Kaushik Kumar Kathuri V. The Union of India and Another

WP/8908/2020

AI Insights

The case revolves around the petitioner, Kaushik Kumar Kathuri, who challenged the actions of the respondents in deactivating his DIN and disqualifying him as a director under the Companies Act, 2013. The petitioner argued that these actions were arbitrary, without jurisdiction, and violated principles of natural justice, as well as constitutional rights under Articles 14 and 19. The respondents had disqualified the petitioner based on his failure to file financial statements or annual returns for three consecutive years, applying the law retrospectively. The court found this application of the law to be incorrect and set aside the disqualification and DIN deactivation, referencing a similar case and the principles of prospective application of new laws.

• Counselvise Citation: [2020] 140 COUNSELVISE.COM (IT) 721873 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 18-07-2020
• Assessment Year: misc
• Other Referred Cases: COMMISSIONER OF INCOME TAX (CENTRAL)-L NEW DELHI v. VATIKA TOWNSHIP PRIVATE LIMITED, YASHODHARA TSHROFF 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 Qualification of Director) Rules, 2014, Constitution of India
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: NAMAVARAPU RAO
• Assessee Lawyers: SURYAVANSHI RATNA
• Keywords: Deactivation of DIN; Director Identification Number; Disqualification of Directors; Natural Justice; Writ of Mandamus
• Section: 248; 252; 164(2)(a)

Judgement Text

"HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction) TUESDAY ,THE TWENTY THIRD DAY OF JUNE TWO THOUSAND AND TWENTY PRESENT THE HON'BLE SRI JUSTICE A. RAJASHEKER REDDY WRIT PETITION NO: 8908 OF 2020 Betwee n: Kaushik Kumar Kathuri, S/o Kathuri Sri Krishna, Aged about 37 years, Occ. Business, R/o. Plot No.5, Sanjeevaiah Colony, Tadbund, Hanuman Temple, Sikh Village, Secunderabad, Hydera bad - 500009. ...PETITIONER AND 1 The Union of lndia, Rep. by its Secretary lVinistry of Corporate Affairs, Government of lndia, A Wing. Shastri Bhawan. Rajendra Prasad Road. New Delhi, Delhl 110001 2. Registrar of Companies (Hyderabad), (For the State of Telangana) 2nd Floor, Corporate Bhawan, GSI Post, Tattiannaram Nagole, Bandlaguda, Hyderabad - 500 068. ...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 proceedings one in the nature of Writ of Mandamus declaring the action of the respondents in so far as deactivating the Director Identification Numbers 02895638 of the Petitioner 1, and restricting the Petitioner from filing statutory returns i.e. the annual returns and financial statements of the company in which they are Director, as arbitrary, without jurisdiction, contrary to the provisions of the Companies Act. 2013 and Rule 1 1 of the Companies (Appointment and Qualification of Director) Rules 2014, violative of the principles of natural justice besides violating the Petitionefu rights guaranteed under Article 14 and Article 19 (t Xg) of the Constitution of lndia and to allow the Petitioner to continue as director in the company by unlocking the DIN umber 02895638 of the Petitioner and permit the Petitioner to be continued as Director/get reappointed or appoint as a director in new company or any company without any hassle. lA NO: 1 OF 2020 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 Stay operation of the disqualification of the Director ldentification Kaushik. Kumar Kathuri (DlN, 02895638 of Petitioner No.1) in so far as the Petitioner is concerned and be pleased to direct the 1st Respondent to stay the disabling and restore the Director ldentification Numbers 02895638, of the Petitioner 1, respectively and enable them to join as a director in New Company or enable them to submit the annual returns and financial statements of the companies in which they are Director. Counsel for the Petitioner: SRl. SURYAVANSHI RAJEEV RATNA Counsel for the Respondents: SRl. NAMAVARAPU RAJESHWAR RAO, ASSISTANT SOLICITOR GENERAL The Court made the following: ORDER THE H()N'BLE SRI JUSTICE A.RAJASHEKI;R ]3EDDY WP No.8908 of 2O2O ORDtrR Aggrieve,l by the action of respondents in disqualifying the petitioner as Di:ec:or under Section l6aQ)@) of the Con)pa:1ies Act, 20 13 and in deactiva:ing his Director ldentification Number DII l), the present Writ Petition has been filed. 2. Learned c,)unsel appearing for petitioner contend rd t hat the lis ir-r the present Wri: Pctition is squarely covered by the con mon order dated 18.O7.2O),9 passed by this Court in W.P.No.5422 of 2013 and batch, and hence the same may accordingly be allowed. 3. Sri N. Rajeshu ar Rao, learned Assistant Solicitor Gr nerai, appearing for respondents, does not dispute the same. 4. The relevant portion of the order in W.P.No.5422 of 20 I8 and batch dated 18,07.201'1, is as under: \"23. ln uieiu of the aboue facts and circumstances a td ihe .judgments refened to supra, as Lhe impugned orders in present urit peti;ion:; disqualifging lhe petitianers as Tireclors under Section 164(2)la) of the Ac| tauet been passec) considering the pedocl pior b A1.04.2014, the same cannot I'e sqstoined, and trre liable to be set ctsirle to tha't extent.\" \"30. IrL uiett, c:[ the above facts and ciranmstances and the judgment re.ferred to suDra, the, deactiuation of the DINs of the petitl)ne:s for alleged uiolations under Seclicn 164 of the Act, cannot be sustained.\" 31. For the lbregoing reasons, the impugned orders in th? LDit petitions to tlTe extent o.f aisqutlif-,ting the petitioners under Section 164(2)1a) of the Act and deactiuation oJ'thetr DINs, are set aside, and the 2nd respondent is directed to actiuate the DINs af the petttioners, enabling them to function (.s Directors other Ihan it1 slnke off co np,tnies. 32. It is made tlear that this order tuill not preclude the 2n,C respondent from taking appropriate action in accordance with law for uiolati,>ns as enuisaged under Sectton )64(2) o.f tlrc Act, giuing the said prouiston prospzctite effect from 01.04.2014 and for ne,:essary action against DIN in case of uiol ttions of RuLe 11 of the Rules. 33. 1t is also ntade clear that if the petitioners are aggriel ed .rU the oction of the respondenrs 'n stnking off their companies under Sectior 248 of th€ Act, theA are at liberty ta oL)ail altem.atiue remedy under Sectton 252 t f thz Act. 34 aboue.\" A the wit petittons are accordtngtA atLou.ted to the extent indicated To, CHR 5. In view of the same, and for the reasons alike, the present Writ Petition is also allowed mutatis mutandis, in terms of the common order dated 18.07.2O19 passed in W.P.No.5422 of 2018 and batch. No order as to costs. Miscellaneous petitions pending, if any, shall stand closed SD/.K.AMMAJI ASSISTANT REGISTRAR ,TRUE COPY// SECTION OFFICER 1, The Secretary IMinistry of Corporate Affairs, Union of lndia, Government of lndia, A Wing, Shastri Bhawan, Rajendra Prasad Road, New Delhi, Delhi 110001 2. The Registrar of Companies (Hyderabad), (For the State of Telangana) 2no Floor, Corporate Bhawan, GSI Post, Tattiannaram Nagole, Bandlaguda, Hyderabad - 500 068. 3. One CC to Sri Suryavanshi Rajeev Ratna Advocate [OPUC] 4. One CC to Sri. Namavarapu Rajeshwar Rao, Assistant Solicitor General tOPUCI (Along with a copy of order, dated 18,07.2019 in W.P.No.5422 of 2018 and batch) 5. Two CD Copies HIGH COURT DATED:23,0612020 ORDER W.P. o.8908 of 2020 ALLOWING THE WRIT PETITION WITHOUT (]OSTS c- o O 0l ,lttt 2M) _i. t l'r -; :',:;Pr-\"' _s !^. t 6 c?'ul rl )tsqF ,-* G:.--h I W.P.NOs.5422. 121A4. 13520. L3783, 13855, t4L66, 24051. 30993. ANp 40953 0F 2018. 5547. 5582. 5669. s687, 5785, 6047, 6087, 6t40. 6444. 6753. 6458, 6954, 6981. 700L. 7008. 7014. 7046, 7069. 7073.7LOs, 7432,7454, 7572.759s. 7732, 7765, 776a. 7a24. 797A, 8111. 8223. 8586. 8590. 9333. 9340. 9381, 9458, 9563, 9584, 9623. 9726,9737. toosa, OO99. 1L208. L1223, 1L239. L1263, LL889, It99L. 120rA. 12036. 12040. L2069. tztoB. L2t44. t2tB6. t2L94, 1220(). 12209. 12215. L22L7. L2243. L2260. L2262. t22AA. L2342, 1235(). 12417.12432. L2472. L249A. 12506, L2574. 1259A. L262r. t2702. 12735. 1274(). 12A45. t2A50, 12865, 12866. 13013. 136la. 13730. L3749, t3779.137AA. L3a39, 13855. L387A. ,-39L2. L3917. 13945. 14101. 14t74. 14207.14350. 1436t. 14390. 14392. 14397. 144(J9. 14582 AND L4597 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 (18 of 2013) (for short 'the Act'). Some of the such companies are active, and some of them have been struck 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 764(2) of the Act, disqualifying 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 five years from the date on which the respective companies failed to do so. The Director Identification Numbers (DINs) of the petitioners were also deactivated. Aggrieved by the same, the present writ petitions have been filed. THE HON'BLE SRI JUSTICE A.RAJASHEKER REDDY 2 4. This coLrrt granted interim orders in the writ petitions directing the 2nd respondent trr activate DINS of the petitioners, to enab e tlrem to function other than in str ke off companies. 5. Heard the learned counsel appearing for the p(:titioners in all the writ petitions, Sri K.Lakshman, learned Assistant Solicitor General appearing for the respondents - Union of India. 6. Learned counsel l'or the petitioners, contend tltat before passing the impugned order, notices have not been issued, giving them opportunity, and this amounts to violation of principles of natural justic,3, and on this ground alone, the impugned orders are liable to be set aside. 7. Learned counsel submits that Section 764(2)(it) of the Act empowers the aLrthority to disqualify a person to be a director, provided he has not filed financial statements or annual returns of the conrpany to which he is director, for any continuous period of three financiirl yr:ars. Learned counsel further submits that this provision came into forc: wlth effect from t.4.2074, and prior thereto i.e., under Section 27aG)G) of the Companies Act, 1956 (1 of 1956), which is the analogous provision, :here was no such requirement for the directors of the private companies. -Ihey contend that this provislon under Act 18 of 2013, will have prospect ve 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, ls witlin its jurisdiction to disqualify them. tsut in the present cases, the 2nd resrondent, taking the period prior to L.4.2O -4, .e., giving the provision retrospective effect, disqualified the petitioners as directors, which is illega I and arbitrary. 8. With regard to deactivation of DINs, learnec counsel for the petitioners submi: that the DINs, as contemplated under Rule 2(d) of the Companies (Appcintment and Qualification of Directors), Rules, 2014 (for J 9. Learned counsel further submits that l't respondent - Government of India represented by the Ministry of Corporate Affairs, has floated a scheme dated 29.72.2O77 viz. , Condonation of Delay Scheme - 2018, wherein the directors, whose DINs have been deactivated by the 2nd 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, seeking 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 business, 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 Afticle 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 submlts that failure to file financial statements or annual returns for any continuous period short'the Rules), are granted for life time to the applicants under Rule 10(6) 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 of 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. 1 of three financia years, automatically entail their disrlualification under Section l6a(2)(a) of the Act and the statute does not pro ide for issuance of any notice. Hence, the petitioners, who have failed to comply with the statutory requirement under Section 164 of the Act, citnnot 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 ente rta in ed. 72. To consider the contention of the learned Asslstant Solicitor General with regard to alternative remedy of appeal under Section 252 of the Act, the said provlsion is required to be considered, 3nd the same is extracted as under fcr better appreciation: 25 2, Appeal to Tribunal (1) Any jrerson aggrieved by an order of the Registrar, not fyinl a company as dissolved uncer Section 248, may file an appeal to the Tribunal vithin a period of three years fronl th-. date of the order of the Registrar and jf the TribL nal is of the opinion that the rerroval of the name of the company from the regi: ter of companies is not justified if vrew of the absence of any of the grounds on wh ch the order was passed by the R:gistrar, it may order restoration of the name of th: cornpany in the register of comp r n ies; Provided th.rt before passing an order under this section, lhe lribunal shall give a reasonabe oDportunity of making representations and of b(ing heard to the Registrar, the company and all the persons concerned: Provided further that if the Registrar is satisfied, that tTe name of the company has been struck off from the register of companies either inadvertently or on basis of inco'rect rnformation furnished by the company or ats directors, which requires restorairion in the register of companies, he may within ir period of three years from the date of passing of the order dissolving the compa ry urlder Section 248, file an apl)lication before the Tribunal seeking restoration of n.rme of such co m pa ny. (2) A copy of the order passed by the Tribunal shall be filec by the company with the Registr.rr w thin thirty days from the date of the order and on r3ceipt of the order, the Registrar shall cause the name of the company to b€ resLored in the register of comp,rnies and shall issue a fresh certificate of incorporat on. (3) If: company, rlr any member or creditor or worler thereof feels aggrieved by the company having its name struck off from the register of companies, the'-rib.rnal or an application made by the company, rlemler, creditor or workman bef)re the expiry of twenty years from the publicati0n ir the Official Gazette of the ]otice under sub-section (5) of Section 248, if sltisfed that the company was, ai the time of its name being struck off, carrying cn bLrsiness or in operatron or oth:rwse it is just that the name of the company b( res[ored to the reqister of comp,rnies, order the name of the company to be restor( d to the register of companies, ar)d the Tribunal may, by the order, give such oth('r di-ections and make such provirions as deerned just for placing the company and )ll ol:her persons in the same postor as nearly as may be as if the name of the clmpany has not been struck off from the register of companies. 5 A reading of above provlsion goes to show that if the company is dissolved under Section 248 of the Act, any person aggrieved by the same, can file an appeal. 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 d isq ua lification of the directors, and deactivation of their DINs. In the present case, the petitioners are only aggrieved by their d isq ua lification as directors 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 Genera!, in this regard, merits for rejection. 13. Under Section t6+(2)(a) 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 2Ot3, came into force with effect from 01.04.20L4, and the petitioners are disqualified as directors under the said provision. At this stage, the issue that arises for consideration is - whether the d isq ua lification envisaged under Section 16a(2)(a) of the Act, which provision came into force with effect from 01.O4.2074, can be made applicable with prospective effect, or has to be given retrospective operation? In other words, the issue would be, from which flnancial 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 brought to the notice of this Court, the General Circular No.08/14 dated 4.4.2014 issued by the Ministry of Corporation affairs, which clarifies the applicability of the relevant financial years. The relevant portion of the said circu la r is as under: \"A number of provisions of the Companies Act, 2013 including those relating to maintenance of books of account, preparation, adoption and filing of financial statements (and documents required to be attached thereto), Auditors reports and the Board of Directors report (Board's report) have been brought into force with 6 effect from 1st April, 2014. Provisions of Schedule II (useful lives to compute depreciation) ard Schedule III (format of financial statementsl have also been brought into force from that date. The relevant Rules pertaining t) th€se provisions have also been notified, placed on the website of the Ministry anl have come into force from the !,ame date. The Ministry has received requests for clarification with regarl to the relevant financial years with effect from which such provisions of the neii Act relating to maintenance ol books of account, preparation, adoption and 'iling of financial statements (anl attachments thereto), auditors report and Boarl's report will be applicable. Although the position in this behalf is quite clear, to make things absolutely clear it is hereby nolified that the financial statements (and documen:s r€quired to be attached tneretl), 3uditors report and Board's report in respect 3f fi.rancial years that commenced earlier than 1st April shall be governed ly :he relevant provisions/schedules/rules of the Companies Act, 1956 and tlat ir respect of financial years (ommencing on or after 1st April, 2014, the provisio\"rs o'the ner/ Act shall apply. \" 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 thEn 07.04.2014, shall be governed by the provisions under the Companies Ac:, 1956 and in respect of financial years cornmencing on or after 01.04.2C74, the provisions of the new Act shall apply. 14. At tl- is stage it is required to be noticed tf at the analogous provision to Section 164(2)(a) of the Act 18 of 2013, is Se:tio1 27a(l)(9) of Act 1 of 1956. The said provision under Act 1 of 1956 is € xtracted as under for ready reference: Section 274(!) A person shall not be capable of being appoirted director of a company, i]' - (g) such pers,rn ls already a director of a public company which, (A) has not filed the annual accounts and annual retLrns for any continuous three financial years commencing ( n alld after the fi'st day of April, 1999; or (B) Provided that such person shall not be eligible to be appointed as I director of any other public corpany for a period of five years from the date on v,h ch such public company, in !,/hi:h I'e is a director, failed to file annual accounts ard annual returns under sub-claus(-'(A) or has tailed to repay its deposits or intere;t or redeem its debentures on dLre cate or pay dividend referred to in clause (B). A reading of the above provision under Act 1 of 1956, makes lt clear that if a person capable of being appointed director of a company and such person is already a director of a public company, which has not file(l annual accounts and annual returns for any continuous three financial year; commencing on 1 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 public company, in which he is a director, failed to file annual accounts and annual returns. So the statutory requirement of filing annual accounts and annual returns, is placed on the directors of a 'public company'. There is no provision under the Act 1of 1956, which places similar obligations 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) of 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', fails to file financial statements or annual returns for any continuous period of three financial years, will not be eligible for appointment as a director of a company. As already noted above, the said provision, came into force with effect from 0L.04.2014. 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 flnancial statements or annual returns, for period prior to 01.04.2014. The action of the 2nd respondent runs contrary to the circular issued by the N4inistry of the Corporate Affairs, and he has given the provisions of Act 18 of 2013, retrospective effect, which is impermissible. 77. The Apex Court in COMMISSIONER OF INCOME TAX (CENTRAL)-L NEW DELHI v. VATIKA TOWNSHIP PRIVATE LIMITEDI 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, ' lzorslr sccr 3 conceptually it is a great deal more than an ordinary prose. - here is a special peculiarity in the mode of verbal communication by a legislation. , legislation is not just a series of statements, such as one finds in a work of fiction/r on fction or even in a judgment of a court of law. There is a technique required to drafi a legislation as well as to L nderstand a legislation. Former technique is known as leqislative drafting and lalter one is to be found in the various principles of'lnterpretation of Statutes'. Vis-)-vis ordinary prose, a legislation differs in its pr)venance, lay-out and features as also in the implication as to its meaning that arise:, by presumptions as to the intent of t-re maker thereof. 28. Of the varous rules guiding how a legislation has to b€ int(:rpreted, one established rul€ is that unless a contrary intention appears, a legis 3tiorr is presumed not to be intenied to have a retrospective operation, The idea )ehind the rule is that a current l:rv should govern current activities, Law passed t(day cannot apply to the events or the past. If we do something today, we do it keeping in the law of today and rn force and not tomorrow's backward adjustment of it. Our belief in the nature of the law s founded on the bed rock that every human bting is entitled to arrange his affairs ry relying on the existing law and should not f nd that his plans have been retrcspe:tively upset. This principle of law is known a: lex prospicit non respacit : law l(oks forward not backward. As was observed in l,hillips vs. Eyre [(1870) LR 6 QB 1], a retrospective legislation is contrary to the general principle that legislation ly which the conduct of mankind is to be regulatec when introduced for the first timl to deal with future acts ought not to change the character of past transactions carried on upon tl're faith of the then existing law. 29. The ob ious basis of the principle against retrospectivity s th,: principle of 'fairness', whiclr m.]st be the basis of every legal rule as was observed in the decrsion reported n L'Office Cherifien des Phosphates v. Yanrash ta-Shinn hon Steamship Co, -td. [{199a) 1 Ac 486]. Thus, Iegislations whach modified accrued rights or which impose obligations or impose new duties or attaclr a new disability have to be trea-ed as prospective unless the legislative intent is c earli/ to give the enactment a reirospective effect; unless the legislation is for purl)ose of supplying an obvious omission in a foTn'leT legislation or to explain a forme legislation. We need not note that Lornucopia of case law available on the subject l)ecause aforesaid legal position clearl.,, emerges from the various decisions and this lsgal position was conceded by tlre counsel for the parties. In any case, we slall -efer to few ludgments containirg this dicta, a little later, 30. We wou d a so like to point out, for the sake of completen,)ss, that where a benefit is conferred by a legislation, the rule against a retrospectr'e c(,nstruction js different. If a legisation confers a benefit on some persons but uithoLrt inflicting a corresponding d:triment on some other person or on the public Aen:rall/, and where to confer such be'refit appears to have been the legislators )bje(:t, then the presumption wculd be that such a legislation, giving it a purpo:ive :onstruction, would warrant it to :)e given a retrospectave effect. This exactly is t-re jLrstification to treat procedura provrsions as retrospective. In Government of lndia & Ors. v. Indian Tobacco Association, [( 2005) 7 SCC 396], the doctrine of fai .nes:; was held to be relevant factor tc construe a statute conferring a benefit, in the ( ont€'xt of it to be given a retrospecti,/e operation. The same doctrine of fairness to hold that a statute was retrospective in nature, was applied in the case of V jay v. State of Maharashtra & <)rs., [(2006) 6 SCC 289]. It was held that where a law is enacted for the benefit )f community as a whole, even in the absence o'a provision the statute may be hed to be retrospective in nature. However, {e arre (slc not) confronted with any such situation here. 31, In such cases, retrospectivity is attached to benefit the persons in contradistinction to the provision imposing some burden or liabilit)' where the presumption att,rched towards prospectivity. ln the instant case, tle p-cviso added to Section 113 c,f the Act is not beneficial to the assessee. On th( cortrary, it is a provision which is onerous to the assessee. Therefore, in a case lke t1is, we have to proceed with thc normal rule of presumption against retrosp lctive operation. Thus, the rule agairst retrospective operation is a fundamental ru e of law that no statute shall b: clnstrued to have a retrospective operation unless such a construction appears very clearly in the terms ofthe Act, or arises )y nocessary and distinct implicatien. Dogmatically framed, the rule is no more tha I a presumption, and thus could be d ;placed by out weighing factors. 43. There is yet another very interesting piece of evidence t.'lat :larifies that provision beyonci any pale of doubt viz., the understanding of CBDI ts,3lf regarding this provision. It is contained in CBDT Circular No.8 of 2002 datec 27.13.2002, with the subject \"Finance Act, 2002 - Explanatory Notes on provision elating to Direct Taxes\". This cir(:ular has been issued after the passing of the Finarce Act, 2002, by which amendme rt tc section 113 was made. In this circular, variL)us amendments to the Income tax Act are discussed amply demonstrating as to wl'ich amendments are clarificatory,/retr)spective in operation and which amendments are prospect ve. 9 For example, Explanation to section 158-BB is 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 clarificatory 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 158-BE, would be prospective i.e., will take effect from 7.6.2002.\" 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 appllcable 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 2nd respondent / competent authority, has disqualified the petitioners as directors under Section L6aQ)@) of the Act 18 of 2013, by considering the period prior to 07.04.2014, the same is contrary to the circular, and also contrary to the law laid down by Apex Court in the above refe rred judgment. 19. If the said provision is glven prospective effect, as per the circular dated 4.4.2Ot4 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 31.03.2C1,7 can be held within six months from the closing of financial year i.e ., by 30.09.2017. Further, the time lirrit fr>r filing annual returns under Sect on 92(4) of the Act, is 60 days frcm ,annual general meeting, or the last date on which annual general meetlng ought to have been held with n')rmal fee, and within 270 days with additirnal fee as per the proviso to Section 403 of the Act. Learned counsel subnrit that if the said dates are calculated, the last date for filing the annual returns would be 30.L1.2017, and the balance sheet was to be filed or 3C,.10.2017 with normal fee and vith additional fee, the last date for filing annual returns is 27.O7.2018. In ,rther words, the disqualification could gel triqgered only on or after 27.07.2078. But thr: period considered by the 2nd respondent in the present writ petitions for clothing the petitioners witr clisqualification, pertains prior to 01.04.20L4. Therefore, when the omiss on, which is now pointed out, was not envisaged as a ground for disquirlifi<:ation prior to 7.4.2014, 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 \"No person shall be convicted of any offence except fo'vic)lation of a law in force at the tirne of the commission of the act charged * e,n offence, nor be subjected to a penalty greater than that which might t.ave been inflicted under the law in force at the time of the commission of lhe offence\". In view of the same, the ground on which the petitioners were disqualified, cannot stand to lega scrutiny, and the same is liable to be:;et aside. 20. A le]rned Single Judge of the High Court of Karnataka in YASHODHARA TSHROFF vs. UNION OF INDI42 considering Section 76aQ)@) of the Act and other provisions of the Acr:, and various judgments, passed an elaborate order and held that the sai,J provision has no retrospective oper-ation. The observations of the learned JL,dge, pertaining to r w.P.No.529l I ol'2017 and barch dated 12.06.2019 1l private companies, which are relevant for the present purpose, are extracted as under: 208. ln view of the aforesaid discussion, I have arrived at the following conclusions: (a) It as held that Section 16a(2)(a) of the Act is not uitra yirus Article 14 of the Constitution. The said provision is not manifestly arbitrary and also does not fall within the scope of the doctrine of proportionality. Neither does the said provision violate Article 19(1)(9) of the Constitution as it is made in the interest of general public and a reasonable restriction on the exercise of the said right, The object and purpose of the said provision is to stipulate the consequence of a disqualification on account of the circumstances stated therein and the same is in order to achieve probity, accountability, and transparency in corporate 9OVerna nce. (b) That Article (slc) Section 164(2) of the Act applies by operation of law on the basis of the circumstances stated therein, the said provision does not envisage any hearing, neither pre-disqualification nor post-disqualification and this is not in violation of the principles of natural justice, is not ultra ylres Article 14 of the Constitution. (c) That Section 764(2) of the Act does not have retrospective operation and js therefore, neather unreasonable nor arbitrary, in view of the interpretation placed on the same. (d) (e) Insofar as the private companies are concerned, disqualification 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 taking 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 conclusion is based on the principal drawn by way of analogy from Article 20(1) of the Constitution, as at no point of time prior to the enforcement of the Act, a disqualification based on the circumstances under Sectaon l6a(2) of the Act was ever envisaged under the 1956 Act vis-i-vis directors of private companies. Such a d isq ua lification could visit a director of only a public company under Section 27a(1)(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 ua shed. (f) (g) 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 or 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 d isq ua lification would a pply to them under the Act. 2L. A learned Single of the High Court of Gujarat at Ahmedabad in GAURANG BALVANTLAL SHAH S/O BALVANTLAL SHAH vs. UNION OF INDIA3 expressed similar view as that of the leaned single Judge of High Court of Karnataka (1 supra), and held that Section 164(2) ot the Act of 2013, which had come into force with effect from 7.4.2074 would have prospective, and not retrospective effect and that the defaults contemplated under Section 164(2)(a) with regard to non-filing of financial statements or r riSpecial Civil Application No.22435 of 201? and batch dated 18.12.2018 12 annual returns for any continuous period of three financ al years would be the default to L,e counted from the financial year 2012:-15 only and not 20t3-L4. 22. A learned single Judge of the High Court of Mad'as in BHAGAVAN DAS DHANANJAYA DAS vs. UNION OF INDIA4 also expressed similar view. The relevant portion is as under: 29. In fine, (a) Vhen the New Act 2013 came into effect fronr 1.4,2014, the second respondent herein has wrongly given retrospective efFect . nd erToneously disqualified the petitioner directors from 1,1.2016 itself before the deadline commencei wrongly fixing the f rst financial year from 1.4,2Ot3 to 31.3.2014. (b) E;y virtue of the new Sectaon 164(2)(a) of the 2013 Act using the €xpression 'for any continuous period of thre€ financial year\" and irr the light of section 2(41) defining \"financial ) ear\" as well as their cvvn General circular No.08/14 dated 4.4.201,+, the first Financial year would be from 1.4.2014 to 31.3.2015, rhe second financial year would be from 1.4.2015 to 31.3.2016 anC the third financial year would be from 7.4.2016 to 31.3.2017, 'vhereas the second r:spondent clearly admitted in paras 15 and 22 of the counter affidavit that the default of filing statutory r:turns for the final years commences from 2OL3-14, 2OL4-15 ard 2115-16 i,e, one year before the Act 2013 came into force, Tl-ris is the basic incurable legal infirmity that vitiates the entire impugned p roceed ings. 23. In vierv of the above facts and circumstances and -he judgments referred to supr-a, as the impugned orders in present writ petitions disqualifying the ret tioners as directors under Section 76t (2)',a) of the Act, have been passe rJ considerlng the period prior to 01.02.2014, the same cannot be sustained, and are liable to be set aslde to that e