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TMI Blog2020 (3) TMI 808X X X X Extracts X X X X X X X X Extracts X X X X ..... is said that 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 years, shall be eligible to be re-appointed as a director of that company or appointed in other company for a period of five years from the date on which the said company fails to do so. Then, there is a proviso, which has been inserted by Act 1 of 2018. As far as Section 167(1)(a) is concerned, there, the vacancy would not occur in the case of a director, who has incurred the disqualifications specified in Section 164 more so, when he incurs that disqualification is sufficiently set out in the statute itself and in the order passed on 15th October, 2019. Applicability of pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 784/2019, 1964/19, 1969/2019, 2005/2019, 2014/2019, 2108/2019, 2322/2019, 2439/2019, 2465/2019, 2537/2019, 2590/2019, 2697/2019, 2718/2019, 2721/2019, 2723/2019, 2812/2019, 3034/2019, 3088/2019, 3089/2019, 3117/2019, 3493/2019, 60/2020, 75/2020, 181/2020, 304/2020, 379/2020 R.I. Chagla And S.C.Dharmadhikari, JJ. P.C. :- 1. The matters were placed before us for considering the prayer for interim relief. 2. On these petitions, on 15th October, 2019, an order was passed by a Division Bench, to which, one of us (S.C.Dharmadhikari, J.), was a party. 3. The Court had, after quoting the sections, raised certain queries. 4. Consistent with those queries, Mr.Anil Singh, learned Additional Solicitor General, submits that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and interpreted by the above High Courts and in that process, the argument of the Central Government has been noted. In that regard, our attention is invited to the judgment and order of the High Court of Karnataka at Bengaluru reported in Indian Law Reporter 2019 Karnataka 3768 (Yashodhara Shroff and Ors. Vs. Union of India and Ors.). Mr.Singh has invited our attention to para 191 of this judgment to urge that the Government argued that the proviso to Section 164(2) is only clarificatory in nature and, therefore, it has retrospective operation, by which, the petitioners would continue as directors of the defaulting company, but they would vacate office in all other companies. This position is envisaged even under Section 167(1) clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . By sub-section (2), it is said that 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 years, shall be eligible to be re-appointed as a director of that company or appointed in other company for a period of five years from the date on which the said company fails to do so. Then, there is a proviso, which has been inserted by Act 1 of 2018. 10. Sub-section (2) of Section 164 has been, on the own showing of all parties before us, brought into effect on 1st April, 2014. So is Section 167. In that Section, we find that it deals with vacation of office of director. That office becomes vacant if any of the disqualifications specified in Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... becoming a defaulting company, he would not incur disqualification. The query that we raised with regard to interpretation of Section 167 sub-section (1) clause (a) is also in consonance with the intent of the legislation and we are of the opinion that the stand of the Central Government before the Karnataka High Court would sufficiently protect the interest of the petitioners before us. Section 167(1)(a) is also considered when this Court raised the above queries. Once the queries themselves denote that the Court was of the prima facie opinion that the re-appointment of director of that company, which has not filed financial statements or annual returns for any continuous period of three financial years would mean that the person can co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... three financial years have not been filed, then, the action is triggered. 13. Prima facie, we do not think that the Circular which has been issued by Ministry of Corporate Affairs and the notice dated 7th September, 2017 is in any way inconsistent or contravening the position emerging from the plain reading of this section. In the event, there is any inconsistency, then, statute must prevail. The Circulars are issued by the members of the Executive and is the same is position qua notices of the Department. However, the interpretation of the legal provision is a job or task to be performed by the Court and understanding of the legal provisions by a member of Executive or any Executive functionary cannot be a substitute for that exerci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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