2021 (3) TMI 1290 - HC - Companies Law

Disqualification of the petitioner as Director - Section 164(2)(a) of the Companies Act, 2013 - directors disqualified on the ground that he has not submitted financial statements for three consecutive financial years - HELD THAT - The issue raised in this writ petition was considered by the Hon'ble Division Bench of this Court in MEETHELAVEETIL KAITHERI MURALIDHARAN, KAMAL ANEESMOHAMED, SATHISH KUMAR GOPAL, GOVINDASAMY BALASUBRAMANIAM, PAARI SENTHIL KUMAR, PAARI DHANALAKSHMI, VERSUS UNION OF INDIA, THE REGISTRAR OF COMPANIES TAMIL NADU, CHENNAI, 2020 (10) TMI 595 - MADRAS HIGH COURT where it was held that The publication of the list of disqualified directors by the ROC and the deactivation of the DIN of the Appellants is hereby quashed. The case on hand stands on the same footing. In the instant case also, no notice was given to the petitioner before disqualifying him as Director of M/s.Open Source Academy India Private Limited. The impugned order dated 17.12.2018 passed by the first respondent disqualifying the petitioner as Director of M/s.Open Source Academy India Private Limited under Section 164(2) (a) of the Companies Act, 2013 is hereby set aside - Petition allowed.

Summary

Issues:
Challenge to disqualification of petitioner as Director under Section 164(2)(a) of the Companies Act, 2013 for not submitting financial statements for three consecutive financial years without prior notice.

Analysis:
The petitioner filed a writ petition challenging the disqualification as Director due to non-submission of financial statements for three consecutive financial years under Section 164(2)(a) of the Companies Act, 2013, citing lack of opportunity before the order was passed. The Central Government Standing Counsel accepted notice for the respondents, and the petition was taken up for final disposal with the consent of both parties. The petitioner's counsel argued that the impugned order was passed in violation of the Companies Act, 2013.

The Court referred to a previous Division Bench judgment in a similar case, highlighting the importance of Rules 9, 10, and 11 regarding the Director Identification Number (DIN) and the consequences of disqualification under Section 164(2) of the Companies Act, 2013. The judgment emphasized that deactivation of DIN due to disqualification would be contrary to the law, and directors should be given the opportunity to rectify defaults. The previous judgment set aside the impugned order, quashed the publication of disqualified directors, and directed reactivation of DIN within 30 days, allowing for further action by the Registrar of Companies (ROC) after an enquiry.

Applying the principles established in the previous judgment to the present case, the Court found that the disqualification of the petitioner as Director without prior notice was unjust. Consequently, the impugned order disqualifying the petitioner was set aside, following the terms of the previous judgment. The writ petition was allowed, with no costs imposed, and connected miscellaneous petitions were closed.

This detailed analysis of the judgment showcases the Court's interpretation of the Companies Act, 2013, and the importance of providing directors with the opportunity to rectify defaults before disqualification. The application of legal principles from a previous judgment to the present case demonstrates consistency in judicial decisions regarding director disqualification issues.