Sri Kishan Nagori V. Union of India

WP/20433/2020

AI Insights

The case involves Sri Kishan Nagori and Smt Abhilasha Nagori, who challenged their disqualification as directors and the deactivation of their DINs by the Registrar of Companies, Telangana. The disqualification was based on their failure to file financial statements or annual returns for three consecutive years, as per Section 164(2)(a) of the Companies Act, 2013. The petitioners argued that the application of this provision was retrospective, which was not permissible under the law. The court examined the legislative intent and relevant circulars, concluding that the provision was intended to be applied prospectively and that the petitioners were not given a fair opportunity to contest the disqualification, violating principles of natural justice.

• Counselvise Citation: [2020] 140 COUNSELVISE.COM (IT) 721708 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 16-11-2020
• Assessment Year: misc
• Other Referred Cases: COMMISSIONER OF INCOME TAX (CENTRAL).I, 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 (Appointment of Directors) Rules, 2014, Constitution of India
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: NAMAVARAPU RAO
• Assessee Lawyers: K SANDEEP
• Keywords: Deactivation of DIN; Disqualification of Directors; Natural Justice; Prospective effect; Retrospective effect
• Section: 151; 226; 248; 252; 164(2)(a)

Judgement Text

"HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (S pecial Original J urisd iction) PRESENT THE HON'BLE SRI JUSTICE CHALLA KODANDA RAM WRIT PETITION NO: 20433 OF 2020 2 Sri Kishan Nagori, S/o Badri Vishal Nagori, Aged about. 45 years. R/o. D-108. Rock Levelz, 648/2 Gulmohar Avenue, Behind Reliance Digital,. Road No.12. Banjara Hills, Khairtabad, Hyderabad,Tela nga na- 500034. Smt Abhilasha Nagori, D/o Sri Binod Kumar Bharadia, Aged about 46 years, R/o D- 108, Rock Levelz, Gulmohar Avenue, behind Reliance Digital. Road No.12, BanlaraHills,Khalftabad,Hyderabad,Telangana-500034. ...pEl,,oNERS AND 1. Union of lndia, Rep.by its the l ,4inistry of Corporate Affairs. A- Wing. Shastri Bhawan. Rajendra Prasad Road. New Delhi - 1 10 001. Represented by its Secretary. 2. The Registrar of Companies, (For State of Telangana) 2nd Floor, Corporate Bhawan, GSI Post. Tattiannaram Nagole, Bandlaguda, Hyderabad - 500 068 RESPONDENTS Petltlon under Ad cle 226 of the Constitut on of lndia pray ng that rn the circun.rstances slated rn the affidavit filed therewith. the High Court nray be p eased to pass an order or drrection or any other proceedinqs one in the nature of VVrit of l 4andamr,rs declaring the action of respondents n disqualifylng the petitioners as a drrectors and deactivating the 1'r petitroner Director identification Number lDlN) 00478867 and 2nd petit oner Director ldentification Number (DlN) 01584255 by vide notification and restricting the petitioners to incorporate new companies UnCer Companies Act. 2013 as arbitrary, illegal and 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 natural justice besides violating the petitioner rights guaranteed under Article 14 and Article 19 (1) (g) of the Constitution of lnd ia 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 direct the l st Respondent to stay the disqualificatron and restore the 1't petitioner Director ldentificat on Numbe(DlN) 00478867 and 2nd petitioner Director ldentilication Number (DlN) 01584255 of the petitioners so as to enable the petrtioners to incorporate new companies under Companies Act, 201 3 Counsel for the Petitioners: SRI K. SANDEEP Counsel for Respondents: SRI NAMAVARAPU RAJESHWAR RAO ASSISTANT SOLICITOR GENERAL The Court made the following: ORDER IIIONDAY, THE SIXTEENTH DAY OF NOVEI IBER TWO THOUSAND AND TWENTY Be twee n : THE HON'BLE SRI JUSTICE CHALLA KODANDA RAM WRIT PETITION No. 20433 of 2O2O ORDER: 'l'hc p('litioncrs cl.ullengc their clisclrLrrlilication lrom I)iltL'ir.rrsl-.ip Luider SccLioir lo'i(21 ol llrt' ( t.rrrp;LIrils AL t. 2(1 13, lrrr rirc :rileged de laUlt in liii;rg l'in:rnciiil stiltcrncnt, Annuiil llctLlirrs. rnci i r..,rrseclLlcn[1 seck reslorutiorl ol the ir Djrcctt,r lclt'rttiircatiorr r-rni-rt'rs lDlNj viz..00.+783b7 and 01584255 rc'spccti '( l . i-carnetl counsel raised i.n the present common order dated lbr the pctitronefs subrnits that thc issuc Writ Petition is squarely covered by the 18.07.2019 in W.P.No.5422 o1' 2018 and Registrar of Companies does not dispute thc aforesaid batch Learncd Assistant Solicitor General appearing lor the 2nd rcspc-,ndent s r-L b rr ission ()pcrirtirc porti.)rl ol tirc aloresaid orclcr re;rcls:rs r.rncler \"For the foregoing reasons, thc impugned orders in the lvrit pctitions to the extent of disqualifying the petitioners under Scction I64{2)(a) of thc Act and dcactivation of their DlNs, are set aside, and thc 2,,d respondent is dircctcd to activat(: the DINs of thc pctitioners. enabling thenl to function as Directors other than in strike off companies. It is made clear that this order will not preclude the 2\"d respondent from taking appropriate action in accordance with law for violations as envisaged under Section 16412l of the Act, giving the said provision prospective effect from O1..O4.2O|4 and for necessary action against DIN in case of violations of Rule 11 of the Rules. 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 ale at liberty to avail alternative remedy under Scction 252 of the Ac t. All the writ pctitions are accordingly allo.rved to the extc nt indicated above,,' Irr vir:u ol Lhc said Orclcr datccl 1cg.O7.2O lrl ancl for rltt, Lhcreoi. No cosLs Miscellancous I)etittor.ls, if an,r. pencltng, shall stand closecl Sd/-B.SATYAVATHI ASSISTANT REGIST R ,TRUE COPY' SEC OFFICER To, NIBC 1. The Secretary, tVinistry of Corporate Affairs. Union of lndia, A- Wing. Shastri Bhawan. Rajendra Prasad Road. New Delhi - 110 001. 2. The Registrar of Companies, (For State of Telangana) 2nd Floor, Corporate Bhawan, GSI Post, Tattiannaram Nagole, Bandlaguda, Hyderabad - 500 068. 3. One CC to Sri K Sandeep Advocate [OPUC] 4. One CC to Sr N Raleshwar Rao, Assistant Sol citor General [OPUC] 5. T,.vo CD Copies (along with copy of common order dated 1Bl07l2A1S in WP No 5422 of 2A1B a^d batch ) 0N----- ' HIGH COURT CKR,J DATED: 1611112020 ORDER WP.No.20433 of 2020 a*- ALLOWING THE WRIT PETITION AT THE STAGE OF ADMISSION, WITHOUT COSTS kr Lo l' \"1 ; 3 I I 20 N}iy 2W0 ,t * f:Q 5^ C'n T t4 E H 1 ( o (, 1_O');) vz. } :,r: W,P,NOs,5422. 12184. 13520. 13783. 13855. 14166. 24051. 30993. AND 40953 0F 2018. 5547. 55a . s669. s687. 5785. 6047. 60a7. oo8 7 0L4 7 046 7 8586 8 9340 468 9563 9584 9623 13945 14101 L4L74 14207. t4 5(). 14351. 143qO_ 143q2. 14397 . L4409,14582 AND 1 4597 0F 20t9 COMMON ORDER Since, the issue involved in all the writ petitions is one and the same, they are heard together and are being disposed of by this common order. 2. The petitioners are the directors of the private companies, registered under the Companies Act, 2013 (18 of 2013) (for short 'the Act'). Some of the such companies are active, and some of them have been struck off from the register of companies under Section 248(1)( c ) of the Act, for not carrying on any business operation for the specified period mentioned in the said provision, and for not making any application within the specified period, for obtaining the status of a dormant company under Section 455 of the Act. 3. The petitioners, who were directors of the struck off companies, and who are presently directors of active companies, during the relevant period in question, failed to file financial statements or annual returns for a continuous period of three years. Therefore, the 2nd respondent passed the impugned order under Section 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 flve years from the date on which the respective companies failed to do so. The Director Identification Numbers (DINs) of the petitioners were also deactivated. Aggrieved by the same, the present writ petitions have been filed. THE HON'BLE SRI JUSTICE A.RAJASHEKER REDDY 7073, 7LOs, 7432, 7454, 7572, 7595, 7732, 7765, 776a, 7a24, 797A, 9726. 9737. LOOSA, tOO99. tt208, tL223. Lt239. 1t263, tt88g. lL99L, L20LA. L2036, L2040. L2069, Lzt0a. L2L44, l2t86, 12L94, 12200, L2209.12215, L22L7.12243. L2260, L2262, 122aA, 12342. 12350. 124L7. L2432, L2472. L2494. 12506. L2574, 12594. L262t, t2702. L2735. 12740. r2A45. LZASO. L2465. L2466, L30L3. t36LA, t3730, t3749, L3779. 13788. L3839. L3455. L3A7a, t39L2. 13917. 4. This court granted interim orders in the 'writ petitions directing 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 Sollcitor 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 1,64(2)(a) of the Act empowers the authority to disqualify a person to be a director, provided he has not filed financial staternents 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 irto force with effect from 1.4.2074, and prior thereto i.e., under Section 274( 1)(g) of the Companies Act, 1956 ( 1 of 1956), which is the analogoLrs provision, there was no such requirement for the directors of the prlvate 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 X.4.201,4, i.e., giving the provision retrospective effect, disqualified the petitioners as directors, which is illega I and arbitrary. B. With regard to deactivation of DINs, learned counsel for the petitioners submit that the DINs, as contemplaterl under Rule 2(d) of the Companies (Appointnirent and Qualiflcation of Directors), Rules, 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 Rules, and the said grounds does not provide for deactivation for having become ineligible for appointment as Directors of the company under Section 164 of the Act. Learned counsel further submits that as against the deactivation, no appeal is provided under the Rules, and appeal to the Tribunal under Section 252 of the Act is provided only against the dissolution of the company under Section 248 of the Act. 9, Learned counsel further submits that 1'r respondent - Government of India represented by the Ministry of Corporate Affairs, has floated a scheme dated 29.t2.2077 viz., Condonation of Delay Scheme - 2018, wherein the directors, whose DINs have been deactivated by the 2\"d respondent, allows the DINs of the Directors to be activated. However, such scheme is not applicable to the companies which are struck off under Section 248(5) of the Act, In case of active companies, they can make application to National Company Law Tribunal under Sectlon 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 lhe Constitution of India. 10, With the above contentions, learned counsel sought to set aside the impugned orders and to allow the writ petitions. 11. On the other hand learned Assistant Solicitor General submits that failure to file financial statements or annual returns for any continuous period .{ of three financial years, automatically entail their disqualification under Section 16a(2)(a) of the Acli and the statute does not provide for issuance of any notice. Hence, the petitioners, who l'rave failed to comply with the statutory requirement under Section 164 of the Act, cannot complain of violation of principles of natural justice, as it is a deeming provision. Learned counsel further submits that the petitioners have alternative remedy of appeal under Section 252 of the Act, and hence writ petltions may not be enterta ined. 12. To consider the contention of the learned Assistant Solicitor General wlth 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 Tribu nal (1) Any person aggrieved by an orderofthe Registrar, notifying a company as dissolved under Section 248, may file an appe.rl to the TribLrnal wrthin a period of three years from the date of the order of lhe Rellistrar ancl if the Tribunal is of the opinion that the removal of the name of the company from the register of companies rs not lustified in view of the absence of any of the grourds on whrch the order was passed by the Regrstiar, it may order restoratron f,f the nane of the company in the register of com pa n ies; Provlded that before passing an order under this sect on, the Tribunal shall give a reasonable opportunity of making representations and of being heard to the Registrar, the compa.ry 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 con]pany, 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, carrylng on busrness or in operation or otherwise it is lust that the name of the company be restored to the register of companres, order the name of the company to be restored to the register oF companies, and the Tribunal may, by the order, give such other dlrections and make such provisions as deemed lust for placing the company and all other persons in the same Fositon as nearly as may be as if the name of the company has not been struck oFf from the reg ster oF companies. 5 A reading of above provision goes to show that if the company is dissolved under Section 248 of the Act, any person aggrieved by the same, can file an 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. \"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 wjth 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 18 of 2OL3, came into force with effect from 07.04.2074, 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 16a(2)(a) of the Act, which provision came into force with effect from 01.O4.2074, can be made applicable with prospective effect, or has to be given retrospective operation? In other words, the issue would be, from which financial year, the defauit envisaged under Section 164(2)(a) of the Act, has to be calculated, to hold the director of the company liable? In this regard, the learned counsel brought to the notice of this Court, the General Circular No.0B/14 dated 4.4.2014 issued by the tvlinistry of Corporation affairs, which clarifies the applicability of the relevant financial years. The relevant portion of the said circular is as under: (t effect from 1'r April, 2014. PTovrsrons ,)f Schedule ll (useful lives to compute depreciation) and Schedule 1:l (:orrnat of financial statements) have also been brought into force from that date. The relevant P.ules pertainlng to these provisions have also been notified, placed on the website of the Ministry and have come into force from the same date. The 14inistry 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 applicable. Although the position in this behalf is quite clear, to make things absolutely clear it is hereby notified that the financial statements (and documents required to be attached thereto), auditors report and Board's report in respect of financlal 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 1't April, 2014, the provisions of the new Act shall a pply. \" 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 comrnenced earlier than 07.04.2014, shall be governed by the provisions under the Companies Act, 1956 and in respect of financial years commencing on or after 01.04.2014, the provisions of the new Act shall apply. 14. At this stage it is required to be noticed that the analogous provision to Section 16a(2)(a) of the Act 18 of 2013, is Section 274(7)(9) ot Act 1 of 1956. The said provision under Act 1 of 1956 is extracted as under for ready reference: Section 274(1) A person shall not be capable of being appointed director of a com pa ny, if - (g) such person is already a director of a public company which, - (A) has not filed the annual accounts and annual returns foT any continuous three financial years commencing on and after the first day of Aprll, 1999; or (B) Provided that such person shall not be eligible to be appcinted 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 ls 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 rn claLse (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 corrpany and such person is already a director of a public company, whi(:h has not filed annual accounts and annual returns for any continuous three financial years commencing on 15. Under Section 164(2) ot the new legislation i.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 flle 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 lnto force with effect from 0t.O4.20L4. 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 financlal 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 lmpermissible. 7. The Apex Court in COMMISSIONER OF INCOME TAX (CENTRAL).I, NEW DELHI v, VATIKA TOWNSHIP PRIVATE LIMITEDL has dealt with the general principles concerning retros pectiv ity. The relevant portion of the judgment is thus: 27. A legislation, be it a statutory Act or a statutory Rule or a statutory Notification, may physically consists of words printed on papers. However, ' 1:o rsy r sccr and after the first day of April 1999, shall not be eligible to be appointed as a director of any other public company for a period of five years from the date on which such public company, in which he is a director, failed to file annual accounts and annual returns. So the statutory requirement of filing annual accounts and annual returns, is placed on the directors of a 'public company'. There is no provision under the Act 1of 1956, which places similar obllgations on the dlrectors 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. ii conceptually it is a great deal more than an ordinary prose There is a special peculiarlty in the mode of verbai communication by a legislation. A legislation is not just a seres of statements, such as one finds in a work of fiction/non fiction or even in a judgment of a court of la!v. There is a technique required to draft a legislation as well as to understand a legislation. Former technique is known as egislative drafting and latter one is to be found in the varlous principles of'Interpretation of Statutes'. Vis-e-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 ls 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 adjustnrent of t. Our belief in the nature of the law is founded cn the bed rock that every human being is entitled to arrange his affairs by relyrnq on the existing law and shJUld not find that his plans have been retrospectively upset. Th s principle of aw rs known as Iex prospicit non resp cit : law looks iorward not backward. As was obs3rved in Ph ll ps vs. Eyre [(1870) LR 6 QB 1], a retrospective legislation s contrar] to the general principle that egislation by wl-rlch the conduct of mankind s to be regu ated when introduced for the frst time to deal with futLrre acts ought not to change the character of past transactions carred on upon the faith of the then existing aw. 29. The obvious basis of the principle against retrospect vily rs the principle of 'fairness', wlr ch must be the bass of every legal ru e as was observed in the decson reported in L'Off ce Cherifien des Phosphates v. Yamashlta Shinnlhon Steamslr p Co. ttd. {1994) 1 Ac 4861. Thus, legislatlons wh ch modiFied accrued rghts or which impcse obligations or impose new duties' c,r attach a new d sabilty have to be treated as prospectiv-^ unless the legislative ntent is clearly to g ve the enactment a retrospective effect; unless the legislation is for purpose of supply ng an obvious omission in a former leglslation or to explain it formeT legislation. We need not note that cornucopra of case law available on th(3 subject because aforesaid legal posltion clearly emerges from the various decisions and thls legal position was conceded by the counsel for the parties. In any ca:;e, we shall refer to few judgments containjnq this dicta, a littie later. 30. We would also like to point out, for the sake of cornpleteness, that where a benefit is conferred by a legislation, the rule against a retrospective construction is different. If a legislation confers a behefit on some persons but without inflicting a corresponding detriment on some other peTson 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 lvas held to be relevant factor to construe a statute conferring a benel'it, in the context of it to be given a retrospective operation, The same doctrine of fairness, to hold that a statute was retrospective in nature, ,^/as applied in the case of Vijay v. State of Maharasl'rtra & Ors., [(2006) 6 SCC 289]. It was hed that where a law ls enacted for the beneflt of community as a whole, even in the absence of a provision the statute may be held to be retrospective in nature. llowever, we are (src not) confronted wlth any:iuch situation here. 31. in such cases, retrospectivity is attached to benefit the persons in contradistinctron to the proviston mposing some burrien or lability where the presumption attached towards prospectivity. In the instant case, the provtso added to Section 113 ofthe Act ts not beneficial to the assessee. On the contrary, lt s a prov sion which is orerous to the assessee. Therefore, in a case like this, we have to proceed with the norma rLtle of presumptior against retrospective opera on. Thus, the rule agarnst retrospectrve operatlon is a fundamental rule of law that no statute shall be ccnstrued to have a retrospective olleration unless slch a construction appears very ciearly in the terms of the Act, or arses by necessary and distinct implication. Dogmatically framed, the ru e is no more than a presumption, and thus could be displaced by out we ghinE factors. 43. There is yet another very interestinq piece of evidence that clarifies that provision beyond an1, pale of doLrbt viz., the understandirg of CBDT itselF regardinq this provislon. It ls contained in CBDT C rcular No.B of 2002 dated 21 .B.ZOA2, wtlh the subject \"Finance Act, 2002 - Expianatory Notes on provisjon relating to Direct Taxes\". This circLllar has been issued after the passing of the Finance Act, 2002, by which amendment to section 113 was made. In this clr(tular, various amendments to the Income tax Act are discussed amply demonstrating as to which amendments are clarificatory/retrospective in operation and which amendments are prospec ve. 9 For example, Explanation to section 158-BB is stated to be clariflcatory in nature. Likewise, it is mentoned that amendments in Sectton 145 whereby provislons of that sectjon are made applicable to block assessments ts made clariftcatory and would take effect retrospectively from 1't day of July, 1995. When lt comes to amendment to Section 113 of the Act, this very clrcular provldes that the sad amendment along with the amendments in Section 158 BE, would be prospective r,e., will take effect from f .6.2OO2.\" 18. Thus, the Apex Court in the above judgment, has made it clear that unless a contrary intention appears, a legislation has to be presumed to have prospective effect. A reading of Section 164 of the Act does not show that the legislation has any intention, to make the said provision applicable to past transactions. Further, the Apex Court in the above judgment at paragraph No.43, found that the circular issued by the authority after passing of the legislation, clarifying the position with regard to applicability of the provisions, has to be construed as an important piece of evidence, as it would clarify the provision beyond any pale of doubt. In the present case, as already noted above, the l.4inistry 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 1B of 2013 i.e., new Act and in respect of financial years commencing earlier to 01.04.2014, shall be governed by Act 1 of 1956. At the cost of repetition, since in the present cases, as the 2\"d respondent / competent authority, has disqualified the petitioners as directors under Section 16a(2)(a) of the Act 18 of 2013, by considering the period prior to 07.04.2014, the same is contrary to the circular, and also contrary to the law laid down by Apex Couft in the above referred judgment. 19. If the said provision is given prospective effect, as per the circular daled 4.4.2014 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 lo 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 l0 proviso to Section 96(1) of the Act, annual general meeting for the year ending 31.03.2077, can be held within six months from the closing of financial year i.e., by 30.09.2017. Further, the time llmit 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 rvithin 270 days with additional fee as per the proviso to Section 413 of the Act. Learned counsel submit that if the said dates are calculated, the last dat.e for filing the annual returns would be 30.71.2017, and the balance sheet ,,^i as to be filed on 30.10.2017 with normal fee and with additional fee, the last date 1'or filing annual returns is 27.07.2018. In other words, the disqualification could get triggered only on or after 27.O7.2018. But the period considered by the 2n0 respondent in the present writ petitions for clothing the petitioners with disqualification, pertains prior to 07.04.2014. Therefore, when the omission, which is now pointed out, was not envisaged as a ground for disqualification prior to I.4.2074, 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 cammission of the offence\". In view of the same, the ground on which tire petitioners were disqualified, cannot stand to legal scrutiny, and the same is Iiable to be set aside. 20. A learned Sinqle Judge of the High Court of Karnataka in YASHODHARA SHROFF vs. I|NION OF INDIA2 considering Section 164(2)(a) of the Act and other provisions of the Act, and various judgments, passed an elaborate order and held that the said provision has no retrospective operation. The observations of the learned ludge, pertaining to 'w.P.No.529l I of20l7 and batch dated 12.06.2019 private companies, which are relevant for the present purpose, are extracted as under: il 208. In vrcw oF the aforesaid discussion, I have arrived at the fo owing conc us ons (a) It is held that Section 16a(2 (a) of the Act is nol ultra ylrus Article 14 of the Consttuton. The said provision is not manifestly arbitrary and also does not fall w thln the scope of the doctnne of proportionality. Neither does the sa d provision violate Article 19(1)(g) of the Constitution as rt rs made in the interest of general public and a reasonable restriction on the exercrse 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 fsic) 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-d isq ua lificatio n and this is not in violation of the principles of natural justice, is not ultra ylres Article 14 of the Constitution. (c) That Section 164(2) of the Act does not have retrospective operation and is therefore, neither unreasonable nor arbitrary, in view of the interpretation placed on the same. (d) (e) Insofar as the private companies are concerned, disqualification on account of the circumstances stated under Section 164(2)(a) of the Act has been brought rnto force for the first time under the Act and the consequences of disqualification could not have been imposed on directors of private companies by taking into consideration any period prior to 01.04.2014 for the purpose of reckoning continuous period of three financial years under the said provlsion, The said conclusion is based on the principal drawn by way ofanalogy from Artlcle 20(1) of the Constrtutron, as at no point of time pflor to the enforcement of the Act, a dsqualificaton based on the circumstances under Section 164(2) oF the Act was ever envisaged under the 1956 Act vis-a-vis directors of private companres. Such a disqualification could visit a director of only a pubiic company !nder Section 2ll(t)(9) of 1956 Act and never a director of a private company. Such disqualification of the petitioners who are d rectors of private companies rs hence quashed. (f) (g) Consequently, where the disqualification under Section 16a(2) of the Act is based on a contlnuous period of three financial years commencing from 07.04.2014, wherein financial statements or annual returns have not been filed by a public or private company, the directors of such a company stand disqualfied 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 764(2) of the Act of 2013, which had come into force with effect frcm 1.4.20L4 would have prospective, and not retrospective effect and that the defaults contemplated under Section 16a(2)(a) with regard to non-filing of financial statements or 'r Spccial ( iril . pplierrtior o.ll-1.j5 ol l0l7 and batch dal.(l 18.11.:0ls t2 annual returns for any continuous period of three l'inancial years would be the default to be counted from the financial year 2014-15 only and not 20t3-L4. 22. A learned single Judge of the High Court of lt4adras in BHAGAVAN DAS DHANANJAYA DAS vs. UNION OF INDIA4 also expressed similar view. The relevant pcrtion is as under: 29. In fine, (a) When the New Act 2013 came intc 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 7,4.2073 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 daled 4.4.20L4, the first financial year would be from 1,4.2014 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 1.4.20L6 to 37.3.7077, whereas the second respondent clearly admitted in paras 75 and 22 of the counter affidavit that the default of filing statutory returns for the final yeaTs commences from 2073-74, 20:14-15 and 2015-16 i.e, one year before the Act 2013 came int,f, force, This is the basic incurable legal infirmity that vitiates the entire impugned proceed ings. 23. In view of the above facts and circumslances and the judgments referred to supra, as the impugned orders irr present writ petitions disqualifying the petitioners as directors under Section 16a(2)(a) of the Act, have been passed consldering 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 164(2)(a) is required to be noticed, and the same is extracted as under for ready reference: 164. Disqualification for appointment of director: t w.P.r.,*o.25455 of 2017 an