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TMI Blog2019 (6) TMI 1076X X X X Extracts X X X X X X X X Extracts X X X X ..... , 6961/2018, 6962/2018,9050/2018, 9051/2018, 9052/2018, 9531/2018 &10113-10116/2018, 9786/2018, 10188/2018, 11652/2018, 11654/2018, 11657/2018, 11829/2018, 12062/2018, 12159/2018, 13075/2018, 13205-13206/2018, 13303/2018, 13304-13305/2018,13306/2018, 13307/2018, 13326-13327/2018,13531/2018, 13773/2018, 13784-13792/2018,13835/2018 & 17372-17376/2018, W.P.Nos.13853/2018C/W W.P.Nos.11865/2018, 17428/2018, 17430/2018,11509/2018 & 13263/2018, 12061/2018, 6876/2018,6853/2018, 15616-15617/2018, 15686/2018,8036/2018, 3842/2018, 3275/2018, 52350/2017,10187/2018, 56364/2017, 54832-54834/2017, 54260-54263/2017, 51408/2017, 52351/2017, 5112151122/2017, 15797/2018, 4669/2018, 3273/2018,14465/2018, 17149/2018, 14466/2018, 10752/2018,14464/2018, 8205/2018, 6854/2018, 2787627877/2018, 28554/2018, 27779-27780/2018, 55358-55359/2017, 51767-51768/2017, 52904-52906/2017, 53707/2017, 54766/2017, 54219-54220/2017, 54830-54831/2017, 53607-53609/2017, 47145-47146/2017,51769/2017, 49124/2017, 53237-53238/2017, 5609856099/2017, 56394/2017, 29857/2018, 27756/2018,29425/2018, 23905/2018, 26089-26090/2018, 27599-27600/2018, 27598/2018, 27891/2018, 26851-26852/2018, 27297-27298/2018, 27459-27461/2018,28185/2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... KUMAR, ADVOCATE FOR SMT. NALINA MAYEGOWDA, ADVOCATE) (BY SRI SANTHOSH S. NAGARALE, ADVOCATE) (BY SMT. SHYAMALA V. DEVAGIRI, ADVOCATE), (BY SRI C.K. NANDAKUMAR, ADVOCATE) (BY SRI SANTOSH S. NAGARALE, ADVOCATE) (BY SRI HARISH KUMAR M.S., ADVOCATE) (BY SRI SANTOSH S. NAGARALE, ADVOCATE) (BY SRI VAMSHI KRISHNA C., ADVOCATE) MR. JOSEPH LOUIS (BY SRI HARISH KUMAR M.S., ADVOCATE) (BY SRI VAMSHI KRISHNA C., ADVOCATE) (BY SRI SHYAM SUNDAR H.V., ADVOCATE) (BY SRI SOURABH R.K., ADVOCATE) (BY SRI GIRISH KODGI, ADVOCATE) (BY SRI SHYAM SUNDAR H.V., ADVOCATE) RESPONDENTS: (BY SRI PRABHULING NAVADGI, ADDL. SOLICITOR GENERAL FOR R-1 & R-2) A/W SMT. ANUPAMA HEGDE, CGC FOR R-1 & R-2) COMMON ORDER Part - 1 As common questions of fact and law arise in these writ petitions, they have been clubbed together, heard and disposed of by this common order. I have heard the learned senior counsel and learned counsel for the petitioners and learned Additional Solicitor General of India and other counsel for Union of India and respondents, and perused the pleadings and statement of objections filed on behalf of the respondents. 2. The Petitioners herein were directors of either public companies or private c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act are also mentioned: Sl. No. Writ Petition No. Whether Constitutional validity challenged? Date and period of Disqualificati on Name of the defaulting company in which petitioner/s is/are director/s Disqualificati on Under Section DIN Number Main Case Con. Case 1 52911/2017 No 1/11/2016 to 31/10/2021 Pondicherry Design Company Pvt. Ltd. 164(2)(a) 00272346 Connected With 1 49012/2018 Yes S. 164(2)(a) & Proviso to S. 167(1)(a) 1/11/2016 to 31/10/2021 M/s. Bangalore Hi- Tech Weaving Park Ltd. 164(2)(a) 2377082 2 49989- 49991/2018 No 1/11/2016 to 31/10/2021 1.Interstuhl Seatings (India) Pvt. Ltd.. [Petr Nos.1 to 3] 2.Suncity Karnataka Developers Pvt. Ltd. [Petr Nos.2 & 3] 164(2)(a) 00220454 (Petr-1) 00245107 (Petr-2) 00244162 (Petr-3) 3 50103/2018 Yes S.164(2)(a), 167(1)(a) & Provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Yes. 164(2)(a) 1/11/2016 to 31/10/2021 BRINDAVAN HOMES Pvt. Ltd. 164(2)(a) 2616838 14 53209/2018 Yes. 164(2)(a) 1/11/2016 to 31/10/2021 BRINDAVAN HOMES Pvt. Ltd. 164(2)(a) 7444488 15 53210/2018 Yes. 164(2)(a) 1/11/2016 to 31/10/2021 Shubh Laxmi Technologies Pvt. Ltd. 164(2)(a) 2603085 16 53442/2018 Yes S.164(2)(a), 167(1)(a) & Proviso to S.167(1)(a) 1/11/2016 to 31/10/2021 C&B Holdings & Projects Pvt. Ltd. 164(2)(a) 824081 17 52460/2018 Yes S.164(2)(a), 167(1)(a) & Proviso to S.167(1)(a) 1/11/2016 to 31/10/2021 M/s Adroitech Designing and Services Pvt. Ltd. 164(2)(a) 1129651 18 52610/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 Silver Events and Media Solutions Pvt. Ltd. 164(2)(a) 3118211 19 52611/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 M/s Circle Source Software Technologies Pvt. Ltd. 164(2)(a) 610624 20 52612/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 M/s Circle Source Software Technologies Pvt. Ltd. 164(2)(a) 610447 21 52766/2018 No 1/11/2016 to 31/10/2021 Prabhakar Power Projects Ltd. 164(2)(a) 2341879 22 52820- 52822/2018 No 1/11/2014 to 31/10/2019 1/11/2015 to 31/10/2020 1/11/2016 to 31/10/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80597 8 55323- 55324/2017 Yes S.164(2)(a) 1/11/2015 to 31/10/2020 ISIS Medicare and Research Center Pvt. Ltd. 164(2)(a) 01017091 (Petr-1) 3465422 (Petr-2) 9 55623/2017 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 M/s Valuemart Info Technologies Ltd. 164(2)(a) 134025 10 55702/2017 Yes S.164(2)(a) 1/11/2015 to 31/10/2020 & 1/11/2016 to 31/10/2021 Carbon Accessories Ltd. 164(2)(a) 00045060 11 55942/2017 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 1.Sunkabir Mobisolutions Pvt. Ltd. 164(2)(a) 364568 12 55949/2017 Yes S.164(2)(a) 1/11/2014 to 31/10/2019 1.M/s Euromarket Consult Services (India) Pvt. Ltd. 164(2)(a) 349450 13 55950/2017 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 1.M/s Euromarket Consult Services (India) Pvt. Ltd. 164 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2)(a) 1/11/2016 to 31/10/2021 Urban Reserves India Pvt. Ltd. (Petr Nos.1 & 2) 164(2)(a) 02088900 (Petr-1) 02100387 (Petr-2) 23 3840/2018 No 1/11/2016 to 31/10/2021 Vishnu Forge (Mysore) Ltd. (VFML) 164(2)(a) 3631105 24 3841/2018 No 1/11/2016 to 31/10/2021 1.Steel Theatres (Mysore) Pvt. Ltd. (STMPL) 2.Metal Cutters (Mysore) Pvt. Ltd. 3.Vishnu Forge (Mysore) Ltd.(VFML) 164(2)(a) 243868 25 3849/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 1.Prabhakar Power Projects Ltd. 2.Trigyn Technologies Ltd. 164(2)(a) 157346 26 3957/2018 No 1/11/2016 to 31/10/2021 1.MKS Biolabs Pvt. Ltd. 164(2)(a) 1743814 27 4741/2018 No 1/11/2016 &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Yes S.164(2)(a) 1/11/2016 to 31/10/2021 E-Merge Waste Management Solutions Pvt. Ltd. 164(2)(a) 25456 38 9531 & 10113-116/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 1.VDB AGRO Farms Pvt. Ltd. (Petr Nos.1 to 5) 164(2)(a) 01657095 (Petr-1) 01657135 (Petr-2) 01298669 (Petr-3) 02287392 (Petr-4) 02285795 (Petr-5) 39 9786/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 M/S.L.S Distributors Pvt. Ltd. 164(2)(a) 2628612 40 10188/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 1.PCPS India Pvt. Ltd. 2.Ecode Engineering Technologies Pvt. Ltd. 164(2)(a) 1602368 41 11652/2018 No 1/11/2015 to 31/10/2020 1.V Connect Relations Pvt. Ltd. 2.Kelan Kare Hygenic Pvt. Ltd. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 1.Trinetra Constructions Pvt. Ltd. 2.Atria Infrastructures Pvt. Ltd. 164(2)(a) 2062888 52 13307/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 1.Accupak Cartons Pvt. Ltd. 2.Kutub Power Co. Ltd. 3.Career vault BPO Services Pvt. Ltd. 164(2)(a) 27646 53 13326- 13327/2018 No 1/11/2014 to 31/10/2019 1/11/2016 to 31/10/2021 Zoet Vineyards Pvt. Ltd. (Petr Nos.1 & 2) 164(2)(a) 1389841 (Petr-1) 2049500 (Petr-2) 54 13531/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 1.Accupack Cartons Pvt. Ltd. 2.Marzdi Finance and Investments Pvt. Ltd. 164(2)(a) 480679 55 13773/2018 Yes S.164(2)(a) 1/11/2014 to 31/10/2019 M/s Health 24x7 Services India Pvt. Ltd. 164(2)(a) 2325879 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 31-10-2021 Nakoda Construction Pvt. Ltd. 164(2)(a) 545840 8 15616- 15617/2018 No 01-11-2016 to 31-10-2021 Malind Properties Pvt. Ltd. (Petr Nos.1 & 2) 164(2)(a) 2689814 (Petr-1) 3175306 (Petr-2) 9 15686/2018 No 01-11-2016 to 31-10-2021 M/s Garuda Vriddhi Boday Care Pvt. Ltd. 164(2)(a) 3137661 10 8036/2018 No 01-11-2016 to 31-10-2021 1.M/s.J.H.Patel Hotels India Pvt. Ltd. 164(2)(a) 1714991 11 3842/2018 No 01-11-2016 to 31-10-2021 1.Steel Theatres (Mysore) Pvt. Ltd. (Stmpl) 2.Mysore Food And Farm Products Pvt. Ltd.(Mfafppl) 3.Mrs Ramaiah Investments Pvt. Ltd. (Mrsripl) 4.Vishnu Forge (Mysore) Ltd. (Vfml) 5. Metal Cutters (Mysore) Pvt. Ltd. 164(2)(a) 116353 12 3275/2018 No 01-11-2016 to 31-10-2021 Staal & Alliage Trading Pvt. Ltd. 164(2)(a) 3553233 13 52350/2017 No 01-11-2014 to 31-10-2019 Tag Media Network Pvt. Ltd. 164(2)(a) 1888830 14 10187/2018 Yes, Proviso to Sec.164(2), 164(3), 167(1)(a), 167(1)(f)Provisions of Part III of the Indian Constitution 01-11-2015 to 31-10-2020 Thinkspan Technologies Pvt. Ltd. 164(2)(a) 01802769 15 56364/2017 Yes S.164(2)(a) 01-11-20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; to 31/10/2019 Hitkari Land and Finance Pvt. Ltd. (HLFPL) 164(2)(a) 716093 26 14466/2018 YES. Proviso to Sec.164(2), 164(3), 167(1)(a), 167(1)(f) 01-11-2015 to 31-10-2020 1.Adhithyaa Eshan Food Zone Pvt. Ltd. 2.V.E.E. Agri Packaging Pvt. Ltd. 164(2)(a) 3298096 27 10752/2018 YES. Proviso to Sec.164(2), 164(3), 167(1)(a), 167(1)(f) 01-11-2015 to 31-10-2020 Jagadish Sugars Ltd. 164(2)(a) 3444916 28 14464/2018 YES. Proviso to Sec.164(2), 164(3), 167(1)(a), 167(1)(f) 01-11-2015 to 31-10-2020 1.Adhithyaa Eshan Food Zone Pvt. Ltd. 2.V.E.E. Agri Packaging Pvt. Ltd. 164(2)(a) 3305472 29 8205/2018 Yes S.164(2)(a) 01-11-2014 to 31-10-2019 KOIOS Softtech Pvt. Ltd. 164(2)(a) 3219243 30 6854/2018 No 1/11/2016 to 31/10/2021 Nakoda Construction Pvt. Ltd. 164(2)(a) 299476 31 27876- 27877/2018 No 01-11-2014 to 31-10-2019 1.Quetzel Designs (India) Pvt. Ltd. (Petr Nos.1 & 2) 164(2)(a) 1770264 (Petr-1) 1783285 (Petr-2) 32 28554/2018 Yes S.164(2)(a) 01-11-2016 to 31-10-2021 Regal Machine Tools Pvt. Ltd. 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01858180 (Petr-2) 02370728 (Petr-3) 42 47145- 47146/2017 No 01-11-2016 to 31-10-2021 Aparajita Hospitality Services Pvt. Ltd. (Pet.Nos.1 and 2) 164(2)(a) 266555 (Petr-1) 1365708 (Petr-2) 43 51769/2017 No 01-11-2015 to 31-10-2020 LXY Homes Pvt. Ltd. 164(2)(a) 24837 44 49124/2017 Yes S.164(2)(a) 1/11/2015 to 31/10/2020 Bright Horizons Child Care Services Pvt. Ltd. 164(2)(a) 18155 45 53237- 53238/2017 Yes S.164(2)(a) 1/11/2015 to 31/10/2015 Bright Horizons Child Care Services Pvt. Ltd. (Pet.Nos.1 to 3) 164(2)(a) 3508545 (Petr-1) 3508551 (Petr-2) 18155 (Petr-3) 46 56098- 56099/2017 No 1/11/2016 to 31/10/2021 Mulder Trading Pvt. Ltd. (Pet.No.1 and 2) 164(2)(a) 00233146 (Petr-1) 00237723 (Petr-2) 47 56394/2017 Yes S.164(2)(a) 01-11-2016 to 31-10-2021 1.G.G. Tronics Minings India Pvt. Ltd. 164(2)(a) 2066206 48 29857/2018 No 01-11-2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Pvt. Ltd. (Petr Nos.1 & 2) 164(2)(a) 2586853 (Petr-1) 02586411 (Petr-2) 63 27926/2018 No 01-11-2016 to 31-10-2021 Celebration Software Development Park Pvt. Ltd. 164(2)(a) 3474437 64 27927/2018 No 01-11-2016 to 31-10-2021 Celebration Software Development Park Pvt. Ltd. 164(2)(a) 3430989 65 27564/2018 No 01-11-2014 to 31-10-2019 Urban Blocks Solutions Pvt. Ltd. 164(2)(a) 1690689 66 11324/2018 YES. Proviso to Sec.164(2), 164(3), 167(1)(a), 167(1)(f) 01-11-2015 to 31-10-2020 1.Indoha Engineers Pvt. Ltd. 164(2)(a) 414011 Sl. No. Writ Petition No. Whether Constitutional validity challenged? Date and period of Disqualificati on Name of the defaulting company in which petitioner/s is/are director/s Disqualificati on Under Section DIN Number Main Case Con. Case 67 11656/2018 YES. Proviso to Sec.164(2), 164(3), 167(1)(a), 167(1)(f) 01-11-2015 to 31-10-2020 1.Sri Bala Finance and Investment Advisory Services Pvt. Ltd. 164(2)(a) 596773 68 27890/2018 No 01-11-2016 to 31-10-2021 Casto Castings India Ltd. 164(2)(a) 2132670 69 27601/2018 Yes S.164(2)(a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 732-734/2018 No 01-11-2014 to 31-10-2019 Longas Autogas India Pvt. Ltd. (Petr Nos.1 to 3) 164(2)(a) 01616647 (Petr-1) 01778418 (Petr-2) 03583091 (Petr-3) 85 27548-549/2018 No 01-11-2016 to 31-10-2021 Prime Finstock (India) Pvt. Ltd. (Petr Nos.1 & 2) 164(2)(a) 01016926 (Petr-1) 01016988 (Petr-2) 86 31035/2018 Yes S.164(2)(a) 01-11-2016 to 31-10-2021 Kripa Cleanworld Equipments Pvt. Ltd. 164(2)(a) 1792893 87 28620/2018 No 01-11-2016 to 31-10-2021 Kissan Ghar Urban & Rural Infrastructure Pvt. Ltd. 164(2)(a) 1276241 88 31575/2018 No 01-11-2016 to 31-10-2021 Parmarth Labs Pvt. Ltd. 164(2)(a) 2374595 89 31576/2018 No 01-11-2016 to 31-10-2021 Parmarth Labs Pvt. Ltd. 164(2)(a) 1765663 90 24976/2018 No 01-11-2016 to 31-10-2021 1.Tidel Silk Technologies Ltd. 2.Blue River Entertainment Pvt. Ltd. 3.Renaissance Clinical and Translational Science Institute (LLP) 164(2)(a) 2757599 91 31172/2018 Yes S.164(2)(a) 01-11-2016 to 31-10-2021 1.Vamsi Infrastructure Project Company Pvt. Ltd. 2.Vamsicon Projects Pvt. Ltd. 164(2)(a) 3297468 92 25036/2018 25298/2018 & No 01-11-2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 1/11/2016 to 31/10/2021 M/s.Rohan Infra Tech Pvt. Ltd. (Pet.No.2 and 3) 164(2)(a) 01194648 (Petr-2) 02759463 (Petr-3) 66 17427/2018 No 1/11/2016 to 31/10/2021 Salt Social Media Pvt. Ltd. 164(2)(a) 1761383 67 17429/2018 No 1/11/2016 to 31/10/2021 * Tuning Fork Technologies Pvt. Ltd. * Salt Social media Pvt. Ltd. 164(2)(a) 1761471 68 17456/2018 YES. Proviso to Sec.164(2), 164(3), 167(1)(a), 167(1)(f) 1/11/2015 to 31/10/2020 DR Krunch Technologies Pvt. Ltd. 164(2) 649660 69 18384/2018 No 1/11/2016 to 31/10/2021 BCIL Little Acre Resorts Pvt. Ltd. 164(2)(a) 1986202 70 19712- 19713/2018 No 1/11/2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Con. Case 76 22008/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 GBMT Structural Steel manufacturing Industries Pvt. Ltd. 164(2)(a) 2927288 77 22010/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 DATSI IT Solutions Pvt. Ltd. 164(2)(a) 2719527 78 22011/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 M/s.GBMT Structural Steel manufacturing Industries Pvt. Ltd. 164(2)(a) 2927266 79 22122- 22123/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 1.Venika Green Power Pvt. Ltd. 2.Venika Rain Power Pvt. Ltd. 3.Venika Renewable Energy Pvt. Ltd. 4.Rain Energy India Pvt. Ltd. 5.Aqua Green Energy India Pvt. Ltd. 6.Sampada Holdings private Ltd. 7.Chandra Power Projects Pvt. Ltd. 164(2)(a) 01927660 (Petr-1) 01633344 (Petr-2) 80 22124- 22125/2018 Yes S.164(2)(a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; to 31/10/2021 Green Park Solutions Pvt. Ltd. 164(2)(a) 2451860 90 22706/2018 No 1/11/2016 to 31/10/2021 M/s.XP Software Solutions Pvt. Ltd. 164(2)(a) 983935 91 22800/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 M/s.Aparna Power Ltd. 164(2)(a) 639818 Sl. No. Writ Petition No. Whether Constitutional validity challenged? Date and period of Disqualificati on Name of the defaulting company in which petitioner/s is/are director/s Disqualificati on Under Section DIN Number Main Case Con. Case 92 22801/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 M/s.Aparna Power Ltd. 164(2)(a) 340613 93 22819- 22821/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 1.Altivo Information Technologies Pvt. Ltd. 2. Gopalan Investments Pvt.&nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 31/10/2021 V.S.Stock Broking Pvt. Ltd. (Petr Nos.1 & 2) 164(2)(a) 0541217(P etr-1) 1936058(P etr-2) 99 24345- 24346/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 Sanwa Tec Pvt. Ltd. (Petr Nos.1 & 2) 164(2)(a) 01957098 (Petr-1) 03424705 (Petr-2) 100 25206/2018 No 1/11/2016 to 31/10/2021 1.Urban Blocks Solutions Pvt. Ltd. 2.Ausm Consulting and Technologies Pvt. Ltd. 164(2)(a) 2521652 Sl. No. Writ Petition No. Whether Constitutional validity challenged? Date and period of Disqualificati on Name of the defaulting company in which petitioner/s is/are director/s Disqualificati on Under Section DIN Number Main Case Con. Case 101 25683- 25684/2018 No 1/11/2014 to 31/10/2019 K.Raheja Hotels and Estates Pvt. Ltd. (Petr Nos.1 & 2) 164(2)(a) 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; to 31/10/2021 1.Sheshadri Mining Co.Pvt. Ltd. 2.Mariyappa Mines and Minerals Pvt. Ltd. Co., 3.VSJ Relators Pvt. Ltd. 164(2)(a) 1622939 12 32065- 32068/2018 No 1/11/2014 to 31/10/2019 Innovative Wine Park and Resorts Pvt. Ltd. 164(2)(a) 01756695 (Petr-1) 01194845 (Petr-2) 01195709 (Petr-3) 01683742 (Petr-4) 13 32069- 32071/2018 No 1/11/2015 to 31/10/2020 Grindwell Norton Managers Housing Pvt. Ltd. (Petr Nos.1 to 3) 164(2)(a) 00437964 (Petr-1) 00438026 (Petr-2) 00470260 (Petr-3) Sl. No. Writ Petition No. Whether Constitutional validity challenged? Date and period of Disqualificati on Name of the defaulting company in which petitioner/s is/are director/s Disqualificati on Under Section DIN Number Main Case Con. Case 14 32615/2018 Yes S.164(2)(a) 1/11/2015 &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; to 31/10/2021 M/s Hiba Constructions Pvt. Ltd. 164(2)(a) 182686 2 27892/2018 No 1/11/2016 to 31/10/2021 Casto Castings India Ltd. 164(2)(a) 2132513 3 27893/2018 No 1/11/2014 to 31/10/2019 Natural Street Pvt. Ltd. 164(2)(a) 3630712 4 32881/2018 Yes S.164(2)(a) 1/11/2015 to 31/10/2020 Meme Media Pvt. Ltd. 164(2)(a) 2058667 5 33080/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 M/s Sri Anjanadri Iron and Alloys Pvt. Ltd. 164(2)(a) 1670503 6 33933/2018 No 1/11/2016 to 31/10/2021 M/s.Irobot (India) Pvt. Ltd. 164(2)(a) 5243421 7 34002/2018 No 1/11/2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 31/10/2021 Abhinav fashions Pvt. Ltd. 164(2)(a) 381891 18 35332/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 M/s Saddles Automotive Seatings Pvt. Ltd. 164(2)(a) 3534076 19 38408/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 1.T.S Figure and Fittness Solutions Pvt. Ltd. 2.Ankit Glass Industries Pvt. Ltd. 164(2)(a) 2143592 20 38495/2018 Yes S.164(2)(a) 1/11/2015 to 31/10/2020 1. Gallery Mermaid Interior Concepts Pvt. Ltd. 3. Kwik Media Solutions Pvt. Ltd. 5.Mermaid Fabric and Art Solutions Pvt. Ltd. 164(2)(a) 2128420 21 34845/2018 No 1/11/2016 to 31/10/2021 Abhinav Fashions Pvt. Ltd. 164(2)(a) 1097530 22 34930/2018 & 35321/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 1.Simply Class Fashions Pvt. Ltd. 2.Rhea Holdings Pvt. Ltd. 3.Karuturi Farm Fresh Products P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. 4.Kwik Media Solutions Pvt. Ltd. 164(2)(a) 2589206 8 39348- 39349/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 1.People Connect Solutions Pvt. Ltd. 2.Sudhir Management Services and Finance Consultant Pvt. Ltd. 164(2)(a) 2519967 (Petr-1) 2590586 (Petr-2) 9 39814/2018 Yes S.164(2)(a) 1/11/2015 to 31/10/2020 1.Gallery Mermaid Interior Concepts Pvt. Ltd. 2.Mermaid Fabric and Art Solutions Pvt. Ltd. 3.Kwik Media Solutions Pvt. Ltd. 164(2)(a) 2592553 10 36625/2018 Yes S.164(2)(a) 1/11/2015 to 31/10/2020 1.Sai Mining Enterprises Pvt. Ltd. 2.Parivarthan Textile Pvt. Ltd. 164 (2)(a) 389387 11 40817/2018 No 1/11/2016 to 31/10/2021 1.Vishala India Minmetals Pvt. Ltd. 164 (2)(a) 1662063 12 41215/2018 Yes S. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section DIN Number Main Case Con. Case Pvt. Ltd. * Spas and Resorts India Pvt. Ltd. * Narthaki Infrastructure Pvt. Ltd. * White Stone Infrastructure Pvt. Ltd. 10. Vinela Exports and Imports Pvt. Ltd. 22 44521- 44522/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 1.Protein Entertainment Pvt. Ltd. * Hungry and Foolish Intellectual properties Pvt. Ltd. * Protein Family Entertainment Centres Pvt. Ltd. * Annapurna Protein Family Entertainment Centre Pvt. Ltd. * Rhiti MSD- N Motor Sport India Pvt. Ltd. * N9 Sports and Leisure Holdings Pvt. Ltd. 164 (2)(a) 337385 (Petr-1) 337429 (Petr-2) 23 40760/2018 Yes S.164(2)(a) 1/11/2016 to 31/10/2021 1.Colossuss Electric Company Pvt. Ltd. 164 (2)(a) 6539032 24 25707/2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Case Numbers is as per cause-list dated 27.03.2019. 7. On perusal of the aforesaid table, it could be gathered that the petitioners are directors either in public companies or private companies, or both, and the period of their disqualification have also been noted. They are aggrieved by they being disqualified on account of non-compliance with the provisions of Section 164(2)(a) of the Act and also the fact that during the pendency of their disqualification and during the pendency of most of these writ petitions, proviso to Section 167(1)(a) of the Act has been inserted. As a result of which, they have to vacate their office as director in all other companies where they are functioning as directors even though there is no default under Section 164(2) of the Act by the other companies. Part - 4 Legal frame work: 8. The relevant provisions of the Companies Act, 1956 (hereinafter referred to as "1956 Act" for the sake of convenience) and "the Act" are extracted as under: Relevant provisions of 1956 Act: 274. Disqualifications of directors.- (1) A person shall not be capable of being appointed director of a company, if - (a) he has been found to be of unsound mind by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) he fails to obtain within the time specified in sub-section (1) of section 270, or at any time thereafter ceases to hold, the share qualification, if any, required of him by the articles of the company; (b) he is found to be of unsound mind by a Court of competent jurisdiction; (c) he applies to be adjudicated an insolvent; (d) he is adjudged an insolvent; (e) he is convicted by a Court of any offence involving moral turpitude and sentence in respect thereof to imprisonment for not less than six months; (f) he fails to pay any call in respect of shares of the company held by him, whether alone or jointly with others, within six months from the last date fixed for the payment of the call unless the Central Government has, by notification in the Official Gazette, removed the disqualification incurred by such failure; (g) he absents himself from three consecutive meetings of the Board of directors, or from all meetings of the Board for a continuous period of three months, whichever is longer, without obtaining leave of absence from the Board; (h) he (whether by himself or by any person for his benefit or on his account), or any firm in which he is a partner or any priv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the company by post a registered letter referring to the first letter, and stating that no answer thereto has been received and that, if an answer is not received to the second letter within one month from the date thereof, a notice will be published in the Official Gazette with a view to striking the name of the company off the register. (4) If the Registrar either receives an answer from the company to the effect that it is not carrying on business or in operation, or does not within one month after sending the second letter receive any answer, he may publish in the Official Gazette, and send to the company by registered post, a notice that, at the expiration of three months from the date of that notice, the name of the company mentioned therein will, unless cause is shown to the contrary, be struck off the register and the company will be dissolved. (5) If, in any case where a company is being wound up, the Registrar has reasonable cause to believe either that no liquidator is acting, or that the affairs of the company have been completely wound up, and any returns required to be made by the liquidator have not been made for a period of six consecutive months, the Regist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of the persons who subscribed the memorandum, addressed to him at the address mentioned in the memorandum. (10) A notice to be sent under this section to a liquidator may be addressed to the liquidator at his last known place of business. x x x Relevant provisions of 2013 Act: 2. Definitions.- In this Act, unless the context otherwise requires,- x x x (20) "company" means a company incorporated under this Act or under any previous company law; x x x (32) "depository" means a depository as defined in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996 (22 of 1996); x x x (40) "financial statement" in relation to a company, includes- (i) a balance sheet as at the end of the financial year; (ii) a profit and loss account, or in the case of a company carrying on any activity not for profit, an income and expenditure account for the financial year; (iii) cash flow statement for the financial year; (iv) a statement of changes in equity, if applicable; and (v) any explanatory note annexed to, or forming part of, any document referred to in sub-clause (i) or to sub-clause (iv): Provided that the financial statement, wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egistration and percentage of shareholding held by them; and (k) such other matters as may be prescribed, and signed by a director and the company secretary, or where there is no company secretary, by a company secretary in practice: Provided that in relation to One Person Company and small company, the annual return shall be signed by the company secretary, or where there is no company secretary, by the director of the company. (2) The annual return, filed by a listed company or, by a company having such paidup capital or turnover as may be prescribed, shall be certified by a company secretary in practice in the prescribed form, stating that the annual return discloses the facts correctly and adequately and that the company has complied with all the provisions of this Act. (3) An extract of the annual return in such form as may be prescribed shall form part of the Board's report. (4) Every company shall file with the Registrar a copy of the annual return, within sixty days from the date on which the annual general meeting is held or where no annual general meeting is held in any year within sixty days from the date on which the annual general meeting should have been h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in which the registered office of the company is situate: Provided that the Central Government may exempt any company from the provisions of this sub-section subject to such conditions as it may impose. Explanation.-For the purposes of this sub-section, "National Holiday" means and includes a day declared as National Holiday by the Central Government. x x x 129. Financial statement.- (1) The financial statements shall give a true and fair view of the state of affairs of the company or companies, comply with the accounting standards notified under section 133 and shall be in the form or forms as may be provided for different class or classes of companies in Schedule III: Provided that the items contained in such financial statements shall be in accordance with the accounting standards: Provided further that nothing contained in this sub-section shall apply to any insurance or banking company or any company engaged in the generation or supply of electricity, or to any other class of company for which a form of financial statement has been specified in or under the Act governing such class of company: Provided also that the financial statements shall not be treated as n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndards, the reasons for such deviation and the financial effects, if any, arising out of such deviation. (6) The Central Government may, on its own or on an application by a class or classes of companies, by notification, exempt any class or classes of companies from complying with any of the requirements of this section or the rules made thereunder, if it is considered necessary to grant such exemption in the public interest and any such exemption may be granted either unconditionally or subject to such conditions as may be specified in the notification. (7) If a company contravenes the provisions of this section, the managing director, the whole-time director in charge of finance, the Chief Financial Officer or any other person charged by the Board with the duty of complying with the requirements of this section and in the absence of any of the officers mentioned above, all the directors shall be punishable with imprisonment for a term, which may extend to one year or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both. Explanation.-For the purposes of this section, except where the context otherwise requires, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e directors to take such steps as may be prescribed. x x x 164. Disqualifications for appointment of director.- (1) A person shall not be eligible for appointment as a director of a company, if - (a) he is of unsound mind and stands so declared by a competent court; (b) he is an undischarged insolvent; (c) he has applied to be adjudicated as an insolvent and his application is pending; (d) he has been convicted by a court of any offence, whether involving moral turpitude or otherwise, and sentenced in respect thereof to imprisonment for not less than six months and a period of five years has not elapsed from the date of expiry of the sentence: Provided that if a person has been convicted of any offence and sentenced in respect thereof to imprisonment for a period of seven years or more, he shall not be eligible to be appointed as a director in any company; (e) an order disqualifying him for appointment as a director has been passed by a court or Tribunal and the order is in force; (f) he has not paid any calls in respect of any shares of the company held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he is convicted by a court of any offence, whether involving moral turpitude or otherwise and sentenced in respect thereof to imprisonment for not less than six months: Provided that the office shall be vacated by the director even if he has filed an appeal against the order of such court; (g) he is removed in pursuance of the provisions of this Act; (h) he, having been appointed a director by virtue of his holding any office or other employment in the holding, subsidiary or associate company, ceases to hold such office or other employment in that company. (2) If a person, functions as a director even when he knows that the office of director held by him has become vacant on account of any of the disqualifications specified in subsection (1), he shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees, or with both. (3) Where all the directors of a company vacate their offices under any of the disqualifications specified in sub-section(1), the promoter or, in his absence, the Central Government shall appoint the required number of directors who shall hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deals with application for allotment of "Director Identification Number", while Rule 10 deals with "Allotment of DIN" and Rule 11 deals with "Cancellation or surrender or Deactivation of DIN. Rule 12 deals with "Intimation of changes in particulars specified in DIN application". Rule 14 speaks about "Disqualification of directors under sub-section(2) of section 164". For the purpose of this case, it would be relevant to extract Rules 11 and 14 which read as under: "11. Cancellation or surrender or Deactivation of DIN.- The Central Government or Regional Director (Northern Region), Noida or any officer authorised by the Regional Director may, upon being satisfied on verification of particulars or documentary proof attached with the application received along with fee as specified in Companies (Registration Offices and Fees) Rules, 2014 from any person, cancel or deactivate the DIN in case - (a) the DIN is found to be duplicated in respect of the same person provided the data related to both the DIN shall be merged with the validly retained number; (b) the DIN was obtained in a wrongful manner or by fraudulent means; (c) of the death of the concerned individual; (d) the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;removal of disqualification of directors shall be made in Form DIR-10." 10. A comparison of Sections 274 of 1956 Act with Section 164 of the Act and Section 283 of 1956 Act with Section 167 of 2013 Act along with the amendments could be made at this stage. Similarly, comparison of Section 560 of 1956 Act with Sections 248 and 252 of the Act could be noted. 1956 Act 2013 Act 274. Disqualifications of directors.- (1) A person shall not be capable of being appointed director of a company, if - * he has been found to be of unsound mind by a Court of competent jurisdiction and the finding is in force; * he is an undischarged insolvent; * he has applied to be adjudicated as an insolvent and his application is pending; * he has been convicted by a Court of any offence involving moral turpitude and sentenced in respect thereof to imprisonment for not less than six months, and a period of five years has not elapsed from the date of expiry of the sentence; * he has not paid any call in respect of shares of the company held by him, whether alone or jointly with others, and six months have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disqualifying him for appointment as a director has been passed by a court or Tribunal and the order is in force; * he has not paid any calls in respect of any shares of the company held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call; * he has been convicted of the offence dealing with related party transactions under section 188 at any time during the last preceding five years; or * he has not complied with sub-section (3) of section 152. (2) No person who is or has been a director of a company which- * has not filed financial statements or annual returns for any continuous period of three financial years; or * has failed to repay the deposits accepted by it or pay interest thereon or to redeem any debentures on the due date or pay interest due thereon or pay any dividend declared and such failure to pay or redeem continues for one year or more, incurred by any person in virtue of clause (e) of subsection (1). (3) A private company which is not a subsidiary of a public c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imprisonment for not less than six months; * he fails to pay any call in respect of shares of the company held by him, whether alone or jointly with others, within six months from the last date fixed for the payment of the call unless the Central Government has, by notification in the Official Gazette, removed the disqualification incurred by such failure; * he absents himself from three consecutive meetings of the Board of directors, or from all meetings of the Board for a continuous period of three months, whichever is longer, without obtaining leave of absence from the Board; * he (whether by himself or by any person for his benefit or on his account), or any firm in which he is a partner or any private company of which he is a director, accepts a loan, or any guarantee or security for a loan, from the company in contravention of section 295; * he acts in contravention of section 299; * he becomes disqualified by an order of Court under section 203; * he is removed in seeking leave of absence of the Board; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the several clauses of subsection (1), he shall be punishable with fine which may extend to five thousand] rupees for each day on which as a director even when he knows that the office of director held by him has become vacant on account of any of the disqualifications specified in sub-section (1), he shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees, or with both. * Where all the directors of a company vacate their offices under any of the disqualifications specified in sub-section(1), the promoter or, in his absence, the Central Government shall appoint the required number of directors who shall hold office till the directors are appointed by the company in the general meeting. * A private company may, by its articles, provide any other ground for the vacation of the office of a director in addition to those specified in sub-section (1). he so functions as a director. (3) A private company which is not a subsidiary of a public company may, by its articles, provide that the office of directo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therein will, unless cause is shown to the contrary, be struck off the register and the company will be dissolved. * If, in any case where a company is being wound up, the Registrar has reasonable cause to believe either that no liquidator is acting, or that the affairs of the company have been completely wound up, and any returns required to be made by the liquidator have not been made for a period of six consecutive months, the Registrar shall publish in the Official Gazette and send to the company or the liquidator, if any, a like notice as is provided in subsection (3). * At the expiry of the time mentioned in the notice referred to in sub-section (3) or (4), the Registrar may, unless cause to the contrary is previously shown by the company, strike its name off the register, and shall publish notice thereof in the Official Gazette; and on the publication in the Official Gazette of this notice, the company shall stand dissolved: Provided that- (a) the liability, if any, of every director, the managing agent, secretaries and treasurers, manager or other officer who was exercising any pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been struck off. * Upon a certified copy of the order under sub-section (6) being delivered to the Registrar for registration, the company shall be deemed to have continued in existence as if its name had not been struck off. * A letter or notice to be sent under this section to a company may be addressed to the company at its passing an order under subsection (5), shall satisfy himself that sufficient provision has been made for the realisation of all amount due to the company and for the payment or discharge of its liabilities and obligations by the company within a reasonable time and, if necessary, obtain necessary undertakings from the managing director, director or other persons in charge of the management of the company: Provided that notwithstanding the undertakings referred to in this subsection, the assets of the company shall be made available for the payment or discharge of all its liabilities and obligations even after the date of the order removing the name of the company from the register of companies. * The liability, if any, of every director, manager or other officer who was exercisin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dissolving the company under section 248, file an application before the Tribunal seeking restoration of name of such company. * A copy of the order passed by the Tribunal shall be filed by the company with the Registrar within thirty days from the date of the order and on receipt of the order, the Registrar shall cause the name of the company to be restored in the register of companies and shall issue a fresh certificate of incorporation. * If a company, or any member or creditor or workman thereof feels aggrieved by the company having its name struck off from the register of companies, the Tribunal on an application made by the company, member, creditor or workman before the expiry of twenty years from the publication in the Official Gazette of the notice under sub-section (5) of section 248 may, if satisfied that the company was, at the time of its name being struck off, carrying on business or in operation or otherwise it is just that the name of the company be restored to the register of companies, order the name of the company to be restored to the register of companies, and the Tribunal may, by the order, give such other directions a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2)(a) of the Act, a person who is or has been a director of a company which has not filed financial statements or annual returns for any continuous period of three years or under Section 164(2)(b) has failed to repay the deposits accepted by it or pay interest thereon or to redeem any debentures on the due date or pay interest due thereon or pay any dividend declared and such failure to pay or redeem continues for one year or more shall not be eligible to be re-appointed as a director of the defaulting company or appointed in any other company for a period of five years from the date on which the said company fails to do so. The distinction is that under the Act, a director of a company which is in default under Section 164(2)(a) and (b) of the Act shall not be eligible to be re-appointed as a director of the defaulting company and be appointed in any other company for a period of five years from the date on which the said company fails to do so. In other words, under the proviso to Section 274(1)(g) of the 1956 Act, the director of a defaulting company could be reappointed as a director of such a company, whereas under the Act he cannot be so re-appointed as a director of even th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1956 Act and Section 167 of the Act both deal with vacation of office by directors on being disqualified. Section 283 of 1956 Act states that the office of the director shall become vacant if any of the contingencies as stated in Clauses (a) to (l) thereto apply. On perusal of the same, they clearly indicate that there is no reference to Section 274(1)(g) of 1956 Act. In other words, when Section 274(1)(g) of 1956 Act was inserted by amendment to 1956 Act with effect from 13.12.2000, there was no corresponding amendment made to Section 283 of 1956 Act. Therefore, even if a director was disqualified by virtue of Section 274(1)(g) of 1956 Act, it did not result in his vacating the office of director either in the defaulting company or in any other company in which he was a director. But, under Section 167(1)(a) of the Act, it is clearly indicated that the office of a director shall become vacant in case he incurs any of the disqualifications specified in Section 164 of the Act. As already noted, Section 164 of the Act is in two parts. Section 164(1)(a) to (h) deals with the disqualifications which affect a director personally, while Section 164(2)(a) and (b) are disqualifications wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 164(2)(a) of the Act as, under Section 274(1)(g) of the 1956 Act, such a disqualification was only restricted to public companies. Part - 5 SUBMISSIONS: 15. In the above background, the submissions of learned senior counsel and learned counsel for the petitioners and learned senior counsel and Additional Solicitor General for India, Sri Prabhuling Navadagi and learned Central Government Standing Counsel have been heard at length. Submissions of Petitioners: 16. Learned senior counsel, Sri Dhyan Chinnappa appearing for the petitioners in Writ Petition Nos.51769 of 2017, 36613 of 2018 and other connected cases drew my attention to Section 164 of the Act and contended that the constitutional validity of Section 164(2)(a) of the Act is assailed. He submitted that Section 164 of the Act deals with disqualification for appointment of director and that Section 164(1) of the Act are those disqualifications which are personal to a director. Section 164(1) of the Act states that a person shall not be eligible for appointment as a director of a company on account of the circumstances stated in Clauses (a) to (h) of the Act thereof, such as unsoundness of mind, being convic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a manner as to not apply to a person who was not a director during the three years period when the financial statements or annual returns were not filed and not extend it to any person who has been a director of a company during any period prior thereto. Further, the period of three years must commence from 01.04.2014 when the Act commenced and not include any period prior thereto. 19. It was further contended that the intention of Section 167(1)(a) of the Act is to restrict the disqualification to only 164(1) of the Act and it does not extend to Section 164(2) of the Act. But, by the proviso, the director who is disqualified on account of Section 164(2) of the Act has to also vacate his office as a director in all companies other than the Company which is in default under that sub-section. It was contended that such a consequence does not have a nexus to the default committed by a company in which a person is a director and the consequence far exceeds the mischief sought to be remedied and hence, it is manifestly arbitrary and disproportionate. 20. In this regard, my attention was drawn to Section 274(1)(g) of the 1956 Act and Section 164(2) of the Act. Similarly, a comparison w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted against the said companies, instead, under Section 164(2) of the Act, disqualification of the directors of such a company occurs, it is by operation of law; without issuing notice or giving an opportunity of hearing to a director who is visited with such serious consequences, it is almost penal in nature and hence, ultra vires the provisions of the Constitution. 23. Further, Section 164(2) of the Act is retrospective in effect inasmuch as three continuous years of non-filing of financial statements or annual returns could extend to even prior to 01.04.2014 (on which date the Act came into force). That there cannot be a retrospective operation of Section 164(2) of the Act resulting in such serious consequences. That the material period of three years under Section 164(2) of the Act has to be construed with effect from 01.04.2014 onwards and cannot extend to any period prior thereof. 24. Learned senior counsel also contended that under Section 403 of the Act, there is provision for extension of time by two hundred and seventy (270) days for filing of annual returns. That even if the disqualification of a director of a company occurs on account of the default of a company by ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases submitted that on account of Company Law Board proceedings, the Company in question could not file its financial statements which has resulted in serious consequences for the directors of the company who have no forum before whom they could express their predicament. He contended that the directors of a defaulting company are visited with a serious consequence of disqualification without a prior or post-decisional hearing. That the exclusion of principles of natural justice vitiates the constitutionality of Section 164(2) of the Act and hence, this Court may read it into the said provisions principles of natural justice. 28. Learned counsel, Sri Holla further contended that Section 164(2)(a) of the Act has a prospective operation and any period prior to 01.04.2014 cannot be reckoned for the purpose of determining three continuous years, when there is non-filing of annual returns. He submitted that this Court may interpret Section 164(2)(a) of the Act in such a manner so as to save it from the vice of unconstitutionality. In support of his submissions, he inter alia placed reliance on the following three decisions namely: 1. Sahara India (Firm), Lucknow vs. Commissioner of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... koned for computing the three continuous financial years during which there is non-filing of annual returns. If three years are so reckoned, then it would be with effect from 01.04.2014 onwards. Therefore, the disqualification of directors on 01.11.2016 is erroneous. The Department has given a retrospective effect to the provision which is impermissible. Secondly, he submitted that under the provisions of the Act, there is extension of time provided under Section 403 of the Act for filing of annual returns and without considering the said period for extension to file the returns, the directors have been visited with almost penal consequences of disqualification. That the benefit of 270 days given for filing annual returns provided under Section 403 of the Act has not been taken into consideration. He further submitted that prior to disqualification of a director, no hearing has been provided and even a representation made has not yet been considered. Placing reliance on paragraph 25 of the judgment of the Madras High Court, he submitted that the Writ Petition Nos.44839 of 2018 and 46210 of 2018 may be allowed. 31. Sri Uday Shankar, learned counsel appearing for petitioners i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of objections filed by Union of India and contended that the Company Law Settlement Scheme and Amnesty Scheme envisage a prospective operation of Section 164(2)(a) of the Act. He relied upon the following decisions in support of his submissions: 1. Govind Das and others vs. The Income Tax Officer and Others, [AIR 1977 SC 552] (Govind Das); 2. Commissioner of Income Tax vs. Vatika Township Private Limited, [(2014) 3 ITR 466 (SC)], (Vatika Township); 3. Jayam and Co. vs. Assistant Commissioner and Others, [AIR 2016 SC 4443], (Jayam). 34. Learned counsel, Sri C.K.Nanda Kumar, appearing for petitioners in Writ Petition Nos.15616617 & 50103 of 2018 contended that the validity of the proviso has been challenged in Writ Petition No.50103 of 2018 but not in Writ Petition Nos.15616617 of 2018. He submitted that if the object of the proviso is to curtail a mischief, then the medicine is worse than the disease. That merely because of a default committed by a company, the director of such a company cannot be tarnished with the same brush vis-à-vis other companies wherein he is a director and which are not in default. That the consequence of a default under Section 164(2) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... triction could be imposed in the interest of general public, but in the instant case, no such justification has been made out by the respondents. That on account of the consequences flowing from Section 164(2) of the Act, it results in a total extinction of a right of a director, which is in violation of Article 19(1)(g) of the Constitution. He submitted that there could have been a less severe consequence under the Act and that the provisions could be read down if not struck down to save it from unconstitutionality. He relied on the following judgments in support of his submissions: 1. Saghir Ahmad vs. State of U.P. and Others, [AIR 1954 SC 728], [Saghir Ahmad]; 2. B.P. Sharma vs. Union of India & Others, [(2003) 7 SCC 309] [B.P.Sharma]; 3. State of Gujarat vs. Mirzapur Moti Kureshi Kassab Jamat and others, [(2005) 8 SCC 534], [Mirzapur Moti Kureshi]; Submissions of Respondents: 38. Sri Prabhuling K.Navadagi, learned Additional Solicitor General appearing for Union of India and other respondents at the outset drew my attention to the Scheme of the Act revolving around Sections 164(2) and 167 of the Act and made his submissions with reference to the statement of objections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 74(1)(g) to the 1956 Act. Vacating of office of a director on account of the disqualification due to a default under Section 274(1)(g) of the 1956 Act was not contemplated under the 1956 Act. But under the Act it is provided for in order to bring about strict corporate governance and transparency. 41. Placing reliance on the interim order of the Calcutta High Court in Nabendu Dutta vs. Arindam Mukherjee and others, [2004 (121) Comp.Cases 150 (Cal)], [Nabendu Dutta], learned ASG contended that Section 164(2)(a) of the Act does not have a retrospective effect and it is prospective in operation. That any person who intends to be a director of a company with effect from 01.04.2014 must have possessed eligibility criteria on and from that date. That the prescription of eligibility criteria having regard to an antecedent period i.e., a period prior to 01.04.2014 does not vitiate any provision of law. He submitted that taking into consideration an antecedent period, i.e., a period prior to coming into force of the Act is permissible, when it comes to construing the eligibility of a person to be appointed as a director. In this regard, my attention was drawn to the latter portion of Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y or other companies. He contended that if the said object and purpose is not given its complete effect and meaning, then it would be unviable. Placing reliance on Fertilizer Corporation Kamgar Union (Reg.) vs. Union of India, [(1981) 1 SCC 568], he contended that holding the post of a director of a company is not pursuant to any fundamental right. That it is a statutory right or one arising under the Memorandum of Association or Articles of Association of the company and thus contractual. That Section 164(2) of the Act is a reasonable restriction imposed in public interest vide Article 19(6) of the Constitution. He further contended that the disqualification being only for a period of five years and not a permanent one the provision is not vitiated as being disproportionate. That the disqualification does not occur on account of the non-filing of annual returns in a single year or for that matter for two consecutive years. That disqualification visits the director of a defaulting company only after three years i.e., on the third consecutive year of non-filing. That even if a director is disqualified to be reappointed as a director or has to vacate his office, it does not prevent h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... off, it would not entail a disqualification of the directors of such a company. That subsequent to the disqualification of directors, some of whom are petitioners before this Court, amendment has been effected to Section 167 of the Act in May 2018. That the amendment has been enforced with retrospective effect which is bad in law. That vacating of office in companies other than defaulting company is with retrospective effect from 1st November 2016 when disqualification occurred, but amendment has been enforced from May 2018. He contended that as the DIN is struck off, the Condonation Scheme also does not apply. That the judgment of the Calcutta High Court cannot be a precedent as it only expresses a prima facie view at an interlocutory stage and it is not a final order. 48. Sri Dhyan Chinnappa, learned senior counsel contended that the expression "he incurs" under Section 167(1)(a) of the Act refers to a disqualification arising only under Section 164(1) of the Act. That the proviso cannot enlarge the scope of Section 167(1)(a) of the Act so as to incorporate something new into the main provision. That vacating of office in companies other than the defaulting company by a directo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned counsel submitted that Section 167(1) of the Act uses the expression "incurs any of the disqualifications". That the expression "incur" cannot be by operation of law. "To incur" means to bring on oneself which is only referable to Section 164(1) of the Act and does not extend to Section 164(2) of the Act thereof. 52. Sri C.K.Nanda Kumar submitted, with regard to challenge made to the validity of proviso to Section 167(1)(a) of the Act are, there is no response by the Union of India or any other respondent. 53. Smt. Gayathri Shridharan submitted that the deactivation of DIN is contrary to proviso to Section 167(1)(a) of the Act, as a disqualified director continues to be a director of the defaulting company. Therefore, DIN cannot be cancelled, as compliances under the Act becomes impossible. That there is no provision for deactivation of the DIN nevertheless it has been done by the respondent authorities, which is contrary to the provisions of the Act. She relied upon Godhra Electricity Co. Ltd. and another vs. State of Gurjarat and Another, [(1975) 1 SCC 199], (Godhra Electricity) and J.S.Yadav vs. State of Uttar Pradesh and another, [(2011) 6 SCC 570], (J.S.Yadav), in supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nciple of proportionality? (2) Whether Section 164(2)(a) of the Act is in violation of principles of natural justice and hence ultra vires Article 14 of the Constitution as it does not envisage any hearing prior to disqualification or post-disqualification? (3) Whether Section 164(2)(a) of the Act has retrospective operation and therefore, is unreasonable and/or arbitrary as per Article 14 of the Constitution? (4) Whether there has been any illegal exercise of power by the concerned respondent-authority in publishing the List of Directors, including the names of petitioners as disqualified directors, under Section 164(2)(a) of the Act? (5) Whether Section 167(1)(a) of the Act is ultra vires Article 14 and/or Article 19(1)(g) of the Constitution as being manifestly arbitrary? (6) Whether proviso to Section 167(1)(a) of the Act is ultra vires Articles 14 and/or 19(1)(g) of the Constitution as being manifestly arbitrary? (7) What order? 57. The aforesaid points shall be considered and answered in seriatim. Part - 7 Preliminary Aspects of the Matter: 58. It is not in dispute that the petitioners in these writ petitions were all holding the position of directors either i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from various disciplines and fields. During the course of its deliberations it inter alia considered the scope and coverage of the Companies Act, 1956, the adaptation to be made to changed circumstances; growth of the corporation regulatory framework; regulatory overlap; framework for small enterprises and institutional structure. The Expert Committee submitted its report on Company Law on 31.05.2005 to the Hon'ble Minister for Company Affairs. It is noted that the Act has incorporated recommendations made by various Committees and after a rigorous review process in the Parliament, after the Bill was first tabled in the year 2009, the Parliamentary Standing Committee of Finance examined the Bill twice, during which, extensive public consultations were also held. The notifications of the provisions of the Companies Act, 2013 has been made in a phased manner with 283 out of 470 provisions being enforced on 01.04.2014. The Act has introduced significant changes in the Company law in India, especially in relation to the accountability, disclosure, investors protection and corporate governance. 60. Sri Raghuram Cadambi, learned senior counsel appearing for Sri C.K.Nandakumar, has drawn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson to represent its interests. The term of office of independent director is prescribed in sub-section 10 of Section 149 of the Act and the liability of an independent director and a nonexecutive director not being promoter or key managerial personnel, with regard to any acts of omission or commissions by a company is circumscribed. (b) Section 150 of the Act deals with appointment of directors while Section 151 deals with appointment of directors elected by small share holders. Section 152(3) of the Act states that no person shall be appointed as a director of a company unless he has been allotted the Director Identification Number (DIN) under Section 154 of the Act. Subsection 6 of Section 152 of the Act states that unless the articles provide for the retirement of all directors at every annual general meeting, not less than twothirds of the total number of directors of a public company shall (i) be persons whose period of office is liable to determination by retirement of directors by rotation; and (ii) save as otherwise expressly provided in this Act, be appointed by the company in general meeting. The remaining directors in the case of any such comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adopt principle of proportional representation for appointment of directors is prescribed in Section 163 of the Act. The duty of directors is prescribed in Section 166 of the Act, while resignation of directors and removal of directors are prescribed in Section 168 and 169 respectively of the Act. The maintenance of registers containing the particulars of its directors and key managerial personnel as may be prescribed is contemplated in Section 170 of the Act. Part - 8 Re. Point No.1: "Whether Section 164(2)(a) of the Act is ultra vires Articles 14 and/or 19(1)(g) of the Constitution being manifestly arbitrary or on the principle of proportionality?" 62. The rival arguments on this point have been narrated above. 63. A comparison of Section 274(1)(g) of the 1956 Act with Section 164(2) of the Act has already been made. To briefly revisit the same for the purpose of answering point No.1, it is noted that Section 274(1)(g) of the 1956 Act was inserted by virtue of an amendment made on 13.12.2000, but having effect from 01.04.1999. The said sub-clause concerned a director of a public company only. It did not disqualify a director of any private company, whereas Section 164(2) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eaning by referring to the three financial years during which the financial statements or annual returns are not filed i.e., material period of three years which leads to a disqualification of a director of a company. In other words, the contention was that the expression "has been" cannot extend to a person who was a director of a defaulting company prior to the three material years or to a director who has joined the company subsequent to the three material years leading to the default and has since ceased to be a director. 66. Further, it was submitted that both under Section 274(1)(g) of the 1956 Act as well as under Section 164(2) of the Act, the disqualification vis-à-vis re-appointment as a director of any other company for a period of five years is identical. But, under Section 164(2) of the Act, the disqualification also extends to re-appointment as a director of a company which has defaulted for a period of five years. In other words, all the directors of a defaulting company would have to be changed once the default occurs and their term ends. 67. On a consideration of the aforesaid arguments, it is observed that Section 274(1)(g) of the 1956 Act is a precursor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies, and in a majority of cases, neither the principal amount nor interest was repaid. In the circumstances, it was held that Section 274(1)(g) of the 1956 Act did not violate the fundamental rights or any other right of the petitioners therein in any manner and the petition was dismissed as being devoid of merit. 69. Similarly, in Sourashtra Cement Limited, a Division Bench of the Gujarat High Court considered a challenge to the constitutional validity of Section 274(1)(g) of the 1956 Act as amended by the Companies (Amendment) Act, 2000 with effect from 13.12.2000. The Gujarat High Court noted that the purpose of Section 274(1)(g) of the 1956 Act was to disqualify certain persons from directorship in public companies so as to protect the investors from mismanagement, ensure compliance in filing annual accounts and annual returns. The purpose of the said provision was not to punish those who were disqualified but to save the community from consequences of mismanagement and also to prescribe standards of corporate managership and to protect the public against future conduct by persons whose past record as directors had shown a great danger to creditors and others. Thus, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. (6) Once a person becomes a Director, it is his primary duty to ensure that there is proper governance and investors' money is protected. (7) The amendment is not violative of Article 14. (8) Amendment to Section 274(1)(g) has been made primarily in larger public interest to protect large number of investors, particularly small and poor investors who had invested their life time savings with these companies and in majority of the case neither principal amount nor interest is paid. " 71. The Gujarat High Court nevertheless considered additional submissions made and upheld the constitutional validity of the said provision by holding that it has been enacted in larger public interest. While saying so, it observed that the object of the provision was that the whole Board of Directors may act vigilantly and that the affairs of the company are managed in such manner that ultimately the deposits are repaid and/or debentures are redeemed. Otherwise, no company would try to improve their affairs and ultimately try to protect the interest of the investors. That the object of the provision is not to punish those who are so disqualified only but to save the community from the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consequence has been stipulated under section 164(2) of the Act are for the very reasons already stated by the Bombay High Court as well as Gujarat High Court. They are in order to protect investors from mismanagement, infuse good corporate governance, regulation of corporate affairs and to protect the interest of investors and ensure compliance in filing the annual accounts and annual returns, which are a means of disclosure to all stock-holders. 74. In this regard, what is to be noted is the fact that the disqualification does not visit the director of a defaulting company when the financial statement or annual returns are not filed in the very first year itself. It is only when, for a continuous period of three financial years, when the company does not file annual statements or annual returns that the disqualification impacts its director. Similarly, under Section 164(2)(b) of the Act, the reason for disqualification being more serious, the disqualification would visit when there is failure to repay the deposits or redeem any debentures for a period continuous for one year or more. Under Section 274(1)(g) of the 1956 Act, the disqualification was only with regard to a director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Authority of India, [(1979) 3 SCC 489], (Ramana Dayaram), it was observed that wherever there is arbitrariness in State action, whether it be of the legislature or of the executive or of an authority under Article 12, Article 14 immediately springs into action and strikes down such State action. The concept of reasonableness and non-arbitrariness pervades the entire constitutional scheme and is a golden thread which runs through the whole fabric of the Constitution. In Mithu vs. State of Punjab, [(1983)2 SCC 277] (Mithu), a Constitution Bench of the Supreme Court struck down Section 303 of the Indian Penal Code, 1860, by which a mandatory sentence of death was imposed on life convicts who commit murder in jail. In Sunil Batra vs. Delhi Administration, [(1978)4 SCC 494] (Sunil Batra), Section 30(2) of the Prisoners Act was read down when a challenge was made regarding a prisoner under sentence of death being confined in a cell apart from all other prisoners, (under solitary confinement). Thus, in the aforesaid cases, Article 14 was referred to in the context of constitutional invalidity of statutory law as the same could be struck down if found to be arbitrary. In Indian Express N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form to norms which are rational, informed with reason and guided by public interest. At the same time, the Hon'ble Supreme Court has cautioned that a Court considering the validity of a legislation must be mindful that a legislation does not become unconstitutional merely because there is another view or because there is another method which may be considered to be as good or even more effective, like any issue of social, or even economic policy. That the Courts cannot substitute their views on what the policy is, vide Dr.Subramanian Swamy vs. Director, Central Bureau of Investigation, [(2005) 2 SCC 317] (Dr.Subramanian Swamy). 84. Manifest arbitrariness, according to the Hon'ble Supreme Court, must be something done by the legislature capriciously, irrationally and/or without adequate determining principle. Also, when something is excessive and disproportionate, such legislation would be manifestly arbitrary. Applying the aforesaid test, the Hon'ble Supreme Court in Shayara Bano, by a majority held that Triple Talaq being an incident and irrevocable form of divorce, was manifestly arbitrary as the marital tie could not be broken capriciously and whimsically by a Muslim man, with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orcement of various provisions of the Act. Sections 164 to 168 of the Act (both inclusive) have been enforced with effect from 01.04.2014. 86. According to the Report of SEBI Committee on Corporate Governance headed by Sri N.R.Narayana Murthy submitted on 08.02.2003, Corporate Governance is about ethical conduct in business. Ethical leadership is good for business as the organisation is seen to conduct its business in line with the expectations of all stake-holders namely, customers, employees, investors, vendor partners, government and society. Corporate governance is beyond the realm of law and stems from the culture and mindset of management, and cannot be regulated by legislation alone. What legislation can and should do, is to lay down a common framework - the "form" to ensure standards. The "substance" will ultimately determine the credibility and integrity of the process. Substance is inexorably linked to the mindset and ethical standards of management. One of the best corporate governance practices is for the management to act as trustees of the share-holders at large and prevent asymmetry benefits between various sections of share-holders esp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und the world understood in order for the securities offerings to be successfully marketed overseas. Companies therefore had to depart from where they received investments. Since, a large portion of such foreign investment came from the developed world (primarily the U.S. and U.K.), it became convenient for companies to adopt standards with which investors from those countries were familiar." 1All securities offerings to the public required the approval of the Controller of Capital Issues [hereinafter "CCI"], which effectively micro-managed offering including by reviewing the details such as price at which securities were to be offered rather than leaving those to the market forces to determine.], The office of the CCI was abolished in 1992 by the Capital Issues (Control) Repeal Act, 1992. Furthermore, SEBI effected a series of capital market reforms in the late 1990s streamlining the public offering process. Significant measures include the introduction of the book-building process for price discovery, dematerialization of securities (and the consequent availability of scripless trading) and the use of "shelf prospectus". All these helped stimulate greater capital market activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preventive action should begin with registration itself and should be sustained through a regime that requires regular and mandatory filing of statutory documents. With introduction of electronic filing, this process would become convenient to companies as well as the stakeholders. Behaviour resulting in non-filing of documents or incorrect disclosures should be dealt with strictly. 14.2 Information provided at the time of registration should determine the addresses of the company as well as its directors. It should be the duty of the Company to intimate any change of address within a fixed time period. 14.3 There should also be a system of random scrutiny of filings of corporates to be carried out by the registration authorities with heavy penalties for the companies found inadequate in their disclosures and filings. 14.4 Inter agency coordination should be enabled to track down the persons behind such companies to bring them to book. Law should be amended to make them disgorge their illgotten gains by lifting the corporate veil. x x x Duties And Responsibilities Of Directors: 18.1 International practice (particularly in U.K.) recognizes a very wide spectrum of duties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd and such failure continues for one year or more. This disqualification should be retained. 19.4 In case of sick companies which have defaulted on payment of deposits/debentures etc., it is necessary to re-constitute its Board of Directors for the purpose of rehabilitation of such companies. The new directors who join boards of such companies are likely to attract the disqualification under the present Section 274(1)(g) of the Companies Act. In order to encourage qualified professionals to join Boards of such companies, it is necessary to amend Section 274(1)(g) of the Companies Act to provide that such disqualification would not be applicable for new directors joining the boards of such sick companies which have failed to repay their deposits, debentures etc." 90. The Hon'ble Supreme Court in N.Narayanan vs. Adjudicating Officer, Securities and Exchange Board of India, [(2013)12 SCC 152], (N.Narayanan), which is a matter that arose under the provision of the Securities and Exchange Board of India Act, 1992 (SEBI Act), pertaining to public companies has observed as under: "35. Gower and Davies on Principles of Modern Company Law, 9th Edition (2012) at page 751, reiterated th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany for a period of five years. The prescription of a two-fold consequence, in my view, cannot be held to be manifestly arbitrary as the Parliament in its wisdom has prescribed the same having regard to the objects sought to be achieved which have been elaborately stated by the Bombay High Court as well as Gujarat High Court and which are reiterated. The prescription of a two-fold consequence is neither arbitrary nor manifestly arbitrary. The additional reasons for stating so could also be gathered while considering the validity of the Section from the point of view of proportionality, which aspect has also been discussed under point No.1. 92. Further, it was brought to my notice that the object of providing for stringent provisions under Section 164(2) of the Act is in order to identify directors of shell companies which are not engaged in any business as such, but are used as a method for dubious financial transactions. That some times shell companies are involved in money laundering and hardly have any operations as such. That such companies are misused for tax evasion or other illegal purposes, such as round tripping of products obtained from illegal transactions and for conv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or annual returns were not filed and who may have since ceased to be a director. Even if such a director has subsequently ceased to be a director after the default has occurred, he would be disqualified. In other words, the expression "has been" is incorporated in the provision to overcome a situation where directors of the company could resign immediately before or soon after the default occurs so as to escape the consequences mentioned in the Section. In other words, if a person has been a director of a company which for a continuous period of three financial years has not filed financial statements or annual returns and has since resigned or ceased to be a director, such a person would also be visited with the disqualification. Therefore, the expression "has been" also refers to a person who ceases to be a director of the company once the default occurs. The reason being, the default by the company would have occurred when he was the director for a continuous three financial years when financial statements or annual returns were not filed. Therefore, the expression "has been" must be interpreted contextually with reference to the three material years, which is continuous period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dhya Pradesh and others, [(2016)7 SCC 353], the "doctrine of proportionality" was applied in the context of Article 19(6) of the Constitution by quoting "Proportionality: Constitutional Rights and Their Limitation (Cambridge University Press 2012)", by Aharon Barak, former Chief Justice, Supreme Court of Israel. It was noted that there are sub-components of proportionailtiy which need to be satisfied. That a limitation of constitutional right will be constitutionally permitted if: (i) it is designated for a proper purpose; (ii) the measures undertaken to effectuate such a limitation are rationally connected to the fulfillment of that purpose; (iii) the measures undertaken are necessary in that there are no alternative measures that may similarly achieve that same purpose with a lesser degree of limitation; and finally, (iv) there needs to be a proper relation ('proportionality stricto sensu' or 'balancing') between the importance of achieving the proper purpose and the social importance of preventing the limitation on the constitutional right. The doctrine of proportionality as delineated by the Hon'ble Supreme Court are referred to in several judgments. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is three years and not immediate which, in my view, is a reasonable period. Thus, Section 164(2)(a) of the Act resulting in an ineligibility for a director after a lapse of three consecutive financial years cannot be held to be capricious or a disproportionate repercussion, lacking in reasonableness or any rationale. A director who is part of a company, which is in default as per Section 164(2)(a) of the Act cannot be perpetuated in the same position by the company. If a remedy is not provided in a manner as provided under Section 162(2) of the Act, the mischief of committing a default would continue and it would appear as if the law permeates such a default by, not only being passive, but rather approving or giving its concurrence to such a default. On the other hand, the reasons stated in the judgments of the Bombay and Gujarat High Courts are apposite. Merely because there is a two pronged effect stipulated under the Act as opposed to Section 274(1)(g) of the 1956 Act, it cannot be held that the same is hit by the doctrine of proportionality. It is further observed that the consequence for non-compliance of Section 164(2)(a) or (b) of the Act is only a suspension by way of an in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ultra vires Article 14 of the Constitution as it does not envisage any hearing prior to disqualification or post-disqualification?" 104. This point concerns the fact that the disqualification under Section 164(2) of the Act is by operation of law and without envisaging any hearing, either a pre or post-decisional hearing and hence according to the petitioners, is in violation of principles of natural justice. In this regard, several decisions have been cited at the Bar. 105. The crux of the matter according to the petitioners is that a director of a defaulting company is visited with disqualification without being given an opportunity of hearing. In other words, it is simply by operation of law and according to petitioners, is not "fair play in action". Hence, it is contended that Section 164(2)(a) of the Act violates Article 14 of the Constitution as it is opposed to principles of natural justice. 106. Having regard to the nuances of the principles of natural justice, learned senior counsel for the petitioners contended that the director of a company cannot be visited with a serious consequence of being disqualified as a director of a defaulting company, without being given an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a director of a company in default. That, when the disqualification occurs by operation of law, the principles of natural justice would not apply. 109. However, by contrast, the contention of the learned senior counsel for the petitioners is not from the point of view of eligibility to be appointed as a director of any company for a period of five years, which is a consequence of disqualification, but the fact that when Section 164(2) of the Act is read along with Section 167(1)(a) of the Act, the serious consequences of disqualification are enlarged. In this regard, it was contended on behalf of the petitioners that Section 164(1) of the Act does not contemplate the right of hearing before a director of a company is disqualified, which is an infraction of the principles of natural justice. But on the other hand, a person who is faced with any of the circumstances stipulated under Section 164(1)(a) to (h) of the Act, the requirement of following the principles of natural justice may not arise; the reason being that if a person who is already a director of a company incurs disqualification on account of the grounds stated under Section 164(1)(a) to (h) of the Act, he would, having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s demolished the conceptualistic distinction between an administrative and a quasi-judicial function in the context of natural justice. It is, no doubt, true that when a person has to be removed from an office, elected or a statutory body, principles of natural justice have to be followed. Similarly, under the AntiDefection law, a Member of the Legislature who defects from his party loses his membership of the House. Whether a Member had defected or not and thereby become subject to the disqualification or not, is a matter to be decided by the Speaker of the House. It has been held that the Speaker acts in a quasi-judicial manner, and has to follow natural justice while adjudicating upon the matter; vide Kihoto Hollohan vs. Zachillu [AIR 1993 SC 412]. 112. On the aspect of exclusion of principles of natural justice, the rule is that a statute can exclude the right of hearing, either expressly or by necessary implication. Whether or not it has been excluded depends upon the language and scheme of the provision conferring the power, the nature of the power, the purpose for which it is conferred and the effect of exercise of that power. For instance, under Article 311(2) of the Const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder to be passed. However, there are difficulties in distinguishing a legislative function from other types of functions. A function may be characterized as a legislative function or as an administrative function depending upon the manner in which such power is exercised. In United States of America two tests have been propounded to identify legislative functions: one test depends upon the element of applicability, i.e., legislative function is normally directed towards the formulation of requirements having a general application to all members of a broadly identifiable class. As against this, an administrative decision is one which applies to specific individuals or situations. In other words, a power to take specific action is administrative; power to take general action is legislative. Another test is, if a rule prescribes future patterns and is applicable generally it is legislative function, but an administrative decision determines liabilities on the basis of present or past facts. 115. In the context of complying with the principles of natural justice in a situation where there is removal from an office, it has been held in a catena of cases, when a person is removed from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a as a dry area in S.M. Mallewar & others vs. State of Maharashtra [AIR 1993 Bombay 237]. The distinction is that where a number of persons are affected and if the principles of natural justice is to be observed, it would not be possible to take timely action. Further, when the administration is discharging a function by following the prescription in the statute and on the occurrence of the circumstances mentioned in the provision if a result ensues, in such an event, the principle of audi alteram partem is excluded. [Source: Principles of Administrative Law by M.P.Jain & S.N.Jain, 7th Edition (2011)]. 118. If the aforesaid principles are to be applied in the instant case, it becomes apparent that under Section 164(2)(a) or (b), if a person who is or has been a director of a company which has not filed financial statements or annual returns for a continuous period of three financial years; or has failed to repay the deposits accepted by it or pay interest thereon or to redeem any debentures on the due date or pay interest due thereon or pay any dividend declared and such failure to pay or redeem continues for one year or more, shall not be eligible to be re-appointed as a directo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y with the provisions of audi alteram partem before such consequences visit a director of such a company. The ineligibility is in the nature of suspension of a director for a period of five years. Therefore, in my view, the need to hear a director of a company before the ineligibility to be reappointed as a director of a company in default or to be appointed in any other company on account of default of a company in which he is a director, for a period of five years from the date of default of the company is rightly not envisaged under Section 164(2) of the Act. Even in the absence of a prior hearing the section is valid and not in violation of Article 14 of the Constitution. 121. However, the controversy does not end, as a contention raised by learned senior counsel, Sri Holla is, if not a prior hearing at least a provision for a post-decisional hearing ought to be read into Section 164(2) of the Act. In other words, the question is, whether, a post-disqualification hearing, i.e., the need to hear a director who has been disqualified under Section 164(2) of the Act, is envisaged under Section 164(2) of the Act? The Hon'ble Supreme Court has propounded the notion of post-decisiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how sufficient cause for non-payment of dues and once such a case is made out by a defaulting member to the satisfaction of the society then he would not have incurred automatic cessation of his membership for that year. 124. It was also thus contended by the learned senior counsel that at least a post-disqualification hearing must be provided under Section 164(2) of the Act after a director is visited with disqualification on the circumstances stated under the said provision. However, the aforesaid cases deal with termination from employment or cessation of membership of a society, as the case may be, in which circumstances, principles of natural justice must be complied with. But the present case is not one of cessation of directorship permanently, but it is only a suspension for a period of five years on the coming into existence the circumstances mentioned in the section. It is by operation of law and not by passing of an administrative order by exercise of discretion. No order disqualifying a director of a defaulting company need be made. It is not by an administrative process but by a legislative intent and by operation of law. 125. Reliance has also been placed on another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case may be, is by operation of law. It affects the entire class of directors of all defaulting companies. It does not affect an individual director or any particular company as such. It is also not necessary to pass any administrative order disqualifying a director of a defaulting company. As already observed it is by operation of law as per the intention of Parliament. Further, the consequence is temporary, for a period of five years and not a permanent one. 127. Swadeshi Cotton Mills vs. Union of India [(1981) 1 SCC 664] is a leading judgment on post-decisional hearing. In the said case, the facts were that on 13.04.1978, the Government of India, in exercise of power under Section 18-AA(1)(a) of the Industries (Development and Regulation) Act, 1951, passed an order for taking over the management of Swadeshi Cotton Mills Limited by the National Textile Corporation Limited, stating that the Central Government was satisfied from the documentary and other evidence in its possession, that the persons in charge of the six industrial undertakings, had, by creation of encumbrances on the assets of the said industrial undertakings, brought about a situation which had affected and was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Chartered Accountants of India was entitled to a hearing by a Council of the Institute after the Disciplinary Committee had submitted its report to the Council of its enquiry into allegations of misconduct against the member. It was held that a member accused of misconduct was entitled to a hearing by the Council when, on receipt of report of the Disciplinary Committee, it proceeded to find whether he is or is not guilty. 130. However, one significant aspect noted is that a post-decisional hearing is envisaged when a decision making authority in the first instance makes a decision which is tentative and after giving an affected person a right of hearing, makes a final decision. In other words, a post-decisional hearing is normally envisaged in the exercise of administrative power. But, the question is as to whether a postdisqualification hearing is envisaged when a consequence occurs on account of an operation of law as in Section 164(2) of the Act. Having regard to the object and reasons of having a provision in the nature of Section 164(2) of the Act, in my view, even a postdecisional hearing, is not contemplated. Hence, in my view, the need to provide or read the requireme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r company. The crux of the matter vis-à-vis Section 164(2)(a) of the Act is with regard to the argument that Section 164(2)(a) of the Act, having a retrospective effect is unreasonable and arbitrary as per Article 14 of the Constitution. The said argument is with regard to material period i.e., continuous period of three financial years. The argument proffered on behalf of the petitioners is that continuous period of three financial years must be with effect from 01.04.2014 onwards as on that date, Section 164 was enforced as different Sections of the Act were enforced on different dates. If it is so, then a continuous period of three financial years must commence from 01.04.2014 onwards i.e., 2014-15; 2015-16 and 2016-17 during which period there would be non-filing of financial statements or annual returns, in which event, the disqualification could occur for the first time only in the year 2017 and thereafter. But in the instant case, the disqualification has been made on 01.11.2016 by taking into consideration period prior to 01.04.2014. That the respondent-authorities have given a retrospective operation to the provision when it could not do so. In other words, the argu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roviso could not be made applicable to the block assessment in question of an earlier period i.e., from 01.04.1989 to 10.02.2000 in the said case. The question was whether the proviso to Section 113 of the Act was clarificatory in nature and thereby having retrospective effect. The Hon'ble Supreme Court held that one of the rules guiding how a legislation has to be interpreted is, unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. According to the Hon'ble Supreme Court, "if we do something today, we do it keeping in view the law of today and in force and not tomorrow's backward adjustment of it. Our belief in the nature of the law is founded on the bedrock that every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset." In the aforesaid decision, Phillips vs. Eyre, [(1870) LR 6 QB 1] was relied upon to observe that a retrospective legislation is contrary to the general principle that le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .R. 20], wherein on the question as to whether a provision has retrospectivity, it has been observed as under: "Parliament was presumed when enacting legislation not to have intended to alter the law applicable to past events and transactions in a manner which was unfair to those concerned in them unless a contrary intention appeared. Accordingly, the question whether an Act was retrospective was to be determined according to whether in a particular case the consequences of reading the statute with the suggested degree of retrospectivity was, having regard to the degree of retrospectivity involved, the value of the rights affected, the clarity of the language used and the circumstances in which the legislation was enacted, so unfair that the words used by Parliament could not have been intended to mean what they might appear to say. ...." (e) Reliance was also placed on the Commissioner of Income Tax 5, Mumbai, vs. Essar Tele Holdings Limited, through its Manager [(2018) 3 SCC 253], wherein the question was, whether Section 14-A(2) and (3) inserted to Income Tax Act, 1961 with effect from 01.04.2007 would apply to all pending assessments and whether Rule 8D was applicable retro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following manner: (i) A law cannot be held to be unreasonable merely because it operates retrospectively; (ii) The unreasonability must lie in some other additional factors; (iii) The retrospective operation of a fiscal statute would have to be found to be unduly oppressive and confiscatory before it can be held to be unreasonable as to violate Constitution norms; (iv) Where taxing statute is plainly discriminatory or provides no procedural machinery for assessment and levy of tax or that is confiscatory, courts will be justified in striking down the impugned statute as unconstitutional; (v) The other factors being period of retrospectivity and degree of unforeseen or unforeseeable financial burden imposed for the past period; (vi) The length of time is not by itself decisive to affect retrospecitivity." It was further observed that it is well settled that the mere date of enforcement of the statutory provisions does not conclude that the statute is prospective in nature. The nature and content of statute have to be looked into to find out the legislative scheme and the nature, effect and consequence of the stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st. Thus, by virtue of Rule 25(2), a member was deemed to have ceased to be a member of the society, but the cessation operated from 02.04.1973, when the Rule came into force. 137. In the aforesaid case, reference was made to Solicitor's Clerk, In Re. [(1957) 3 All. E.R. 617(DC)] (Solicitor's Clerk), wherein the bone of contention revolved around Solicitor's Act of 1956 which provided that no solicitor should employ any person who was convicted of larceny without the permission of the Law Society. The clerk in that case was convicted of larceny in 1953, while the ban was imposed in 1956. It was urged that the provisions of the 1956 Act cannot be applied to him because he was convicted before that Act came into operation and to do otherwise, it would make its operation retrospective. The said contention was rejected by Lord Goddard, C.J. by observing that the provision enabled an order to be made disqualifying a person from acting as a solicitor's clerk in the future and what happened in the past as the cause or reason for the making of the order; but the order has no retrospective effect. It would be retrospective if the Act provided that anything done before the Act came ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Legislature of a State, take effect until three months have elapsed from that date or, if within that period an appeal or application for revision is brought in respect of the conviction or the sentence, until that appeal or application is disposed of by the Court. The contention advanced was that Section 8(4) of the RP Act did not provide a rationale for making an exception in the case of Members of Parliament or a Legislature of a State and hence was arbitrary and discriminatory and violative of Article 14 of the Constitution. It was submitted that persons elected as Members of Parliament and State Legislature stand on the same footing as sitting Members of Parliament and State Legislatures so far as disqualifications are concerned and sitting Members of Parliament and State Legislatures cannot enjoy the special privilege of continuing as Members even though they are convicted of the offences mentioned in sub-sections (1), (2) and (3) of Section 8 of the RP Act. 140. The Hon'ble Supreme Court, after referring to Article 102(1)(e) and Article 191(1)(e) of the Constitution regarding disqualification for being chosen as, and for being, a Member of either House of Parliament or L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be treated for future occurrence, then the amendment portion could not be given any effect at all for a period of one year. One year is the minimum period of default as far as nonpayment of deposits or interests is concerned. That if the operation of the provision cannot be suspended for a period of one year unless it is provided expressly or at least by giving an interpretation of the words and language of the Section itself. It was further observed that interpretation of the words of any statute cannot be to frustrate or defeat the object of the Act or lead to an absurdity. While holding so, the Calcutta High Court held at the interlocutory stage, prima facie, that defendant No.1 therein was disqualified to be appointed as a director in defendant No.3/company therein. 142. In reply, learned counsel for the petitioners contended that there is a distinction between Section 274(1)(g) of the 1956 Act and Section 164(2)(a) of the Act. Firstly, that Section 274(1)(g) of the 1956 Act, applied only to public companies and not to private companies. That for the first time, a director of a private company is brought into the fold of such a disqualification. Secondly, under Section 274(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ackward, but a retrospective statute operates forward, but it looks backward in that it attaches new consequences for the future to an event that took place before the statute was enacted. (iii) A retroactive statute changes the law from what it was; a retrospective statute changes the law from what it otherwise would be with respect to a prior event. 144. Applying the distinction, Driedger in "Construction of statutes (2nd Edition 1983 @ page 192)" could be quoted as under: "These past facts may describe a status or characteristic, or they may describe an event. It is submitted that where the fact situation is a status or characteristic (the being something), the enactment is not given retrospective effect when it is applied to persons or things that acquired that status or characteristic before the enactment, if they have it when the enactment comes into force; but where the fact-situation is an event (the happening of or the becoming of something), then the enactment would be given retrospective effect if it is applied so as to attach a new duty, penalty or disability to an event that took place before the enactment." (underlining by me) 145. In the words of Canadian Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en into consideration, then the provision would have a retrospective effect which is unreasonable and therefore, in violation of Article 14 of the Constitution of India. 148. On considering the aforesaid rival submissions, it is noted that under the 1956 Act, if a director was disqualified under Section 274(1)(g) of the Act, it did not result in vacating office of the director under Section 283 of the said Act. The only consequence was that a director of such a defaulting company could not be appointed as a director of any other company for a period of five years. He could however be re-appointed as a director of the defaulting company. But under the Act, the consequences are three-fold which can be categorized as immediate and long term. The immediate consequences are that a director of the default company would have to vacate his office as a director in all companies other than the company in default as per the proviso to Section 167(1)(a) of the Act. Whereas the long term effect is that he cannot be reappointed as a director in the defaulting company. He is also not eligible to be appointed as a director in any other company for a period of five years. 149. The other imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equent to the enforcement of the Act, which is from 01.04.2014. In such a situation, the consequences envisaged under Section 164(2) read with Section 167(1)(a) of the Act cannot be applied. 152. Thus, if the default occurred in any financial year prior to 01.04.2014, but such a director seeks re-appointment in the defaulting company or in any other company, the ineligibility as envisaged under the Act would apply. Also, after the enforcement of the Act with effect from 01.04.2014 onwards, if a director is disqualified the consequences that would follow is as per Section 164(2)(a) of the Act. In other words, up to 31.03.2014, Section 274(1)(g) of the 1956 Act would apply, but with effect from 01.04.2014, Section 164(2) of the Act would apply if a director seeks re-appointment in the defaulting company or appointment in any other company. But, if the continuous period of three financial years is spread prior to 01.04.2014 as well as subsequent thereto, then the consequences under Section 164(2) of the Act would not apply. This is so, where the company is a public limited company. In this regard, the judgments relied upon by the learned counsel for the petitioners would apply. 153. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o antecedent situations/facts. As already noted, Section 164(2) of the Act would apply to a director who has been disqualified under the provisions of the 1956 Act (old Act) if, after coming into force of the same i.e., with effect from 01.04.2014, he seeks appointment as a director in any company. Thus, where a disqualification affects a director of a public company under Section 274(1)(g) of the 1956 Act and question arises as to whether he could be appointed as a director of the company after the enforcement of the Act, the fact that he had sustained a disqualification under the 1956 Act could be taken into consideration after the enforcement of the Act from 01.04.2014. Section 164(2) of the Act would accordingly apply. Therefore, a past event can be taken into onsideration for the purpose of Section 164(2) of the Act after it comes into effect. Therefore, if a past event has to be taken note of while applying Section 164(2) subsequent to its enforcement and while ascertaining the antecedents of a person, it is noted that he had sustained a disqualification on account of Section 274(1)(g) of the 1956 Act, the said disqualification under the 1956 Act would have a bearing at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nancial years is inclusive of not only a period prior to 01.04.2014, but also subsequent thereto, unless specifically stated otherwise. The contention of the petitioners is that no period prior to 01.04.2014 could be reckoned for the purpose of counting three continuous financial years under Section 164(2)(a) of the Act. That the said period of three continuous financial years must have begun with effect from 01.04.2014 onwards for the consequences under Section 164(2) to apply. The reasons for such a submission are two-fold: firstly, because of the severity of the consequences envisaged under Section 164(2) of the Act as compared to the consequence under Section 274(1)(g) of the 1956 Act. Secondly, for the first time, under the Act, a director of a private company also sustains such a disqualification under Section 164(2) of the Act, whereas under the 1956 Act, it was only a director of a public company who could be visited with such a disqualification. 158. I find, substance in the contentions advanced on behalf of the petitioners, inasmuch as directors of private companies are concerned, a provision like Section 164(2) is applicable for the first time. Thus, no period anteceden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) of the Act when a director has to be re-appointed in a defaulting company or in any other company. Thus, the new law can be applied to an act or transaction which has been completed before it is enforced. In such a case, the provision is not retrospective because a part of the requisite for its action is drawn from a time antecedent to its passing. The new law imposes consequences in respect of past events, with effect from 01.04.2014 which is prospective. But on the other hand, when the new law is applied to an act or event or transaction which is in the process of completion i.e., when the continuous period of three financial years is spread prior to 01.04.2014 when the Act was not in force and subsequent thereto, then in such a case, the consequences stipulated under Section 164(2) of the Act would not apply to a director of a defaulting company. 161. The reason for the same have been stated above and are reiterated. As far as a private company is concerned, till 01.04.2014, there was no provision akin to Section 164(2) which applied to a director of such a private company. In fact, Section 274(1)(g) of the 1956 Act expressly stated that it applied only to a public company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred on or before 31.03.2014 under the provisions of the 1956 Act. Thus, even in respect of such disqualification after the enforcement of Section 164(2)(a) of the Act, any such director who has been disqualified cannot be reappointed in the defaulting company or in any other company for a period of five years. 163. In the circumstances, point No.3 is answered by holding that Section 164(2) of the Act is not unreasonable or violative of Article 14 of the Constitution as it does not violate the rule against retrospectivity. 164. The petitioners being directors of public and/or private companies could not have been disqualified on 01.11.2016 by taking into consideration three continuous financial years prior thereto, which includes a period prior to 01.04.2014, on which date Section 164(2) was enforced as on that date the basis for application of the provision did not exist so as to disqualify the directors of public and/or private company. 165. It may be that, after the coming into force of the Act, if a person has to be considered to be appointed as a director of the company, then inter alia, the ineligibility on account of the operation of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... office in all other companies where he is a director. On a reading of Section 167 of the Act, it is evident that Section 167(1)(a) of the Act deals with the disqualifications specified in Section 164. Section 164(1)(a) to (h) of the Act deals with those grounds of disqualification, which according to petitioners' counsel are personal to a director of a company, but under Section 164(2) of the Act, the disqualification occurs on account of the default of the company, either under clause (a) or (b) thereof, resulting in an ineligibility for a director to be re-appointed as a director either in that company or in any other company for a period of five years. 167. An argument advanced on behalf of the petitioner is, under Section 167(1)(a) of the Act, vacating of office of a director on account of the disqualification is limited to only Section 164(1) of the Act; it does not extend to Section 164(2) of the Act. If it is interpreted otherwise, it would be in violation of Articles 14 and 19(1)(g) of the Constitution as the said provision would be unreasonable and arbitrary. 168. The said argument is rebutted by learned Additional Solicitor General and other counsel for respondent-Uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or other employment in the holding, subsidiary or associate company, ceases to hold such office or other employment in that company. That, clauses (b) to (h) of Section 167(1) of the Act deal with the conduct of a director in the discharge of his duties as a director of the Board of Directors whereas Clause (a) of Section 167(1) deals with incurring a disqualification specified in Section 164 of the Act. It was contended on behalf of the petitioners that under Clauses (b) to (h) of Section 167(1) of the Act, a director would vacate his office as a director only from the Board of Directors of that company in which his conduct contravenes or comes within the scope and ambit of clauses (b) to (h). But, under clause (a) of Section 167(1)(a) of the Act, the director would vacate his office if he incurs any of the disqualifications specified in Section 164 of the Act in respect of all companies where he is a director. But, under Section 167(1)(b) to (h) of the Act, he would vacate office as a director of that company only which has defaulted under Section 164(2) of the Act. That there is also a distinction between Section 164(1) and (2) of the Act. Under Section 167(1)(a) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on incurred by a director vicariously on account of the company being in default. In such an event, even according to the proviso, he continues to hold office of the director in the defaulting company. It was contended on behalf of the petitioners that, when such a director could continue to hold office in a company which is in default under Section 164(2) of the Act, there is no reason as to why he should vacate office of the director in all other companies in which he is a director, which are not at all in default under Section 164(2) of the Act. In other words, the disqualification under Section 164(1)(a) to (h) of the Act would render a director being disqualified vis-à-vis all companies in which he is holding office of a director and he has to vacate the said office. But, when disqualification is on account of Section 164(2)(a) or (b) of the Act, the same is not in the nature of a disqualification which is "incurred" by a director as under Section 164(1) of the Act, as contended by Sri Prashanth. 171. Therefore, the plausible interpretation suggested by petitioners' counsel at the Bar is that a director who incurs disqualification on account of Section 164(2) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from the date of disqualification, by the same logic, the director cannot be permitted to continue as a director in any other company. The short term effect of the non-compliance of Section 164(2) of the Act by a company is that the director of such a defaulting company would have to vacate his office as a director in all companies where he is a director. The whole object and purpose of such a provision is to ensure that a director of a defaulting company does not continue to hold the office of the director in any company, while at the same time, he is ineligible to be appointed as a director in the defaulting company or in any other company. In other words, when there is ineligibility for a director of a defaulting company to be re-appointed as a director of the defaulting company or appointed as a director of any other company, then by the same logic he cannot be permitted to be continued as a director in the defaulting company or in any other company. The disqualification on account of non-compliance under Section 164(2) of the Act implies that the director is a part of the Board of Directors of a company who has not complied with the requirements of Section 164(2) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his acts of commission or omission, as the case may be. But, the same is not extended to all other companies in which such a director holds the position of a director. In other words, absenteeism, contravention of the provisions of the Act etc. mentioned under Section 167(1)(b) to (h) of the Act would result in vacating the office of only the Board of Directors of that company in respect of which the misconduct or omission has occurred and not in other companies in which such a director is also holding the office of a director. 176. Section 167(1)(a) of the Act uses the expression "any of the disqualifications specified in Section 164". On a plain reading of the same, it cannot be restricted to only Section 164(1) of the Act. 177. While holding so, reliance could be placed on the guiding principles of interpretation of statute. One such principle is that the Court is not entitled to ignore words or read words into a provision of an Act, for the meaning is to be found within the four corners of the provision of the Act, as in the instant case. Therefore, while it is not permissible to add words or to fill in a gap or lacuna, on the other hand effort should be made to give mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal with the misconduct of a director of Board of Directors is the argument proffered on behalf of the petitioners. But, in such a situation, the director who has misconducted himself by being absent or failing to disclose his interest, etc., does not lose his position as a director in all other companies. In other words, he will have to vacate the office of the director in only that company in respect of which he has misconducted himself. Hence, it is contended by petitioners that there can be no vacation of office for a disqualification incurred under Section 164(2) of the Act under Section 167(1)(a) of the Act. If the aforesaid logic is now applied, in a reverse manner, to Section 167(1)(a) of the Act, the director who has incurred a disqualification under Section 164(2) of the Act, under the proviso to Section 167(1)(a) of the Act, while he continues to be in office in the defaulting company, according to the petitioners, for no reason or in the absence of any nexus has to vacate his office in all other companies wherein he is a director. Hence, in the proviso to Section 167(1)(a) of the Act, the words "the office of the director shall become vacant in all the companies" is ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so long associated personally with the management of the Company that he will be deemed to be not merely cognizant of but liable for fraud in the conduct of business of a Company even though no specific act of dishonesty is provide against him personally. He cannot shut his eyes to what must be obvious to everyone who examines the affairs of the Company even superficially." 184. But, in order to avoid an incongruent situation where all the directors of a defaulting company would have to vacate their office, the proviso has been added, by which the directors who incur disqualification on account of Section 164(2) of the Act would not vacate their office in the defaulting company. The proviso to the said extent is clarificatory in nature and would apply to any disqualification that occurs after the enforcement of the Act. Even according to the petitioners, the remedy provided in the proviso to that extent is just and proper. 185. But the further grievance of the petitioners is, by a proviso, the directors who incur disqualification under Section 164(2) of the Act in respect of a defaulting company would have to vacate their office of director in all other companies other than the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain rules collated from judicial precedents. Firstly, a proviso is not to be construed as excluding or adding something by implication i.e., when on a fair construction, the principal provision is clear, a proviso cannot expand or limit it. Secondly, a proviso has to be construed in relation to which it is appended i.e., normally, a proviso does not travel beyond the provision to which it is a proviso. A proviso carves out an exception to the main provision to which it has been enacted as a proviso and to no other. However, if a proviso in a statute does not form part of a section but is itself enacted as a separate section, then it becomes necessary to determine as to which section the proviso is enacted as an exception or qualification. Sometimes, a proviso is used as a guide to construction of the main section. Thirdly, when there are two possible construction of words to be found in the section, the proviso could be looked into to interpret the main section. However, when the main provision is clear, it cannot be watered down by the proviso. Thus, where the main section is not clear, the proviso can be looked into to ascertain the meaning and scope of the main provision. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of the preceding portion of the enactment or to qualify something enacted therein, which, but for the proviso, would be within it". [See "Craies" on Statute Law - 6th Edition - P.217]. In this case, the Court was considering Section 5(2) (a) (ii) of Bengal Finance Sales Tax Act, 1941 and Rule 27-A of Bengal Sales Tax Rules. In Dattatraya Govind Mahajan and Others Vs. The State of Maharashtra and another, [AIR 1977 SC 915], a Constitution Bench of the Apex Court, while considering the amendment made to Maharashtra Agricultural Lands (Ceiling on Holdings) Act, 1961, in the context of Article 31B of the Constitution and the second proviso thereto, reiterated what was stated in Ishverlal's case, supra. In S.Sundaram Pillai, etc, vs. V.R.Pattabiraman, [AIR 1985 SC 582], while dealing with the scope of a proviso and explanation to sub-section (2) of Section 10 of Tamil Nadu Buildings (Lease and Rent Control) Act, 1960, the Hon'ble Supreme Court held that a proviso may have three separate functions. Normally, a proviso is meant to be an exception to something within the main enactment or qualifying some thing enacted therein which, but for the proviso, would be within the purview ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f learned counsel for the petitioners is that the petitioners herein were disqualified on 01.11.2016. On that date, they did not have to vacate office as it was not envisaged under Section 167(1)(a) of the Act. But, by the Amendment Act, 2017, by insertion of a proviso, the petitioners who were disqualified on 01.11.2016 cannot now be forced to vacate the office of director in all other companies in which they are holding the position of directors as the said provision cannot have a retrospective operation. 189. Therefore, it is necessary to understand the operation of the proviso in question and as to whether it has a retrospective operation or a prospective one. 190. It is noted that the amendment to Section 167(1)(a) of the Act by the Amendment Act, 2017 has been with effect from 07.05.2018. However, the disqualification in most of these cases has been with effect from 01.11.2016. The question then is whether the proviso to Section 167(1)(a) of the Act inserted by virtue of the Amendment Act, 2017 can be made applicable to the petitioners herein, in which event, the petitioners who have been disqualified as on 01.11.2016 would not vacate the office of the directors in the defa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ospective operation which has the effect of taking away a benefit already available to the employee under the existing rule is arbitrary, discriminatory and violative of the rights guaranteed under Articles 14 and 16 of the Constitution." (e) Similarly in P.Tulsi Das V. Government of A.P., (2003) 1 SCC 364, it has been held that wherever the amendment purports to restore the status quo ante for the past period taking away the benefits already available, accrued and acquired by them, the law may not be valid. 193. But, I find much force in the argument of learned ASG that the proviso is only clarificatory in nature as Section 167(1)(a) of the Act categorically states that the office of the director shall become vacant in case he incurs "any of the disqualification specified in Section 164 of the Act". The aforesaid expression cannot be read down to refer only to those disqualifications under Section 164(1)(a) to (h) of the Act. It even incorporates a disqualification incurred under Section 164(2) as well as (3) of the Act. Thus, the object of introducing Section 167(1)(a) of the Actwhen such a provision was conspicuous by its absence in 1956 Act-is to bring in higher degree of tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to vacate the office of the director in all other companies in which they are directors while continuing as a director in the defaulting company. That part of the proviso has to be construed to be prospective and it would imply that the petitioners herein would continue as directors of the defaulting company and would not have to vacate office of the director in all other companies in which they are directors. The proviso would therefore apply only to those directors who sustain disqualification subsequent to 07.05.2018 when the proviso was introduced. Consequently, under Section 167(1)(a) of the Act, a director of a defaulting company who has been disqualified prior to 07.05.2018 would not have to vacate his office of such a company or in any other company. Further, the petitioners who were also protected by the interim order passed by this Court would continue to be the directors of the defaulting company till their term of office ends. 197. In the result, point No.6 is answered by holding that the proviso to Section 167(1)(a) of the Act is not ultra vires Articles 14 and 19(1)(g) of the Constitution. The words "provided that where he incurs disqualification under sub-section (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Form DIR-9. Point Nos.5 and 6 are accordingly answered. Part-12 Judgments of Madras and Gujarat High Courts: 201. At this stage, it is necessary to refer to the judgments of Madras High Court and Gujarat High Court. 202. The Madras High Court in Bhagavan Das Dhananjaya Das vs. Union of India & Others, [(2018) 210 Comp. Cases 151 (Mad), at paragraphs 29 & 30 of the judgment has summarized its conclusions as under: "29. In fine, (a) When the New Act 2013 came into effect from 1.4.2014, the second respondent herein has wrongly given retrospective effect and erroneously disqualified the petitioner-directors from 1.11.2016 itself before the deadline commenced wrongly fixing the first financial year from 1.4.2013 to 31.3.2014. (b) By virtue of the new Section 164(2)(a) of the 2013 Act using the expression for any continuous period of three financial years' and in the light of Section 2(41) defining 'financial year' as well as their own General Circular No.08/14 dated 4.4.2014, the first financial year would be from 1.4.2014 to 31.3.2015, the second financial year would be from 1.4.2015 to 31.3.2016 and the third financial year would be from 1.4.2016 to 31.3.2017, whereas the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both. Again under Section 137, the failure to file the financial statement visits punishment with imprisonment for a term which may extend to six months or with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees, or with both. Further, under Section 441(4), the default in filing returns or accounts compoundable by Tribunal or Regional Director or by any officer authorized by the Central Government. (f) In view of the above legal position, when the default in filing the accounts or returns are made as compoundable offence, Section 164(2)(a) providing the disqualification of director of private company not only in the defaulting company, but also from other company in which the petitioner is a director, diligently and meticulously following every provision of law, is certainly disproportionate to the lapse, as it is only regulatory in nature, because, notice to be sent under Section 248(1) of the Companies Act, 2013 by the Registrar of Companies for striking off the name of the company from the Registrar of Companies on the premise that the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the list dated 12.09.2017 of directors associated with "Struck off Companies" under Section 248 of the Companies Act, 2013 on the website of the Ministry of Corporate Affairs, Government of India to the extent, the said list shows the status of the petitioners as "disqualified" Directors. At paragraph Nos.33 to 35 of the judgment, Gujarat High Court has observed as under: "33. The upshot of the aforesaid discussion and findings may be summarized as under:- a. Section 164(2) of the Act of 2013, which had come into force from 1.1.2014 would have prospective and not retrospective effect. b. The defaults contemplated under Section 164(2)(a) with regard to nonfiling of financial statements or annual returns for any continuous period of three financial years would be the defaults to be counted from the financial year 2014-15 only and not 2013-14. c. The respondents could not have treated the Directors as disqualified/ ineligible for a period of five years from 1.11.2016 to 1.11.2021, while publishing the impugned list under Section 248 of the Act of 2013. d. Even if the Registrar removes the name of a company from the register of companies, and even if such company would stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that every citizen in all walks of life must endeavour to bring in transparency and accountability in his / her work if our country, India or Bharat is to endure. Thus, the time has come for us citizens, to transform ourselves ethically by erasing all dark spots in our minds and hearts and to work towards a resurgent Nation. Article 51A of the Constitution of India which deals with fundamental duties states that, it shall be the duty of every citizen of India to strive towards excellence in all spheres of individual and collective activity so that the nation constantly rises to higher levels of endeavour and achievement, but by ethical means. The Act and the amendments made to it are only small steps taken towards that goal. It is only when a strict implementation of the same by all the stake-holders in the corporate world as well as the authorities concerned is made, that the aims and objects of the legislation could be achieved. Part-13 Summary of Conclusions: 208. In view of the aforesaid discussion, I have arrived at the following conclusions: (a) It is held that Section 164(2)(a) of the Act is not ultra vires Article 14 of the Constitution. The said provision is not mani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of time prior to the enforcement of the Act, a disqualification based on the circumstances under Section 164(2) of the Act was ever envisaged under the 1956 Act vis-à-vis directors of private companies. Such a disqualification could visit a director of only a public company under Section 274(1)(g) of 1956 Act and never a director of a private company. Such disqualification of the petitioners who are directors of private companies is hence quashed. (f) But, if any disqualification of directors of public companies has occurred under the 1956 Act, i.e., prior to 01.04.2014, the same would result in an ineligibility under Section 164(2) of the Act on account of the retro-active operation of the Section. (g) Consequently, where the disqualification under Section 164(2)(a) of the Act is based on a continuous period of three financial years commencing from 01.04.2014, wherein financial statements or annual returns have not been filed by a public or private company, the directors of such a company stand disqualified and the consequences of the said disqualification would apply to them under the Act. (h) That Section 167(1)(a) of the Act is not ult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 167(1)(a) would imply that the director of a defaulting company who has suffered disqualification need not vacate his office of the director in the defaulting company. (l) Consequently, proviso to Section 167(1)(a) of the Act having a prospective operation would affect only those directors who are disqualified on or after 07th May 2018 insofar as vacating office of director other than the defaulting company is concerned. (m) It is held that the directors of the struck off companies under Section 248 of the Act do not per se get disqualified. But, if the said company has also not complied with Section 164(2)(a) of the Act, then the said company being a defaulting company, the directors of such a company get disqualified in terms of the discussion made above. Re. Point No.7: 209. In the result, I pass the following order: O R D E R (i) Where the disqualification of the petitioners is based by taking into consideration any financial year "prior to 01.04.2014 as well as subsequent thereto" while reckoning continuous period of three financial years under Section 164(2)(a) of the Act, irrespective of whether the petitioners are directors of public companies or private compan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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