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TMI Blog2019 (10) TMI 1269X X X X Extracts X X X X X X X X Extracts X X X X ..... of 2013') with a direction to activate the Director Identification Number allotted to the petitioners. The activation of the Director Identification Number is required, as the petitioners were dis-qualified to be Director for any of the Companies in reference to the dis-qualification occurred in one company. 3. Similar controversy was raised in other High Courts and after considering the issue at length, the Gujarat High Court decided batch of petitions led by Special Civil Application No. 22435 of 2017 by its order dated 18.12.2018. The Special Civil Application has been allowed. Therein also, the name of the petitioner was struck off from the list of Director of various companies. The publication of which was made under Section 248 of the Act of 2013. A direction to activate the Director Identification Number of the petitioner forthwith has been given, if not activated so far. It was however with the liberty to take legal action against the petitioner for any statutory default or non-compliance of the provisions of the Companies Act. 4. In the light of the aforesaid and taking into consideration that the similar issue has been decided by eight other High Courts taking simi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny 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 said provision has come into force w.e.f. 1.4.2014. Hence, three financial years, if counted from the said date would be the financial years 2014-15, 2015-16, and 2016-17. At this stage, it is pertinent to note that the Companies Act, 1956 has stood repealed in view of Section 465 of the Act of 2013, and the corresponding Section 274 of the Act of 1956 regarding disqualification of the directors did not prescribe disqualification for the Directors of a private company for not filing financial statements or annual returns for continuous period of three financial years. Of course, it was incumbent on the part of every company not having a share capital, to file with the Registrar annual returns as per Section 160 and failure to file such returns entailed penal consequences as per Section 162 of the Act of 1956. However, no such disqualification as under Section 164(2) of the Act of 2013, was being incurred by the Directors of private company under Section 274 of the Act of 1956, inasmuch as, Clause (g) of Sub-section (1) of Section 274 of the Act of 1956 contemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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. 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 bed rock 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. This principle of law is known as lex prospicit non respicit : law looks forward not backward. As was observed in Phillips vs. Eyre, a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law. 29. The obvious basis of the principle against retrospectivity is the principle of 'fairness', which must be the basis of every legal rule as was observed in the decision reported in L'Office Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l rule of presumption against retrospective operation. Thus, the rule against retrospective operation is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication. Dogmatically framed, the rule is no more than a presumption, and thus could be displaced by out weighing factors. 32. Let us sharpen the discussion a little more. We may note that under certain circumstances, a particular amendment can be treated as clarificatory or declaratory in nature. Such statutory provisions are labeled as "declaratory statutes". The circumstances under which a provision can be termed as "declaratory statutes" is explained by Justice G.P. Singh in the following manner: "Declaratory statutes The presumption against retrospective operation is not applicable to declaratory statutes. As stated in CRAIES and approved by the Supreme Court : "For modern purposes a declaratory Act may be defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any statute. Such Acts are usually held to be retrospective. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slature has by the amending Act attempted to explain the meaning of that provision. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act." 34. It would also be pertinent to mention that assessment creates a vested right and an assessee cannot be subjected to reassessment unless a provision to that effect inserted by amendment is either expressly or by necessary implication retrospective. 35. We would also like to reproduce hereunder the following observations made by this Court in the case of Govinddas v. Income-tax Officer, while holding Section 171(6) of the Income Tax Act to be prospective and inapplicable for any assessment year prior to 1st April, 1962, the date on which the Income Tax Act came into force: "11. Now it is a well settled rule of interpretation hallowed by time and sanctified by judicial decisions that, unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able especially in case of penal statute. It is also held by the Supreme Court in case of Madhya Pradesh Vs. Narmada Bachao Andolan and Anr. (supra) that an interpretation, which is just, fair and sensible should be made and not an interpretation which results in drastic consequences. 24. In the light of the said legal position, it is required to be held that Sub-section (2) of Section 164 of 2013 could be made applicable only prospectively and not retrospectively. Therefore, the financial years contemplated in the said provision have to be counted from 1st of April 2014 i.e. financial years 2014-15, 2015-16, and 2016-17. The disqualification under the said provision would be attracted, or the Director of a company would become ineligible to be reappointed as the Director of the defaulting company or appointed in other company for a period of five years, only if the company in which he was the Director had not filed the financial statements or annual returns for continuous period of three financial years from 2014-15. 25.As discussed herein above, the annual general meeting has to be held within six months from the date of closing of the financial year. In case of Financial Yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the petitioners as a consequence of the impugned list ? In this regard, it would be appropriate to refer to the relevant provisions contained in the Act and the said Rules. Section 152(3) provides that no person shall be appointed as a Director of a company, unless he has been allotted the Director Identification Number under Section 154. Section 153 requires every individual intending to be appointed as Director of a company to make an application for allotment of DIN to the Central Government in such form and manner as may be prescribed. Section 154 states that the Central Government shall within one month from the receipt of the application under Section 153 allot a DIN to an applicant in such manner as may be prescribed. Section 155 prohibits any individual, who has already been allotted a DIN under Section 154 from applying for or obtaining or possessing another DIN. Rules 9 and 10 of the said Rules of 2014 prescribe the procedure for making application for allotment and for the allotment of DIN, and further provide that the DIN allotted by the Central Government under the said Rules would be valid for the lifetime of the applicant and shall not be allotted to any other per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me would not justify the action of the respondents, in publishing the impugned list, which was absolutely contrary to the provisions of the Act of 2013 and the Rules made thereunder. The said scheme was in force from 1.1.2018 to 31.3.2018, which was extended up to May 2018, under which the Directors associated with the "struck of companies", which had failed to file financial statements or annual returns continuously for a period of three financial years from 2013-14 to 2015-16 were granted an opportunity to rectify the default, by following the procedure laid down therein. However, this Court has held hereinabove that the provisions of Section 164(2)(a) having come into force from 1.1.2014, three financial years for the purpose of the said provision would be financial years 2014-15, 2015-16 and 2016-17 only, and not 2013-14, 2014-15, and 2015-16. In any case, due to deactivation of the DINs, the concerned Directors were unable to take benefits of the said scheme also. Hence, the said scheme could not be pressed into service for justifying the publication of the impugned list. 6. The similar view has been taken by Madras High Court as well as High Court of Madhya Pradesh. 7. In v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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