2020 (9) TMI 1088 - HC - Companies Law

Companies Fresh Start Scheme (CFSS) 2020 - Defaulting company - Publication of the name of the Petitioner in the list of disqualified directors - Disqualification as a director under Section 164 of the Companies Act, 2013 - alleged non-compliance by DCDPL in filing its returns from 2014-2017. Whether the DIN of the Petitioner is liable to be activated for the two companies ABMR and DCD Grand? - HELD THAT - The DIN of the Petitioner herein was deactivated and he was disqualified prior to the proviso to Section 167(1)(a) taking effect. Thus, qua ABMR and DCD Grand, the Petitioner s disqualification is not sustainable. Whether the Petitioner can be considered as a Director of DCDPL? - HELD THAT - The ROC s stand that the shareholders can nominate a new director and approval for the same can be sought, would not be an answer, as the same could in effect result in dummy directors being appointed to Companies, which is exactly what the new provisions may have intended to avoid. In any event, so long as the present case is covered by the Mukut Pathak 2019 (11) TMI 319 - DELHI HIGH COURT decision, the Petitioner does not demit office and would be entitled to act as a Director in DCDPL. Whether the Petitioner can file the Returns on behalf of the defaulting company DCDPL, which wishes to avail of the Scheme? - HELD THAT - The answer to the same would be in the affirmative. As held by this Court recently, vide order dated 2nd September 2020, in Sandeep Agarwal Anr. Vs. Union of India Anr 2020 (9) TMI 175 - DELHI HIGH COURT the purpose of the Scheme is to provide an opportunity for active companies, who may have defaulted in filing of documents, to put their affairs in order. The Scheme is a fresh lease of life given to defaulting companies, which are not yet declared Inactive , to file their returns and do their businesses in accordance with law - The scheme is an ENABLER and not a DISABLER for defaulting but active companies. The Petitioner would be entitled to avail of the Scheme to file documents of the defaulting company, which is still an active company whose name has not been struck off. Petition allowed.

Summary

Issues:
1. Disqualification of a director under Section 164 of the Companies Act, 2013 and freezing of DIN and DSC.
2. Challenge to the disqualification and seeking relief under the Companies Fresh Start Scheme, 2020.
3. Interpretation of relevant legal provisions and judgments regarding director disqualification and company compliance.

Issue 1: Disqualification of a Director and Freezing of DIN and DSC:
The petitioner, a director in three companies, was disqualified under Section 164 of the Companies Act, 2013 due to non-compliance by one of the companies in filing returns. The Director Identification Number (DIN) and Digital Signature Certificate (DSC) of the petitioner were also frozen. The petitioner sought to challenge the disqualification and freezing of DIN and DSC, arguing that the disqualification should not apply retroactively based on legal provisions and previous judgments.

Issue 2: Challenge Under Companies Fresh Start Scheme, 2020:
The petitioner relied on the Companies Fresh Start Scheme, 2020 to argue for relief from disqualification and freezing of DIN and DSC. The Scheme aimed to allow defaulting active companies to file belated documents without facing additional penalties. The petitioner sought to avail of the Scheme to file documents for the defaulting company, which was still active. The court analyzed the provisions of the Scheme and previous judgments to determine the petitioner's eligibility for relief under the Scheme.

Issue 3: Interpretation of Legal Provisions and Judgments:
The court considered the legal provisions of Section 164 of the Companies Act, 2013, and relevant judgments such as Mukut Pathak case to interpret the disqualification of directors and company compliance requirements. The court noted that the disqualification provisions should not have retrospective effect and analyzed the implications of the judgments on the petitioner's case. The court also examined the purpose and intent of the Companies Fresh Start Scheme, 2020 in providing a fresh start for defaulting active companies to comply with regulations amid economic disruptions caused by COVID-19.

The judgment by Justice Prathiba M. Singh allowed the petitioner to avail of the Companies Fresh Start Scheme, 2020 to file documents for the defaulting company that was still active. The court held that the disqualification of the petitioner was not sustainable for two companies based on previous judgments. The court emphasized the importance of enabling defaulting active companies to comply with regulations and conduct business lawfully. The petitioner was granted relief under the Scheme, and the court issued specific directions for compliance within the given deadline.