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2021 Supreme(Online)(KER) 2831
HIGH COURT OF KERALA
N. NAGARESH, J
TECHMATE TOWNSHIP INTERNATIONAL PVT.LTD., – Appellant
Versus
UNION OF INDIA, – Respondent
WP(C)/7524/2020
NAVOD PRASANNAN PATTALI SRI.K.V.KRISHNAKUMAR
The court asserted that disqualifications under the Companies Act 2013 are constitutional and do not infringe upon the principles of natural justice, being a matter of statutory compliance.
Headnote:
Disqualification - Directors - Companies Act 2013 - Sections 164(2)(a), 167(1)(a) - The court held that the provisions are constitutional and do not violate Articles 14 or 19 of the Constitution. They permit automatic disqualification of directors for defaults not personally attributable to them.
Fact of the Case:
Petitioners contested disqualifications under Sections 164(2)(a) and 167(1)(a) of the Companies Act 2013, following their companies' failure to file annual returns for three consecutive years, claiming this was unjust and lacked due process.
Finding of the Court:
The court found no constitutional violation in the disqualification provisions. It ruled that disqualification arises by operation of law, and principles of natural justice do not apply as disqualifications are based on automatic defaults, not individual failures.
Issues: 1. Are Sections 164(2)(a) and 167(1)(a) ultra vires the Constitution? 2. Should the principles of natural justice be applied? 3. Is Section 164(2) retrospective? 4. Justification for deactivating DINs?
Ratio Decidendi: Automatic disqualification under Sections 164 and 167 is legal, not violating constitutional rights, as it serves public interest by enforcing transparency in corporate governance.
Final Decision: Writ petitions are dismissed; disqualifications upheld.
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
