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TMI Blog2019 (11) TMI 319X X X X Extracts X X X X X X X X Extracts X X X X ..... There is no dispute that the provisions of Section 164(2) of the Act must be applied prospectively - The Karnataka High Court, Gujarat High Court and Madras High Court have also considered a similar challenge - All of the aforesaid Courts are unanimous in their opinion that the provisions of Section 164 apply prospectively. The petitioners would not demit their office on account of disqualifications incurred under Section 164 (2) of the Act by virtue of Section 167(1)(a) of the Act prior to the statutory amendments introduced with effect from 07.05.2018. However, if they suffer any of the disqualifications under Section 164(2) on or after 07.05.2018, the clear implication of the provisos to Section 164(2) and 167(1)(a) of the Act are that they would demit their office in all companies other than the defaulting company. Automatic vacancy of officer of director - Whether the consideration of the default committed in filing financial statements and annual returns for the financial years 2013-14 would amount to applying the provisions of Section 164(2) of the Act retrospectively? - HELD THAT:- The proviso to Section 167(1) of the Act imposes a punitive measure on directors o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such principles are required to be read into any law must be considered in the context of the basic scheme of the statutory provisions - the contention that the impugned list is void as having been published without following the principles of natural justice, is rejected. Deactivation of the DIN of the defaulting directors - Held that:- Neither any of the provisions of the Companies Act nor the Rules framed thereunder stipulate cancellation or deactivation of DIN on account of a director suffering a disqualification under Section 164(2) of the Act. It is relevant to note that Rule 11 of the Company (Appointment and Qualification of Directors) Rules, 2014 was amended with effect from 05.07.2018 to provide for deactivation of DIN in the event of failure to file Form DIR-3-E-KYC within the period as stipulated under Rule 12A of the said Rules. The amendment so introduced also does not empower the Central Government to cancel or deactivate the DIN of disqualified directors. - None of the provisions of Rule 14 of the said Rules indicates that the DIN of directors incurring the disqualification under section 164(2) of the Act, is required to be deactivated. Conclusion: the off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere directors in various companies. By way of the impugned list, the petitioners have been disqualified from being appointed / reappointed as directors for a period of five years under Section 164(2)(a) of the Act. Further, the names of some of the companies, in which the petitioners were holding the office of directors, have been struck off from the Register of Companies. In WP. (C) 3658 of 2019, the petitioners have been disqualified as directors on account of failure on the part of a company (Logic Eastern India Private Limited) to file its annual returns. It is stated that Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016 has been initiated in relation to said company. 3. The impugned action was taken against the petitioners on account of default on the part of the companies in not filing the annual returns for the preceding financial years. 4. The petitioners have challenged the impugned list, essentially, on four grounds. First, that the action of the respondents in disqualifying the petitioners is arbitrary inasmuch as the petitioners were not afforded an opportunity to be heard. The petitioners contend that the said action is in vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upto the financial year 2012-13, but the petitioners failed to submit the aforesaid statements for the subsequent years. 10. In the year 2014, respondent no.1 issued a circular (General Circular No. 34/2014), whereby it floated a scheme called Company Law Settlement Scheme, 2014. The said Scheme was floated to provide an opportunity to the defaulting companies to file their (belated) financial statements and annual returns for the consecutive period of three financial years. The said Scheme also offered an opportunity to the inactive companies to get their companies declared as dormant company under Section 455 of the Act by filing a simple application at reduced fees . 11. Thereafter, in the year 2015, the petitioners applied for the voluntary closure of companies, namely M/s. Aryan Express Holding Pvt. Ltd. and M/s. Aryan Cargo Logistics Pvt. Ltd., on account of failure to commence the business. It is stated that the said applications were rejected by the ROC. 12. On 12.04.2017, a notice dated 19.03.2017 under Section 248 of the Act was sent to petitioner no.1 and 2, inter alia, stating that the company Aryan Cargo Express Pvt. Ltd. had been non-operational for two pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were blocked and details of these directors regarding their disqualification for the period from 01-11-2016 to 31-10-2021, were updated. 17. It is submitted by the respondents that the aforesaid list published on 15.09.2017 did not take into account the defaults committed in filing the annual returns for the preceding block of three financial years financial years 2011-12, 2012-13 and 2013-14 (FYs 2012-14) and financial years 2012-13, 2013-14 and 2014-15 (FYs 2013-2015), respectively. 18. It is further submitted that the said defaulting directors were also disqualified because part of the defaults was post 01.04.2014. For the block of financial years 2012-14 and financial years 2013-15, two separate lists of disqualified directors, both dated 03.10.2017, were published by respondent no.2 under which 37,237 directors were identified as disqualified for the block years 2012-14, for the period 01.11.2014 to 31.10.2019 and 01.11.2015 to 31.10.2020, respectively. 19. A tabular statement of the list of disqualified directors for the aforesaid block years, that is 2012-14, 2013-15 and 2014-16 is set out below: List Block Years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioners under Section 248(1) of the Act cannot be construed as a show cause notice, as a company s name is open to be struck off for failure to carry on business for a period of two financial years, but for incurring a disqualification under Section 164(2) of the Act, the company must default for a minimum period of three financial years. 22. Second, it is contended that the provisions of Section 164 of the Act, being penal in nature, could not be applied retrospectively. It is submitted that the Companies Act, 2013 (the Act) came into force on 01.04.2014 but the petitioners were disqualified as directors for committing defaults for the financial years preceding the first financial year commencing on 01.04.2014. It is further submitted that in terms of the General Circular No. 08/2014 dated 04.04.2014, the provisions of the Companies Act, 1956 would govern the financial years preceding 01.04.2014. 23. Third, that on a plain interpretation of Section 164(2)(a) of the Act, the petitioners cannot be disqualified to act as directors of the companies, which had not defaulted in filing their annual returns and financial statements for a period of three consecutive years. 24 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issions advanced on behalf of the petitioners that considering the defaults in filing financial statements and annual returns for the financial year ending 31.3.2014 (FY 2013-14) and prior years for the purposes of imposing the disqualification under Section 164(2) of the Act, tantamount to applying the said provisions retrospectively. This, according to the petitioners, is impermissible. 29. Section 164(2) of the Act disqualifies a director from being reappointed in a company for a period of five years, if the company has (a) not filed financial statements or annual returns for any continuous period of three financial years; or (b) 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. In addition, a director of such a company is also disqualified from being appointed in any other company for a period of five years. 30. Clause (g) of Section 274(1) of the Companies Act, 1956, which was in force prior to 01.04.2014, also contained similar provisions for disqualifying a director of a company that had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or of a private company is stipulated under the Act in the form of Section 164(2), the said provision must be given only a prospective operation. 35. In Gaurang Balvantlal Shah (supra), the Gujarat High Court had observed as under:- Such provision of disqualification for the director of a company public or private company, has been incorporated for the first time in Section 164(2) of the Act of 2013. Such being the case, the said provision has to be construed as having prospective effect. If retrospective effect is given to it, that would destroy, alter and affect the right of the Directors of private company existing under the Act of 1956. 36. The essential question to be addressed is whether the consideration of the default committed in filing financial statements and annual returns for the financial years 2013-14 would amount to applying the provisions of Section 164(2) of the Act retrospectively. It is well settled that no statute shall be construed to apply retrospectively, unless such a construction appears clear from the language of the enactment or otherwise necessary by implication. It is also equally trite that a statute is not retrospective merely be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Constitution of India, there is no restriction on the Parliament or any State Legislature to enact any law with retrospective effect. However, it is also settled that no law shall be read as applicable retrospectively unless it is expressly enacted or necessarily implied. A retroactive law impairs vested rights acquired under the existing laws. It seeks to reopens past transactions and affects accrued rights. It is for this reason that retrospective application of a law is not readily inferred. 41. The question whether a law is retrospective has to be viewed in the context whether it divests a person of accrued rights, or creates new obligations, or attaches a disability in respect of transactions or actions done in the past. 42. It is apposite to bear the aforesaid in mind while examining the issue whether consideration of the defaults in filing financial statements and returns pertaining to financial year 2013-14, for the purposes of Section 164(2) of the Act, amounts to retrospective application of Section 164(2) of the Act. 43. It is necessary to bear in mind that there is no dispute that the Companies Act, 1956, as well as the Act (Companies Act, 2013) expres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for this default since it pertains to filing returns for a financial year that had closed prior to Section 164 of the Act coming into force. The date on which such default occurred is after the date on which Section 164 of the Act had become effective. This Court finds it difficult to understand as to which right of the petitioners has been impaired by considering such default for the purposes of Section 164 of the Act. 46. The penal consequences of not filing returns for three consecutive financial years would be attracted on section 164 of the Act coming into force. Section 164 of the Act came into force on 01.04.2014 and thus, the failure of a company/its directors to file annual returns (for three financial years) thereafter would result in the directors incurring the disqualification as specified under Section 164(2) of the Act. It is of little consequence that such defaults relate to filing annual returns that pertain to a period prior to 01.04.2014. Undisputedly, the concerned companies (and vicariously the petitioners) were obliged to file the financial statements for the financial year 2013-14 after 01.04.2014. As noticed above, the failure to do so would be in violatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lt or event, which had occurred or an action which was required to be taken, prior to Section 164 of the Act coming into force. 51. In view of the above, this Court is in respectful disagreement with the view of the Karnataka High Court, Madras High Court and Gujarat High Court in Yashodhara Shroff v. Union of India; Bhagavan Das Dhananjaya Das v. Union of India and Ors. and Gaurang Balvantlal Shah v. Union of India (supra) inasmuch as the said Courts have held that the defaults for the financial year ending 31.03.2014 cannot be considered for determining whether a director had incurred the disqualification under Section 164(2) of the Act. 52. Concededly, Section 164(2) of the Act operates prospectively. However, such prospective operation would entail taking into account failure to file the financial statements pertaining to the financial year ending 31.03.2014 on or before 30.10.2014. This Court is of the view that the taking into account such default does not amount to a retrospective application of Section 164 of the Act and the contentions advanced by the petitioners in this regard, are unmerited. 53. The impugned list of disqualified directors published on 15.09. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced, perhaps, because it would be inconsistent with respect to the period for which disqualification is stated to have been incurred. Clearly the respondents cannot contend that a director who has been disqualified to act as such on account of defaults committed for the financial years ending 31.03.2012, 31.03.2013 and 31.03.2014 can be held to be responsible for any defaults for a period of five years thereafter since, according to them, he would have been disqualified to act as a director after incurring the disqualification under section 164(2) of the Act. As mentioned in the third list, such persons would suffer the disqualification for the period 01.11.2014 to 31.12.2019. All the names included in the third list, except names of 786 persons, are common with the names in the first list. 55. In the aforesaid context, Ms Shiva Laxmi, learned counsel appearing for the respondents, after seeking instructions, conceded that the second and third list was inconsistent in respect of disqualification period as specified in the impugned list. Since neither the petitioners nor the respondents have argued that the defaults committed prior to 01.04.2014 can be considered for imposing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or quasi-judicial functions. They are a kind of code of fair administrative procedure. In this context, procedure is not a matter of secondary importance as it is only by procedural fairness shown in the decision making that decision becomes acceptable. In its proper sense, thus, natural justice would mean the natural sense of what is right and wrong. 59. The Supreme Court further referred to the views of Professor D.J. Gallian and had observed as under:- It, thus, cannot be denied that principles of natural justice are grounded in procedural fairness which ensures taking of correct decision and procedural fairness is fundamentally an instrumental good, in the sense that procedure should be designed to ensure accurate or appropriate outcomes. In fact, procedural fairness is valuable in both instrumental and non-instrumental terms. 60. It is clear from the above that the principles of natural justice have been accepted as a part of procedural law, where it is necessary to supplement it. The question whether such principles are required to be read into any law must be considered in the context of the basic scheme of the statutory provisions. 61. In Maneka Gand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les of natural justice then the court cannot ignore the mandate of the legislature or the statutory authority and read into the concerned provision the principles of natural justice. So also the right to be heard cannot be presumed when in the circumstances of the case, there is paramount need for secrecy or when a decision will have to be taken in emergency or when promptness of action is called for where delay would defeat the very purpose or where it is expected that the person affected would take an obstructive attitude. To a limited extent it may be necessary to revoke or to impound a passport without notice if there is real apprehension that the holder of the passport may leave the country if he becomes aware of any intention on the part of the passport authority or the Government to revoke or impound the passport. But that by itself would not justify denial of an opportunity to the holder of the passport to state his case before a final order is passed. It cannot be disputed that the legislature has not by express provision excluded the right to be heard . 63. In Swadeshi Cotton Mills v. Union of India : (1981) 1 SCC 664 , the Supreme Court of India referred to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditions, which if not complied with would disqualify an individual a person from being reappointed or appointed as a director. To put it in a converse manner, the said sections sets out a qualifying criterion for directors to be appointed or re-appointed, in negative terms. This provision does not entail any decision-making process on the part of the Authorities administering the Act. No Authority is required to exercise any discretion or take any judicial or quasi-judicial decision regarding disqualification of a director. The Authority is also not required to pass any order disqualifying an individual. Clearly, in these circumstances, the rule of audi alteram partem would be inapplicable. As noticed above, such rules are meant to supplement the law to ensure procedural fairness. Such principles are also to be followed while taking administrative decisions to ensure fairness in action. In Dharampal Satyapal Ltd (supra), Dr A.K. Sikri, J had observed that such principles are a kind of code of fair administrative procedure in the decision making process . It is difficult to understand as to how such principles would assist in the administrative procedure where an authority is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... qualitative decision required to be taken by the authorities, the rule of affording a prior hearing cannot be readily inferred as a part of Section 164(2) of the Act. This is so because the same would have the effect of obstructing and rendering the provision inefficient. 70. In Yashodhara Shroff v. Union of India (supra), the Karnataka High Court rejected the contention that the rule of audi alteram partem is applicable in the context of Section 164(2) of the Act. The Court had observed as under:- 127. Thus, when the ineligibility for being appointed as a director of the defaulting company or in all the companies is for a period of five years from the date of the default is by operation of law, there is no necessity to give a prior hearing or comply 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 the 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being reappointed in that company or being appointed in any other company for a period of five years. She submitted that the word appointed and re-appointed cannot be read as synonyms. She stated that since two separate expressions appointed and reappointed have been used by the legislature in the same statutory provision, the same must be given different meanings. On the strength of the aforesaid principle, she contended that a person who has incurred the disqualification under Section 164(2) of the Act, cannot be appointed in any other company but can be re-appointed. She contended that in this view, there was no impediment for a director to be re-appointed in a company that had not committed any default as specified in clauses (a) and (b) of Section 164(2) of the Act. She contended that a director of a defaulting company is disqualified from being appointed in any company in which he was not serving as a director at the material time. In other words, if a person was a director of a defaulting company but was also a director of other companies that were not in default, he would be disqualified from being reappointed in defaulting company or for being appointed in any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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. (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 hold office till the directors are appointed by the company in the general meeting. (4) 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). 77. A plain reading of Clause (a) of Section 167 (1) of the Act indicates that a Director would dem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 for the payment of the call; (g) he has been convicted of the offence dealing with related party transactions under section 188 at any time during the last preceding fiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the conditions as set out in subsection (1) of Section 164, which disqualify a person from being appointed as a Director are directly attributable to him/her. In contrast to the above, the provisions of sub-section (2) of Section 164 of the Act stipulates the defaults committed by a defaulting company, which results in the directors of that company incurring the disqualification being vicariously responsible for such defaults. It is possible that a particular director may not be, in fact, directly responsible for such defaults; nonetheless, he is disqualified to act as a director on account of being responsible for the affairs of the defaulting company by virtue of his holding the office of a director. 82. A person who has incurred the disqualification under section 164 (1) of the Act is not eligible for being appointed as a director of any company. Any person who has incurred the disqualification under sub-section (2) of section 164 of the Act is not eligible for being reappointed as a director of the company that has defaulted in terms of clause (a) and (b) of subs-section (2) of section 164 of the Act. He is also disqualified for being appointed to any other company for a per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f an offence involving moral turpitude and sentenced for imprisonment for not less than six months; (e) disqualifying for being appointed as a director by an order passed by any Court; (f) a defaulter on account of not paying calls in respect of any shares of any company held by him; (g) convicted of an offence with respect to related party transactions under Section 188 of the Act; or (h) not compliant with the provisions of section 152(3) of the Act. 86. The problem, essentially, arises in implementing the provisions of Section 167(1) (a) in respect of directors who have incurred disqualification under Section 164(2) of the Act. This is so because the disqualification incurred in Sub-Section (2) are not directly on account of reasons attributable to an individual director but on account of defaults committed by a company. Any person who is or has been a director of a company, which commits the defaults as set out in clauses (a) and (b) of Sub-Section (2) of Section 164 of the Act, incurs the disqualification for being appointed/reappointed as a director. If the provisions of Section 167(1)(a) of the Act are applied in such a case, all directors of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the same amending enactment. 89. The proviso to section 164 (2) provides that any person who has been appointed as a director of a company which is in default of clauses (a) or (b) of Sub-Section (2) of Section 164 of the Act would not incur the disqualification for a period of six months. Clearly, this proviso is not clarificatory. It is a substantive provision to enable a company to appoint directors (other than those who had incurred any disqualification) to enable them to cure the defaults. The legislature has provided a window of six months for curing the defaults and to enable the incoming directors appointed on the board of the defaulting companies to avoid disqualification under Section 164 (2) of the Act. There is no possibility to read such a window of six months in Section 164 (2) of the Act prior to 07.05.2018; that is, prior to enactment of the proviso to section 164(2) of the Act. 90. This also leads to the question as to why it was necessary to introduce the proviso to Section 164 (2) of the Act. It is obvious that such a proviso was also necessary if the provisions of Section 167(1)(a) were to be extended to result in vacation of office occupied by perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose provisions stand materially amended by introduction of the provisions with effect from 07.05.2018. 95. Indisputably, the plain language of Section 164(2) read with Section 167(1)(a) of the Act leads to an absurd situation as discussed earlier. In this view, the rule of literal interpretation cannot be applied for interpreting the provisions of Section 167(1)(a) of the Act. In Kaynet Finance Limited v. Verona Capital Limited (supra), the Bombay High court had resolved this issue by reading down the provisions of Section 167 (1) (a) to apply to cases of disqualification falling under Section 164(1) of the Act and not 164(2) of the Act. In other words, Clause (a) of Section 167 (1) has been read as, he incurs any of the disqualification specified in Section 164 (1) instead of he incurs any of the disqualification specified in Section 164 . This Court respectfully concurs with this view. 96. There is compelling reason for limiting the scope of Section 167(1)(a) for the disqualification incurred under Section 164(1) of the Act. As noticed above, the disqualifications under Section 164(1) of the Act are directly attributable to the individuals incurring such disqualific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be prescribed. 100. It is apparent from the above that the application for a DIN is required to be made by any person who intends to be appointed as a director. There is no impediment for a person who has been temporarily disqualified from acting as a director, to apply for a DIN. 101. In terms of Section 154 of the Act, the Central Government is required to allot a DIN to any applicant within a period of one month from receipt of the application under Section 153 of the Act. Section 155 expressly proscribes an individual from having more than one DIN. No individual who has been allotted a DIN can apply for or possess any other DIN. Section 156 of the Act requires a director to inform his DIN to the company(ies) in which he is a director. Section 157 of the Act obliges a company to inform the DIN of its directors to the Registrar of Companies. Section 158 of the Act makes it obligatory for a director to indicate his DIN while furnishing any return or information or particulars as required under the Act. 102. It is at once clear that the provisions pertaining to DIN are only to ensure that any person acting as a director has a unique identity to identify him. Plainly, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntification Number) Rules, 2006. Rule 11 of the Companies (Appointment and Qualification of Directors) Rules, 2014 is relevant and is set out below:- 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 11 alongwith 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 concerned individual has been declared as a person of unsound mind by a competent Court; (e) if the concerned individual has been adjudicated an insolvent: Provided that before cancellation or deactivation of DIN pursuant to clause (b), an opportunity of being heard shall be given to the concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) of the Act, is required to be deactivated. 108. It is important to note that whereas a DIN is necessary for a person to act as a director; it is not necessary that a person who has a DIN be appointed as a director. Section 164(2) only provides for temporary disqualification for a period of five years for a person to be appointed/re-appointed as a director. Thus, it is not necessary that the DIN of such person to be deactivated. 109. It is also material to note that sub-section (2) of section 167of the Act provides for a punishment for any person who functions as a director knowing that his office has become vacant on account of his disqualification as specified in Section 167(1) of the Act. Thus, Section 167 includes a mechanism for enforcing the rigors of Section 167(1) of the Act. In the present case, the respondents have sought to cancel/deactivate the DIN of directors disqualified under Section 164 (2) of the Act. This has been done to enforce the provisions of Section 167 (1) of the Act. Clearly, this is not supported by any statutory provision. This Court is of the view that the Central Government having framed the rules specifying the conditions in which a DIN may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be applied retrospectively. It is well settled that the Statute that impairs an existing right, creates new disabilities or obligations otherwise than in regard to matters of procedure cannot be applied retrospectively unless the construction of the Statute expressly so provides or is required to be so construed by necessary implication. Therefore, the office of a director shall become vacant by virtue of Section 167(1)(a) of the Act on such director incurring the disqualifications specified under Section 164(1) of the Act. It shall also become vacant on the directors incurring the disqualification under Section 164(2) of the Act after 07.05.2018. However, the office of the director shall not become vacant in the company which is in default under sub-section 164(2) of the Act. 114. As discussed above, there is also much merit in the contention that the DIN and DSC of the petitioner could not be deactivated. Accordingly, the respondents are directed to reactivate the DIN and DSC of the petitioners. 115. It is clarified that the petitioners would continue to be liable to pay penalties as prescribed under the Act. 116. The petitions are disposed of in the aforesaid t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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