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2021 (2) TMI 843 - HC - Companies LawDe-activation of the Director Identification Number - Section 164(2) of the Companies Act 2013 - HELD THAT - Similar issue decided in the judgment of the Gujarat High Court in 2019 (1) TMI 27 - GUJARAT HIGH COURT where it was held that The writ petition for challenge to the de-activation of the Director Identification Number are 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. The opposite parties would however be at liberty to take legal action against the petitioner for any statutory default or non-compliance of the provisions of the Act of 2013.
Issues Involved:
1. Deactivation of Director Identification Number (DIN) under Section 164(2) of the Companies Act, 2013. 2. Applicability of Section 164(2) retrospectively. 3. Validity of the list of disqualified directors. 4. Legal procedure for deactivation or cancellation of DIN. 5. Reliance on the Condonation of Delay Scheme. Detailed Analysis: 1. Deactivation of Director Identification Number (DIN) under Section 164(2) of the Companies Act, 2013: The petitioner challenged the deactivation of their DIN, which was invoked under Section 164(2) of the Companies Act, 2013. The petitioner sought a direction to reactivate their DIN, arguing that the disqualification in one company should not affect their directorship in other companies. 2. Applicability of Section 164(2) retrospectively: The court referred to the Gujarat High Court's judgment in Special Civil Application No. 22435 of 2017, which clarified that Section 164(2) of the Companies Act, 2013, should be applied prospectively and not retrospectively. The court emphasized that the provision came into force on April 1, 2014, and thus, the three financial years for disqualification should be counted from 2014-15, 2015-16, and 2016-17. The court rejected the respondents' argument that the financial years should include 2013-14, as it would imply a retrospective application of the law, which is generally presumed to be prospective unless explicitly stated otherwise. 3. Validity of the list of disqualified directors: The court found that the list of disqualified directors published on September 12, 2017, was premature and untenable at law. The disqualification under Section 164(2) would only be triggered after the financial year 2016-17, and thus, the list showing disqualification from November 1, 2016, to October 31, 2021, was unjustified. The court quashed and set aside the impugned list, stating that the publication of such a list was not in consonance with the provisions of Section 164(2). 4. Legal procedure for deactivation or cancellation of DIN: The court examined the relevant provisions of the Companies Act and the Companies (Appointment and Qualification of Directors) Rules, 2014. It noted that Rule 11 of the said Rules does not provide for the suo motu deactivation or cancellation of DIN by the authorities. The court held that the deactivation of the petitioner's DIN was not legally tenable as the grounds for such action were not met under Rule 11. The court emphasized that once a DIN is allotted, it is valid for the lifetime of the applicant and cannot be deactivated merely because one of the companies in which the individual was a director was struck off. 5. Reliance on the Condonation of Delay Scheme: The court addressed the respondents' reliance on the Condonation of Delay Scheme introduced by the Ministry of Corporate Affairs. The scheme, which was in force from January 1, 2018, to March 31, 2018, and extended to May 2018, allowed directors of struck-off companies to rectify defaults. However, the court held that the scheme could not justify the premature publication of the disqualification list. The court noted that due to the deactivation of the DINs, the concerned directors were unable to benefit from the scheme, rendering the reliance on the scheme irrelevant. Conclusion: The writ petition challenging the deactivation of the DIN was allowed. The court directed the respondents to reactivate the DIN for use in other companies, while reserving the right to take legal action against the petitioner for any statutory default or non-compliance with the Companies Act, 2013, in accordance with the law.
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