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2021 (3) TMI 433 - HC - Companies LawDe-activation of the Director Identification Number - Section 164(2) of the Companies Act, 2013 - HELD THAT - Similar controversy was raised in other High Courts and after considering the issue at length, the Gujarat High Court decided batch of petitions in GAURANG BALVANTLAL SHAH S/O BALVANTLAL SHAH VERSUS UNION OF INDIA 2019 (1) TMI 27 - GUJARAT HIGH COURT - 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 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 - Decided in favor of petitioner.
Issues Involved:
1. Deactivation of 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 impugned list showing disqualified directors. 4. Legal tenability of deactivating DINs based on disqualification. 5. Relevance of the Condonation of Delay Scheme. Issue-wise Detailed Analysis: 1. Deactivation of Director Identification Number (DIN) under Section 164(2) of the Companies Act, 2013: The petitioner challenged the deactivation of his DIN, arguing it was unjustified as the disqualification in one company should not affect his directorship in other companies. The High Court acknowledged that the petitioner was disqualified due to defaults in one company but emphasized that the activation of the DIN is necessary for the petitioner to continue as a director in other companies. 2. Prospective vs. Retrospective Application of Section 164(2) of the Companies Act, 2013: The Court referred to the Gujarat High Court's judgment in Special Civil Application No. 22435 of 2017, which clarified that Section 164(2) should be applied prospectively. It stated, "the said provision has come into force w.e.f. 1.4.2014," and hence, the three financial years should be counted from 2014-15, 2015-16, and 2016-17. The Court emphasized that applying Section 164(2) retrospectively would be contrary to legal principles, as it would impose new liabilities on actions taken before the law was enacted. 3. Validity of the Impugned List Showing Disqualified Directors: The Court found the impugned list, which disqualified directors from 1.11.2016 to 31.10.2021, to be premature and legally untenable. It stated, "the impugned list dated 12.9.2017 showing the petitioners as disqualified for a period of five years from 1.11.2016 to 31.10.2021... appears to be not only premature, but untenable at law." The Court held that disqualification under Section 164(2) would only be valid after the defaults occurred post-1.4.2017. 4. Legal Tenability of Deactivating DINs Based on Disqualification: The Court examined Rule 11 of the Companies (Appointment and Qualification of Directors) Rules, 2014, which outlines the grounds for cancellation or deactivation of DIN. The Court concluded that Rule 11 does not authorize the suo motu deactivation of DINs by the Central Government or any authority based on disqualification under Section 164(2). It stated, "the action of the respondents in deactivating the DINs of the petitioners... was not legally tenable." 5. Relevance of the Condonation of Delay Scheme: The Court addressed the Condonation of Delay Scheme introduced by the Ministry of Corporate Affairs, which allowed directors of struck-off companies to rectify defaults. However, the Court noted that the scheme could not justify the publication of the impugned list, as the scheme was applicable from 1.1.2018 to 31.3.2018, and the disqualification period mentioned in the list was premature. The Court held that the scheme did not alter the prospective application of Section 164(2). Conclusion: The writ petition challenging the deactivation of the DIN was allowed. The Court directed the respondents to activate the DIN for use in other companies, while retaining the liberty to take legal action against the petitioner for any statutory default or non-compliance with the Companies Act, 2013. The judgment emphasized the prospective application of Section 164(2) and invalidated the premature disqualification and deactivation actions taken by the respondents.
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