been struck off from the Register of Companies. In W.P. (C) 3658 of 2019, the petitioners have been disqualified as directors on account of failure on the part of a company (Logic Eastern India Private Limited) to file its annual returns. It is stated that Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016 has been initiated in relation to said company.

3. The impugned action was taken against the petitioners on account of default on the part of the companies in not filing the annual returns for the preceding financial years.

4. The petitioners have challenged the impugned list, essentially, on four grounds. First, that the action of the respondents in disqualifying the petitioners is arbitrary inasmuch as the petitioners were not afforded an opportunity to be heard. The petitioners contend that the said action is in violation of principles of natural justice. Second, that Section 164 of the Act, which mandates the disqualification of directors, being penal in nature, could not be applied retrospectively. Third, that on the plain interpretation of (2)(a) of the Act, the petitioners cannot be disqualified to act as directors of the companies, which have not defaulted in filing their annual returns and financial statements for a period of three consecutive years. And fourth, that the defaults under (2) of the Act result in the directors being disqualified from being appointed/re-appointed as directors but does not result in them demitting office as directors.

5. The respondents dispute the aforesaid contentions and contend that sufficient opportunity had been provided to the petitioners to correct the default of not filing the statutory documents.

6. These petitions were heard together, as the controversy involved in the present petitions is common.

7. In view of the above, this Court will refer to only to the facts of W.P. (C) 9088/2018 for addressing the controversy raised in these petitions.

8. The petitioners in W.P. (C) 9088/2018 were appointed as directors in various companies in the period of 2005-2010.

(i) Petitioner no. 1 and 2 were appointed as directors in the company