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2021 (1) TMI 817 - HC - Companies LawValidity of de-activation of the Director Identification Number - invocation of Section 164(2) of the Companies Act, 2013 - seeking direction to activate the Director Identification Number allotted to the petitioner - HELD THAT - Similar controversy was raised in other High Courts and after considering the issue at length, the Gujarat High Court in GAURANG BALVANTLAL SHAH S/O BALVANTLAL SHAH VERSUS UNION OF INDIA 2019 (1) TMI 27 - GUJARAT HIGH COURT . The Special Civil Application has been allowed. Therein also, the name of the petitioner was struck off from the list of Director of various companies. The publication of which was made under Section 248 of the Act of 2013. A direction to activate the Director Identification Number of the petitioner forthwith has been given, if not activated so far. It was however with the liberty to take legal action against the petitioner for any statutory default or non-compliance of the provisions of the Companies Act. The writ petition for challenge to the de-activation of the Director Identification Number is allowed . It was de-activated on account of dis-qualification in one company effecting Director Identification Number for the other companies. The opposite parties are directed to activate the Director Identification Number for use for other company.
Issues Involved:
1. Challenge to the de-activation of the Director Identification Number (DIN) under Section 164(2) of the Companies Act, 2013. 2. Prospective vs. Retrospective application of Section 164(2) of the Companies Act, 2013. 3. Validity of the list of disqualified directors published on 12.09.2017. 4. Legality of deactivation of DINs of directors of "struck off" companies. 5. Relevance of the condonation of delay scheme dated 29.12.2017. Issue-wise Detailed Analysis: 1. Challenge to the de-activation of the Director Identification Number (DIN) under Section 164(2) of the Companies Act, 2013: The petitioner challenged the deactivation of their DIN, arguing it was necessary for their role as a director in other companies. The court noted that similar issues had been considered by other High Courts, including the Gujarat High Court, which had ruled in favor of reactivating DINs under similar circumstances. 2. Prospective vs. Retrospective application of Section 164(2) of the Companies Act, 2013: The court analyzed Section 164 of the Companies Act, 2013, which deals with disqualifications for appointment as a director. It was clarified that Section 164(2) applies prospectively from 01.04.2014. The financial years considered for disqualification under this section should be 2014-15, 2015-16, and 2016-17. The court emphasized that applying this section retrospectively would be unfair and against established legal principles, citing Supreme Court judgments to support this view. 3. Validity of the list of disqualified directors published on 12.09.2017: The court found the list of disqualified directors published on 12.09.2017 to be premature and legally untenable. It stated that disqualification under Section 164(2) would only take effect after the due dates for filing annual returns and financial statements for the financial year 2016-17 had passed, which would be after 30.11.2017. Therefore, the list showing disqualifications from 01.11.2016 to 31.10.2021 was invalid. 4. Legality of deactivation of DINs of directors of "struck off" companies: The court examined the relevant rules and found that Rule 11 of the Companies (Appointment and Qualification of Directors) Rules, 2014, does not provide for the deactivation of DINs of directors of "struck off" companies. The DIN, once allotted, is valid for the lifetime of the applicant and cannot be deactivated except under specific circumstances outlined in Rule 11, none of which applied in this case. Therefore, the deactivation of the petitioner's DIN was deemed illegal. 5. Relevance of the condonation of delay scheme dated 29.12.2017: The court noted that the condonation of delay scheme introduced by the Ministry of Corporate Affairs could not justify the publication of the impugned list. The scheme was intended to allow directors of "struck off" companies to rectify defaults, but the premature deactivation of DINs prevented them from availing of this scheme. The court reiterated that the financial years for disqualification should be counted from 2014-15, not 2013-14, making the scheme inapplicable in justifying the list. Conclusion: The writ petition challenging the deactivation of the DIN was allowed. The court directed the authorities to reactivate the DIN for use in other companies, while maintaining the liberty to take legal action against the petitioner for any statutory defaults or non-compliance with the Companies Act, 2013, in accordance with the law.
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