Shri Ravi Kumar Reddy Tamidala V. Union of India and another

WP/16699/2020

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The case involves Shri Ravi Kumar Reddy Tamidala, who challenged his disqualification as a director and the deactivation of his DIN by the Ministry of Corporate Affairs and the Registrar of Companies, Telangana. The disqualification was based on alleged non-filing of financial statements and annual returns for three consecutive years, as per Section 164(2)(a) of the Companies Act, 2013. The petitioner argued that the action taken was arbitrary, illegal, and violated principles of natural justice, as it was based on a retrospective application of the law. The court examined the applicability of Section 164(2)(a) and related rules, ultimately finding that the disqualification and DIN deactivation were improperly applied retrospectively and thus set aside the actions taken against the petitioner.

• Counselvise Citation: [2020] 140 COUNSELVISE.COM (IT) 721725 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 25-09-2020
• Assessment Year: misc
• Other Referred Cases: COMMISSIONER OF INCOME TAX (CENTRAL)-L NEW DELHI v. VATIKA TOWNSHIP PRIVATE LIMITED, YASHODHARA SHROFF v. 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 of Directors) Rules, 2014, Constitution of India
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: NAMAVARAPU RAO
• Assessee Lawyers: A NAGARAJ KUMAR
• Keywords: Director Identification Number; Disqualification of director; Financial Statements; Natural Justice; Writ of Mandamus
• Section: 226; 252; 248(1)(c); 164(2)(a)

Judgement Text

"HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original J urisdiction) FRIDAY, THE TWENTY FIFTH DAY OF SEPTEMBER TWO THOUSAND AND TWENTY PRESENT THE HONOURABLE SRI JUSTICE CHALLA KODANDA RAM WRIT PETITION N : 16699 OF 2020 Between: Shri Ravi Kumar Reddy Tamidala, (DlN. 02187692) S/o, Shri Chandra Sekhar Reddy Tamidala, Aged about 43 years R/o. 1-1 1 1 , Kaipa, Banaganapalle Kurnool - 518124. Andhra Pradesh' lndia ...pETrroNER AND 'l . Union of lndia, Represented by the Secretary, tVinistry of Corporate Affairs, A Wing, Shastri Bhavan, Rajendraprasad Road-,_New Delhi -1'10 001. 2. The Registrar of Companies of Telangana, 2\"\" Floor, Corporate Bhavan, GSI Post, rattiannaram, Nasole, Bandlaguda, Hyderabad - uoo ouL.J'EBEBXIB.*,, 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 issue appropriate writ, order or direction, more particularly a Writ of lvlandamus, declaring. a. that the list of directors notified by the lvlinistry of Corporate Affairs (IVCA) on its website, i.e. www.mca.gov.in, as arbitrary, illegal, without jurisdiction, contrary of the provisions of the Companies Act, 2013 and Rule 1 1 of the Companies (Appointment of Directors) Rules, 2014, violative of the principles of natuiral justice besides violating the Petitioner's rights guaranteed under Article 14 and Article 1S (1) (g) of the Constitution of lndia and quash / set.aside the same to the extent it declares / treats the Petitioner as disqualified in terms of Section 164 (2) (a) of the Companies Act 2013, in the interest of justice, b.that the Petitioner is not disqualified in terms of Section 164 (2) (a) of the Companies Act, 2013, for the reason of alleged default of non-filing financial statements/Annual Returns by the Companies, c.a writ of mandamus or any other appropriate writ, order or direction commanding the Respondents to restore the D|N.02187692 of the Petitioner, d.Award cost of this petition to the Petitioner 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 suspend the notification of the Respondents disqualifying the Petitioner as director, consequently direct the Respondent-2 to activate the DIN: 02187692 of the Petitioner, Counsel for the Petitioner : SRI A.NAGARAJ KUMAR Counsel for the Respondents : SRI NAMAVARAPU RAJESHWAR RAO ASSISTANT SOLICITOR GENERAL The Court made the following: ORDER THE HCI]]I,]3LE SRI JUSTICE CHALLA KODA,IID.A. RAM WRIT PETITION No. L6699 of 2O2O ORDER: The pel.itioner challenges his disque li fic:ation from Directorship under Section l6a(2 of the Companies, (t, 2013, for the alleged default irr filing financial statement/Annual Returns, and consequentlJ' see { restoration of his Director Ident ifLcrltion Number (DIN) viz., 02187e92. Learned t:ounsel for the petitioner submits that tl- e issue raised in the present W:it Petition is squarely covered by the r:ommon order dated 18.07.2019,in W.P.No.5422 0f 2018 and batch. Learned Standing Counsel for the 2\"d responclent - Registrar of Companies dcr:s not dispute the aforesaid submission Operativr: portion of the aforesaid order reads rs, under: \"For the foregoing reasons, the impugned orde,rs in the writ petitiotrs to the extent of disqualifying the petitior.ers under Section l.6d'(2)(a) of the Act and deactlvation of their DINS, are set aside, and the 2\"d respondent is directed to activat() the DINS of the petitioners, enabling them to function as Dirrlctors other than in stri:ke off companies. It isr made clear that this order will not pr':clude the 2\"d respondent from taking appropriate action in accordance with law for violations as envisaged under Section 164.2t ctf the Act, giving the rraid provision prospective effect from O 1.r)4.2O14 and for necessary action against DIN in case of violati()ns of Rule 11 of the Rrrle r- It is also made clear thlat if the petitioners are aggrieved by the ar:tion of the respondents in stliking off tt.eir companies ) under Section 24g of the Act, they are at liberty to avail alternative remedy under Section 2S2 of the Act. AII the writ petitions are accordingly allowed to the extent indicated above.', in view of the said Order dated lg.O7.2otg and for the reasons recorded therein, this writ petition is arso alrowed in terms thereof. No costs. Miscellaneous Petitions, if any pending, shail stand closed. SD/.K.AMMAJI ASSISTANT REGI //TRUE COPY// To SECTION OFFICER The Secretary, Union of lndia, Ir/inistry of Corporate Affairs, A Wing, Shastri Bhavan, Rajendraprasad Road, New Delhi -1-10 001. The Registrbr of Companies of Telangana, 2n0 Floor, Corporate Bhavan, GSI Post, Tattiannaram, Nagole, Bandlaguda, Hyderabad - 500 068. Telangana. One CC to Sri. A.Nagaraj Kumar, Advocate [OPUC] One CC to Sri. Namavarapu Rajeshwar Rao, Assistant Solicitor General [OPUC] Two CD Copies (along with a copy of the order dated 1810712019 in WP No.5422 of 2018) t. 2. 3. 4. 5. Kj *)< HIGH COURT DATED:25l09lii.020 ORDER WP.No.16699 of 2020 Allowing the Writ Petition without costs. o o cf. HE S14 ;p,1TCH(,o --- (s 3 0 sEP 20il ( Z t 0i6. TH E HO N ,B t E SRI JUSTICE A.RAIASH EI(ER REDDY WrP.NOs.5422, 12184. 13520, 13783, 13855. 14166. 24051, 30993, D40 5 o 18 5547 2 s669 5 7 5 I 4 2 6L40, 64A4, 6753. 6A5A, 6958, 69AL, 700L, 700A. 70L4. 7046. 7069, 7 07 3. 7 LOs, 7 432. 7 454, 7 57 2. 7 595. 77 32, 7 7 65. 7 7 64. 7 424, 7 97 A, 8111, 8223, 8586, 8590, 9333, 9340, 9381. 9468, 9s63, 9s84, 9523, 9726, 9737, 10058. 10099, 112 63, 11889, 11991, 12018, 12036, 12040, 12069, 12108, 12144, 12186. 12194. L22t 22 12243 t226 L22 2 t22 123s0, 124L7, L2432, L2472, L2498,.L25O6, L2574, 12s98. r262t, 12702, L2735. t2740, 12845. 12850. L2865.72866. 13013, t36LA, 7AA 3839 85 13 7 2 1 1 1 r394s. L4LOL, 141.74, t4207, L4350. L4361. L4390. L4392. 14397, 14409, 14s82 AN t4597 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 petitiorers, who were directors of the struck off companies, and who are presently dlrectors of active companies, during !he re evant period in question, failed to file tinancial 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, disquallfying them as directors, and further making them ineligible to be re-appolnted 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 ' 4. This crurt granted interim orders in the writ petitions clirecting the 2''c respondeni to 3c:ivate DiNs of the petitioners, to enable then'r to function other than r1 srrike o\"f companies, 5. Heard the learned counsel appearing for the pelitione-s in all the wrrt petltlons, Sfi f:. Lakshman, learned Assistant Solicitor Generirl appearing for the responCents - Unlon of India. 6. Learnecl counsel for the petitioners, contend that before passing the impugned order, notices have not been issued, giving th{lm r)pporl:unity, and this amounls ro violation of principles of natural justi(:e and on this ground alone, tl^e nrpugned orders are liable to be set aside. 7. Learil€ra c:ounsel submits that Section 162(2)(a. oi the Act emDoweTS the a'Jt-Tl-lty to disqualify a person to be a d;rector, rrov ded he has not filed financ al statements or annual returns of the cornDany to which he ls director, for ,?n'/ continuous period oF three financial 1'e:rs, Learned counsel further sub'nits that this provision came into force vrrth effect fronl 1.4.2414, and pric,T thereto i.e., under Section 214(t)(gi ot' the Companies Act, 1956 (1of 1956), which is the analogous provision, there v/as no such requirement fo: the drrectors of the private companies, The y c')ntend that this provision u rcler Act 1B of 2013, will have prospective c)p,iration and lrence, if the dlr€:c:ors of company fail to comply with th,: r€quirements mentioned in the sa c provision subsequent to the said dater, tl^e authority under the Act, is v,'ithin its jurisdiction to disqualify them. Bul in the present cases, the 2nd :espcrdent, taking the period prior to !.4,2074, i.e,, giving the provision retrospective effect, disqualified the petitioners as ciirectors, which is illeqa I and arbitra:y, B. With r€gard to deactivation of DINs, Iearned petitioners subrrit tl^et the DINs, as contemplated under Conrpanies (Appointn-renl and Qualification of Directors), ccu n r;el fo r the Rule :z(d ) of the Ru le s, 2014 (for 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 Ru es, 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 agalnst 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 1tt respondent - Government of India represented by the 14inistry of Corporate Affairs, has floated a scheme dated 29.12.2017 viz., Condonation of Delay Scheme - 2018, wherein the direclors, whose DINs have been deactivated by the 2'c 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, !hey 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 DlN of such directors, whose DIN are deactivated. Ho*euer, 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 Cons[itution of India. 10. With the above contentionsr 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 flle financial statements or annual returns for any continuous period + of three Financ al y€ars/ automatically entail their disqualif cation under Section 164(2)(a) cf the Act and the statute does not provice f:r issuance of any notice. Hence, the petitioners, who have failed to conrp y with the statutory requirernen'. under Section 164 of the Act, cannot r:omplain of vioiation of princip, es Jf natural justice, as it is a deeming pro /isic n. Learned counsel further subnlits that the petitioners have aiternai.i e remedy of appreal under S€rctiJn 2it2 of the Act, and hence writ petitlcns nay nor be entertained, 12. To c()rsi(ter the contention of the learned Asr;istant Solicitor General with regarc :o alternative remedy of appeal under Se:t on 252 of the Act, the said provision is required to be considered, an I the same is extracted as under for better appreclation: 252. App€al lo fribunal: (1) Any person aggrleved by an order of the Registrar, notiF,/lirg a company as dissolved under Section 248, may file an appeal to the Tribunel w tltir a period of three years irorn the date of the order of the Registrar and if the Tril)una is of the opinjon that the re-no/al of the name of the company from the register o'clmpanies is not justifled in vre of the absence of any of the grounds on which th3 order was passed by tl\"e :leg sr:r3r, it may order restoration of the name of the cr)n'p.,ny in the register oF com pa \"rles Prov ded :hat before passing an order under this section, the T ib.rnal sha I give a reasonaDle opportunity of making representations and of beine l-eard to tlte Registrar, th€ cor.'r!ary and all lhe persons concerned: Provded further that lf the Registrar is satisfied, that Ihe n,]rre of rhe company has been st-uck off from the register of companies either inadvertentLy or on basis of ncr)r-ecl nformation Furnished by the company or its dl-ectcrs, which requires restoratif,n r the register of companies, he may wrthir a p--roc oF th.ee years from the dl:e of passnq of the order dissolving the company urder Section 248, file an a3cl cati3n before the Tribunal seeking restoration oF ra1,]€r cf such company. (2) a cot) oF lhe order passed by the Tribunal shall b-- Filed b tTe company ,vith the P.egist.