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2021 Supreme(Online)(KER) 45395
HIGH COURT OF KERALA
N. NAGARESH, J
JOSE MATHEW – Appellant
Versus
UNION OF INDIA – Respondent
WP(C)/9513/2018
NAVOD PRASANNAN PATTALI, SRI.K.V.KRISHNAKUMAR
Directors can be disqualified automatically for non-filing by their companies under the Companies Act, 2013 without a prior hearing, reinforcing the accountability principle.
Headnote:
Disqualification - Companies Act - Sections 164(2)(a), 167(1)(a) - The court upheld the constitutionality of the sections that impose disqualifications on directors for non-compliance with filing requirements, emphasizing the principle of accountability within corporate governance.
Fact of the Case:
Multiple writ petitions challenged the disqualification of directors based on Sections 164(2)(a) and 167(1)(a) of the Companies Act, 2013, arising from their companies' failure to file annual returns for three consecutive years.
Finding of the Court:
The court found the provisions constitutional and valid, determining that disqualification under these sections did not violate Articles 14 and 19 of the Constitution. The court emphasized that automatic disqualification is not in breach of natural justice principles.
Issues: Whether Sections 164(2)(a) and 167(1)(a) are constitutional, if the principles of natural justice apply, and the retrospective nature of the disqualification provisions.
Ratio Decidendi: The court concluded that disqualification under the Companies Act is automatic and does not require a hearing, as the provisions signify strict liability intended to enhance corporate accountability.
Final Decision: The disqualification of the petitioners is upheld; their Director Identification Numbers (DINs) should be reinstated, but the provisions of disqualification remain constitutional.
J U D G M E N T CR
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Dated this the 16th day of June, 2021 [W.P.(C) Nos.21628/2020, 21393/2018, 24426/2018, 40504/2018, 9651/2019, 15713/2019, 27686/2019, 10939/2020, 11896/2020, 11900/2020, 12827/2020, 14895/2020, 17218/2020, 17225/2020, 19830/2020, 19924/2020, 19996/2020, 20220/2020, 20229/2020, 20253/2020, 20312/2020, 20421/2020, 27379/2020, 28116/2020, 9841/2019, 39369/2018, 19228/2020, 19249/2020, 42106/2018, 14993/2018, 15928/2018, 16065/2018, 16083/2018, 16085/2018, 23143/2018, 26401/2018, 30284/2018, 30296/2018, 30374/2018, 32719/2018, 38728/2018, 39345/2018, 39365/2018, 39371/2018, 41734/2018, 10315/2019, 10441/2019, 10720/2019, 10862/2019, 10866/2019, 11273/2019, 11401/2019, 12058/2019, 12059/2019, 12061/2019, 12070/2019, 12146/2019, 15712/2019, 15717/2019, 15728/2019, 27693/2019, 10559/2020, 10937/2020, 12313/2020, 12332/2020, 12335/2020, 12833/2020, 15407/2020, 15674/2020, 16587/2020, 16648/2020, 17243/2020, 19179/2020, 19220/2020, 19239/2020, 19455/2020, 19570/2020, 19774/2020, 20268/2020, 3725/2021, 15344/2019, 31949/2017, 33126/2017, 34847/2017, 35810/2017, 36410/2017, 8074/2018, 9513/2018, 9818/2018, 10932/2018, 12998/2018, 18319/2018, 20135/2018, 20348/2018, 23327/2018, 24984/2018, 31541/2018, 32916/2018, 36842/2018, 41201/2018, 41664/2018, 664/2019, 1569/2019, 1583/2019, 1619/2019, 1620/2019, 1898/2019, 1909/2019, 3242/2019, 3730/2019, 5622/2019, 5698/2019, 5999/2019, 6306/2019, 6315/2019, 6321/2019, 6678/2019, 7292/2019, 7317/2019, 7682/2019, 7789/2019, 7847/2019, 7962/2019, 8193/2019, 8443/2019, 8645/2019, 8997/2019, 9317/2019, 9338/2019, 9369/2019, 9550/2019, 10051/2019, 11823/2019, 12032/2019, 12097/2019, 12191/2019, 12422/2019, 12531/2019, 12581/2019, 12628/2019, 12632/2019, 12644/2019, 12648/2019, 12685/2019, 12706/2019, 12798/2019, 12853/2019, 13224/2019, 13245/2019, 13313/2019, 13330/2019, 13356/2019, 13613/2019, 13940/2019, 14062/2019, 14106/2019, 14195/2019, 14257/2019, 14617/2019, 14727/2019, 15055/2019, 15063/2019, 15146/2019, 15248/2019, 15667/2019, 15674/2019, 15721/2019, 16036/2019, 16156/2019, 16230/2019, 16235/2019, 16248/2019, 16424/2019, 16512/2019, 16858/2019, 17194/2019, 17220/2019, 17364/2019, 17984/2019, 18316/2019, 18395/2019, 18405/2019, 18584/2019, 18729/2019, 18760/2019, 18971/2019, 19127/2019, 19224/2019, 19390/2019, 19516/2019, 19933/2019, 20422/2019, 21127/2019, 21616/2019, 21620/2019, 21875/2019, 22535/2019, 23010/2019, 23780/2019, 27696/2019, 28590/2019, 30533/2019, 567/2020, 6885/2020, 7524/2020, 10270/2020, 13826/2020, 15130/2020, 19406/2020, 19711/2020, 20032/2020, 20033/2020, 20248/2020, 21194/2020, 21432/2020, 21558/2020, 25131/2020, 25538/2020, 28774/2020, 29010/2020, 3136/2021, 3658/2021, 4674/2021, 5134/2021 and 6338/2021]
In all these writ petitions, the challenge is against Sections 164 (2)(a) and 167(1)(a) of the Companies Act, 2013 and the disqualification thrust upon the petitioners for acting as
244 Directors of Companies, pursuant to Sections 164 and 167. Common questions of law arise for consideration in all these writ petitions and hence the writ petitions are heard together and disposed of by a common judgment.
2. The Companies Act, 1956 was enacted with the objective to consolidate and amend the law relating to the companies and certain other associations. The said Act has been in force for about fifty-five years and was amended several times. In view of changes in the national and international economic environment and expansion and growth of economy, the Central Government decided to repeal the Companies Act, 1956 and enact a new legislation to provide for new provisions to meet the changed national and international economic environment and further accelerate the expansion and growth of economy. And for this purpose, the Companies Bill, 2009 was introduced on 3rd August, 2009 in the Lok Sabha. The said Bill was referred to the Parliamentary Standing Committee on Finance for examination and the Committee gave its Report on the 31st August, 201
