Sint Gitanjali Puljal V. Union of India and another

WP/19262/2020

AI Insights

The case involves Smt. Gitanjali Puljal, who challenged the disqualification imposed on her and the deactivation of her DIN by the Registrar of Companies, Telangana. The disqualification was based on alleged defaults in filing 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 was arbitrary, illegal, and violated principles of natural justice, as it was applied retrospectively. The court examined the legal provisions, relevant circulars, and precedents, ultimately finding that the retrospective application of the law was incorrect and that the petitioners were entitled to relief.

• Counselvise Citation: [2020] 140 COUNSELVISE.COM (IT) 744552 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 03-11-2020
• 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 DHANANJAIA DAS vs. UNION OF INDIA
• Laws Referred To: Companies Act, 2013, Companies (Appointment of Director) Rules, 2014, Constitution of India
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: NAMAVARAPU RAO
• Assessee Lawyers: ANGOTHU NEHRU
• Keywords: Deactivation; Director Identification Number (DIN); Disqualification; Natural Justice; Writ of Mandamus
• Section: 226; 248; 252; 164(2)(a); 16a(2)(a)

Judgement Text

"HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Spec ia I Originat J urisdiction ) TUESDAY. THE THJRD DAY OF NOVEII,]BER TWO THOUSAND AND TWENTY PRESENT THE HON'BLE SRI JUSTICE CHALLA KODANDA RAIVI WRIT PETITION NO: 19262 O F 2020 Between: AND 1. Sint Gitanjali Puljal, W/o Sri Abhilash Puljal, Aged about 44 year, Rio 8, 1'1 Floor, School Lane, Bensali lvlarket, New Delhi G.P.o. New Dethi, D€jthi-1 ,llJalliib*r* 2 Union of India , Represented by its I /linistry of Corporate Affairs, Shastri Bhawan, Dr. Rajender Prasad Road, New Delhi -1 10001 The Registrar of Companies, Telangana 2nd Floor, Corporate Bhawan, Thattiannaram, G.S.l. Post, Bandlaguda, Nagole, Hyderabad - 500068. ...RESPONDENTS Petition under Arlicle 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 proceedinqs one in the nature of Writ of Nrlandamus declaring the action of Respondents in deactivating the DIN 05183449 (Smt G tanjal Pul.lal), as arbitrary. illegal, without lurisdiction. contrary or the provrsions of the Companies Act, 2013 and Rule 11 of the Companies (Appointment of Director) Rules. 2014. violative of the principles of natural justice besides vio atrng the Petrtioner flghts guaranteed under Artlcle 14 and Article 1S (1 ) (g) of the Constitution of ln d ia. lA NO: 1 OF 2020 Petrt on under Sect on 151 CPC praying that in the circumstances stated n the affldavit filed in support of the petition, the High Court may be pleased to direct the 1st Respondent to stay the disabling and restore the DIN 05183449 so as to petitioner enable to proposed to appoint as a director in the active status company and also to appoint as a director for the purpose of incorporation of further new companies Under Companies Act. 2013. Counsel for the Petitioner : SRl. ANGOTHU NEHRU Counsel for the Respondents : SRI NAMAVARAPU RAJESHWAR RAO, ASSISTANT SOLICITOR GENERAL The Court made the following: ORDER T'HE ].ION'BLE SRI JUSTICE CHALLA KODANDA RAM II/RIT PETITION No. 19262 of 2O2O ORDEB: The petitioner chaLlenges her d isqualification fron-t Directorship under Section l6aQ) of the Companies Act, 2013, for the alleged delault in fi)ing financial statement/ Annllal Returns. and conserluenth seek restoration oI her Dire<:tor Identrficatior.r Nr:mbe r (DIN) r,i2..051834r+9. Lc:rrrrc:cl cottnscl lirr thc pctlrrorrcr sui.rt.tits thirL tlle issLrLl raiscd in thc prcsernt Writ Petition is squirrell' cor,cred br, the commc,n order dated 18.O7.2019 in W.P.No.5422 of 2a l8 arncl batch. !lri Namavarapu Rajeshrvar Rao, learned Assistar-rt Solicitor General ol India, arppeanng for the 2n(L respondent - Rcgistrar ol Companies does not dispute the aforesaid submission. Operative portior-r of t.he aforesaid order reads as under \"For the foregoing reasons, the impugned orders in the writ petitions to the extent of disqualifying tlre petitioners under Section rca?lla) of the Act and deactivation of their DINs, are sct aside, and the 2.d respondent is directed to activate the DINS of thc petitioners, enabling them to function as Directors other than in strike off companies. It is made clea! that this order rvill not preclude the 2\"c respondent from taking applopriate action in accordance rrith law fo! violations as envisaged under iSection 16412l of t.he Act, giving the said provision prospective effect from O1.O4.2O14 and fo! necessary action againlit DIN in case of violatio ns of Rule 11 of the .Rules. It is also made clear that if the petitioners are aggrie'ued by the action of the respondents in striking off their companies under Section 248 of the Act, they are at liberty to avail alternativc remcdy under Section 252 of thc Act. All the rvrit petitions are accordingiy allo!vcd to the extent indicated above. \" Irr vie u, ol thc said ()rdor dared 18.07.20l9 trrtd lirr Lhc reasons recorded therein, this Wrlt petrtion is also:rllor,r.ed in rcrms thereof. No costs. Miscellaneous Petitions, if any stand closed. SD/- I.NAGALAKSHIV]I ASSISTANT REGIS o ,TRUE COPY// SECTI N OFFICER To, CHR 1. The N/inistry of Corporate Affairs, Union of lndia and another, Shastri Bhawan, Dr. Ralender Prasad Road, New Delhi -1 10001 2. The Registrar of Companies, Telangana 2nd Floor, Corporate Bhawan, Thattiannaram. G.S.l. Post. Bandlaguda, Nagoie, Hyderabad - 500068. 3 One CC to Sri Angothu Nehru, Advocate IOPUC] 4 One CC to Sri Namavarapu Rajeshwar Rao, Assistant Solicitor General IOPUC] 5. Two CD Copies (Along rvith a copy of the order, dated 18.07 2019 in W.P. No. 5422 of 2018) , ; t HIGH COUTRT DATED:0311112020 ORDER W.P.No.1921i2 ctf 2020 ALLOWING -THE WRIT PETITION WITHOUT COTS; -..1 : i ,2 (' >- i[ I 1HE 0 5 Noy 2u0 6 '( z -i (-, W.P.NOs.5422. 121A4. 13520, t37A3, 13855. 14156, 240s1,309e3, 9 69 5647 7A 47 6 7 6140. 6484, 675 , 6858, 6958. 6981. 7001. 7008. 7OL4, 2O4SL7o6e, attl.4223.8586. 8590. 9333. 9340. 93a1. 946a. 9s53. 9sa4. e623. 9726, 9737, 100s8- 10099, LL OS-11223, 1L239, tt263, 11889, 11991, 12018, 12036, L2040, L2069, 12108, L2t44, 12186, L2194, 1))oar 1))no 1))1 1))14 1))a?, 1))6n 1))6) 1))R9, 1)?.4) 12350, t24L7, L2432, 12472, 12494. 12506. L2574. 1259a. t2621. 1)'rf|, 1)aa.E 1r-rdn 1re4 12850 12865 t2aAA ?nl 2 1?al a 1 L3730. t3749, t3779. L37A8, 13A39,13A55, L3878. L39t2. 139L7. L3945.14101, 1 4174. 14207.14350. L4361, 1439o. 14392, 14397, s 4409 1 5 4 70F2 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 companles/ 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 offfromtheregisterofcompanlesundersection24B(1)(c)oftheAct'for not carrying on any business operation for the specifled 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 compantes' 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 16a(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 Identification Numbers (DINs) comPanies fa iled to do of the Petition ers weTe so. The Dlrecto r also deactivated ' Aggrieved by the same' the present writ petitions have been filed' THE HON'BLE SRI JUSTICE A.RAJASHEKER REDDY 7073, 7705, 7432. 7454. 7572.7595.7732, 7765.776A. 7A24.797A. 4. Thi:; court granted interim orders in the Writ petitions directing the 2nd respondent to activate DINs of the petitioners, to enabre them to function other than in strike off companies' 5'Heardthelearnedcounselappearingforthepetitionersinallthe writ petitions,' Sri K,Lakshman, learned Assistant Solicitor General appearing for the respondents - Union of India' 6. Learned counsel for the petitioners, contend that before passing the impugned order, notices have not been issued' giving them 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 16a(2)(a) of the Act empowers th(: authority to dlsqualify a person to be a director, provided he has not filed l'lnancial statements or annual returns oF the company to which he is director, for any continuous period of three financial years Learned counsel furthr:r submits that this provision came into force with effect from 1.4.2014, and prior thereto i.e., under Section 27aG)G) of the Companies Act, 1956 (1 of 1956), which is the analogous provision, there was no such requirement for the directors of the f)rivate companies. They contend that this provision under Act 1B of 2013, will have prospective operation and hence, if the directors of company fail to comply with the requirements mentioned ln the said provision subsequent to the said date, the authority under the Act, is within its jurisdiction to disqualify them. But in the present cases, the 2nd respondent, taking the period prior to 7.4.2074, i.e., giving the provision retrr)spective effect, disqualified the petitioners as directors, which is illegal and a rbitrary. 8. With regard to deactlvation of DINs, learned counsel for the petitioners submit that the DINs, as contemplated Lrnder Rule 2(d) of the Companles (l ppointment and Qualification of Directors), Rules, 2Ol4 (for short 'the Rures), are granted for life time to the appricants under Ruie 10(6) of the said Ru/es, and cance//ation of the DIN can be made onty 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 inerigibre for appointment as Directors of the company under section 164 of the Act. Learned counsel further submits that as against the deactivation, no appeal is provided under the Rules, and appeal to the Tribunal under Section 252 of the Act is provided only against the dissolution of the company under Section 248 of the Act. 9. Learned counsel further submits that 1't respondent - Government of India represented by the Mlnistry of Corporate Affairs, has floated a scheme dated 29.12.2017 viz., Condonation of Delay Scheme ' 2ola, wherein the directors, whose DINs have been deactivated by the 2\"d respondent, allows the DINS of the Directors to be activated. However, such scheme is not applicable to the companies which are struck off under Section 248(5) of the Act. In case of active companies' they can make application to National Company Law Tribunal under Section 252 of the Act' seeking for restoration, and the Tribunal can order for reactivatlon of DIN of such directors, whose DIN are deactivated' However' under Section 252 only the companles, 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 the jurisdiction of thls court under Article 226 of the Constitution of invo ke India. 10. With the above contentions' learned counsel sought to set aside the impugned orders and to allow the writ petitions' 11. On the other hand learned Assistant Solicitor General submits that failure to file financial statements or annual returns for any continuous period .+ of three financial Yea rs ' Section 164(2)(a) of the Act and any notice, tlence, the petitioners' who statutory requirenlent under Section 164 counsel appeal automatically entail their dlsqualification under the statute does not provide for issuance of have failed to comPlY wlth the of the Act, cannot comPlain of violation of prlnciples of natural justice' as it is a deeming provlslon Learned further submits that the petitioners have alternatlve under Section 252 of the Act, and hence writ petitions remedY of may not be entertained. 12. To consider the contention of the learned Asslstant Solicitor General with regard to alternative remedy of appeal under Section 252 of the Act, the saic 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 dissoived under Section )+8, may file an appeal to the Tribunal within a period of if,r\"\" y\"ur. 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 tle Registrar, it may order restoration of the name of the company in the register of compa nies; Provided that before passing an order under this sectlon, the Tribunal shall give a reasonable opportunity of making representations and of being heard to the Reglstrar, the conrpany and all the persons concerned: Provided further that if the Registrar is satisfied, that the name oF the company h.s been struck off from the register of companies either rnadvertenfly or on basis of incorrect informatron furnished by the company or its directors, whlch requires restoration rn the register of cornpanies, he may within a period of three years From the date of passing of the order dissolving the company under Section 249, file an application before the Tribunal seeking restoration of name of such com pany. (2) A copy of the order passed by the Tribunal shall be filed by the company with the Re{listrar within thirty days frorrr the date of the order and on receipt of the order, the llegistrar shall cause the name of the company to be restored in the reqister of companies and shall issue a fresl] certificate of incorporation. (3) If a company, or any member or creditor or worker thereof feels aggrieved lly 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 publicataon in the Official Gazette of the notice under sub-section (5) of Section 248, if satisfied that the company was, at the time of its name being struck off, carrying on business or in operation or otherwise it is just that the name of the company be restored to the register of companies, order the name of the company to be restored to the register of companies, and the Tribunal may, by the order, give such other directions and make such provislons as deemed just for placing the company and all other persons in the sam€ position as nearly as may be as if the name of the company has not been struck off from the register of companies. 5 A reading of above provision goes to show that if the company is dissolved under Section 24g of the Act, any person aggrieved by the same, can fite an appeal' Thus the said provision provides the forum for redressar against rhe 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 thejr 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 alternatrve remedy for seeking that rerief, and the contention of the rearned Assistant Solicitor General, in this regard, merits for reJection. 13. Under Section rcae)e) of the Act, if the Director of a company fails to fire financiar statements or annuar 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 fairs to do so. The said provision under the Act 18 of 2013, came into force with effect from 01.o4.2074, and the petitioners are disqualified as directors under the said provision. At this stage, the issue that arises for consideration is - whether the disqualificatlon envisaged under Section 16a(2)(a) of the Act, which provision came into force with effect from Ol.O4.2Ol4, 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 16+(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 4.4.2074 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 (r effect from l't April, 2014. --Provisions of schedule 11-!'i:lt\" Iives to compute .reoreciatiorr) ancl schedure \"' ii;;;;; Ji tinunciur tt\"::T:gt)\" i;J=\"\" l:.X nii ni{:; : I I ri:r*:rin I[l j *'\";\" ll: ,;:\"\"'1s 5i ii'\"'fi [ii['\" ;; i u\"' \" io^. \" \".\" force from the same date The Ministry has received requests for clarificatron with 'reqard to the relevant frnancral years with effect tr.orn\"i'niin J\"n \"pr.ouit'ont of the- new Act relating to marntenance of books o' utto'ni''\"0'\"pJ'aIon' aooption, and filinq of ftnancral sratements (and attachments it*tJti ' \"l'O'tors report and Board's report will be applicable Arthouqh Ihe L osrt on 'n thrs behalf rs (]uite clear' to make thinos absoluterY clear iI s hereb] ,ot,tred thal ,n\" nl\" \"i'\"iiilietents (ano docurreits required to be attachedtheretol,auditors-p\"\"\"\"OBoard'srepottinrespectoffinancialyears that comrrrencecl earlier than\" f'l npril shall be. ^governed by the relevant provisions/5chedtrles/rules of tn\"'Corniun'\"t Act' 1956 and that ln respect of frnancral ve,lrs commencrng o\" oiuri\"r. ii Aptil ' 20!4' the provrsions of the new Act shall apPlY.' A reading of the above circular makes it clear the financial statements and the documenl.s required to be attached thereto, auditors report and Board's report in respect of financial years that commenced earlier than 0L'04'2014' shall be governed by the provisions under the Companies Act' 1956 and in respect of financial years commencing on or after 0t'O4'2014, the provisions of the new Act shall aPPlY. L4. At this stage it is required to be noticed that the analogous provision to S;ection 16a(2)(a) of the Act 18 of 2013, is Section 27aQ,)@) ot Act 1 of 1956. The said provision under Act 1 of 1956 is extracted as under for ready reference: Section 274(!) A person shall not be capable of lleing appointed director of a company, if - (g) such person ls already a director of a public company which, - (A) has not filed the annual accounts and annual returns for any continuous three financial yeaTS 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 suclr pubiic 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 1 15. Under Section 76a(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 07.04.20t4. 16. Coming to the facts on hand, the 2\"0 respondent has disqualified the petitioners under Section 164(2)(a) of the Act 18 of 2013, for not filing financial statements or annual returns, for period prior to 01.04.2014. The action of the 2''d respondent runs contrary to the circular issued by the Ministry of the Corporate Affairs, and he has given the provisions of Act 1B of 2013, retrospective effect, which is impermissible. lf . The Apex Court in COMMISSIONER OF INCOME TAx (CENTRAL)-L NEW DELHI v. VATIKA TOWNSHIP PRIVATE LIMITEDL has dealt with the general principles concerning retrospectivity. 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, '1:ots1t scc t 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 djrector, 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. S 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-i-vis ordinary prose, a legislation differs in its provenance, lay-out and feature:; 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 isi 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 i:orce and not tomorrow's backward adlustment of it. Our belief in the nature of the law is founded on the bed rock that every hurnan being is entrtled to arrange his ar'farrs by relying on the existing law and should not find that his plans trave been retros[)ectrvely upset. Thrs pri]rcrple oF law is known as lex prospicit non respcit: law looks forward not backward. As was observed in Phillrps vs. Eyre [(1870) LR 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 tlme to deal with future acts ought not to change the character of past transactions carried on upon the farth of the then existing law. 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 beneflt 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 grven a retrospe,:tive 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 Maharashtr.r & Ors., [(2006) 6 SCC 289], It was held that where a law is enacted for the beneFrt ol' community as a whole, even in the absence of a provrsion the statute mav be held to be retrospective in nature. However, we are (sic not) confronted wrih ary such situatron here. 31. in s;uch cases, retrospectivity is attached to benefit the persons rn contradistrn,:tLon to the provision imposing some burden or liability where the presumption atta{:hed 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 whi(:h is onerous to the assessee. Therefore, in a case like thls, 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 coLrld be displaced by out weighing factors. 43. There is yet another very interesting piece of evtdence that clarifies that provision b€,yond any pale of doubt viz., the understanding of CBDT itself regarding this provisicn. It is contained in CBDT Circular No,B of 2OO2 dated 27.8.2002, with the subject \"f:inance 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 Incorne tax Act are discussed amply demonstrating as to which amendments are cla rifica tory/ retrospective jn operation and which amendments are prospective. 29. The obvior.rs basis of the princip e against retrospectivity is the principle of 'fairness', y/hich must be the basis of every legal rule as was observed in the decrsion reDorted in L'Office Cherifien des Phosphates v. Yamashita-Shinnihon Steamship (:o. Ltd. [{1994) 1Ac 486]. Thus, legislations which modified accrued rghts or whr(h irrpose obliqations or impose new duties or attach a new disabilily have to be treated as prospective unless the legislatlve intent is clearLy to give the enactment ii retrospective effect; unless the legislation is for purpose of supplying an obvious ornission 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 contair'ring this dicta, a Iittle later. 9 For example, Explanat,on tn c, -L,kew,se. ,,-i, .\"';;;:;:; l;\":\":l\"i r5B-BB ,s srareo ro be c r,,d! secrron are mdde urrl,.\" iT:ndl\"n,. \" i\".u\"\"'\",ii Llanlcatorv in ralurc would rake etfe* .errosoecri,3l1 .13-0191* \"31;\"::;;;ir':r' xher ebv prov;srons of dmendrnenr to section r13 nr,rL.rom r'day o, ,,,u,-rdni'uo\" cla,frcdtorv dno drnenonenr arons w,rh ,n\" \"-^:1.*1f1. 1n\" \"\".v .lll;,;l?\",Yi,\"ini,tl#\"1\"1! r.e., w,r take.rr\"it i.o, l,;.;;bTgt\"\",t in sectron IsB-Br, wo,,id oe prospccr!e 18. Thus, the Apex Court in the above judgment, has made it clear that unless a contrary jntention appears, a legislation has to be presumed to have prospective effect. A reading of section 164 0f the Act does not show that the legisration has any intention, to make the said provision appricabre to past transactions. Further, the Apex Court in the above judgment at paragraph No.43, found that the circurar issued by the authority after passing of the Iegislation. 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 Ministry 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 1B of 20f3 i.e., new Act and in respect of financial years commencing earlier to 01.04.2014, shall be governed by Act 1 of 1956. At the cost of repetition, since in the present cases, as the 2\"d respondent / competent authority, has disqualified the petitioners as directors under Section 16a(2)(a) of the Act 1B of 2013, by considering the period prior to 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 judg ment. 19. If the said provision is given prospective effect, as per the circular daled 4.4.2074 and the law laid down by the Apex Court, as stated in the writ affidavlts, the first financial year would be from 07-04-2074 to 31.03.2015 and the second and third years financlal 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 I () proviso to Serctiorr 96(1) of the Act' annual general meeting for the year ending 31.03. 2017, 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$) of the Act, ls 60 days from annual general meeting, or the last date on which annual general meeting ought to have been held with normal fee, and within 270 days with additional fee as per the proviso to Section 403 of the Act. Learned counsel submit that if the said dates are calculated, the last date for filing the annual returns would be 30.ll.2OL7, and the balance sheet was to be filed on 30'10'2017 with normal fee anc with additional fee, the last date for filing annual returns is 27.O7.2OlA. In other words, the disqualification could get triggered only on or after 27.O1'.201\"8. But the period considered by the 2\"d respondent in the present writ petitions for clothing the petitioners with disqualification, pertains prior to 07.O4.2014. Therefore, when the omisslon, which is now pointed out, was not envisaged as a ground for disqualification prior to 1.4.2014, 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 lavr 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. I, learned Single Judge of the High Court of Karnataka in YASHODHAFI.A :;HROFF vs. UNION OF INDIA2 considering Section 164(:l)(a) of the Act and other provisions of the Act, and various judgments, passecl an elaborate order and held that the said provision has no retrospective operation. The observations of the learned Judge, pertaining to - W.P No.529l I of 201? and batch dated 12.06.2019 private companies, which are relevant for the present purpose, are extracted as under: r Spccial Civil Applicalion No 22'115 ol 20l7 and batch claled l l( 1 2 l0 l s 208. In vieW of the aforesajd discussion, I have arrived at the fotiowing conclusions: (a) It is held that Section 164(2)(a) of the Act is not uttra virus Article 14 oF the constitution. rne saio orov,sron t ,\"i ,\"\",i\"rtrv;r;'#, and atso does not fall within the scope of the doctrine- of proportionality. Nelther does the sard provisron violate Articte 19(1)(q) of the constitution;;;li, ;;;;;; the interest of senerat public and a reasonable restriction on tne exeicise Jf-ifre saiO right. The object and purpose of the said -provision i. to .i,prfut\" the consequence of a disqualification on account of ihe circumstani\"r riui\"a* tn\"r\",n and the same is in order to achieve probity, accountability, unJ trunapur\"n.y in corporate governance, (b) That Article (s/c) section 164(2) of the Act appries by operation of raw on the basis of the circumstances stated _therein, the said prouision does not envisage any hearing, neither pre-disquarification nor post-dlsquarification and this is not in violation of the principles of natural justice, is nol ultra vlres Article 14 0f the Constitution. (c) That Section f64{2) of the Act does not have retrospective operation and is therefore, neither unreasonable nor arbitrary, in view of the jnterpretation placed on the sa me. (d) . . . (e) Insofar as the private companies are concerned, disqualifrca!on 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 disqualificatron 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 sard provrsion. 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 drsquaiification based on the circumstances under Section 164(2) of the Act was ever envisaged under the 1956 Act vis-;-vis directors of private compan es. Such a drsqLralrficatron could visit a director of only a publlc company under Sectron 274(1)(g) of 1956 Act and never a director of a private company. Such disqualification of the petitioners who are directors of prlvate compantes is hence quashed. (f)... (g) Consequently, where the disqualification under Section 16a(2) of the Act is based on a continuous period of three financial yeaTs 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 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 High Court of Karnataka (1 supra), and held that Section $aQ) of the Act of 2013, which had come into force with effect from 14 2014 would have prospective, and not retrospective effect and that the defaults contemplated under Section 16+(2)(a) with regard to non-filing of financial statements or iI ll annual returns for any continuous period of three financial years would be the default t,: be counted from the flnancial year 2014-15 only and not 2013-74. 22. A learnr:d single ludge of thLe High Court of Madras in BHAGAVAN DAS DHANANJAIA DAS vs. /JNION OF INDIA4 also expressed similar 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 1.1,2016 itself before the deadline commenced wrongly fixing the first financial year from I.4,2013 to 31,3 2014. (b) By virtue of the new Section 164(Z)(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 orarn General circular No.08/14 dated 4.4.2014, the first financlal year would be from 1.4.2074 to 31.3.2015, the second financial year would be from 1.4.2015 to 31.3.2016 and the third financial year would be from 7.4.2076 to 31.3.2017, whereas the second re;pondent clearly admitted in paras 15 and 22 of the counter afl'idavit that the default of filing statutory returns for the final years commences from 20L3-14, 2Ol4-15 and 2015-16 i.e, one year before the Act 2013 came into force. This is the basic rncurable legal infirmity that vitiates the entire impugned proceedings, 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 rcae)e) of the Act, have been passed considering the period prior to 07.04.2014, the same cannot be sustained, and are liable to be set aside to that extent. 24. As far as the contention regarding jssuance of prior notice before disqualifying ttre petitioners as direct,lrs is concerned, Section 164(2)(a) is required to l)€r noticed, and the sarne is extracted as under for ready refe ren ce: 16.4. Disqua lification for appointment of director: t tV.P.No.l54.55 ol 20lT urrd barch datcd 2i.t)7.201E l.l (2) No person who is or has been a dlrector oF a company which_ *,-,* \"lil,lX'r#:':Tr::il? statements or annuar returns ror anv continuous (b).. . Shall be eligible to be re_appointed as a director of that company or :i'.\"::ftJlr\"lffi;\"Ti:31\"' ror a period or rive vears riorir ,i\" du,\" on *'ni.r, ti,\" 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 fired financiar statements or annuar returns for any continuous period of three financiar years, sha, be rnerigibre to be re- appointed as a director of that company or appolnted in any other company for a period of five years from the date on which the said company fairs 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, Unlon 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 Sectlon 164(2)(a) of the Act applies by operatlon of law on the basis of the circumstances stated therein, the said provision does not envisage any hearing, neither pre-d isq u a lification nor post-d isq ua lificatio n and this is not in violatlon of the principles of natural justice and hence, is not ultra vires Article 14 of the Constitution. I concur with the said reasoning. 25. Thus, from the above, it is clear that Section 16a(2)(a) of the Act is a deeming provision and the disqualification envlsaged under the said provision comes into 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 16a(2)(a) of the Act. 26. The ne:(t grievance of the petitioners is with regard to deactivation of their DINs. The contentlon of the learned counsel for the petitioners is that except for the grounds mentioned under Rule 11' (a) to (f) of the Rules' the DINs carnot be cancelled or deactivated' and the violatlon mentioned under Section 16a(2)(a) of the Act, ls not one of the grounds mentloned under clauses (a) to (f) of Rule 11, and hence for the alleged violation under Section 16a(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 cancellaUon 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 Centra GovernmenL or Regional Director (Northern Region), Noida or any officer authorized by the Req onal Director may, upon being satisfied on verification of particulars or documentary proef attached with the applicat on rece ved from any person, cancel or deactivate the DIN in case - -+ tl're DIN rs found to be duplicated in respect ofthe same person provided the dara related to both the DIN shall be merged with the va ld y retained number; the DII \"./as obtalned in a wrcnqful manneT oT by fraudulent means; of the death of the concerned ind vidual; the corcerned lndividual has br:en declared as a person of unsound mind by a com petent Court; i: the concerned individual has been adjud cated an insolvent; Provided that before cancellaton or cleactrvation of DIN pursuant to clause (b), an opportunity of being heard shall be given to the concerned indivldual; 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 ancl the said DIN has never been used for filing of any document with any authori:y, the Central Government may deactivate such DIN; Pro /ided that before deactivatjon of any DIN in such case, the Central Government shall verify e-records. Explanation; for the purposes of clause (b) - ]'he terms \"wrongful manner\" means if the DIN is obtained on the strength of documents which are not ,egally valid or incomplete documents are furnished or on suppression of material information or on the basis of wrong certification or by making mis eading or false information or by misrepresentation; (ii) the term \"f-audulent means\" means if the DIN is obtained with an ntent tc, deceive any other person or any authority including the C3ntral Govern me nt. 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 (a) ( b) (c) ( cr) (e) (f) (i) l5 Section 164(2)(a) of the Act. Therefore, for the alleged violation under Section 764 of the Act, DINs cannot be cancelled or deactivated, except in accordance with Rule 11 of the Rules. 29. Learned Single Judge of the Gujarat High Court in the decision cited 2 supra, held as under: \"29. This takes the Court to the next question as to whether the respondents could have deactivated the DINS of the petitloner as a consequence of the impugned list? In this regard, it would be appropriate to refer to the relevant provisions contained in the Act and the said Rules. Section 153(3) provides that no person shall be appointed as a Director of a company, unless he has been allotted the Director Identification Number under Section 154. Section 153 requires every individual intending to be appointed as Director of a Company to make an application for allotment of DIN to the Central Government in such form and manner as may be prescnbed. Section 154 states that the Centra Government shall withln one month from the receipt of the application under Sectron 153 allot a DIN to an appllcant rn such manner as may be prescribed. Section 155 prohibits any individual, who has already been allotted a DIN under Section 154 from applyrng for or obtarn ng or possessrng another DIN. Rules 9 and 10 of the said Rules of 2014 prescr be the procedure for making application for allotment and for the allotment of DIN, and further provide that the DIN allotted by the Central Government under the said Rules would be valid for the life trme of the applicant and shall not be allotted to any other person. 30, Rule 11 provides for cancellation or surrender or deactivation of DlN. Accordingly, the Central Government or Regional Director or any authorized officer of Regional Director may, on beinq satisfied on verification of particulars of documentary proof attached with an application from any person, cancel or deactivate the DIN on any of the grounds mentioned in Clause (a) to (f) thereof. The said Rule 11 does not contemplate any suo motu powers either with the Central Government or with the authorized officer or Reqional Director to cancel or deactivate the DIN allotted to the Director, nor any of the clauses mentioned in the said Rules contemplates cancellation or deactivation of DIN of the Director of the \"struck off company\" or of the Director having become ineligible under Section 164 of the said Act. The reason appears to be that once an individual, who is intending to be the Director of a particular company is allotted DIN by the Central Government, such DIN would be valid for the life time of the applicant and on the basis of such DIN he could become Director in other companies also. Hence, if one of the companies in which he was Director, is \"struck off\", his DIN could not be cancelled or deactivated as that would run counter to the provisions contained in the Rule 11, which specifically provides for the circumstances under which the DIN could be ca ncelJed or deactivated. 31. In that view of the matter, the Court is of the opinion that the actron of the respondents in deactivating the DINS of the petitioners - Directors along with the pubiication of the impugned list of Directors of \"struck off\" companies under Section 248, also was not legally tenable. Of course, as per Rule 12 of the said Rules, the individual who has been allotted the DIN, in the event of any change in his particulars stated in Form DIR -3 has to intimate such change to the Central Government within the prescrbed time in Form DIR-6, however, if that rs not done, the DIN could not be cancelled or deactivated. The cancellation or deactivatron of the DIN could be resorted to by the concerned respondents only as per the provrsions contained in the said Rules.\" 30. In vlew of the above facts and circumstances and the judgment referred to supra, the deactivation of the DINs of the petitioners for alleged violations under Section 164 of the Act, cannot be sustained. l6 31. For the foregoing reasons, the impugned orders in the writ petitions to the extent of disqualifying the petitioners under Section 16a(2)(a) of the Act and deactivation of their DINs, are set aside, and the 2\": respondent is directed to activate the DINS of the petitioners, enabling then-r to fr-rnction as Directors; other than in strike off companies. 32. It is made clear that this order will not preclude the 2\"d respondent from taking appropriate action in accordance with Iaw for violations as envisaged under Section l6aQ) of the Act, giving the said provision prospective effect from 07.O4.2OL4 and for necessary action against DIN in case of violations of Rule 11 of the Rules. 33. It is also made clear that if the petitioners are aggrieved by the action of the respondents in striking off their companies under Section 248 of the Act, they are at liberty to avail alternative remedy under Section 252 of the Act. 34. A.ll the writ petitlons are accordingly allowed to the extent ind icated a bove 35. Inl:erlocutory applications trending, lf any, shall stand closed. No order as to cosl.s. A,RAJASHEKER REDDY,J DATE:18-07-2019 AVS "