Naresh Kumar Arora V. Union of India

WP/13218/2020

AI Insights

The case revolves around the disqualification of Naresh Kumar Arora, a director of private companies, under Section 164(2)(a) of the Companies Act, 2013, for failing to file financial statements or annual returns for three consecutive years. The disqualification was applied retrospectively by the Registrar of Companies, which led to the activation of the petitioner's DIN being challenged. The petitioner argued that the retrospective application of the law was illegal and violated the principles of natural justice, as no prior notice was given. The respondents contended that the law's retrospective effect was justified and that the disqualification was automatic under the statute. The court, referencing various precedents and the Ministry's circular, ruled in favor of the petitioner, emphasizing the prospective application of the law and the lack of procedural fairness in the disqualification process.

• Counselvise Citation: [2020] 140 COUNSELVISE.COM (IT) 738966 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 31-08-2020
• Assessment Year: misc
• Other Referred Cases: COMMISSIONER OF INCOME TAX (CENTRAL)-L 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 Act, 1956, Constitution of India
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: N RAO
• Assessee Lawyers: VANGA
• Keywords: Director Identification Number; Disqualification of director; Natural Justice; Retrospective effect; Writ of Mandamus
• Section: 151; 226; 92(4); 403; 455; 248(1)(c); 164(2)(a)

Judgement Text

"HIGH COURT FOR THE STATE OF TELANGANA (Special Original J urisdiction) MONDAY, THE THIRTY FIRST DAY OF AUGUST TWO THOUSAND AND TWENTY PRESENT THE HONOURABLE SRI JUSTICE A.RAJASHEKER REDDY Between: Naresh Kumar Arora R/o. Flat No. 201 an Telangana- 500 007. AND 1 d2/o. Kanhiya Lal Arora Age. 71 Years, Occ. Business, 02, Acropolis Villa, Street No.6, Habsiguda, Hyderabad, ...PETITIONER 2 Union of lndia, Rep by its Secretary, Ministry of Corporate Affairs, Shastry Bhavan, Dr. Rajendra Prasad Marg, New Delhi. The Registrar, Office of Registrar of Companies, ROC, 2nd Floor, Corporate Bhavan, Near Central Water Board, GST Post, Bandlaguda, Nagole, Hyderabad - 500068. ...RESPONDENTS Petition under Article 226 ol lhe Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue any writ, order of direction more particularly one in the nature of writ of l rlandamus to permit the Petitioner to continue as a Director of the Company and/or get appoint or reappointed as a Director of any Company 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 stay of the d isqua lificatio n of directorship of the petitioner by activating the DIN No. 03032660 and digital signature of the Petitioner, in so far as the Petitioner herein is concerned, pending disposal of the above writ petition. Counsel for the Petitioner: M/S. VANGA ANITA Counsel for the Respondents: SRl. N. RAJESHWAR RAO, ASSISTANT SOLICITOR GENERAL The Court made the following: ORDER WRIT PETITION NO: 13218 OF 2020 lA NO: 1 OF 2020 HON'BLE SRI JUSTICE A.RAJASHEKER REDDY Writ Petition No.13218 OF 2O2O ORDER: Learned counsel for the petitioner as well as Sri Namavarapu Rajeshwar Rao, learned Assistant Solicitor General ol India, appearing for the respondents submits that the Jis in this Writ Petition is squarely covered by the Comrnon Orders of this Court in WP No.5422 of 2O7a & batch, dated 1 8.O7.2O19. In view of the same and for the reasons alike in the Common Order in WP No.5422 ol 2Ol8 & batch, dated 18.07.2019, this Writ Petition is also allowed. There shall be no order as to costs. As a sequel thereto, miscellaneous applications, if any, pending in this Writ Petition, shall stand disposed of. //TRUE COPY' SD/. B. SATYAVATHI ASSISTANT REGISTRAR v To, SECTION OFFICER '1 . The Secretarv. [ ,4inistrv of Corporate Affairs, Union of lndia, Shastry Bhavan, Dr. _ Rajendra pra3ad Marci, t{ew delni'- 2 The Registrar, office 5i negista\"i;r companies, Roc, 2nd Froor, coroorate PlBffiAe*\"rr Central wate\"i Ej\";rd: GSf \"p;;it\"norrsra\", Nasole, Hyderabad 9. 9nu CC to M/s. Vanga Anita, Advocate (OPUC) 4. one CC to Sri. N. Ra\"ieshwal nJd, A!'rr-rti\"tt7icitor cenerat (OPUC) 5. Two CD Copies. (Along with a copy of order dared 18/712019 in wp.No. s422 of 2018 & batch.) PIV. rx^^ -,- u -.,- HIGH COURT DATED:31 tOAt2O2O ORDER WP.No.1321B of 2O2O Allowing the Wp Without costs 0 4 StP 2020 {:- -t. o 'rA)A s E H 1 $1, \" 6crP'9 )t- dq \"\"' 1 :,, :r' THE HON'BLE SRI JUSTICE A.RAJASHEKER REDDY W.P.NOs.5422. l2lg4. 13 5 2(). 13783. 13855. 14166. 24051. 30993. AND 40953 0F 2018. 5547. 5582. 5659. 5687. 5785. 6047. 6087. 6140. 6484, 6753. 6A58, 6958. 69At. 700L. 7008, 7014, 7046, 7069, 7073. 7LO'. 7432. 7454, 7572, 759s. 7732. 776s, 776a. 7A24. 797a, 8111. 8223. 8586. 8590. 9333. 9340. 9381, 9468. 9553. 9584. 9623. 9726,9737,10058, 10099, 11208, t!223, Lt239, 11263, 11889, L1991. 12018. t2036. 12040, L2069. tzt0A. L2144. L2!A6, L2194, L2200. 12209. t22L5, 122L7. L2243. 12260, L2262. L22Aa, L2342. L235(J, 12417,12432. 12472. L2498. 12506. L2574. L259A. L2621. L2702. t2735. L2740. L2A45. 12A50, L2A65. L2a66. L30L3. t36L8. L3730. t3749. L3779. t37Aa. 13A39. L3A55, t3A7A. L39L2. L39L7. 13945, t4tol. t4L74, L4207.14350. L4361. 14390. 14392, L4397. L4409, 145A2 AND 14597 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. 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 L64(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 weTe also deactivated. Aggrieved by the same, the present writ petitions have been filed. 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(l)( 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. 4. This court granted interim orders in the writ petitions directlng the 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 passinq the impugned order, notices have not been issued, giving 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 lnto force with effect from 7.4.2014, and prior thereto i,e., under Section Z7q(t)(g) 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 18 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 7.4,2O74, i.e., giving the provision retrospective effect, disqualified the petitioners as directors, which is illegal and a rbitra ry. 8. 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, 2074 (for 3 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. 9. Learned counsel further submits that 1st respondent - Government of India represented by the Ministry of Corporate Affairs, has floated a scheme dated 29.12.2017 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 2a8(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 Article 226 of the Constitution of I nd ia. 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 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 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, 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 Tribunal is of the opinion that the removal of the name of the company from the register of companies is not justified in 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 reqister of compan ies j Provided that before passing an order under this section, the Tribunal 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 register of companies either inadvertently or on basis of incorrect information furnished by the company or its directors, which requires restoration 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 company. (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 reqister 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 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. of three financial years, automatically entail their disqualification under Section 16a(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 violatlon 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. 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 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 disqualification 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 General, in this regard, merits for rejection. 13. Under Section 16a(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 1B of 2013, came into force with effect from 07.04.2014, and the petitioners are disqualified as directors under the said provision. At this stage, the issue that arises for consideration is - whether the disqualification envisaged under Section 164(2)(a) of the Act, which provision came into force with effect from 0L.04.2074, can be made applicable with prospective effect, or has to be given retrospective operation? In other words, the issue would be, from which financial year, the default envisaged under Section 16a(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.0B/14 dated 4.4.2074 issued by the Ministry of Corporation affairs, which clarifies the applicability of the relevant financial years. The relevant portion of the said circular 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 1't April, 2014. Provisions of Schedule Il (useful lives to compute depreciation) and Schedule III (format of financial statements) have also been brought into force from that date. The relevant Rules pertaining to these provisions have also been notified, placed on the website of the Ministry and have come into force from the same date. The I 4inistry has received requests for clarification with reqard to the relevant financial years with effect from which such provisions of the new Act relating to maintenance of books of account, preparation, adoption and filing of financial statements (and attachments thereto), auditors report and Board's report will be appljcable. Although the position in this behalf is quite clear, to make things absolutely clear it is hereby notified that the financial statements (and documents requared to be attached thereto), auditors report and Board's report in respect of financial years that commenced earlier than 1't April shall be governed by the relevant provisions/schedules/rules of the Companies Act, 1956 and that in respect of financial years commencing on or after 1st April, 2014, the provisions of the new Act sha ll 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 than 07.04.2074, shall be governed by the provisions under the Companies Act, 1956 and in respect of financial years commencing on or after 01.04.20t4, the provisions of the new Act shall apply. 14. At this stage it is required to be noticed that the analogous provision to Section 76aQ)@) of the Act 18 of 2013, is Section 27aG)G) of Act 1 of 1956. The said provision under Act 1 of 1956 is extracted as under for ready reference: Section 274(11 A person shall not be capable of being appointed director of a company, if - (9) 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) Provided that such person 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 under sub-clause (A) or has failed to repay its deposits or interest or redeem its debentures on due date or pay dividend referred to in clause (B). 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 public company, which has not filed annual 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 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 1 of 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 L6a(2) of the new legislation 1.e., Act 1B 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 01.04.201,4. 16. Coming to the facts on hand, the 2nd 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 2nd respondent runs contrary to the circular issued by the lvlinistry 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 LIMITEDL has dealt with the general principles concerning retros pectivity. 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, ' (20r5)l scc l E conceptually it is a great deal more than an ordinary prose. There is a special peculiarity in the mode of verbal communication by a legislation. A legislation is not just a series of Statements, such as one finds in a work of fiction/non fiction or even in a judgment of a court of law. There is a technique required to draft a legislation as well as to understand a legislation. Former technique is known as legislative drafting and latter one is to be found in the various principles of'Interpretation of Statutes'. Vis-d-vis ordinary prose, a legislation differs in its provenance, lay-out and features as also in the implication as to its meaning that arises by presumptions as to the intent of the maker thereof. 28. Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in the law of today and in force and not tomorrow's backward adjustment of it. Our belief in the nature of the law is founded on the bed rock that every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit : law looks forward not backward. As was observed in Phillips vs. Eyre [(1870) tR 6 QB 1], a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existjng law. 29. Tl]e obvious basis of the principle against retrospectrvity is the princrple of 'fairness', which must be the basis of every legal rule as was observed in the decision reported in L'Office Cherifien des Phosphates v. Yamashita-Shinnihon Steamship Co. Ltd. [{1994) 1Ac 486], Thus, legislations which modified accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospectrve unless the legislative rntent is clearly to give the enactment a retrospective effect; unless the legislation is for purpose of supplying an obvjous omission in a former legislation or to explain a former legislation. We need not note that cornucopia of case law available on the subject because aforesaid legal position clearly emerges from the various decisions and this legal position was conceded by the counsel for the parties. In any case, we shall refer to few judgments containing this dicta, a little later. 30. We would also like to point out, for the sake of completeness, that where a benefit is conferred by a legislation, the rule against 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 generally, and where to confer such benefit appears to have been the legislators 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 justification to treat procedural provisions as retrospective. In Government of India & Ors. v. Indian Tobacco Association, [(2005) 7 SCC 396], 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 retrospectjve 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 (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 liability where the presumptjon 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 js onerous to the assessee. Therefore, in a case like this, we have to proceed with the normal rule of presumption against retrospective operation. Thus, the rule against retrospective operation is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication. Dogmatically framed, the rule is no more than a presumption, and thus could be displaced by out weighing factors. 43. There is yet another very interesting piece of evidence that clarifies that provision beyond any pale of doubt viz., the understanding of CBDT itself regarding this provision. It is contained in CBDT Circular No.8 of 2002 dated 27.8.2002, with the subject \"Finance Act, 2002 - Explanatory Notes on provision relating to Direct Taxes\". This circular has been issued after the passing of the Finance Act, 2002, by which amendment to section 113 was made. In this circular, various amendments to the Income tax Act are discussed amply demonstrating as to which amendments are clarificatory/retrospective in operation and which amendments are prospective. For example, Explanation to sect,on 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 1.6.2002.\" 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 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 evldence, as it would clarify the provision beyond any pale of doubt. In the present casei as already noted above, the N4inistry of Corporation affairs has issued the circular No.0B/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 164(2)(a) of the Act 18 of 2013, by considering the period prior to 07.O4.2014, the same is contrary to the circular, and also contrary to the law laid down by Apex Court in the above referred judgment. 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 9 10 proviso to Section 96(1) of the Act, annual general meeting for the year ending 31.03.2OL7 , can be held within six months from the closing of financial year i.e., by 30.09.2017. Further, the time limit for filing annual returns under Section 92(4) 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 lf the said dates are calculated, the last date for filing the annual returns would be 30.77.2017 , 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 27.07.2078. In other words, the d isq ua lification could get triggered only on or after 27.07.2078. But the period considered by the 2nd respondent in the present writ petitions for clothing the petitioners with disqualification, pertains prior to 01.04.2014. Therefore, when the omission, which is now pointed out, was not envisaged as a ground for d isq ua lification 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 \"/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 vs. UNION OF INDIA2 considering Section 76 Q)Q) of the Act and other provisions of the Act, and vartous judgments, passed an elaborate order and held that the said provision has no retrospective operation. The observations of the Iearned Judge, pertainjng to 'W.P.No.529l I of 2017 and batch dated 12.06.2019 private companies, which are relevant for the present purpose, are extracted as under: 208. In view of the aforesaid discussion, I have arrived at the following concluslons: (a) It is held that Section 16a(2)(a) of the Act is nat ultra ylrus Article 14 of the Constltution. The said provision is not manifesuy arbitrary and also does not fall wjthin 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 governance. (b) That Article fslc) 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, js nol ultra ylres Article 14 of the Constitution. (c) That Section 164(2) ot the Act does not have retrospective operation and is therefore, neither unreasonable nor arbitrary, in view of the interpretation placed on the same. il (d) . 1r'iSpecial Civil Applioation No.l24l5 ol20l7 and ba(ch daled 18.12.1018 (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 farst 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 Section f6aQ) of the Act was ever envisaged under the 1956 Act vis-a-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 quashed. (f) (g) Consequently, where the disqualification under Section !64(2) ot the Act is based on a continuous period of three financial years commencing from 07.04.2414, 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 disqualification would apply to them under the Act. 21. 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 Hlgh Court of Karnataka (1 supra), and held that Section 1'64(2) of 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 L6aQ)G) with regard to non-filing of financial statements or 12 annual returns for any continuous period of three financial years would be the default to be counted from the financial year 2Ol4-L5 only and not 2073-14. 22. A learned single Judge of the High Court of lvladras in BHAGAVAN DAS DHANANJAYA DAS vs. UNION OF INDIA4 also expressed simllar view. The relevant portion is as under: 29. In fine, (a) When the New Act 2013 came into effect from 1.4.2014, the second respondent herein has wrongly given retrospective effect and erroneously disqualified the petitioner - directors from 7.1,.2076 itself before the deadline commenced wrongly fixing the first financial year from L.4.2073 to 31.3.2014. (b) By virtue of the new Section 164(2)(a) of the 2013 Act using the expression'for any continuous period of three financial year\" and in the light oF section 2(41) defining \"financial year\" as well as their own General circular No,08/14 dated 4,4,2014, the first financial year would be from 7.4.2074 to 31.3.2015, the second financial year would be from 7.4.2075 to 31.3.2016 and the third financial year would be from t.4.2O76 to 37.3.2077, whereas the second respondent clearly admitted in paras !5 and ?2 of the counter affidavit that the default of filing statutory returns for the final years commences from 2013-14, 2OL4-15 and 2015-16 i.e, one year before the Act 2013 came into force. This is the basic incurable legal infirmity that vitiates the entire impugned proceed ings, 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 16+(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. 24. As far as the contention regarding issuance of prior notice before disqUalifying the petitioners as directors is concerned, Section 16a(2)(a) is required to be noticed, and the same is extracted as under for ready reference: 164. Disqua lification for appointment of director: o W.P.No.25455 ol'201? and batch d ated,27 .07 .20t8 l3 (2) No person who is or has been a director of a company which- (a) has not filed financial statements or annual returns for any continuous period of three ftnancial years; or (b)... Shall be eligible to be re-appojnted as d director of that company or appointed in other companies for a period of five years from the date on which the said company fails to do so, A reading of the above provision makes it clear that it provides disqualification on happening of an event i.e., if a person who is or has been a director of a company has not filed financial statements or annual returns for any continuous period of three financial years, shall be ineligible to be re- appointed as a director of that company or appointed in any other company for a period of five years from the date on which the said company fails to do so, The provision does not provide for issuance of any prior notice or hearing. A learned single Judge of the High Court of Karnataka in Yashodara Shroff v. Union of India (1 supra), as well as the learned single ludge of the High Court of Gujarat at Ahmedabad in Gaurang Balvantlal Shah s/o Balvantlal Shah vs. Union of India (2 supra), after analyzing various provisions of the Act and Rules framed thereunder, and by relying on various judgments of the Apex Court, held that Section 16a(2)(a) of the Act applies by operation of law on the basis of the circumstances stated therein, the said provision does not envjsage any hearing, neither pre-disqualification nor post-dlsqualification and this is not in violation of the principles of natural justice and hence, is not ultra vfes Article 14 of the Constitution. I concur with the said reason in g. 25. Thus, from the above, it is clear that Section 164(2)(a) of the Act is a deeming provision and the d isq ua lification envisaged under the said provision comes lnto force automatically by operation of law on default and Legislature did not provide for issuance of any prior notice, but the respondents notified disqualification even before it incurred, and deactivated DINs, which is illegal arbitrary and against provisions contained in Section 76a(2)(a) of the Act. I (a) (b) (c) (d) (e) (f) (i) t4 26. The next grievance of the petitioners is with regard to deactivation of their DINs. The contention of the learned counsel for the petitloners is that except for the grounds mentioned under Rule 11 (a) to (f) of the Rules, the DINs cannot be cancelled or deactivated, and the violation mentioned under Section 164(2)(a) of the Act, is not one of the grounds mentioned under clauses (a) to (f) of Rule 11, and hence for the alleged violation under Section 164(2)(a) of the Act, DIN cannot be cancelled, 27. Rule 10 of the Rules provide for allotment of DIN and under sub rule (6) of Rule 10, it is allotted for life time. Rule 11 provides for cancellation or deactivation. Rule 11, which is relevant for the present purpose, is extracted as under for ready reference: 11. Cancellation or surrender or deactivation of DIN: The Central Government or Regional Director (Northern Region), Noida or any officer authorized by the Regional Director may, upon being satisfied on verification of particulars or documentary proof attached with the application received from any person, cancel or deactivate the DIN in case - the DIN is found to be duplicated in respect of the same person provided the data related to both the DIN shall be merged with the validly retained number; the DIN was obtained in a wrongful manner or by fraudulent means; of the death of the concerned individual; the concerned individual has been declared as a person of unsound mind by a competent Cou rt; if the concerned individual has been adjudicated an insolvent; Provided that before cancellation or deactivation of DIN pursuant to clause (b), an opportunity of being heard shall be given to the concerned individual; on an application made in Form DIR-5 by the DIN holder to surrender his or her DIN along with declaration that he has never been appointed as director in any company and the said DIN has never been used for filing of any document with any authority, the Central Government may deactivate such DIN; Provided that before deactivation of any DIN in such case, the Central Government shall verify e-records. Explanation: for the purposes of clause (b) - The terms \"wrongful manner\" means if the DIN is obtained on the strength of documents which are not legally valid or incomplete documents are furnished or on suppression of material information or on the basis of wrong certification or by making misleading or false information or by misrepresentation; (ii) the term \"fraudulent means\" means if the DIN is obtained with an intent to deceive any other person or any authority including the Centra I Govern ment. 28. Clauses (a) to (f) of Rule 11, extracted above, provides for the circumstances under which the DIN can be cancelled or deactivated. The said grounds, are different from the ground envisaged under "