2021 (7) TMI 461 - HC - Companies Law

Seeking for reactivation of DIN/DSC of the Directors - disqualification of directors under Section 164 and 167 of the Companies Act, 2013 - HELD THAT - In cases where directors have been disqualified prior to 7th May, 2018, the proviso to Section 167(1)(a) would not apply and the directors would continue to be directors in companies other than the defaulting company. The disqualification of such directors qua active companies would therefore be liable to be set aside and their DIN and DSC s reactivated. Directors who have been disqualified post 7th May 2018, qua other active companies - HELD THAT - The DINs and DSCs of disqualified directors of struck off companies, who are also directors in active companies, may be reactivated qua the active companies, in line with the spirit of the CFSS-2020. Directors of active companies who have been disqualified - HELD THAT - In cases where directors of active companies have been disqualified, CFSS-2020 would squarely apply. Such directors would be entitled to avail of CFSS-2020 and file documents of the defaulting company. Disqualified directors of struck off companies seeking appointment as directors in other/new companies - HELD THAT - This scheme has been introduced in view of the COVID-19 pandemic with the aim to enable a fresh start to defaulting companies and directors of such companies. The disqualification of defaulting companies was a step which was taken sometime in 2016-17 in order to ensure that filing of regular returns and compliances are undertaken strictly as per the provisions of the Act - A substantial part of the disqualification period has already been completed. The introduction of the CFSS is itself a step for providing a fresh start . Under such circumstances, continuation of the disqualification would defeat the Scheme and its purpose. The CFSS-2020 was last extended till 31st December 2020. If the scheme is extended beyond 30th December, 2020, directors who fall in any of the categories mentioned above ought to be given an opportunity to avail of the same. Since the Petitioners wish to start a new business, their DIN/DSC ought to be reactivated within a period of one week to enable them to conduct their fresh business in accordance with law - Petition disposed off.

Summary

Issues Involved:
1. Disqualification of directors under Sections 164 and 167 of the Companies Act, 2013.
2. Deactivation of Director Identification Number (DIN) and Digital Signature Certificate (DSC).
3. Reactivation of DIN/DSC for starting a new business.
4. Interpretation of legal aspects based on previous judgments.
5. Categories of directors seeking setting aside of disqualification and activation of DIN/DSC.

Analysis:

1. Disqualification of Directors under Sections 164 and 167:
The judgment addresses the disqualification of directors under Sections 164 and 167 of the Companies Act, 2013. It distinguishes between directors disqualified before and after 7th May 2018. For directors disqualified before this date, the proviso to Section 167(1)(a) does not apply retrospectively, allowing them to continue as directors in companies other than the defaulting one. However, for directors disqualified post 7th May 2018, the proviso applies, leading to their cessation as directors in all companies. The judgment clarifies the implications of these provisions based on the timing of disqualification.

2. Deactivation of DIN and DSC:
The judgment discusses the deactivation of Director Identification Number (DIN) and Digital Signature Certificate (DSC) due to disqualification. It highlights the impact of deactivation on directors' ability to engage in new business ventures. The petitioners sought reactivation of their DIN/DSC to facilitate the commencement of a new business. The court's decision on reactivation is crucial for the petitioners' future business activities and compliance with legal requirements.

3. Reactivation of DIN/DSC for Starting a New Business:
The petitioners, former directors of a struck-off company, aimed to start a new business and requested the reactivation of their DIN/DSC. The judgment emphasizes the importance of reactivating these identifiers for individuals seeking to engage in new business endeavors. The court's decision to permit the reactivation within a specified timeframe is essential for enabling the petitioners to conduct their fresh business activities lawfully.

4. Interpretation of Legal Aspects Based on Previous Judgments:
The judgment references previous legal decisions, such as Mukut Pathak, Sandeep Agarwal, and Radhika Byrne cases, to analyze the legal aspects related to director disqualification and reactivation of DIN/DSC. These judgments provide a framework for interpreting the provisions of the Companies Act, 2013, and determining the rights and obligations of disqualified directors in different scenarios. The court's reliance on these precedents adds depth to the legal analysis in the current case.

5. Categories of Directors Seeking Setting Aside of Disqualification:
The judgment categorizes directors into four groups based on the timing and nature of their disqualification. It discusses the implications of disqualification for directors of struck-off companies and those involved in active companies. The court's analysis distinguishes between directors disqualified before and after specific dates and outlines the eligibility of directors to avail themselves of the benefits under the CFSS-2020 scheme. The judgment's detailed examination of different categories of directors seeking relief provides clarity on the application of legal provisions in varied circumstances.

In conclusion, the judgment by Justice Prathiba M. Singh of the Delhi High Court offers a comprehensive analysis of the issues related to director disqualification, reactivation of DIN/DSC, and the application of legal provisions based on previous judgments. The decision provides clarity on the rights and obligations of disqualified directors and sets a precedent for addressing similar cases in the future.