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2021 Supreme(Online)(KER) 2832
HIGH COURT OF KERALA
N. NAGARESH, J
RANJIT KARTHIKEYAN – Appellant
Versus
UNION OF INDIA – Respondent
WP(C)/10862/2019
ADVS.NAVOD PRASANNAN PATTALI SRI.K.V.KRISHNAKUMAR
Directors are disqualified by law for company non-compliance, reinforcing accountability in corporate governance without violating natural justice principles.
Headnote:
Disqualification - Companies Act - [Sections 164, 167] - The court examined the constitutionality of disqualification provisions for directors under Companies Act, interpreting Sections 164 and 167, determining they were not arbitrary nor in violation of natural justice principles, and addressed retrospective application.
Fact of the Case:
Petitioners challenged disqualifications under Sections 164 and 167 of the Companies Act, 2013 for failure to file company returns, arguing the provisions were disproportionate and violated their rights without an opportunity to be heard.
Finding of the Court:
The court upheld the validity of the disqualification provisions, concluding they were neither arbitrary nor unconstitutional. It emphasized the statutory duty of compliance for directors and the clear legislative intent behind the provisions.
Issues: Key issues included whether the disqualification provisions were arbitrary, if principles of natural justice should be applied, retrospective applicability of the provisions, and the legitimacy of deactivating Director Identification Numbers (DIN).
Ratio Decidendi: The court reasoned that disqualifications under Sections 164 and 167 stem from statutory non-compliance, and no prior hearing was required as disqualification is automatic by law. It also ruled that retrospective application would only apply from the enactment date.
Final Decision: The disqualification under Section 164(2) upheld; DINs must remain active unless deactivated for other legal reasons.
JUDGMENT 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 Directors of Companies, pursuant to 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, 2010.
