2022 (8) TMI 767 - HC - Companies Law

Disqualification of Director - Seeking direction to the respondents to activate the petitioner s Director Identification Number 01858905 in order to enable him to continue as and be re-appointed as Director in active companies that have complied with the statute - HELD THAT - The guidelines require the Registrar to examine the application for striking off before issuing notice to the company under Section 560(3) of the Companies Act 1956. The further requirement under Section 560(3) is that on expiration of 30 days and on being satisfied that the application is otherwise in order the Registrar shall strike the company s name off the Register and send a notice for publication in the Official Gazette. The applicant company will stand dissolved from the date of publication of the notification. Ext.P6 reveals that the notice regarding striking off and dissolution of Margin Free Kuries Pvt Ltd was forwarded to the Government of India Press. As such the entire procedure contemplated under Section 560 and the guidelines stood complied with the company s name stood struck off from the register and the company itself got dissolved. It is preposterous for the respondents to contend that the petitioner was disqualified for failure to submit returns with respect to a dissolved company. It is disheartening to note that even when the anomaly with respect to the status of the company was informed to the second respondent absolutely nothing was done by the respondents. Petition allowed.

Summary

Issues:
1. Disqualification of petitioner under Section 164(2) of the Companies Act, 2013.
2. Deactivation of petitioner's Director Identification Number (DIN).
3. Alleged illegal actions by the second respondent.
4. Request for relief through a writ petition.

Analysis:

1. The petitioner, a Director of a defunct company, filed for striking off and dissolution under Section 560 of the Companies Act, 1956. The Government issued guidelines for Fast Track Exit mode for defunct companies. Despite following the prescribed procedure, the petitioner's company's status was inaccurately shown as 'under process of striking off' on the website. This led to the petitioner's DIN being disqualified and deactivated, affecting his directorship in other companies. The petitioner challenged this disqualification, arguing that the company had been dissolved as per the guidelines, and the disqualification was unjustified.

2. The petitioner's counsel contended that the Registrar should issue a notice for striking off only after examining the application and confirming its compliance. In this case, the Registrar followed the procedure outlined in Section 560 of the Companies Act, 1956, leading to the dissolution of the company. Therefore, the disqualification of the petitioner based on the failure to file returns for a dissolved company was deemed incorrect and unjust by the petitioner.

3. The respondents argued that the petitioner's company had defaulted in filing statutory returns, leading to disqualification under Section 164(2) of the Act. They maintained that the disqualification was a statutory consequence of non-compliance, and no violation of natural justice occurred. The respondents identified disqualified Directors based on non-compliance with statutory requirements, justifying the disqualification and deactivation of the petitioner's DIN.

4. The High Court acknowledged the facts presented, emphasizing the discrepancy in the company's status on the website despite being dissolved. The Court agreed with the petitioner's counsel that the Registrar had followed the necessary procedures for striking off and dissolution. It criticized the respondents for penalizing the petitioner for their oversight and ruled in favor of the petitioner. The Court quashed the disqualification, directed the activation of the petitioner's DIN, and allowed him to continue as a Director in active companies, without imposing costs or compensation, hoping for immediate correction of the mistake.

In conclusion, the High Court's judgment favored the petitioner, highlighting procedural compliance, erroneous disqualification, and the need for fair and reasonable actions by public authorities.