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No Director of the Company Is Disqualifying Without Giving Notice: Madras High Court

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Case: Akash Ramani vs Union Of India on 26 March 2021                                                                              

Facts of the Case

A petition was filed by Akash Ramani, the petitioner against the Union of India represented as Ministry of Corporate Affairs, under Article 226 of the Indian Constitution before the Madras High Court for disqualification of the petitioner as Director and hence the petitioner sought for seconds respondent records relating to the impugned order on 13th of December, 2019 which was uploaded on the website of the first respondent and for the concern of the petitioner to quashed the same as illegal, arbitrary and also devoid of merits, therefore, the respondent should permit the petitioner by reappointing as the director of any company.

Arguments made by the Petitioner

The writ petition was filed by the petitioner challenging disqualification as the Director under section 164(2) (a) of the Companies Act, 2013 based on that for three consecutive years he has not submitted the financial statements and therefore challenged the impugned order passed on 13th of December, 2019 without giving any opportunity to the petitioner by the respondent. 

It is contended by the learned counsel Mr S. Shanmuga Velayutham for the petitioner that the impugned order which was passed earlier has violated the provisions of the Companies Act, 2013, and therefore, the said order is bad in law.

Arguments made by the Respondent

The learned Additional Central Government Standing Counsel, Mr A. Prakash from the side of the respondents said that “this writ petition was taken up for final disposal by consent of both the parties, at the time of admission itself”.

Court’s Observation

The Divisional Bench had considered the issue raised in the order passed on 9th of October, 2020 in the case Meetgelaveetil Kaitheri Muralidharan Versus Union of India & Another that neither the cancellation nor deactivation is provided for upon disqualification under Section 164(2) of Companies Act, 2013 it is pertinent to refer to Section 167(1) of Companies Act 2013 and, point out that it is not possible to file either the financial statements or the annual returns without a Director Identification Number (DIN). Consequently, the director of the Defaulting Company would be required to retain the Director Identification Number (DIN) to remove the deficiency by filing the respective documents. The impugned order passed on the 27th of October, 2020 the appeals are allowed by setting aside. Consequently, the publication of the list of disqualified directors by the Registrars of Companies (ROC) and the deactivation of the DIN of the Appellants is quashed. 

The court stated that respective directors shall be reactivated within 30 days of the date of receipt of a copy of this order. It is open to the Registrars of Companies (ROC) concerned to initiate the action regarding disqualification of the subject to an inquiry to decide the question of attribution of default to specific directors by taking into account the observations and conclusions of the case. 

Court’s Decision

The court after reference to the above case held that there was no notice given to the petitioner as Director of M/s. Graaby Tech Private Ltd, before disqualifying him and observed that the facts of the above cases matched with the instant case and therefore accordingly, the impugned order was passed on 13th of December, 2019 by the second respondent disqualifying the petitioner as Director of M/s.Graaby Tech Private Limited under Section 164(2) (a) of the Companies Act, 2013 is hereby set aside and the writ petition is allowed.

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