2020 (9) TMI 1189 - HC - Companies Law

Disqualification of directors Companies Fresh Start Scheme, 2020 - applicability of Section 167 (3) of Companies Act - HELD THAT - Nothing stops this Petitioner from persuading the other directors or the promoter from nominating any other person as a director to apply under the Scheme. We have to also keep in mind the delay and the stage at which the Petitioner has approached this Court regarding the Scheme. Since the position has been clarified by the learned Additional Solicitor General as above, that in the capacity of promoter the Petitioner/s can nominate any person as a director and follow section 167(3) of the Act to apply under the Scheme, it is not necessary for us to issue any further directions. This course of action is, therefore, available to the Petitioner/s regarding the Scheme.

Summary

Issues:
Directors disqualified seeking relief under Companies Fresh Start Scheme, 2020.

Analysis:
The petitioners, directors facing disqualification, sought relief under the Companies Fresh Start Scheme, 2020. The Scheme, valid until 30 September 2020, aimed to provide a fresh start to companies. The petitioners challenged their disqualification, seeking activation of their DIN to apply under the Scheme. However, the Additional Solicitor General argued that under Section 167(3) of the Companies Act, 2013, the promoter could appoint directors when all directors vacate their offices due to disqualification. This provision allowed the promoter to nominate directors to benefit from the Scheme, even if disqualified directors were also promoters. The petitioners raised concerns about their eligibility to nominate directors if they were both disqualified directors and promoters. The Additional Solicitor General clarified that a person acting as a director cum promoter, if disqualified as a director, could still act as a promoter to nominate directors under Section 167(3). The petitioners were advised to follow this course of action, and the court found it unnecessary to issue further directions. The court emphasized that the petitioners could persuade other directors or promoters to nominate directors to apply under the Scheme. The court also noted the delay in approaching the court and the need for evidence to prove discord between directors. The court decided that the petitioners could nominate directors under Section 167(3) and pursue relief under the Companies Fresh Start Scheme, 2020, without requiring additional directions. Further questions raised by the petitioners would be considered in due course after the respondents filed their response.