Directors can face disqualification under the Companies Act from multiple companies for violations, but disqualification cannot exceed five years from the date of non-compliance.

Headnote:(A) Companies Act, 2013 - Sections 164 and 167 - Disqualification of directors - Disqualification applied under Section 164(2) due to failure to repay deposits and relevant non-compliance by the company for a period extending beyond five years is unconstitutional - The statute does not allow disqualification beyond a five-year term post-default - Directors may be disqualified from any company regardless of allegations on others (Paras 11.1 - 11.18).

(B) Constitutional Law - Article 19(1)(g) - The right to practice trade and profession is subject to reasonable restrictions; the provisions of the Companies Act, 2013 do not infringe this right but impose necessary limitations (Paras 11.16).

Facts of the case:
The directors sought relief against the disqualification and blocking of their Directors Identification Numbers (DINs) while attempting to file statutory documents for their company. They argued the action violated their constitutional rights under Article 19(1)(g).

Findings of Court:
The court held that there was no power to extend disqualification beyond five years from the date of non-compliance and pronounced the petition without merit.

Issues: Whether a director can be disqualified from multiple companies under Section 164, and if disqualification can extend beyond five years.

Ratio Decidendi: A director can be disqualified for multiple companies based on violations against one, and that the statute explicitly limits the disqualification period to five years, which cannot be extended.

Result: Petition dismissed.

CAV ORDER

1. The Petitioners are before this Court seeking for the following reliefs:

i. Declare that the action of the Respondents disqualifying and blocking the DINs of the petitioners and preventing the petitioners from filing any document (e-Forms) with the Respondent No.3 through MCA portal through their DIN/DSC No.07590137 & 07590139, as unconstitutional and in violation of the fundamental rights of the Petitioners as guaranteed by Article 19(1)(g) of the Constitution of India, and

ii. Pass such other/ further order(s) as deemed fit by this Hon’ble Court in view of the facts and circumstances of the present case in the interest of justice and equity.

iii. Grant such other relief that this Hon’ble Court be pleased to deem fit in the facts of the present case.

2. The petitioners claim to be the directors of M/s Vihaan Direct Selling (India) Private Limited (hereinafter referred to as “M/s Vihaan”) who were appointed as directors in the year 2016. When the company attempted to file its annual returns and statutory filings for the year 2017-18 and 2018-19, a pop-up dialogue box on the official web portal of Respondent No.1-Ministry of Corporate Affairs displayed the message “the Directors disqualified under the provisions”.

3. It is in that background that +ise for consideration are;

1. Whether under Section 164 of the Companies Act 2013 , a director can be disqualified from being a director in the company as regards which the allegations are made, as well as regarding any other company in which he or she is a director, for which no allegations are made?

2. Whether there is any power with the concerned authorities to extend a period of disqualification beyond a period of five years?

3. What order?

10. I answer above points are as under;

11.Answer to point No.1: Whether under Section 164 of the Companies Act 2013 , a director can be disqualified from being a director in the company as regards which the allegations are made, as well as regarding any other company in which he or she is a director, for which no allegations are made?

11.1. Section 164 of the Companies Act 2013 is reproduced hereunder for easy reference;

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;

(d) he has been convicted by a court of any offence, whether involving moral turpitude or otherwise, and sentenced in respect thereof to imprisonment for not less than six months and a period of five years has not elapsed from the date of expiry of the sentence:

Provided that if a person has been convicted of any offence and sentenced in respect thereof to imprisonment for a period of seven years or more, he shall not be eligible to be appointed as a director in any company;

(e) an order disqualifying him for appointment as a director has been passed by a court or Tribunal and the order is in force;

(f) he has not paid any calls in respect of any shares of the company held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call;

(g) he has been convicted of the offence dealing with related party transactions under section 188 at any time during the last preceding five years; or (h) he has not complied with sub-section (3) of section 152.

[(i) he has not complied with the provisions of sub-section (1) of section 165.]

(2) No person who is or has been a director of a 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 eli

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2025 Supreme(Online)(Kar) 20552

Directors can face disqualification under the Companies Act from multiple companies for violations, but disqualification cannot exceed five years from the date of non-compliance.

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