HC Writ Petition for DIN Activation Under Section 164(2) For Disqualification of Directors By Virat Maheshwari

DIN is required to be retained or DIN shall not be deactivated during disqualification of directors u/s 164(2) or no notice given to petitioner before disqualifying him as director of company by Registrar of Companies was illegal and same was to be set aside.

A writ petition was filed challenging the disqualification of the petitioner as Director under section 164(2)(a) of the Companies Act, 2013 on the ground that he has not submitted financial statements for three consecutive financial years.

The petitioner has challenged the impugned order dated 17-12-2018 passed by the first respondent on the ground that without affording opportunity to the petitioner, the said order has been passed.

  • As is evident from the Rules 9 and 10 deals with the application for allotment of DIN.

  • Rule 10 (6) specifies that the DIN is valid for the life time of the applicant and shall not be allotted to any other person.

  • Rule 11 provides for the cancellation or surrender or deactivation of the DIN.

  • It is very clear upon examining Rule 11 that neither cancellation nor deactivation is provided for upon disqualification under section 164(2) of CA 2013.

  • In this connection, it is also pertinent to refer to Section 167(1) of CA 2013 which provides for vacating the office of director by a director of a Defaulting Company.

As a corollary, it follows that if a person is a director of five companies, which may be referred to as companies A to E, if the default is committed by company A by not filing financial statements or annual returns, the said director of company A would incur disqualification and would vacate office as director of companies B to E. However, the said person would not vacate office as director of company A. If such person does not vacate office and continues to be a director of company A, it is necessary that such person continues to retain the DIN.

In this connection, it is also pertinent to point out that it is not possible to file either the financial statements or the annual returns without a DIN. Consequently, the director of Defaulting Company A, in the above example, would be required to retain the DIN so as to make good the deficiency by filing the respective documents. Thus, apart from the fact that the Rules do not empower the ROC to deactivate the DIN, we find that such deactivation would also be contrary to Section 164(2) read with 167(1) of CA 2013 in as much as the person concerned would continue to be a director of the Defaulting Company.

In the result, these appeals are allowed by setting aside the impugned order dated 27-1-2020. Consequently, the publication of the list of disqualified directors by the ROC and the deactivation of the DIN of the Appellants is hereby quashed. As a corollary to our conclusion on the deactivation of DIN, the DIN of the respective directors shall be reactivated within 30 days of the date of receipt of a copy of this order. Nonetheless, we make it clear that it is open to the ROC concerned to initiate action with regard to disqualification subject to an enquiry to decide the question of attribution of default to specific directors by taking into account the observations and conclusions herein. No costs. Consequently, connected miscellaneous petitions are closed.

The reasons laid down by the Hon'ble Division Bench of this Court Meethelaveetil Kaitheri Muralidharan (supra) & batch applies to the facts of the instant case also.

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