CORPORATE LAW CORNER

1. P. Parameswaram vs. Union of India  [2020] 118 taxmann.com 113 (Delhi) Date of order: 23^rd July, 2020

Section 164 read with section 167 of the
Companies Act, 2013 and Rule 11 of the Companies Act (Appointment and
Qualification of Director) Rules, 2014 – Disqualifications for appointment of
Director. Director had defaulted in filing annual returns for three consecutive
years. Another company, in which also he was a Director, had been struck off by
the Registrar of Companies on account of its defaults in filing requisite
returns. Thus, the Director was disqualified as a Director and his DIN was
de-activated. Since he had not filed necessary Form with Registrar of Companies
at the material time, his prayer of not treating him as disqualified Director
was rejected. However, since he had been disqualified as a Director, he could
not access the website of the Ministry of Corporate Affairs to file returns or
forms as a Director of any other company and further, since his DIN was not
de-activated in terms of Rule 11 of Appointment and Qualification of Director
Rules, the ROC was directed to activate his DIN

FACTS

PP was appointed as an Independent Director
of KHF Limited (KHF) but had resigned on 22^nd May, 2016. He was not
only a Director in KHF Limited but also in another company, SLD Company Private
Limited (SLD). The name of SLD had also been struck off from the Register of
Companies as it had defaulted in filing annual returns as required under the
Companies Act, 2013. In view of the defaults committed by KHF and SLD, PP was
disqualified as a Director in terms of sections 164(2) and 167(1) of the
Companies Act, 2013.

HELD

The limited
questions that were to be considered by the Court were whether the decision of
the ROC in disqualifying PP was illegal? And whether the other decision of the
ROC to deactivate his DIN was sustainable?

The Court held
as under: There is no dispute that KHF had defaulted in filing its annual
returns for three consecutive years. Similarly, SLD had also been struck off
from the Register of Companies on account of its defaults in filing the
requisite returns under the Companies Act, 2013.

PP claimed
that he had resigned from the Board of Directors of KHF with effect from 26^th
May, 2016. However, he had not filed the necessary form with the Registrar of
Companies at the material time.

The question
whether a Director would be disqualified to act as a Director by virtue of
provisions of sections 164(2)(a) and 167(1)(a) of the Companies
Act is covered by the decision of the Delhi High Court in Mukut Pathak
& Ors. vs. Union of India and Ors. [W.P. (C) 9088/2018 decided on 4^th
November, 2019].

Insofar as the
prayer that his DIN be directed to be activated is concerned, the said issue is
also covered by the decision of the Delhi High Court in Mukut Pathak
& Ors. (Supra). It is not disputed that the DIN of PP
had been deactivated only on account of his being disqualified to act as a
Director. As held in Mukut Pathak’s case, the said action is not sustainable.
The DIN could be deactivated in terms of Rule 11 of the Companies Act
(Appointment and Qualification of Director) Rules, 2014. But admittedly, the
DIN of PP has not been deactivated in terms of the said Rules.

In view of the
above, the prayer that the ROC be restrained from treating PP as a disqualified
Director was rejected. However, the ROC was directed to activate PP’s DIN.

PP had further
prayed that he be permitted to access the website of the Ministry of Corporate
Affairs, Government of India, but it cannot be acceded to. PP has been
disqualified as a Director; therefore, he cannot access the said website to
file returns or forms as a Director of KHF or any other company.