Are you a disqualified director whose DIN has been deactivated because of non-compliance by your company/companies? Are you in the belief that your career has come to a halt for the next five years? Take heart and get first-hand information about the reason for your disqualification, then find out your rights as to overcome this situation.
In 2017, the Ministry of Finance (MCA), in its zest to eradicate wrongful practices in the companies, struck off thousands of them. Maximum disqualifications of directors have occurred due to financial non-compliance of companies under Section 248 of the Companies Act, 2013. In connection to this, the provisions under Section 164 (2) mandated the disqualification of directors of such companies.
If you are one of such directors, then stay informed that there are ways and means to remove your disqualification.
Your Rights; Your Way Out Of This Tangle
In the initial strike off days there was a huge hue and cry about MCA’s action, which was viewed as prejudiced or high-handed by many. MCA then took cognizance of the issue and opened a window for redressal known as Condonation of Delay Scheme (CODS) in 2018. Many companies grabbed this opportunity of filing the overdue documents and becoming active again. The directors of these companies too were able to remove their disqualification from respective ROCs.
Since CODS is closed, then those companies who have not initiated to regain their status, their directors are stuck. So, is there no way out for such aggrieved directors? It’s not so! There are different provisions which can be availed by you, you just need to be aware of them.
The NCLT Route: Some companies have appealed to the NCLT under Section 252 of the Companies Act, 2013, and the concerned formalities completed. If the Tribunal finds merit in the case and the company is declared ‘active’ once again, then directors DIN shall be restored.
Writ Petition: At this juncture, the best option for the suffering directors like you is to take legal recourse. You have the right to file a Writ Petition in the High Court, which has brought some positive results in similar cases.
You will be happy to note that the Gujarat High Court on December 18, 2018, gave judgment on a bunch of writ petitions and quashed the MCA list of Disqualified Directors.
In other similar judgment, the Madras High Court passed an interim judgment staying the ROCs order against the petitioner. If you explore, you will come across judgments of similar nature from HCs of Rajasthan, Delhi, Karnataka, Hyderabad, etc.
Factors Favoring Directors Stand Legally:
Against the Principle of Natural Justice: Most of the petitioners have stated in the petition that the mandatory Notice was never served on them; hence, no chance was provided to them to resolve the issues. This was seen as in opposition to the principle of Natural Justice, which has been declared as a basic structure of the Indian Constitution by the Apex Court.
Retrospective application of Section 248: The Companies Act, 2013 came into effect from April 1, 2014, hence the compliance clause which mandates financial documents of all companies for consecutive 3 years, cannot be used retrospectively by the MCA. The Court agrees that an Act which is perspective in nature, cannot be applied retrospectively by the regulators.
Flawed Interpretation: The most crucial point that favors the directors is that before the Companies Act, 2013 came into effect, the Act of 1956 governed the Companies and under it there is no such provision as removal of directors for non-compliance.
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