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TMI Blog2020 (9) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... eeping changes with respect to the filing of Annual Returns and Financial Status, brining strict compliance thereof. The equivalent provision to Section 164 of the 2013 Act was Section 274 of the Companies Act 1956. One important change which had been brought about was that under Section 274 of the Company Act 1956, it was provided that there would be disqualification with respect to Directorship of 'Public' companies and it would be attracted when annual returns and financial statements were not filed. In the Act of 2013, disqualification was attracted even for Directors of all Companies, not just public companies, and disqualification was attracted for non filing of financial statements or annual returns. 23. The provisions are clear. There is no scope for ambiguity for the same. This Court had not been called to give a ruling on the vires of Section 164(2)(a). According to this provision, if a person, who is a Director of a Company which had not filed financial statements or annual returns for a continuous period of three financial years, then he/she was not eligible to be reappointed as a Director on that Company or can be appointed in other Company for a period of fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Vs. Union of India and other, Writ-C.No. 12498 of 2019 (batch); wherein also the very same issue had been agitated. The Allahabad High Court by order dated 16.01.2020 had struck down disqualification as Directors of the petitioners. A careful reading of the Judgement of the Allahabad High Court shows that as in the previous Judgement Bhagavan Das Dhananjaya Das (supra) of this Court with relation to the similar notification issued in the year 2017, they were concerned with the fact that three consecutive years had not been completed from and after 01.04.2014. The three financial consecutive years after which the Companies Act 2013 came into force would be 2014-2015, 2015-2016 and 2016-2017. It is under these circumstances since the provisions can only be prospective in nature that the Allahabad High Court had expressed its views that disqualification can be attracted only if those three financial years are completed and annual return/financial statements had not been filed. When the three financial years had not been completed, the Division Bench of the Allahabad High Court had stated that notice is essential. A similar view had also been taken by the learned Single Judge of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions relating to penalty /punishment relied on by the petitioners would be attracted when for a single year annual returns/financial statements are not filed. But when they are not filed for three consecutive years then the Directors are automatically disqualified. 29. In (2000) 7 SCC 529 { Aligarh Muslim University and Others Vs. Mansoor Ali Khan}, the Hon'ble Supreme Court had an ocassion to consider the effect of a " useless formalities" - a theory which is an exemption to the principles of natural justice. "21.As pointed recently in M.C. Mehta Vs. Union of India (1999 (6) SCC 237), there can be certain situations in which an order passed in violation of natural justice need not be set aside under Article 226 of the Constitution of India. For example where no prejudice is caused to the person concerned, interference under Article 226 is not necessary. Similarly, if the quashing of the order which is in breach of natural justice is likely to result in revival of another order which is in itself illegal as in Gadde Venkateswara Rao vs. Government of Andhra Pradesh [1966 (2) SCR 172 = AIR 1966 SC 828], it is not necessary to quash the order merely because of violation of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly applied the principle of prejudice in several cases. The above ruling and various other rulings taking the same view have been exhaustively referred to in State Bank of Patiala Vs. S.K. Sharma ( 1996(3) SCC 364). In that case, the principle of 'prejudice' has been further elaborated. The same principle has been reiterated again in Rajendra Singh Vs. State of M.P. ( 1996(5) SCC 460). 25. The 'useless formality' theory, it must be noted, is an exception. Apart from the class of cases of "admitted or indisputable facts leading only to one conclusion" referred to above,- there has been considerable debate of the application of that theory in other cases. The divergent views expressed in regard to this theory have been elaborately considered by this Court in M.C. Mehta referred to above. This Court surveyed the views expressed in various judgments in England by Lord Reid, Lord Wilberforce, Lord Woolf, Lord Bingham, Megarry, J. and Straughton L.J. etc. in in various cases and also views expressed by leading writers like Profs. Garner, Craig, De. Smith, Wade, D.H. Clark etc. Some of them have said that orders passed in violation must always be quashed for otherwise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted as a "tharaka manthra" or panacea for all diseases, to the present stage where the Courts have started looking at the credentials of the person using them as a shield or sword and accepting the fact that they are not indispensable." 32. The march of law expanding the interpretation of the principles of natural justice and examining exceptions to the same shows that where the issuance of notice is a futile exercise since only one conclusion can be reached, then the petitioners cannot turn around and seek a relief on the ground that notice was not issued prior to disqualification. The petitioners cannot plead ignorance of law or innocence of fact and seek indulgence of the Court. 33. In the Judgment relied on by the petitioners Gaurang Balvatlal Shah Vs. Union of India (supra), a learned Single Judge of the Gujarat High Court by Judgment dated 18.12.2018 had questioned the authority of the Registrar to deactivate the DIN number. This was based on a reading of Rule 11 of the Companies (Appointment and Qualification of Directors) Rules 2014. There can be no quarrel with the rule. 34. However, whenever law holds that if for three consecutive years, the annual returns or financ ..... 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