Akasam Surya Chaitanya V. Union of India and Another

WP/8172/2020

AI Insights

The case revolves around the petitioner, Akasam Surya Chaitanya, who was disqualified as a director and had his DIN deactivated by the Registrar of Companies, Telangana, due to non-filing of financial statements and annual returns for three consecutive years. This action was based on Section 164(2)(a) of the Companies Act, 2013, which came into effect on April 1, 2014. The petitioner challenged this decision, arguing that the provision should be applied prospectively and not retrospectively, as it was applied by the Registrar. The court examined the applicability of the law and the principles of natural justice, ultimately deciding in favor of the petitioner.

• Counselvise Citation: [2020] 140 COUNSELVISE.COM (IT) 743101 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 12-06-2020
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax (Central)-New Delhi v. Vatika Township Private Limited, Yashodhara Shroff vs. Union of India, Gaurang Balvantlal Shah s/o Balvantlal Shah vs. Union of India, Bhagavan Das Dhananjaya Das vs. Union of India
• Laws Referred To: Companies Act, 2013, Companies (Appointment and Qualifications of Directors) Rules, 2014, Constitution of India
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: N RAO
• Assessee Lawyers: J VARDHAN
• Keywords: Deactivation; Director Identification Number; Disqualification; Natural Justice; Writ petition
• Section: 226; 248; 252; 164(2)(a)

Judgement Text

"HIGH COURT FOR THE STATE OF TELANGANA (Special Original Jurisdiction) FRIDAY ,THE TWELFTH DAY OF JUNE TWO THOUSAND AND TWENTY PRESENT THE HONOURABLE SRI JUSTICE A.ABHISHEK REDDY WRIT PETITION NO: 8172 OF 2020 Between: Akasam Surya Chaitanya, S/o.Akasam lVlalleshwara Business RJo. No. 1343,0001 , 29th lt4ain Poorna Subramanyapura, Bangalore South, Karnataka-560061 Rao, Age. 36 Years, Occ. Pragna Layout, Uttarhalli, ...PETITIONER AND 1 2 Union of lndia, rep. by Principal Secretary, l ,4inistry of Corporate Affairs, 5th floor, A Wing, Sashtry Bhavan, Dr. Rajendra Prasad Road, New Delhi-1 10001. The Registrar of Companies, Telangana, 2nd floor, Corporate Bhavan, GSI Post., Tattiannaram, Nagole, Bandlaguda, Hyderabad-500068,T. S. ...RESPONDENTS Petition under Article 226 of the Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to pass an order or direction or any other proceeding of Writ Order of direction more padicularly one in the nature of Writ of lvlandamus by declaring the order of the Respondents relating to the impugned order dated 1210912017 in so far as deactivating the Director ldentification Number 02291513(Akasam Surya Chaitanya)of petitioner uploaded in the website of the respondent No.1 as arbitrary, illegal without jurisdiction contrary to the provision of the companies Act, 2013 and Rule 11 of the Companies (Appointment and qualifications of the Directors) Rules 2014 violative of the principles of natural justice besides violating the petitioner rights guaranteed under Article 14 and Article l9 (t) (g) of the Constitution of lndia. Devoid of merit and to quash the list Dt 1210912017 uploaded in the website of Respondent No lwith regard to the petitioner and consequently direct the Respondents herein to permit the Petitioner to continue as Director of the Companies and/or get appoint or reappointed as Director of any Company and file statutory returns i.e., annual returns and financial statements of the Companies which arc active without any interference Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to direct the Respondent to stay the disabling and restore the Director ldentificatron 02291513(Akasam Surya Chaitanya) for Petitioner so as to enable him to continue as Director of the Companies and/or get appoint or reappointed as Director of any Company/ incorporate a new company and file statutory returns i.e., annual returns and financial statements of the active companies ln which he is the director without any interference and earn remuneration for their livelihood by serving the company as Director. Counsel for the Petitioner:SRl. J. VISHNU VARDHAN Counsel for the Respondents: SRl. N. RAJESHWAR RAO, ASSISTANT SOLICITOR GENERAL The Court made the following lA NO: 1 OF 2020 THE HO]{ BLE SRI JUSTICE A.ABHISHEK RE,DD]' iVRIT PETITION No.8172 of 2O2O ORDER: Aggrieved cy the action of the 2\"d responrlent. - The Registrar, Officr: of the Registrar of Companies, in disq,ralifl,ing the petitioner as Dj-ector of the Company under Section 16+(2)(a) of the Companies, Act, 2013, and deactivating l.is Director Identification Nr-rmber (DIN), the present writ petition is; fik:d. 2. With the consent of both the parties, the present writ petition is disp,rsed of at the admission stage itself. 3. The learned Counsel appearing for the p:titioner has contended that the matter is squarely covered by the common order, dated 1,3.O7.2OI9, passed by this Court in W.P.N:.5422 of 2018 and bat< h. Therefore, the writ petition may ire allowed in terms of the aL,ove referred common order. 4 , Sri I'l. Rajeshwar Rao, the learned Assis -anl Soiicitor Generai appearing on behalf of the respondents;, ltas fairly conceded tha,. :he common order of the learned Sinl;le Judge passed in W.F'.No.5422 of 20i8 and batch, dated 1€,.07.2019, covers the lis irL question. 5. A r:ading of the common order, dated 1t!.07.2019, passed in W.['.No.5422 of 2018 and batch, reveals t]rat this Court while dealing u'ith the issue in question, has held as rrnder: \"i'!1. In uiew of the aboue facts and circumstances and the judg,r eruts rekned to supra, as the impugned o.der.; in prese li urit petittons disqualifuing the petitictTers as Dirertors under Section 16a(2)(a) of the AcL haue beerL pass(d consideing the peiod prtor to 01.04,2014, the slme WP No 8172 of 2r AAR cannot be sustained, and are liable to be set astde to that etlent. 30. In uiew of tfe aboue facls and circumstances and the judgment rekrred to supra, the deactiuation of the DlNs of the petitioners for alleged violations under Section 164 of the Act, cannot be sustatned. 31 . For the foregoing reasons, the tmpugned orders in the wit petitions to the extent of disqualifuing the petitioners under Section 16a(2)(a) of tlLe Act and deactiuation of their DIN', are set aside, and the 2\"d respondent ts directed to actiuate the DlNs of the petitioners, enablirtg them to function as Directors other than in stike off companies. 32. It is made clear that this ord.er uill not preclude the 2\"d respondent from taking appropiate action in accordance uith lau for vioLations as envisaged under Section 164(2) of the Act, gtuing the said prouision prospectiue effect from A1.04.2014 and for necessary action against DIN tn case of uiolattons of Rute 1 I of the Rules. 33. 1, is atso made clear that tf the petttioners are aggieued by the action of the respondents tn striking off their compantes under Section 248 of the Act, theV are at libertA to auail altentative remedg under Section 252 of the AcL 34. AU the uit petttions are accordtnglA alLoued to the ertent indicated aboue.\" 6. In view of the above, the present writ petition is allowed in terms of the common order, dated 18.07.2019, passed in W.P.No.5422 of 2018 and batch. The miscellaneous petitions pending, if any, shall stand closed, There shall be no order as to costs. Sd/-N.CH.ANDRA SEKH RAO ASSISTANT R STRAR SEC N OFFICER 1. The Principal Secretary, Ministry of Corporate Affairs, Union of lndia 5th floor, A Wing, Sashtry Bhavan, Dr. Rajendra Prasad Road, New Delhi-1 10001. 2. The Registrar of Companies, Telangana, 2nd floor, Corporate Bhavan, GSI Post., Tattiannaram, Nagole, Bandlaguda, Hyd erabad-500068,T. S. 3. One CC to Sri. J. Vishnu Vardhan, Advocate (OPUC) 4. One CC to Sri. N. Rajeshwar Rao, Advocate (OPUC) 5. Two CD Copies. (along with a copy of order dated 1810712019 in WP.No, 5422 of 2018 and batch) 2 To, PM V- ,TRUE COPY// THE I- I]N,BLE SRI JUSTICE A.RAJASHEKER R:C'DY W. P. N Os. 542 e- I 2 1 84, 135 20, 1 3783. 1 3855. 14 16(r,-24-95-L 3q9-99 AND 409s3 Qlrr2018. 5547, 5s82. 5669. 5687. 578 i 6947. 6047. 6L40, 6484, 67 7073.7LOs, 7,! 8111. 8223. a5 9726. 9737 . '. l:;3. 5458. 5954, 6981. 7OO1, 7OO8, 7C,14, -r046,7069, -t424,7974, 9584.9623. '.,t2. 7454. 7572. 7s95. 7732, 7765. 7'16& [r_!r. 859O. 9333, 934O, 9381, 9468, 9s,5A .,QO58, 1OO99. 11208. 11223, 11239, t:t 263, 11889, 11991, 12O18_. L2O36, t2O4O. 12069, L2LOA, L2t44. .t2 186 12194 L2200, L2209, 22L5.122L7, L2243, L226O, L2262. r2ZaA. L2342, 2350. 124L7...L2432, L2472, L249A. L25O6. L2574, :12594, 1262L, r2702, L27 35, 13730, L3749, .L2740.12445. L2A5O. L2465, L2466_ :r.3Q13, 13618. 13779. 13788, 13839. 13855. 13878. .139t2, 139t7. 13945, 14101,..t_4174, L42O7, 14350, 14361, t4394- :14392. L4397, L4409, 14582 AND 14597 0F 2019 Since, the l:;sue involved in all the writ petitions is one and the same, they are heard to(;ether and are being disposed of by this io'nrnon order. 2. The )etitioners are the directors of the priva te companies/ registered under :he Companies Act, 2013 (18 of 2013) (for short'the Act'). Some of the sucl companies are active, and some of thenl have been struck off from the regir;,er of companies under Section 248(1)( c ) of the Act, for not carrying on any business operation for the specifled p,:riod mentioned in the said provisio r, and for not making any application w ithitr the specified period, for obtairlng the status of a dormant company unCer Section 455 of the Act. 3. The p(rt it:ioners/ who were directors of the str.lck cff companies, and who are pr(:':;ently directors 01' active companies, cilring the relevant period in questior, failed to file financial statements or attnu;tl returns for a continuous periorl of three years. Therefore, the 2nd respond3nt passed the impugned order Jlder Section 164(2) of the Act, discuslifying them as directors, and further making them ineligible to be re-appointed as directors of that company, or any other company, for a period of 'lve /ears from the date on which the respective companies failed to do so. The Director Identification Nurnbers (DINs) of the petitioners were also deactivated. Aggrieved by the :;ame, the present writ petitions have bee n fi ed. COMMON ORDER 2 4. This court granted interim orders in the writ petitions directing the 2\"d respondent to activate DINs of the petitioners, to enable them to function other than in strike off companies. 5. Heard the learned counsel appearing for the petitioners in all the writ petitions, Sri K.Lakshman, learned Assistant Solicitor General appearing for the respondents - Union of India. 6. Learned counsel for the petitioners, contend that before passing the impugned order, notices have not been issued, giving them opportunlty, and this amounts to violation of principles of natural justice, and on this ground alone, the impugned orders are liable to be set aside. 7. Learned counsel submits that Section 164(2)(a) of the Act empowers the authority to disqualify a person to be a director, provided he has not filed financial statements or annual returns of the company to which he is director, for any continuous period of three financial years. Learned counsel further submits that this provision came into force with effect from 7.4.2014, and prior thereto i.e., under Section 27+(t)(g) of the Companies Act, 1956 (1 of 1956), which is the analogous provislon, there was no such requirement for the directors of the private companies. They contend that this provision under Act 18 of 2013, will have prospective operation and hence, if the directors of company fail to comply with the requirements mentioned ln the said provision subsequent to the said date, the authority under the Act, is within its jurisdiction to disqualify them. But in the present cases, the 2nd respondent, taking the period prior to 1.4.2014, i.e., giving the provision retrospective effect, dlsqualified the petitioners as directors, which is illega I and arbitrary. B. With regard to deactivation of DINs, learned counsel for the petitioners submit that the DINs, as contemplated under Rule 2(d) of the Companies (Appointment and Qualification of Directors), Rules, 20L4 (for J ,1ort'the Rules), are granted for life time to the applicarl.s uttder Rule 10(6) of the said Rule:i, and cancellation of the DIN can be ma ie only for the grounds mentior t:d in clauses (a) to (f) under Rule 11 o' the Rules, and the said grounds dols not provide for deactivation for havlr,l bercome ineligible for appointment ils Directors of the company under Seciion 164 of the Act. Learned counsel 'urther submits that as against the dea(tivatlon, no appeal is provided under the Rules, and appeal to the Tribunal urrcer Section 252 of the Act is prov 1ed only against the dissolution of t1e ( ompany under Section 248 of tl r: Act. 9. Learne: counsel further submits that 1sr respor,ient - Government of India represented by the Ministry of Corporate Affairs, has floated a scheme dated .19.12.20L7 viz., Condonation of Delay Scleme - 2018, wherein the dirtrctors, whose DINS have been deact vat(:d by the 2nd respondent, allorvs the DINs of the Directors to be activat3d. However, such scheme is not . pplicable to the companies which are st -uck off under Section 248(5) lf the Act. In case of active companie:s, 1:hey can make application to N.tional Company Law Tribunal under Section 252 of the Act, seeking for restcration, and the Tribunal can order for reactivation of DIN of such directors, whose DIN are deactivated. However, unc,lr Section 252 onlY the companies, n,hich are carrying on the buslness, can approach the Tribunal and the companies, which have no business, cannot approach the Tribunal for resto -ation. They submit that since the penal Dr,)vision is given retrospective op3ration, de hors the above scheme, they are entitled to invoke the jurisc iction of this court under Article 226 of the Constitution of India. 10. With the above contentions, learned counsel s;ought to set aside the impugned o\"rj:rs and to allow the writ petitions. 11. On th: r>ther hand learned Assistant Solicitor Gr:neral subrnits that failure to file finarcial statements or annual returns for an)' cotrtinuous period 4 of three financial years, automatically entail their disqualificatlon under Section 164(2)(a) ofthe Act and the statute does not provide for issuance of any notice. Hence, the petitioners, who have failed to comply with the statutory requirement under Section 164 of the Act, cannot complain of violation of principles of natural justice, as it is a deeming provision. Learned counsel further submits that the petitioners have alternative remedy of appeal under Section 252 of the Act, and hence writ petitions may not be entertained. 72. To consider the contention of the learned Assistant Solicitor General with regard to alternative remedy of appeal under Section 252 of the Act, the said provision is required to be consldered, and the same is extracted as under for better appreciation: 252. Appeal to Tribu na I (1) Any person aggrieved by an order of the Registrar, notifying a company as dissolved under Section 248, may file an appeal to the Tribunal within a period of three years From the date of the order of the Registrar and if the Tnbunal is of the opinion that the removal of the name of the company from the register of companres is not justlfied rn view of the absence of any of the grounds on which the order was passed by the Registrar, it may order restoration of the name of the company in the register of compa n ies; Provided that before passing an order under this section, the lrlbunal shall give a reasonable opportunity of making representations and of being heard to the Registrar, the company and all the persons concerned: Provided further that if the Registrar is satisfied, that the name of the company has been struck off from the reqister of companies either inadvertently or on basis of incorrect jnformation furnished by the company or its directors, which requires restoratlon in the register of companies, he may within a period of three years from the date of passing of the order dissolving the company under Section 248, file an application before the Tribunal seeking restoration of name of such compa ny. (2) A copy of the order passed by the Tribunal shall be filed by the company with the Registrar within thirty days from the date of the order and on receipt of the order, the Registrar shall cause the name of the company to be restored in the register of companies and shall issue a fresh certificate of incorporation. (3) If a company, or any member or creditor or worker thereof feels aggrieved by the company having its name struck off from the register of companies, the Tribunal or an application made by the company, member, creditor or workman before the expiry of twenty years from the publication in the Official Gazette of the notice under sub-section (5) of Section 248, if satisfied that the company was, at the time of its name being struck off, carrying on business or in operation or otherwise it is just that the name of the company be restored to the register of companies, order the name of the company to be restored to the register of companies, and the Tribunal may, by the order, give such other directions and make Such provisions as deemed just for placing the company and all other persons n the same position as nearly as may be as if the name of the company has not been struck off from the register of companies. , reading of abov(r provision goes to show that if the comgrany' ls dissolved under Section 248 :)f the Act, any person aggrieved by the :;ame, can file an appeal. Thus the :;,: d provision provides the forum for red'essirl against the dissolution and str l