2017 (10) TMI 1067 - HC - Companies Law

Default in filing the annual returns and consequent disqualification of the Directors to rectify the defect - Held that - In the light of the fact that a defaulting company is allowed to rectify the defect by filing the returns which have not been filed earlier, the natural corollary of the same would be that the designated/competent authority is required to take the same into consideration. As the filing has to be done through e-platform, the same cannot be done unless access is provided to. The authorized individual/Director has to file the same, which obviously requires providing access by the authorities. In the light of the above discussion, there shall be a direction to respondent No.1 to restore DIN Numbers 00057433 and 00129701 of petitioners 2 and 3 insofar as petitioner No.1-Company, so as to enable them to submit annual returns of petitioner No.1 Company for the years 2011-12 to 2015-16 and further financial statements for the years 2012-13 to 2015-16 in compliance with Rule 14 of the afore-stated Rules read with Form DIR-8, Form DIR-9 and Form DIR-10.

Summary

Issues involved:

1. Lacuna in the procedure for defaulting companies in filing annual returns and consequent disqualification of directors.

Analysis:

The judgment addresses the issue of a procedural gap in the Companies (Appointment and Qualification of Directors) Rules, 2014, concerning defaulting companies and the disqualification of directors. The court notes that Rule 14 of the said Rules allows defaulting companies to rectify the defect by filing their returns but lacks clarity on the actions required by authorities. The court emphasizes the need for designated authorities to consider filings by defaulting companies, as access to the e-platform for filing is essential. The court references a report by the Companies Law Committee highlighting the anomaly of disqualification extending to individuals across companies. The court opines that the disqualification scope should be limited to the defaulting company only.

The judgment directs respondent No.1 to restore DIN Numbers of petitioners 2 and 3, enabling them to submit annual returns and financial statements for the specified years in compliance with Rule 14 and relevant forms. This direction aims to rectify the disqualification issue faced by the directors due to the defaulting company's non-compliance with filing requirements. The court's decision seeks to address the procedural lacuna and ensure that directors are not unfairly penalized for the company's defaults.