Jupudi Lakshmi Narayana V. Union of India and another

WP/13485/2020

AI Insights

The case revolves around the petitioner, Jupudi Lakshmi Narayana, challenging the deactivation of his DIN and his disqualification as a director by the respondents, which included the Union of India and the Registrar of Companies, Hyderabad. The petitioner argued that these actions were taken without proper jurisdiction and violated principles of natural justice, specifically the right to be heard. The court examined whether the disqualification under Section 164(2)(a) of the Companies Act, 2013, could be applied retrospectively and found that it could not. The court also considered the procedural validity of the DIN deactivation under the Companies (Appointment and Qualification of Directors) Rules, 2014.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 736796 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 18-07-2019
• Assessment Year: misc
• Other Referred Cases: WP No.5422 of 2018 & batch, Yashodhara Shroff vs. Union of India, Gaurang Balvantlal Shah vs. Union of India, Bhagavan Das Dhananjaya Das vs. Union of India
• Laws Referred To: Companies Act, 2013, Companies (Appointment of Directors) Rules, 2014, Constitution of India
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: NAMAVARAPU RAO
• Assessee Lawyers: MARIPATI VISWARAJ
• Keywords: DIN Deactivation; Director disqualification; Natural justice violation; Retrospective application
• Section: 455; 248(1)(c); 164(2)(a)

Judgement Text

"Jupudi Lakshmi Narayana, S/o. Jupudi Radha Krishna [/lurthy, A Occ. Business, R/o.5-6-75/1, Plot No.187, Sri Lakshmi Nilayam. Nagar, Hayathnagar, Vanastalipuram, Hyderabad- 500070. HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original J u risdiction) TUESDAY, THE FIRST DAY OF SEPTE[/BER TWO THOUSAND AND TWENTY PRESENT THE HON'BLE SRI JUSTICE A. RAJASHEKER REDDY WRIT PETITION N O: 13485 OF 2020 Between: ged about 63 years, Street No.7, Vaidehi ...PETITIONER AND 1. Unron of India, l 4inistry of Corporate Affairs, 'A'Wing, Shastri Bhawan, Rajendra Prasad Road, New Delhi -1 10001, Rep. by its Secretary. 2. The Reqistrar of Companies (ROC), at Hyderabad, For the State of Telangana, 2\"\" Fioor, Corporate Bhawan, GSI Post, Nagole, Bandlaguda, Hyderabad, Telangana - 500068 ...RES'.NDENTS Petition under Art cle 226 of the Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be p eased to rssue a Wrlt of I ,4andamus, or any other appropriate writ, order or directlon, declaring the action of the respondents in deactivating the DIN No. 00057705, of the petitioner and making him disqualified as a Director, as illegal, arbitrary, without jurisdiction, contrary to the provisions of the companies Act, 2013 and Rule 1 1 of the Companies (Appointment of Directors) Rules, 2014' violative of the principles of natural justice besides violating the petitioner's rights guaranteed under Article 14 and Article 19(1Xq) of the Constitution of lndia. IA NO:1OF 2020 Petitionundersectionl5lcPCprayingthatintheCirCUmstanCesstatedin the afficlavit filed in support of the petition, the High court may be pleased to grant rnterim drrectlon directing the respondents to restore the DIN No'00057705 of the petittoner, so as to enable the petitioner to discharge the functions as a Director in Act ve Company, to lncorporate new companies under the Companies Act' 20'1 3 and to qet appoint as a Dlrector ln other companres including putting a digital srgnature. pending disposal of the above writ petition Counsel for the Petitioner: SRI MARIPATI MAHARSHI VISWARAJ Counsel for the Respondents: SRI NAMAVARAPU-RAJESHWAR RAO' ..- - NSSISTNNT SOLICITOR GENERAL The Court made the following: ORDER HON'BLE SRI JUSTICE A.RAJASHEKER REDDY Writ Petition No.13485 OF 2O2O ORDER: Learned counsel for the petitioner as well as Sri Namavaraplr Rajeshwar Rao, learned Assistant Solicitor General of India, appearing for the respondents submits that the lis in this Writ Petition is squarely covered by the Common Orders of this Court in WP No.5422 of 20 18 & batch, dated la.O7 .2019. Irr r. ier,r, of the same and for the reasons alike i:-r thc Common Order in VP No.542'2 of 2t) l8 & barch. clated 16.07.2019. rl.ris Wrir Pt'ririon is a iso allou,ed. There shali be no orcler aS to q3stS. As :i scclucl titt.rr,t,. rliscellu:reous applications, it arnr, pcncline in this , 'rit [)criti.n. slrirll stirncl ciis po sccl ol-. SD/.I.NAGALA MI ,TRUE COPY' ASSISTANT RE TRAR SECTI OFFICER To, 2 5 CHR 3 4 The Secretary. Union of Indra l ,4inistry of Corporate Affarrs ,A, Wing. Shastrr Bhawan, Rajendra prasad Road, Ner.i O\"rni_Tiorjoi' +[\".[\"\"?'33;\"J,i,\"\"T,,*:',JES|A\"1l,1,,i\"J,x?a*f.zJ|,:;'a,;.\".1,r;i?:n\"\", I elangana - 500068 3ffi 33 ls .?l ffj,t:?: x;ifl :[.H:i Hif,,x3:f,E lp553lo, c. nu,u r ro p u c] (Along with a copy of order, dated 18.07.201g in w.p.No.54 22 0f 2o18and batch) Two CD Copies -+-' HIGH COURT DATED:01 10912020 ORDER W.P,No.13485 of 2020 ALLOWING THE WRIT PETITION WITHOUT COSTS I TA .e s e H 1 Y ,.\"j ?.UN I 0 P i i--{-) ct! /to a / THE HON'BLE SRI JUSTICE A.RAJASHEKER REDDY W p Nnc 4a)) l)1Ra 1?5?o l?7R? l?Rqq 14166 ,4OEl ?nqo? AND 40953 0F 2018. 5547,5582,5669, 5687. 5785, 6047, 6087, 6L40, 6444, 6753, 6858, 6958, 6981, 7001, 7008, 7014, 7046, 7069, 8111.8223.8586 , 8590, 9333, 9340. 9381. 9468. 9563, 9584, 9623, 9726.9737, LOO58. LOO99. L1208. 1L223. L1239, LL263. LLAA9. 11991, 12018, 12036, 12040, 12069, 12108, 12L44J2L8S, 12194 12702. L273s. L2740, 12845, 128so. 12a5s. 12866. 13013. 13618, 13945. L4tOr. L4L74. L4207. L4350. L436r. L4390. L4392. L4397. 14409. 14582 AN L4s97 0F 2019 COMMON ORDER Since, the issue involved in all the writ petitions is one and the same, they are heard together and are being disposed of by this common order' 2. The petitioners are the directors of the private companies, registered under the companies Act, 2013 (1S of 2013) (for short'the Act'). SomeofthesuchCompaniesareactive?andsomeofthemhaVebeenstruck off from the register of companies under section 248(1)( c ) of the Act, for not carrying on any business operation for the specified period mentioned in the said provision, and for not making any application within the specified period, for obtaining the status of a dormant company under Section 455 of the Act. 3. The petitioners, who were directors of the struck off companies' and who are presently directors of active companies, during the relevant period in question, failed to file financial statements or annual returns for a continuous period of three years. Therefore, the 2nd respondent passed the impugned order under Section 164(2) of the Act' disqualifying them as directors,andfurthermakingthemineligibletobere-appointedasdirectors of that company, or any other company' for a period of five years from the date on which the respective companies failed to do Identification Numbers (DINs) of the petitioners were so. The Directo r also deactivated. Aggrieved by the same, the present writ petitions have been filed 7 07 3. 7 1,Os. 7 432, 7 454, 7 s7 2. 7 595. 77 32. 7 7 65. 77 68, 7 824. 7 97 8, 12200. 12209. 12215. t22r7.12243. 12260. 12262. L22AA. t2342. L2350. !2417.12432. !2472. 1249A. 12506. 12574. 12594. L2621. 13730. L3749. L3779, 137A8, L3A39, L3A55. L387A. L39t2. 139L7, ) 4.ThiscourtgrantedinterimorderSintheWritpetitionsdirectingthe 2nd 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, givinq them opportunity/ 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 7.4.201,4, and prior thereto i.e., under Section 27aQ)@) of the Companies Act, 1956 (1 of 1956), which is the analogous provision, there was no such requirement for the directors of the private companies. They contend that this provision under Act 1B of 2013, will have prospective operation and hence, if the directors of company fail to comply with the requirements mentioned in 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 7.4.2014, i.e,, giving the provision retrospective effect, disqualified the petitioners as directors, which is illega I and arbitrary. 8. With regard to deactivation of DINs, learned counsel for the petitioners submit that the DINs, as contemprated under Rure 2(d) of the Companies (Appointment and eualification of Directors), Rules, 2074 (for short'the Rules), are granted for life time to the applicants under Rule 1o(5) of the said Rules, and cancellation of the DIN can be made only for the grounds mentioned in clauses (a) to (f) under Rule 11 0f the Rules, and the said grounds does not provide for deactivation for having become ineligible for appointment as Directors of the company under Section 164 of the Act. Learned counsel further submits that as against the deactivation, no appeal is provided under the Rules, and appeal to the Tribunal under Section 252 of the Act is provided only against the dissolution of the company under Section 248 of the Act. 9. Learned counsel further submits that 1't respondent - Government of India represented by the Ministry of Corporate Affairs, has floated a scheme dated 29.1-2.20!7 viz., Condonation of Delay Scheme - 2018, wherein the directors, whose DiNs have been deactivated by the 2\"d respondent, allows the DINS of the Directors to be activated. However, such scheme is not applicable to the companies which are struck off under Section 248(5) of the Act. In case of active companies, they can make application to National Company Law Tribunal under Section 252 of the Act, seekinq for restoration, and the Tribunal can order for reactivation of DIN of such directors, whose DIN are deactivated. However, under Section 252 only the companies, which are carrying on the business, can approach the Tribunal and the companies, which have no buslness, cannot approach the Tribunal for restoration. They submit that since the penal provision is given retrospective operation, de hors the above scheme, they are entitled to invoke the jurisdiction of this court under Article 226 of the Constitution of India. 10. With the above contentions, learned counsel sought to set aside the impugned orders and to allow the writ petitions. 11. On the other hand learned Assistant Solicitor General submits that failure to file financial statements or annual returns for any continuous period 4 of three financial years, automatically entail their disqualification under section 164(2)(a) of the 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 e nterta ined. 12. 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 considered, and the same is extracted as under for better appreciation: 252. Appeal to Tribunal: (1) Any person aggrieved by an order of the Registrar, notrfying 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 lf the Tribunal is of the opinion that the removal of the name of the company from the register of companies s not.lustified in view of the absence of any of the grounds on whrch the order was passed by the Registrar, it may order restoration of the name of the company in the register of com pa nies; Provided that before passing an order under this section, the Tribunal shall give a reasonable opportunrty of making representations and of berng heard to the Registrar, the company and all the persons concerned: Provided further that if the Registrar rs satrsfied, that the name of the company has been struck off from the register of companies either inadvertently or on basis of incorrect information furnished by the company or rts directors, whlch requires restoration rn 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, ftle an application before the Tribunal seeking restoration of name of such com pa 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 otherwase 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 provisjons as deemed just for placing the company and all other persons in 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, -5 A reading oF above provision goes to show that if the company is dissolved under Section 248 of the Act, any person aggrieved by the same, can file an appear' Thus the said provision provides the forum for redressal against the dissolution and striking off the company from the register of companies. It does not deal with the disqualification of the directors, and deactivation of their DINs. In the present case, the petitioners are only aggrieved by their disqualification as drrectors and deactivation of DINs, but not about striking off companies as such. Hence, Section 252 of the Act, cannot be an alternative remedy for seeking that relief, and the contention of the learned Assistant Solicitor General, in this regard, merits for rejection. 13. Under Section l6ae)@) of the Act, if the Director of a company fails to file financial statements or annual returns for any continuous period of three financial years, he shall not be eligible to be re-appointed as a director of that company or appointed in other company for a period of five years from the date on which the said company fails to do so. The said provision under the Act 18 of 2013, came into force with effect from 01.04.2014, and the petitioners are disqualified as directors under the said provision. At this stage, the issue that arises for consideration is - whether the disqualificat jon envisaged under Section 16a(2)(a) of the Act, which provision came into force with effect from O1.04.2074, can be made applicable with prospective effect, or has to be given retrospective operation? 1n other words, the issue would be, from which financial year, the default envisaged under Section 164(2)(a) of the Act, has to be calculated, to hold the director of the company liable? In this regard, the learned counsel broughttothenoticeofthisCourt,theGeneralCircularNo.OS/14dated 4.4.2OT4issuedbytheMinistryofCorporationaffairs,whichclarifiesthe applicability of the relevant financial years' The relevant portion of the said circular is as u nder: \"A number of provisions of the Companies Act' 2013.including those relating to maintenance of books or ua.ornt,-prLpirition,'adoption and filing of financial statements (and documents req'ii\"o io-'0\" attached thereto,)' Auditors reports and the Board of Directors |.\"po* iiouia'i report) nave been brought into force with o A reading of the above circular makes it clear the financial statements and the documents required to be attached thereto, auditors report and Board's report in respect of financial years that commenced earlier than 07.04.2014, shall be governed by the provisions under the Companies Act, 1956 and in respect of financial years commencing on or after 01.04.20L4, the provisions of the new Act shall apply. 14. At this stage it is required to be noticed that the analogous provision to Section 16a(2)(a) of the Act 18 of 2013, is Section 27 g)@) of Act 1 of 1956. The said provision under Act 1 of 1956 is extracted as under for ready reference: effect from 1't Apnl, 2014. Provisions of schedule lt -!\"i:ltrl lives to compute oeorec,atron) and sLhedule \"' ii;;;;; Ji r'nunt'ut statements) have also been broushi ,nto rorce from tnut ou'\")'\"t'n\"\"'\"I!vant Rules o.:n\"]:lln\"l; tl\"t;: ::\"J:t:\"1: ;\"\"#;L;;\"; notrfred, olaced on the website of the Minrstrv force from the same date' The Ministry has received requests for clarrflcatlon '^/rth reqard to the relevant financial years with effect rr-orn\"*-niin s\"n p'ou'sions of the new Act relating to rnaintenance of books or u..orni, -pr\"paraiion, adopt,on. and filing of financial statements (and attachments tr\"tJt\"l,-!'a'to\"'report and Board's report will be applicable. Although the position in this behalf is quite clear' to make things absolutely clear it i. 't \"-rJv notiii\"O tn\"t the finincial statements (and documents required to be aitacneO tnereto), auditors report and Board's report in respect of financial years tnut- a-ornrn\"n.\"a earlier than 1st April shall be go-verned by the relevant pi\"rirt\" lfrin\"J r leiT ru les of the com'panies Act, 1956 and that in respect of iinancial years commencing on or after ist April, 2014, the provisions of the new Act shall apply. \" Section 274(l'l A person shall not be capable of being appointed director of a com pany, if - (g) such person is already a director of a public company which, _ (A) has not filed the annual accounts and annual returns for any continuous three financial years commencing on and after the first day of April, 1999; or (B) Provlded.that such person shall not be eligible to be appointed as a director of any other public company for a period of five lears fro, ti! Jui\"-on whjch such pubtic company/ in which he is a director, failed to file annual accounti and annual returns under sub-clause (A) or has faired to repay it, oeposiis oirnt\"r\"., o.. redeem its debentures on due date or pay dividend ,\"f\"ir\"J to i-n Jur.\" fAi' A reading of the above provision under Act 1 of 1956, makes it clear that if a person capable of being appointed director of a company and such person is already a director of a pubric company, which has not fired annuar accounts and annual returns for any continuous three financial years commencing on 7 and after the first day of April 1999, shall not be eligible to be appointed as a director of any other public company for a period of five years from the date on which such pubiic company, in which he is a director, failed to file annual accounts and annual returns. So the statutory requirement of filing annuar accounts and annuar returns, is placed on the directors of a ,pubric company'. There is no provision under the Act 1of 1956, which places similar obrigations on the directors of a 'private company,. Therefore, non- filing of annual accounts and annual returns by the directors of the private company/ will not disqualify them as directors under the provisions of Act 1 of 1956. 15. Under Section 164(2) ot the new legislation i.e., Act 18 of 2013, no such distinction between a 'private company, or a.public company, is made and as per the said provision goes to show that no person who is or has been a director of a 'company', fairs to fire financiar statements or annuar returns for any continuous period of three financiar years, wiI not be erigibre for appointment as a director of a company. As already noted above, the said provision, came into force with effect from Ot.O4.2Ot4. 16. Coming to the facts on hand, the 2\"d respondent has disqualified the petitioners under Section 16a(2)(a) of the Act 18 of 2013, for not filing financial statements or annual returns, for period prior to 01.04.2014. The action of the 2\"4 respondent runs contrary to the circular issued by the Ministry of the Corporate Affairs, and he has given the provisions of Act 18 of 2013, retrospective eFfect, which is impermissible. 17. The Apex Court in COMMISSIONER OF INCOME TAX (CENTRAL)-1, NEW DELHI v. VATIKA TOWNSHIP PRIVATE LIMITED| has dealt with the general principles concerning retrospectiv ity. The relevant portion of the judgment is thus: 27. A legislation, be it a statutory Act or a statutory Rule or a statutory Notification, may physically consists of words printed on papers. However, ' (20l5) I scc t E conceoLJ arrv't s a s reat l::l T;;\",tJ';,:\"i:\"\";i :\"'Jr :;T:\" Ti# i'\"X\"':;::l oecul,arity in the mode o'veroa -^ ,n: work of .rct.oa/non f'(tron or evec l.st a serres or srarerne'ts, :.r* ii:i5 : ;i;;;;r-\" |-\"qu,|,\"o ,., o-aft a 'es,srat,on in u luog.\"\"t or a court 3l il- . \"ii\"i '- r\"ori,-\"r t\".nn.que ,s lnnown as req'|sratrve il. H,\"J :'J i \"i #.\" :=\"':, i *, ;i.\"X' I j f \"nf *, g: ff ; : \" J :|\"'ffi : iii \"\":i ::1;::i\",\"y;;\"\"[: :'$:\"i]J;\"il'iu' io i\" '\"un'ns thar a- s€s bv p'esumpt ons ;; t\"ih\" intent of the mal'er thereof 28. Of the various rules guiding how a legislation- has^ to be interpreted' one esrablished rule rs that unr\"\" u\"tlniTu'v rntentron appears' a leoislatron ts presumed not to be intended to rtu\"\" u 'Jt?lp'\"lt'\"\"-\"p\"i\"oli\" l:^loj\" behind the rLrle 's that a current law should gou\"r;'.r;\"ni acttvittes, La!^/ passed tOdaY cannot apply to the evenrs of rhe past. ,, *; ;\";#\",N;g ioduy, *\" Oo it keeprng 'n the law of todav and in force and not to\"oil*i' oitl*iJ iai'=t'\"nt of it our belief in the natuie of the law is torno\"o ol.it#'o-\"J l,oJt tut every human l)eing is entitled to arrange hls affairs by relying on in\" \"'Lti\"g law and should not find that his plans have been retrospectively uptut' 'init p'intiple of law is known as Iex prospicit non r\"rp,,it , li*-r\"tii ior*uro' noi'oulrt*uto As was observed in Phillips vs Eyre t(1870) LR 6 QB 11, u l-\"tl-o'puti''\" legislation rs contrary to the qeneral principle that .egis at,on by whicl' tre .onO'ti \"ii\"u\"l nd is to be reqLlated wher rntroduced for the first time to deal wltn futuie'acts ought not to change thL'character of past iiunlu-.tion. .urtied on upon the faith of the then existing law 29. The obvious basis of the principle against retrospectivity is the principle.of 'ruilnersi, which must ue tne La'sis oi \"u\"ly legal rule as was observed in the o\".irLn 'r\"po.t\"a in L'Office Cherifien des Phosphates v Yamashita-Shinnihon iteursnip bo. ttd. t{199a) r lc +B6l Thus, legislations which modified accrued \"qhtt ;, *nl.n impose obligation, ol- itpot\" neur dutres or attarlh a new disability have to be treated as prospecttve unless the legislative lntent is clearly to g ve the enactment a retrospective effect; unless the legislation is for purpose of supp ying an obvlous omlsslon in a formeT legislation or to explain a former legislation We need not note that cornucopia of case law avallable on the subiect because aforesaid legal position clearly emerges frorn the various decisions and this legal position was co-nceded by the counsel- for the parties, In any case, we shall refer to few ludgrnents containing thls dicta, a llttle later. 30. We would also like to point out, for the sake of completeness, that where a benefit is conferred by a leq slation, the rule aga nst a retrospective construction is different. If a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public general y, and where to confer such benefit appears to have been the leqislators object, then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. This exactly is the justlfication to treat procedural provisions as retrospective. In Government of India & Ors. v. lndian Tobacco Association, t(2005) 7 SCC 3961, the doctrine of fairness was held to be relevant factor to construe a statute conferring a benefit, in the context of it to be given a retrospective operation. The same doctrine of fairness, to hold that a statute was retrospective in nature, was applied in the case of Vijay v. State of Maharashtra & Ors., [(2006) 6 SCC 289]. It was held that where a law is enacted for the benefit of community as a whole, even in the absence of a provision the statute may be held to be retrospective in nature. However, we are (sic not) confronted with any such situation here. 31. In such cases, retrospectivity is attached to beneflt the persons in co ntrad istinctio n to the provision imposing some burden or Iiability where the presumption attached towards prospectivity. In the instant case, the proviso added to Section 113 of the Act is not beneficial to the assessee. On the contrary, it is a provision which is onerous to the assessee. Therefore, in a case like this, we have to proceed with the normal rule of presumption against retrospective operaton. lhus, the rule against retrospective operation is a fundamental rule of law that no statute shall be construed to have a retrospective operatlon unless such a construction appears very clearly in the terms of the Act, or arises by necessary and dlstinct implication. Dogmatically framed, the rule is no more than a presumptron, and thus could be dispiaced by out we ghing factors. 43. There is yet another very tnteresting piece oF evidence that clarifies that prov sion beyond any pale of doubt viz., the understand ng of CBDT itself regarding this provision. It is contained ln CBDT Circular No.B of 2002 dated 27.8.2002, wlth the subject \"Finance Act, 2002 - Explanatory Notes on provision relating to Direct Taxes\". This crrcular has been issued after the passing of tl'te Finance Ad, 2A02, by which amendment to section 113 was made. in this circuar, various amendments to the lncome tax Act are discussed amply demonstrating as to vvhich amendments are clar ficatory/retrospective in operation and which amendments are prospective. 9 For exampie, Explanation to section 158-BB js stated to be clarificatory in nature. Likewise, it is mentioned that amendments in Section 145 whereby provisions of that. section are made applicable to block assessments is made claiificatory and would take effect retrospectively from 1't day of July, 1995. When it comes to amendment to Section 113 of the Act, this very circular provides that the said amendment along with the amendments in Section 1SS-BE, would be prospective i.e., will take effect from 1.6.2OO2.\" 18. Thus, the Apex Court in the above judgment, has made it clear that unless a contrary intention appears, a legislation has to be presumed to have prospective efFect. A reading of Section 164 of the Act does not show that the legislation has any intention, to make the said provision applicable to past transactions. Further, the Apex Court in the above judgment at paragraph No.43, found that the circular issued by the authority after passing of the legislation, clarifying the position with regard to applicability of the provisions, has to be construed as an important piece of evidence, as it would clarify the provision beyond any pale of doubt. In the present case, as already noted above, the 14inistry of Corporation affairs has issued the circular No.08/2014 dated 4.4.2014 clarifying that financial statements commencing after 01.04.2014, shall be governed by Act 18 of 2013 i.e., new Act and in respect of financial years commencing earlier to 01.04,2014, shall be governed by Act 1 of 1956. At the cost of repetition, since in the present cases, as the 2\"d respondent / competent authority, has disqualified the petitioners as directors under Section 16a(2)(a) of the Act 1B of 2013, by considering the period prior to O1.04.2014, the same is contrary to the circular, and also contrary to the law laid down by Apex Court in the above referred judg ment. 19. If the said provision is given prospective effect, as per the circular dated 4.4.20t4 and the law laid down by the Apex Court, as stated in the writ affidavits, the first financial year would be from 01-04-2014 to 31.03.2015 and the second and third years financial years would be for the years ending 31.03.2016 and 31.03.2017. The annual returns and financial statements are to be filed with Registrar of Companies only after the conclusion of the annual general meeting of the company, and as per the first 10 proviso to Section 96(1) of the Act, annual general meeting for the year ending 31.03.2017, can be held within six months from the closlng of financial year i.e., by 30.O9.2017. Further, the time limit for filing annual returns under Section 92() of the Act, is 60 days from annual general meeting, or the last date on which annual general meeting ought to have been held with normal fee, and within 270 days with additional fee as per the proviso to Section 403 of the Act. Learned counsel submit that if the said dates are calculated, the last date for filing the annual returns would be 30.17.2077, and the balance sheet was to be filed on 30.10.2017 with normal fee and with additional fee, the last date for filing annual returns is 27.07.2018. In other words, the disqualification could get triggered only on or after 27.O7.2018. But the period considered by the 2\"d respondent in the present writ petitions for clothing the petitioners with disqualification, pertains prior to 07.04.2014. Therefore, when the omission, which is now pointed out, was not envisaged as a ground for disqualification prior to I.4.2014, the petitioners cannot be disqualified on the said ground. This analogy is traceable to Article 20(1) of the Constitution of India, which states that \"/Vo person shall be convicted of any offence except for violation of a law in force at the time of the commission of the act charged as an offence, nor be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence,,. In view of the same, the ground on which the petitioners were disqualified, cannot stand to legal scrutiny, and the same is liable to be set aside. 20. A learned Single Judge of the High Court of Karnataka in YASHODHARA SHROFF ys, UNION OF INDIA2 considering Section 164(2)(a) of the Act and other provisions of the Act, and various judgments, passed an elaborate order and held that the said provision has no retrospective operation, The observations of the learned ludge, pertaining to ' w.P.No.529t 1 01'20t7 arld batch darcd 12.06.20t9 ]I pflvate companies, wh jch are reievant for tfrg prs56nt purpose, are extracted aS Under: 208. In view of the aforesaid discg55196, I have arrived at the following conclusions: (a) It rs hetd that Sectjon 154 otr:;utl\",Ti,'.#il!xiiti'\":::ri,:1il\"i;[i:,l::;j:'j':\"\"\"'J\"\".ti:i v o'ate artic,e\"leiirirl:; #i.lL?iTi#Tllly; ffi,Jil ff::\",i\"\"iflif.r\"\"\",:,,.J 3::' ;:;1:.'lTonaebresrestnction o, tr\" \"r\"i.,.\"'oilne'saio rrsrrt. rhe object aisqujririlation ;\" ;:;\";?:. Pl\"visjon rs to stipulate the. consequence of a ;.:,; \" i i; .; ; : ; J. ;\";llJl' :\". ;l',iT,:l i;:\"'\":T \"[\",H:ff# f '** l: (b) That Articre (s/c) section 164.(2) of the Act apprres by operation of law on the basis of the cjrcumstances stated thereir, tn\" i!i-o p.\",1,jli io\", not envisage any l:^?:ll9t \":,1-.\", pre-disquar,f,cat,o\"'no.'port_aiiir;];;:\";\"\" and this is nor,n vroratron of rhe princrples of naturar justi'ce, ri ;;;-;;;;;'r,.\", Artrcre 14 of the Constttutton. (c) That Section 164(2) of the. Act does not have retrospective operation and is therefore, neither unreasonable nor arbrtrary, i\" \"i\"* oi'ti\" interpretation placed on the same. (d) (e) Insofar as the private companies are concerned, disqualificatton on account of the circumstances stated under Section 164(2)(a) of the Act has been brought into force for the first time under the Act and the consequences of disqualification could not have been imposed on directors of private companies by iaking into consideration any period prior to 01.04.2014 for the purpose of reckoning continuous period of three financial years under the said provision. The said concl!sion is based on the principal drawn by way of analogy from Articte 2O(1) of the Constitution, as at no point of time prior to the enforcement of the Act, a disqualification based on the circumstanc€s under Section 164(2) of the Act was ever envisaged under the 1956 Act vis-;,vis directors of private companies. Such a disqualification could visit a director of only a public company under Section 27a(l)(9) of 1956 Act and never a director of a private company. Such disqualification of the petitioners who are directors of private companies is hence q uas hed. (f) (9) Consequently, where the disqualification under Section 164(2) of the Act is based on a continuous period of three financial years commencing from 01.04.2014, wherein financial statements oT annual returns have not been filed by a public or private company, the directors of such a company stand disqualified and the consequences of the said disqualification would apply to them under the Act. 21. A learned Single of the High Court of Gujarat at Ahmedabad ln GAURANG BALVANTLAL SHAH S/O BALVANTLAL SHAH vs' UNION OF INDIA3 expressed similar view as that of the leaned single ludge of High Court of Karnataka (1 supra), and held that Section 164(2) of the Act of 2013, which had come into force with effect frcm l'4'2O14 would have prospective, and not retrospective effect and that the defaults contemplated under Section 76aQ)G) with regard to non-filing of financial statements or 1 riSpccial Civil Application No.22'135 ol l0 I 7 and batch datcd I 8 l l'10 I ll tl annuar returns for any continuous period of three financial years would be the default to be counted from the financial year 2014-15 only and not 2073'14. 22. A learned single ludge of the High Court of Maclras in BHAGAVAN DAS DHANANJAYA DAS VS' UNION OF INDIA4 AISO CXPTCSSCd SiMiIAT view. The relevant portion is as under: (b) 23, In view of the above facts and circumstances and the judgments referred to supra, as the impugned orders in present writ petitions disqualifying the petitioners as directors under Section 16a(2)(a) of the Act, have been passed considering the period prior to 01.04.2014, the same cannot be sustained, and are liable to be set aside to that extent. When the New Act 2013 came into effect from 14 2014' the r\".\"|,io' |.i pl,iioenf hel.ein r'Js wtongty given retrospective effect ;; ';r;;;;\";v oisquatirieo tire ietiiioner - directors from i.iz,iio iit\"iitjefore ihe deadtine commenced wronglv fixinq the fir.ili\"-.i\"f year from 7'4'2013 to 31 3 2014 By virtue of the new Section 164(2)(a) of the 2013 Act using the a 1nrp