2019 (10) TMI 377 - HC - Companies Law

Resolution passed by the Board of Directors consisting of director not having DIN - Attachment of decretal amount - release of the amount deposited in the treasury to the respondent/decree-holder - Section 266 A of the Companies Act, 2006 - HELD THAT - A perusal of Section 266 A of the Companies Act, 2006 reveals that every person intending to be appointed as a Director of a company or a Director of Company appointed before commencement of the Companies Amendment Act, 2006 was required to make an application for allotment of Director Identification Number to the Central Government and that every director appointed before the commencement of the Companies Amendment Act, 2006 was required to make the application within 60 days of the commencement of the said Act to the Central Government - Further Rule 2(1)(d) of the aforementioned Rules stipulates Director Identification Number as a requirement not only for any person to be appointed as Director but also for an existing Director of a company for the purpose of his identification as a Director of a company . A person not possessing a DIN under Section 154 of the Act is not eligible to be appointed as a Director or to continue as a Director of a Company as he incurs a disqualification for appointment as a Director in terms of Section 164(1)(h) of the Act and in terms of Section 167 of the Act, the office of such a Director becomes vacant as he incurs the disqualification specified under Section 164 which inter alia includes ineligibility for appointment as a Director of a Company in the absence of allotment of DIN read with Rule 2(1)(d) of the Rules, which defines DIN as an identification number allotted to an individual intending to be appointed as director or to any existing director of a company for the purpose of his identification as a director of a company. Order set aside - the execution application is held to be non maintainable - M/s H.S. Tuli Sons Builders Pvt. Ltd. (decree holder) shall be at liberty to recover the amount owed to it by the petitioner in accordance with law.

Summary

Issues Involved:
1. Competence to file the execution application.
2. Validity of the resolution authorizing the execution application.
3. Requirement of Director Identification Number (DIN) for directors.
4. Calculation of the decretal amount and interest.

Detailed Analysis:

1. Competence to File the Execution Application:
The petitioner contended that the execution application was not filed by a competent person, as it was based on a resolution from a dissolved company (M/s Harbans Singh Tuli and Sons Builders Pvt. Ltd.). The respondent argued that the resolution was actually from M/s H.S. Tuli and Sons Builders Pvt. Ltd., which had a typographical error. Upon verification of the original resolution book, the petitioner did not press this objection further.

2. Validity of the Resolution Authorizing the Execution Application:
The petitioner argued that the execution application was invalid as the resolution authorizing it was passed by directors without a Director Identification Number (DIN), as required by the Companies Act, 2013. The respondent conceded that the directors did not possess DINs but argued that this objection was not raised before the Executing Court. The court held that non-possession of DIN disqualified the directors from acting, rendering the resolution invalid.

3. Requirement of Director Identification Number (DIN) for Directors:
The court examined Sections 152, 164, and 167 of the Companies Act, 2013, and Rule 2(1)(d) of the Companies (Appointment and Qualification of Directors) Rules, 2014. It concluded that DIN is mandatory for all directors, and non-possession leads to disqualification and vacation of office. Consequently, the resolution passed by the board without DINs was invalid, and any proceedings based on such a resolution were null.

4. Calculation of the Decretal Amount and Interest:
The petitioner objected to the calculation of interest, arguing that the Executing Court incorrectly clubbed the principal amount with interest for future interest calculations. The respondent countered that the calculations were correct as per the order dated 04.10.2006, which had attained finality. The court did not need to address this objection in detail due to the acceptance of the primary objection regarding the non-maintainability of the execution proceedings.

Conclusion:
The court set aside the orders dated 13.10.2018 and 05.11.2018, holding that the execution application was non-maintainable due to the directors' non-possession of DINs. However, it allowed M/s H.S. Tuli & Sons Builders Pvt. Ltd. the liberty to recover the amount owed in accordance with the law.