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TMI Blog2021 (1) TMI 317X X X X Extracts X X X X X X X X Extracts X X X X ..... does not provide for any administrative procedure for disqualification of Directors by operation of Section 164(2). Respondents 3 to 7 also admit that no application to declare that the office has been vacated, can be entertained by the Company Court. According to respondents 3 to 7, the remedy available is through civil court. The disqualification for reappointment prescribed by Section 164(2) of the Companies Act, 2013 is for a period of five years. As initiation of civil proceedings and final culmination of the proceedings after appeals provided under the Code of Civil Procedure, 1908, ordinarily takes more than five years, this Court finds that civil remedy is not an efficacious alternate remedy and consequently a writ petition under Article 226 of the Constitution of India will be maintainable in appropriate cases. Whether the Directors of the 3rd respondent-Yogam have defaulted in filing annual returns and are disqualified to hold office by operation of Section 164(2) of the Companies Act? - HELD THAT:- Section 164(2)(a) makes it clear that a Director of a company which has not filed financial statements or annual returns for any continuous period of three financial year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectors in the Yogam. In the circumstances, this Court finds that it will not be appropriate to declare that respondents 4 to 7 are disqualified to be reappointed as Directors of Yogam, in this writ petition. The petitioner has approached the 2 nd respondent filing Ext.P4 petition seeking to remove the disqualified Directors of the Yogam, including respondents 4 to 7, in the light of Section 164(2) of the Companies Act, 2013 - the writ petition is disposed of directing the 2nd respondent to consider and take a decision on Ext.P4 petition submitted by the writ petitioner, within a period of three months. - WP(C).No.19266 OF 2020(G) - - - Dated:- 5-1-2021 - THE HONOURABLE MR.JUSTICE N.NAGARESH FOR THE PETITIONER : BY ADVS. SRI.P.B.KRISHNAN SRI.P.B.SUBRAMANYAN SRI.SABU GEORGE SRI.MANU VYASAN PETER FOR THE RESPONDENT : R1-R2 BY GOVT. PLEADER SMT. DEEPA NARAYANAN R3-R7 BY ADV. SRI.A.N.RAJAN BABU JUDGMENT The petitioner, a retired Professor, Writer and Critic, who has authored large number of literary works, has filed this writ petition. The petitioner is a social worker and is a member of the Aruvippuram Sree Narayana Dharma Paripalana Yogam. The petitioner see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fective regulatory frame work. The petitioner urged that respondents 4 to 7, who are General Secretary, President, Vice President and Devaswom Secretary of the Yogam, stand disqualified for being Directors of the Yogam since the year 2017. But, they are reappointed as Directors from time to time. 5. The petitioner further alleged that the Yogam administers more than 40 Schools and 4 Colleges and respondents 4 to 7 are making appointments to various posts in the Schools and Colleges illegally. They are making amendments to the bye-laws without prior sanction of the Government. Local Branches and Unions of the Yogam are appointed and dismissed indiscriminately to stiffle dissent. As the Directors of the Yogam are disqualified, an Administrator has to be appointed for day to day functions and to conduct elections in accordance with law. 6. Respondents 3 to 7 filed a counter affidavit and defended the writ petition. Respondents 3 to 7 stated that Section 164(2) of the Companies Act, 2013 only prescribes that 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, is not eligi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... larity as to whether the Non-trading Company Registrar has the power to consider applications under the CFSS, 2020. Ultimately, the Registrar of Non-trading Company issued an adjudication order dated 24.09.2020 imposing a penalty of ₹1 lakh and filing fees of ₹6,600/- for receiving the annual returns of the Yogam. 11. On receipt of complaints from the petitioner, a letter was sent to the Government of India for clarification as to whether CFSS, 2020 is applicable to the Yogam. Now, the Government has informed that the CFSS, 2020 is applicable to Non-trading Companies also. Accordingly, the application submitted by the Yogam was considered and Immunity Certificate was issued to the Yogam after receiving requisite fees. The 2nd respondent submitted that the representation submitted by the petitioner will be considered after receipt of reply from the Government. 12. The learned counsel for the petitioner argued that it has been held by this Court in K. Manoj @ Manoj Kadakampally and others (supra) that the provisions of the Companies Act, 2013 are applicable to the Companies governed by the Kerala Non-trading Companies Act, 1961. From the said judgment, it is clear t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ispute, there cannot be any automatic disqualification of the Directors of the Yogam under Section 164 of the Companies Act, 2013. 16. I have heard Sri. P.B. Krishnan, learned counsel appearing for the petitioner, Smt. Deepa Narayanan, learned Government Pleader appearing for respondents 1 and 2 and Sri. A.N. Rajan Babu, learned counsel appearing for respondents 3 to 7. 17. The questions arising for consideration in this writ petition are whether the writ petition is maintainable, whether the Directors of the Yogam have defaulted in filing annual returns and whether there is an automatic disqualification of the Directors of the Yogam for re-appointment as the Directors of the Yogam. 18. Before dealing with the issues, it would be beneficial to read Sections 152(3), 152(4), 164 and 167 of the Companies Act, 2013 which are as follows:- 152. Appointment of Directors: (1) x x x x x (2) x x x x x x x x x x x (3) No person shall be appointed as a director of a company unless he has been allotted the Director Identification Number under section 154. (4) Every person proposed to be appointed as a director by the company in general meeting or otherwise, shall furnish his Direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (1) shall not take effect - (i) for thirty days from the date of conviction or order of disqualification; (ii) where an appeal or petition is preferred within thirty days as aforesaid against the conviction resulting in sentence or order, until expiry of seven days from the date on which such appeal or petition is disposed of; or (iii) where any further appeal or petition is preferred against order or sentence within seven days, until such further appeal or petition is disposed [of]. 167. Vacation of office of director.-- (1) The office of a director shall become vacant in case - (a) he incurs any of the disqualifications specified in section 164; (b) he absents himself from all the meetings of the Board of Directors held during a period of twelve months with or without seeking leave of absence of the Board; (c) he acts in contravention of the provisions of section 184 relating to entering into contracts or arrangements in which he is directly or indirectly interested; (d) he fails to disclose his interest in any contract or arrangement in which he is directly or indirectly interested, in contravention of the provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alifications specified in Section 164. 20. The Companies Act, 2013 does not provide for any administrative procedure for disqualification of Directors by operation of Section 164(2). Respondents 3 to 7 also admit that no application to declare that the office has been vacated, can be entertained by the Company Court. According to respondents 3 to 7, the remedy available is through civil court. The disqualification for reappointment prescribed by Section 164(2) of the Companies Act, 2013 is for a period of five years. As initiation of civil proceedings and final culmination of the proceedings after appeals provided under the Code of Civil Procedure, 1908, ordinarily takes more than five years, this Court finds that civil remedy is not an efficacious alternate remedy and consequently a writ petition under Article 226 of the Constitution of India will be maintainable in appropriate cases. 21. Now the question is whether the Directors of the 3rd respondent-Yogam have defaulted in filing annual returns and are disqualified to hold office by operation of Section 164(2) of the Companies Act. Section 164(2)(a) makes it clear that a Director of a company which has not filed financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... panies Act, 1961 and the Hon'ble high Court of Delhi has set aside the said order and directed the Central Government to decide the issue afresh after giving appropriate notice to the parties. 26. Ext.R3(f) letter dated 18.10.2011 of the Deputy Registrar of Companies, Kerala would show that the entire records of the Yogam have been transferred to the Inspector General of Registration in January, 2009. Ext.R3(g) letter dated 18.12.2012 of the 4th respondent would show that balance sheet and income and expenditure account along with audit report and annual report was forwarded to the Registrar of Non-trading Corporation on 18.12.2012. Therefore, it is evident that the Yogam had made some attempts to file annual returns/financial statements during the years 2009 to 2012. However, there are no materials to indicate that the Directors of the Yogam took any effective steps to file annual returns/financial statements during the period from 2013-'14 to 2015-'16. Even if such attempts were made unsuccessfully, that my not be sufficient to avert disqualification because the disqualification under Section 164(2) is by operation of law and automatic. Since the Yogam has not file ..... X X X X Extracts X X X X X X X X Extracts X X X X
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