WP/24373/2020 of Kamal Chander Agarwal Vs Union of India on 30 December 2020

ORDER:

The petitioners [challenge ][their ][disqualification ][from]Directorship [under ][Section ][164(2 ][of ][the ][Companies ][Act' ][2013']1nfinancialstatement/ [annual]for the alleged [default]liling Returns, andconsequentlY,seek restorationof their [Director]IdentificationNumber [(DIN)]0286 161 L [and ][030 ][134 ][17]respectivelY.

submits that [the ][issue]Learrled counsel [for the ][petitioners]raised in the [present ][Writ ][Petition ][is ][squarely ][covered ][by ][the]common order [dated lB ][OT ]['2}lg ][in ][W P'No ][5422 ][ol ][2OlB ][and]batch.

Learned [Standing counsel ][for the ][2nd ][respondent-Registrar]of Companies [does ][not dispute ][the aforesaid ][submission']

Operative [portion ][of the ][a-foresaid ][order reads ][as ][under"]

"For [the ][foregoing ][reasons' ][the ][impugned ][orders]in the writ [petitions ][to ][the ][extent ][of ][disqualifying ][the]under [Section ][16412ll^l ][of the ][Act ][and ][the]petitioners deactivation of [their ][DINS, ][are ][set ][aside' ][and ][the ][2"d]respondent [is ][directed ][to ][activate ][the ][DINs ][of ][the]petitioners, [enabling ][them ][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 ][o1'04'2014 ][and ][for ][necessary]action against [DIN ][in ][case ][of violations ][of ][Rule ][11 of]the Ru1es.

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, theyare at liberty to arrail alternative remedy under Section252 of the Act.

All the writ petitions ate accordingly allowed tothe extent indicated above."

In view of the said order dated lB.OT.2Olg and for thereasons recorded therein, thls Writ petition is also allowed interms thereof. No costs.

Miscellaneous Petitions, if any stand closed.

SD/.B.SATYAVATASSISTANTGIR//TRUE COPY//SECTION OFFICER

SECTION OFFICERTo,'I . The Principal Secretary, .tt/inistry of c-orporate Affairs, Union of lndia, srh floor, AWingA Sashtry B.havan'Dr. nrtu'nora pl.jri j"'n,jjii, r.i"* Dethi - ,l 10ootz. ^ rne Kegrstrar Kegrstrar ot Com.anies, Telangana, 2no Com.anies, Telangana, 2no Telangana, 2no 2no Floor, Corporate gnawln, 'OSf post, rne Kegrstrar Kegrstrar ot Com.anies, Telangana, 2no Com.anies, Telangana, 2no Telangana, 2no 2no Floor, Corporate '. [[Tattiannaram ][l\agole. ]][[l\agole. ]][[BandlaguOa, ]][["HyOdranaO ]]--SOO-OOb, 'feli.qr;;: [[["' ]]]

. [[Tattiannaram ][l\agole. ]][[l\agole. ]][[BandlaguOa, ]][["HyOdranaO ]]--SOO-OOb, '9 9nu 99 9nu 99 99 [[to ][Sri ][Jai,surya ][visnn"u ]][[Sri ][Jai,surya ][visnn"u ]][[Jai,surya ][visnn"u ]][[visnn"u ]][[Viiorian ]]A;;;.ri;ib;,tii [[["' ]]]4 one cc to Sri cc to Sri to Sri Sri Namairarapu . 9 9nu 99 9nu 99 99 [[to ][Sri ][Jai,surya ][visnn"u ]][[Sri ][Jai,surya ][visnn"u ]][[Jai,surya ][visnn"u ]][[visnn"u ]][[Viiorian ]]A;;;.ri;ib;,tii [[["' ]]]4 one cc to Sri cc to Sri to Sri Sri Namairarapu na;estrwai Rao l;;i#;i so'iilitor Generar (opuc)5. Two CD Copies.ffo.ry [wllf ][a ][Copy ][of the ][Common Order ][dated ]18.Ot.2}jg in W.p.No.5422 of2018 and batch IVP

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HIGH COURTDATED:3011212020

ORDERWP.No.24373 of 20201tlesTA rcieor.)0 6 [JAN ][2021]**i.'s ALLOWING THE WRIT PETITIONWITHOUT COSTS

THE HON'BLE SRI JUSTICE A.RA]ASHEKER REDDY

Conclusion

W.P.NOs.5422. 12184, 13520. 13783, 13855, 14166, 24051. 30993,AND 409s3 0F 2018. ss47. 5s82.5669. s687. s785. 6047.6087.6L40. 64A4, 6753. 6AsA. 69s4. 69AL 7001,7004.70L4,7046.7069.7073, 7LOs. 7432. 7454. 7572. 7595, 7732, 7765. 7764, 7424, 7974.a111. 8223. a586. 8590. 9333. 9340. 9381, 9468. 9563. 95a4. 9623.9726.9737. 10054. 70099. Lr20a, L1223. LL239. L1263. LLaA9.LL99L. L20L8. L2036. L2040. L2069. L2LO8. 12144. 12L86. 12L94.L2200. L2209. L22L5. L22L7.12243. L2260. L2262. 12244. L2342.L2350. 124t7. L2432, L2472. L2494. L2506. 12574. 12594. L262t,L2702. t2735. L274(). L2845. L2850. L2865, 12A66. !30L3. L36lA,L3730. L3749, L3779. L37AA. 13a39. L3855, 13a78. t39L2. L3917,t3945. L IOL. L4174. L4207. L4350. L436L. t4390. L4392, L4397.L4409, 14542 AN14597 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(l)( ][c ]) [of the ][Act, for]not carrying on any business [operation ][for the ][specified ][period ][mentioned ][in]the said [provision, ]and [for not ][making ][any ][application ][within ][the ][specified]period, for obtaining the status of a [dormant ][company ][under ][Section ][455 of]the Act.

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 ][76aQ) ][of ][the Act, ][disqualifying ][them ][as]directors, and further [making ][them ][ineligible ][to ][be ][re-appointed ][as directors]of that company, or any [other ][company, ][for ][a ][period ][of five ][years ][from ][the]date on which the respective [companies ][failed ][to ][do ][so. ][The ][Director]Identification Numbers [(DINs) ]of [the ][petitioners ][were also ][deactivated.]Aggrieved by the same, the [present ][writ ][petitions ][have ][been ][filed.]

4. This court granted interim orders in [the ][writ ][petitions directing ][the]2n'r respondent tc, activate DINS of the [petitioners, ][to ][enable ][them to ][function]other than in strilce off companies.

5. Heard the learned counsel appearing [for the ][petitioners ][in ][all ][the]writ petitions, Sri K.Lakshman, learned Assistant Solicitor [General ][appearing]for the respondents - Union of lndia.

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 thisground alone, the impugned orders are liable to be set aside,

7. Learned counsel submits that Section rcaQ)@) of the Acternpowers the authority to disqualify a [person ]to be a director, [provided ]hehas not filed finarrcial statements or annual returns of the company to whichhe is director, for any continuous period of three financial years. t-earnedcounsel further submits that this [provision ]came into force with effect from!.tt.2014, and prior thereto i.e., under Section 27 4(t)(g) of the CompaniesAct, 1956 (1 of 1956), which is the analogous [provision, ]there was no suchrequirement for the directors of the private companies. They contend thatthis provision under Act 1.8 of 2013, will have [prospective ]operation [and]hence, if the directors of company fail to comply with the requirementsmentioned 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 1,4.20L4, [i.e', ][giving the]provision retrospective effect, disqualified the petitioners as directors, whichis illegal and a rbitra ry.

8. With regard to deactivation oF DINs, learned counsel [for ][the]petitioners submit that the DINs, as contemplated under Rule 2(d) of theCompanies (Appointment and Qualification of Directors), [Rules, ][2Ol4 ][(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 thegrounds mentioned in clauses (a) to (f) under Rule 11 of the Rules, and thesaid grounds does not provide for deactivation for having become ineligiblefor appointment as Directors of the company under Section 154 of the Act.Learned counsel further submits that as against the deactivation, no appealis provided under the Rules, and appeal to the Tribunal under Section 252 ofthe Act is provided only against the dissolution of the company underSection 248 of the Act.

9. Learned counsel further submits that 1't 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 ][2nd]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 ][reactivation ][of ][DIN of]such directors, whose DIN are [deactivated. ][However, under Section ][252 ][only]the companies, which are [carrying ][on ][the ][business, ][can ][approach ][the]Tribunal and the companies, [which have ][no ][business, ][cannot ][approach the]Tribunal for restoration. [They submit ][that ][since ][the ][penal provision ][is ][given]retrospective operation, de [hors ][the ][above ][scheme, ][they are ][entitled ][to]invoke the [jurisdiction of ][this ][court ][under Article ][226 ][of the ][constitution ][of]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 ][d ][isq ua ][lification ][under]Section 164(2)(a) of the Act and the [statute ][does ][not ][provide ][for ][issuance ][of]any notice. Hence, the [petitioners, ][who ][have ][failed ][to ][comply ][with ][the]statutory requirement under Section [164 ]of [the Act, ][cannot ][complain of]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 ][petitions ][may ][not ][be]entertained.

t2. To consider the contention of the learned Assistant [Solicitor]General with regard to alternative remedy of appeal under Section [252 of the]Act, the said provision is required to be considered, and the [same ][is]extracted as under for better appreciation:

252. App€al to Tribunal:

(1) Any person aggrieved by an order of the Registrar, notifying a companyas dissolved under Section 248, ['Tl,ay ]file an appeal to the [Tribunal ][within ][a ][period ][of]three [years ]from the date of the order of the [Registrar ][and ][if ][the Tribunal is ][of ][the]opinion that the removal of the name of the company [from ][the ][register of ][companies]is not [justified ]in view of the absence of any of the [grounds ][on which ][the ][order ][was]passed by the Registrar, it rnay order restoration of the name of the company in thereg ister of companies; Providecl that before [passing ]an order under this section, [the ][Tribunal ][shall]give a reasonable opportunity of making representations and of being heard to theRegistrar, the company and all the [persons ]conceTned:

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 restor.rtion 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 248, file an application before the [Tribunal ][:;eel(ing ][restoration ][of ][name ][of ][such]com [pany.]

(2) A copy of the order passed by the fribu 1al shall be filed by the companywith 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 ][tl]e ][company, member, creditor]or workman before the expiry of twenty [years ][from ][the ][publication ][in the ][official]Gazette of the notice under sub-section [(5) ]of [Section ][248, ][if ][satisfied ][that ][the]company was, at the time of its name being [struck ]off, [carrying ][on ][business ][or ][in]operation or otl.rerwise 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 [provisions ]as deemed [just ]for [placing ][the company ][and ][all ][other ][persons]in the same [position ]as nearly as may be as if the [name ]of [the ][company has ][not]been struck off trom the register of companies.

A reading of above provision goes to show that if the company is dissolvedunder Section 248 of the Act, any person aggrieved by the same, can file anappeal. Thus the said provision provides the forum for redressal against thedissolution and striking off the company from the register of companies. Itdoes not deal with the d isq ua lification of the directors, and deactivation oftheir DINs. In the present case, the petitioners are only aggrieved by theirdisqualification as directors and deactivation of DINs, but not about strikingoff companies as such. Hence, Section 252 of the Act, cannot be analternative remedy for seeking that relief, and the contention of the learnedAssistant Solicitor General, in this regard, merits for rejection.

13. Under Section l6aQ)@) of the Act, if the Director of a companyfails 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 saidprovision under the Act 18 of 2013, came into force with effect from07.04.2014, and the [petitioners ]are disqualified [as directors under ][the ][said]provision. At this stage, the issue that arises for consideration [is ][- ][whether]the disqualification envisaged [under ][Section ][t6aQ)@) ][of ][the ][Act, ][which]provision came into force with effect from 07.04.20t4, 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 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.08/14 ][dated]4.4.2014 issued by the Ministry of [Corporation ][affairs, which ][clarifies ][the]applicability of the relevant financial [years. ][The relevant portion of ][the ][said]circu la r 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]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]

effect from 1't April, [2014. ][Provisions ][of ][Schedule ][II ][(useful ][lives ][to ][compute]depreciation) and [Scheduie ]III [(format ][of ][financial statements) have ][also ][been]brought into force from [that ][date. ][The relevant ][Rules ][pertaining ][to ][these ][provisions]have also been notified, [placed ][on ][the ][website ][of the ][Ministry and have come into]force from the same date.

The Ministry has received [requests ][for ][clarification ][with ][regard ][to ][the ][relevant]financial [years ]with [effect ][from ][which such ][provisions ][of the ][new ][Act ][relating ][to]maintenance 01' 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 ][financial ][years]that commenced earlier than [1't ][April ][shall ][be ][governed ][by ][the ][relevant]provisions/schedules,/rules of the Companies Act, 1956 [and ][that ][in ][respect ][of]iinancial [years ]commencing [on or ][after ][1't ][April, ][2014, ][the ][provisions ][of ][the ][new Act]shall apply. "

A reading of the above circular [makes ][it ][clear ][the ][financial statements ][and]the documents required to be attached [thereto, ][auditors report and ][Board's]report in respect of financial [years ]that commenced [earlier ][than ][0t.O4'2074,]shall be governed by the [provisions ]under [the ][Companies ][Act, ][1956 and ][!n]respect of financial [years ]commencing [on ][or ][after ][01.04.2074, ][the ][provisions]of the new Act shall apply.

74. At this stage it is required to be [noticed ]that [the ][analogous]provision to Section 164(2)(a) of the Act 18 of 2013, is Section [27aQ)@) ][ot]Act 1 of 1956. [-fhe ]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 [pany, ]if - (g) such person is already a director of a [pulllic ]company [which, ][-]

(A) has not filed the annual accounts and [annual returns ][for ][any]continuous three financial [years ][commencing ][on ][and after ][the]first day of April, 1999; orcontinuous three financial [years ][commencing ][on ][and after ][the]first day of April, 1999; or (B)

Provided that such [person ]shall [not ][be eligible ][to ][be ][appointed ][as ][a director ][of ][any]other [public ][company ][for ][a ][period ][of five ][years ][from the ][date on which such ][public]company, in which [he ][is ][a director, failed ][to ][file ][annual accounts and ][annual returns]under sub-clause [(A) ]or [has ][failed ][to ][repay ][its ][deposits ][or ][interest ][or ][redeem ][its]debentures on due date or [pay ][dividend referred ][to ][in clause (B).]

A reading of the above [provision ]under [Act ][1 ][of ][1956, makes ][it ][clear ][that ][if ][a]person capable of being appointed director of a company [and such person ][is]already a director of a [public ]company, [which ][has ][not ][filed ][annual ][accounts]and annual returns for any continuous [three ][financial ][years ][commencing ][on]

and after the first day of April 1999, shall not be eligible to be appointed asa director of any other public company for a period of five years from thedate on which such public company, in which he is a director, failed to fileannual accounts and annual returns. So the statutory requirement of filingannual accounts and annual returns, is placed on the directors of a 'publiccompany'. There is no provlsion under the Act 1of 1956, which placessimllar obligations on the directors of a 'private company'. Therefore, non-filing of annual accounts and annual returns by the directors of the privatecompany, will not disqualify them as directors under the provisions of Act 1of 1956.a director of any other public company for a period of five years from thedate on which such public company, in which he is a director, failed to fileannual accounts and annual returns. So the statutory requirement of filingannual accounts and annual returns, is placed on the directors of a 'publiccompany'. There is no provlsion under the Act 1of 1956, which placessimllar obligations on the directors of a 'private company'. Therefore, non-filing of annual accounts and annual returns by the directors of the privatecompany, will not disqualify them as directors under the provisions of Act 1of 1956.

15. Under Section 764(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 ][01.04.2074.]

16. Coming to the facts on [hand, ][the ][2nd ][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 2nd respondent [runs ][contrary ][to ][the ][circular ][issued ][by ][the]Ministry of the Corporate Affairs, and [he ][has ][given ][the ][provisions of ][Act ][18 ][of]2013, retrospective effect, which [is impermissible.]

77. The Apex court in CoMMISSIONER [OF ][INCOME ][TAX](CENTRAL)-L NEW DELHI V. VATIKA TOWNSHIP [PRIVATE ][LTMITEDL]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,]' [(2015) ][I sccr]Notification, may [physically ]consists of words [printed ][on papers. ][However,]' [(2015) ][I sccr]

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 is 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 features as also in the [implication ][as ]to [its ][meaning ][that ][arises ][by ][presumptions]as to the intent of the maker [thereof.]

28. Of the various rules [guiding how ]a [legislation has ][to ][be interpreted, ][one]established rule is that unless a [contrary intention ][appears, ][a legislation ][is presumed]not to be intended to have a [retrospective ]operation. [The idea behind ][the ][rule ][is]that a current law should [qovern ][current ]activities. [Law passed ][today cannot ][apply]to the events of the [past. ]if [we ]do [something today, ][we ][do ][it ][keeping ][in ][the ][law of]today and in force and not tomorrow's backward [adjustment ]of it. [Our belief in the]nature of the law is founded on the bed [rock ]that [every human being is entitled to]arrange his affairs by relying on the [existing law and should not ][find ][that ][his ][plans]have been retrospectively upset. This [principle ]of [law is known as lex prospicit ][non]respicit : law looks forward not backward. [As ][was ][observed ][in ][Phillips ][vs. ][Eyre]i(1870) [LR ][6 ]QB [11, ][a ][retrospective legislation ][is ][contrary ][to ][the ][general ][principle]that legislation by which the conduct of mankind [is ]to [be regulated when ][introduced]for the first time to deal with future acts ought not to change [the ][character ][of ][past]transactions carried on upon the faith of the then existing [law]

29. The obvious basis of the [principle ]against [retrospectivity is ][the ][principle ][of]'fairness', which must be the basis of every legal rule as was observed in [the]decision repoded in L'Office Cherifien des Phosphates [v. ][Yamashita-Shinnihon]Steamship Co. Ltd, [{199a) 1 Ac 486]. [Thus, legislations which modified ][accrued]rights or which impose obligations or impose [new duties ]or [attach ][a ][new disability]have to be treated as [prospective ]unless the [legislative ][intent ][is clearly ][to ][give the]enactment a retrospective effect; unless the legislation [is ]for [purpose ][of ][supplying]an obvious omission in a former legislation or to [explain ][a former ][legislation. ][We]need not note that cornucopia of case law available on the subject [because aforesaid]legal position clearly emerges from the various decisions and this legal [position ][was]conceded by the counsel for the [parties. ]In any [case, ][we ]shall [refer ][to ][few]judgments containjng this dicta, a little later.

30. We would also like to [point ]out, for the sake of completeness, that [where ][a]benefit is conferred by a legislation, the rule against [a ][retrospective construction ][is]diFferent. If a legislation confers a benefit [on some ][persons ][but ][without ][inflicting ][a]corresponding detriment on some other [person ]or on the [public ][generally, ][and where]to confer such benefit appearsi to have been the [legislators ][object, ][then ][the]presumption would be that sucll a legislation, [giving ]it a [purposive ]construction,would warrant it to be [given ]a relrospective effect. [This ][exactly ][is ][the ][justification ][to]treat [procedural provisions ]as retrospective. In [Government ][of ][India ][& ][Ors. ][v.]lndian Tobacco Association, t(2005) 7 SCC 3961, the [doctrine of ][fairness was held to]be relevant factor to construe a statute conferring [a ][benefit, ][in ][the context of it ][to ][be]given a retrospective operation. The same doctrine of fairness, to [hold ][that ][a]itatute was retrospective in nature, [was applied ][in ][the ][case ][of ][Vijay ][v. ][State of]Maharashtra & Ors., [(2006) 6 SCC 289]. It [was held ][that ][where ][a law ][is ][enacted]for the benefit of community as a [whole, even ][in the ][absence ][of ][a ][provision the]statute may be held to be retrospective ln nature. [However, ][we ][are (slc ][not)]confronted with any such situation [here]

31. In such cases, retrospectivity [is ][attached ]to [benefit ][the ][persons ][in]contradistinctjon to the [provision imposing ]some [burden ][or ][liability ][where ][the]presumption attached towards prospectivity. ln the instant case, the [proviso ][added]to Section 113 of the Act [is not ][beneficial ][to the ][assessee. ][On ][the contrary, ][it ][is ][a]provision which is onerous to the assessee. Therefore, in a case [like ][this, ][we ][have]to [proceed ]with the normal rule of [presumption ][against ][retrospective ][operation.]Thus, the rule ,against retrospective [operation is ][a ][fundamental ][rule ][of ][law ][that ][no]statute shall be construed to have a [retrospective ][operation unless such ][a]construction appears very clearly [in ][the terms of the Act, or ][arises ][by ][necessary ][and]distinct implication, Dogmatically [framed, ][the ][rule ][is ][no ][more ][than ][a ][presumption,]and thus could le displaced by out [weighing factors.]

43. There is [yet ]another very [interesting ][piece ][of ][evidence ][that ][clarifies ][that]provision beyond any pale of doubt viz., the understanding of CBDT [itself ][regarding]this provision. It is contained [in ][CBDT ][Circular ][No ][g of ][2002 dated 27.8.2002, with]the subject "Finance Act, 2OO2 - Explanatory [Notes ][on ][provision relating ][to ][Direct]Taxes". This circular has been issued after [the ][passing ][of ][the ][Finance ][Act, 2002, ][by]which amendment to section 113 was made. In [this ][circular, various ][amendments]to the Income tax Act are discussed [amply demonstrating ][as ][to ][which ][amendments]are clarificatory/retrospective in operation [and which amendments ][are ][prospective.]

For example, Explanation to section 158-BB is stated to be clarificatory in nature,Likewise, it is mentioned that amendments in Section 145 whereby provisions ofthat section are made applicable to block assessments is made clarificatory andwould take effect retrospectively from 1st day of luly, 1995. When it comes toamendment to Section 113 of the Act, this very circular [provides ]that the saidamendment along with the amendments in Section 158-BE, would be [prospective]i.e., will take effect from f .6.2002."

18. Thus, the Apex Court in the above [judgment, ]has made it clearthat unless a contrary intention appears, a Iegislation has to be [presumed ]tohave prospective effect. A reading of Section 164 of the Act does not showthat the legislation has any intention, to make the said [provision ]applicable topast transactions. Further, the Apex Court in the above [judgment ]atparagraph No.43, found that the circular issued by the authority after passingof the legislation, clarifying the [position ]with regard to applicability [of ][the]provisions, has to be construed as an important piece of evidence, as itwould 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.0B/2014 dated 4.4.2074 [clarifying ][that ][financial ][statements]commencing after 01.04.2014, shall [be ][governed by ][Act ][18 ][of 2013 ][i.e., ][new]Act and in respect of financial [years commencing earlier ][to ][01.04.2014, ][shall]be governed by Act 1 of [1956. ][At ][the ][cost ][of ][repetition, ][since in ][the ][present]cases, as the 2nd respondent / [competent ][authority, ][has ][disqualified ][the]petitioners as directors under Section [164(2)(a) ][of the Act ][18 ][of ][2013, ][by]the [period ][prior ][to ][0t.04.2074, ][the ][same ][is ][contrary ][to ][the]considering circular, and also contrary [to the ][law laid down by Apex Court ][in the ][above]referred [judgment.]

19. If the said [provision is given prospective ][effect, ][as per ][the ][circular]dated 4.4.2074 and the [law ][laid down ][by ][the ][Apex Court, as ][stated ][in ][the]writ affidavits, the first [financial ][year ][would ][be ][from ][01-04-2014 ][to]31.03.2015 and the second [and ][third ][years ][financial years would ][be ][for ][the]years ending 31.03,2016 and 31,03.2017. [The ][annual returns ][and financial]statements are to be filed [with ][Registrar ][of ][Companies ][only ][after ][the]conclusion of the annual [general meeting ][of ][the ][company, and as ][per ][the first]

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 limit for ][filing ][annual]returns under Section 92(4) ot the Act, is 60 days [from ][annual ][general]meeting, or the last date on which annual [general meeting ][ought ][to ][have]been held with normal fee, and within 270 days [with ]additional [fee ][as ][per the]proviso to Section 403 of the Act. Learned counsel submit that if the saiddates are calculated, the last date for flling the annual [returns would ][be]3O.L1.2O17, and the balance sheet was to be filed on 30.10,2017 [with]normal fee and with additional fee, the last date for filing annual returns [is]27.07,2018, In other words, the disqualification could [get ]triggered only onor after 27.07.zAtB. But the period considered by the 2nd respondent in thepresent writ petitions for clothing the petitioners with disqualification,pertains prior to Ot.A4.2074. Therefore, when the omission, which is nowpointed out, was not envisaged as a ground for d isq ua lification prior to1.4.2014, the petitioners [,:annot ]be disqualified on the said ground. Thisanalogy is traceable to Article 20(1) of the Constitution of india, which statesthat "/Vo person shall be convicted of any offence except for violation of a lawin force at the time of the commission of the act charged as an offence, [nor]be subjected to a [penalty ]Ereater than that which might [have ][been ][inflicted]under the law in force at the time of the commission of the offence". [In]view of the same, the ground on which the [petitioners ][were ][disqualified,]cannot stand to legal scrutiny, and the same is liable to be [set ][aside.]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 limit for ][filing ][annual]returns under Section 92(4) ot the Act, is 60 days [from ][annual ][general]meeting, or the last date on which annual [general meeting ][ought ][to ][have]been held with normal fee, and within 270 days [with ]additional [fee ][as ][per the]proviso to Section 403 of the Act. Learned counsel submit that if the saiddates are calculated, the last date for flling the annual [returns would ][be]3O.L1.2O17, and the balance sheet was to be filed on 30.10,2017 [with]normal fee and with additional fee, the last date for filing annual returns [is]27.07,2018, In other words, the disqualification could [get ]triggered only onor after 27.07.zAtB. But the period considered by the 2nd respondent in thepresent writ petitions for clothing the petitioners with disqualification,pertains prior to Ot.A4.2074. Therefore, when the omission, which is nowpointed out, was not envisaged as a ground for d isq ua lification prior to1.4.2014, the petitioners [,:annot ]be disqualified on the said ground. Thisanalogy is traceable to Article 20(1) of the Constitution of india, which statesthat "/Vo person shall be convicted of any offence except for violation of a lawin force at the time of the commission of the act charged as an offence, [nor]be subjected to a [penalty ]Ereater than that which might [have ][been ][inflicted]under the law in force at the time of the commission of the offence". [In]view of the same, the ground on which the [petitioners ][were ][disqualified,]cannot stand to legal scrutiny, and the same is liable to be [set ][aside.]

20. A learned Single Judge of the High [Court ]of [Karnataka ][in]YASHODHARA SHROFF vs, UNION OF INDIA2 consideringSection L64(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 noretrospective operation. The observations of the [learned ][Judge, pertaining ][to]

2 w l'.N,).52911 of201ii and batch dated 12.06.2019

private companies, which are relevant for the present purpose, are extracted as under:

208. In view of the aforesaid discussion, I have arrived at the following conclusions (a) It is held that Section 164(2)(a) of the Act is not u/tra yfus Article 14 of theConstitution. The said provision is not manifestly arbitrary and also does not fallwithin the scope of the doctrine of proportionality. Neither does the said provisionviolate Article 19(1)(9) ofthe Constitution as it is made in the interest ofgeneralpublic and a reasonable restriction on the exercise of the said right. The objectand purpose of the said provision is to stipulate the consequence of adisqualification on account of the circumstances stated therein and the same is inorder to achieve probity, accountability, and transparency in corporategoverna nce.Constitution. The said provision is not manifestly arbitrary and also does not fallwithin the scope of the doctrine of proportionality. Neither does the said provisionviolate Article 19(1)(9) ofthe Constitution as it is made in the interest ofgeneralpublic and a reasonable restriction on the exercise of the said right. The objectand purpose of the said provision is to stipulate the consequence of adisqualification on account of the circumstances stated therein and the same is inorder to achieve probity, accountability, and transparency in corporategoverna nce.

(b) That Article (sic) Section 164(2) of the Act applies by operation of law on the basisof the clrcumstances stated therein, the said provision does not envisage anyhearing, neither pre-disqualification nor post-disqualification and this is not inviolation of the principles of natural justice, is not ultra [ylres ]Article 14 of theConstitution.of the clrcumstances stated therein, the said provision does not envisage anyhearing, neither pre-disqualification nor post-disqualification and this is not inviolation of the principles of natural justice, is not ultra [ylres ]Article 14 of theConstitution.

(c) That Section 76a(2) of the Act does not have retrospective operation and istherefore, neither unreasonable nor arbitrary, in view of the interpretation [placed]on the same.therefore, neither unreasonable nor arbitrary, in view of the interpretation [placed]on the same.

(d)

(e) lnsofar as the private companies are concerned, disqualification on account of thecircumstances 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 disqualificationcould not have been imposed on [directors ]of [private ][companies ][by takinq ][into]consideration any [period ][prior ]to [01.04.2014 ][for ]the [purpose ][of ][reckoning]continuous [period ]of three financial [years under ]the said [provision. ][The ][said]conclusion is based on the [principal ]drawn [by ][way ][of ][analogy ][from ][Article ][20(1) ][of]the Constitution, as at no [point ]of time [prior ][to the ][enforcement ][of the Act, ][a]disqualification based on the circumstances [under Section ][164(2) of ][the ][Act ][was]ever envisaged under the 1956 [Act vis-e-vis directors ][of ][private ][companies. ][Such]a disqualification could visit a [director ][of ][only ][a ][public ][company ][under ]27aG)G) of 1956 Act and never a [director ][of ]a [private ][company. ][Such]disqualification of the [petitioners who are directors ][of ][private companies is ][hence]q uashed.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 disqualificationcould not have been imposed on [directors ]of [private ][companies ][by takinq ][into]consideration any [period ][prior ]to [01.04.2014 ][for ]the [purpose ][of ][reckoning]continuous [period ]of three financial [years under ]the said [provision. ][The ][said]conclusion is based on the [principal ]drawn [by ][way ][of ][analogy ][from ][Article ][20(1) ][of]the Constitution, as at no [point ]of time [prior ][to the ][enforcement ][of the Act, ][a]disqualification based on the circumstances [under Section ][164(2) of ][the ][Act ][was]ever envisaged under the 1956 [Act vis-e-vis directors ][of ][private ][companies. ][Such]a disqualification could visit a [director ][of ][only ][a ][public ][company ][under ]27aG)G) of 1956 Act and never a [director ][of ]a [private ][company. ][Such]disqualification of the [petitioners who are directors ][of ][private companies is ][hence]q uashed.

(f) ...

(9) Consequently, where the disqualification [under Section 164(2) of ][the ][Act is ][based]on a continuous [period ]of three [financial years ][commencing ][from ][o7.04.2074,]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.]on a continuous [period ]of three [financial years ][commencing ][from ][o7.04.2074,]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 164(2) ][of ][the ][Act ][of]2013, which had come into [force ][with ][effect ][from ][7.4.2074 ][would ][have]prospective, and not retrospective effect and that [the ][defaults ][contemplated]under Section 164(2)(a) with [regard ]to [non-filing ][of ][financial statements or]r r/Special Civil Application No.22435 of 2017 and batch dated 18.12.201 8

annual returns for any continuous [period ][of ][three ][financial years would ][be]the default to be counted [from the ][financial ][year ][2014-15 ][only and ][not]20t3-t4.

22. A learned single Judge of the [High ][Court ][of ][Madras ][in BHAGAVAN]DAS DHANANJAYA DAS vs, ttNIoN OF [INDIA4 ][also expressed similar]view, The relevant [portion ]is as under:

29. in fine,

(a) lvhen the New Act 2013 came into effect from 1.4.2014, thesecond respondent herein has wrongly [given ]retrospective [effect]and erroneously djsqualified the [petitioner ]- directors [from]1..1.2016 itself before the deadline commenced wrongly [fixing ][the]first financial year from 1,4,2013 to 31.3,2014.second respondent herein has wrongly [given ]retrospective [effect]and erroneously djsqualified the [petitioner ]- directors [from]1..1.2016 itself before the deadline commenced wrongly [fixing ][the]first financial year from 1,4,2013 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]crwn General circular No,08/14 daled 4.4.2074, the first [financial]year would be from 1.4.2Ot4 to 31.3.2015, the second financialyear would be from 1.4,2015 to 31.3.2016 and the third financialyear would be from 7,4,2076 b 3f ,3.20t7, whereas the secondrespondent clearly admitted in [paras ]15 and 22 of the counteraffldavit that the default of f:ling statutory returns [for ][the ][final]years commences from 2013-1.4, 2014-15 and 2015-16 i.e, oneyear before the Act 2013 came into force. This is the basicirrcurable legal infirmity that vitiates the entire [impugned]prroceed ings.expression'for any continuous [period ]of three financial [year" ][and]in the light of section 2(41) defining "financial [year" ][as ][well ][as ][their]crwn General circular No,08/14 daled 4.4.2074, the first [financial]year would be from 1.4.2Ot4 to 31.3.2015, the second financialyear would be from 1.4,2015 to 31.3.2016 and the third financialyear would be from 7,4,2076 b 3f ,3.20t7, whereas the secondrespondent clearly admitted in [paras ]15 and 22 of the counteraffldavit that the default of f:ling statutory returns [for ][the ][final]years commences from 2013-1.4, 2014-15 and 2015-16 i.e, oneyear before the Act 2013 came into force. This is the basicirrcurable legal infirmity that vitiates the entire [impugned]prroceed ings.

23. In view of the above facts and circumstances [and ][the ][judgments]re1€rred to supra, as the impugned orders in [present ][writ ][petitions]disqualifying the petitioners as directors under [Section ][164(2)(a) ][of ][the ][Act,]have been passed considering the [period ][prior ]to [01'04.2014, ][the ][same]cannot be sustained, and are liable to [be ][set ][aside ][to ][that ][extent.]

24. As far as the contention regarding [issuance ][of ][prior notice ][before]disqualifying the [petitioners ]as directors [is ][concerned, ][Section ][16a(2)(a) ][is]rertruired to be noticed, and the same is [extracted ][as ][under ][for ][ready]reference:

164, Disqualification for appointment of director:

(2) No person who is or has been a director of a company which- (a) has not filed financial statements or annual returns for any continuousperiod of three flnancial years; or (b)...

Shall be eligible to be [re-appointed ][as ][a ][director ][of ][that ][company or]appointed in other companies [for ][a period of five years ][from the ][date on which the]said company fails to do so.

A reading of the above [provision makes ][it ][clear ][that ][it ][provides]disqualification on happening [of an event ][i.e', ][if ][a ][person ][who ][is ][or ][has ][been]a director of a company [has ][not ][filed financial statements ][or ][annual ][returns]for any continuous [period ]of [three ][financial years, shall be ineligible ][to ][be ][re-]appointed as a director [of ][that ][company ][or ][appointed in any other ][company]for a period of five [years ][from the ][date on which ][the ][said company fails ][to ][do]so. The [provision does ][not ][provide ][for ][issuance ][of ][any prior ][notice ][or]hearing. A learned single [Judge ][of ][the ][High ][court ][of ][Karnataka ][in Yashodara]Shroff v. union of [India (1 supra), ][as ][well ][as ][the ][learned single ][Judge 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]judgmentsoftheApexCourt,heldthatSectionl6a(2)(a)oftheActappliesby operation of law [on ][the ][basis ][of ][the ][circumstances stated ][therein, the ][said]provision does not envisage [any ][hearing, ][neither ][pre-disqualification ][nor]post-disq ua llfication and this [is ][not ][in ][violation ][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 envisaged ][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]notified [disq ][ua ][lification even before ][it ][incurred, and ][deactivated]respondents DlNs,whichisillegalarbitraryandagainstprovisionscontainedinSection 164(2)(a) [of ][the ][Act.]

26. The next grievance of the [petitioners ]is with regard to deactivation,of their DINs. The contention 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 cannot be cancelled or deactivated, and the violation mentionedunder Section 16a(2)(a) of the Act, :s not one of the [grounds ]mentionedunder clauses [(a) ]to [(f) ]of Rule 11, and hence for the alleged violation underSection 164(2)(a) of the Act, DIN cannot be cancelled.

27. Rule 10 of the Rules provide for allotment of DIN and under subrule (6) of Rule 10, it is allotted for life time. Rule 11 provides forcancellation or deactivation. Rule 11, which is relevant for the presentpurpose, is extracted as under for ready reference:

11, Cancellation or surrender or deactivation of DIN: The CentralGovernment or Regional Director (Northern Region), Noida or any officer authorizedby the Regional Director may, upon being satisfied on verification of particulars ordocumentary [proof ]attached with the application received from any person, cancel ordeactivate the DIN in case -

(a) the DiN is found to be duplicated in respect of the same person providedthe data related to both the DIN shall be merged with the validly retainednum ber;(b)the DIN was obtained in a wrongful manner oT by fraudulent means;the data related to both the DIN shall be merged with the validly retainednum ber;(b)the DIN was obtained in a wrongful manner oT by fraudulent means;

(c) of the death of the concerned individual; (d)the concerned individual has been declared as a person of unsound mindby a competent Court;by a competent Court; (e)if the concerned individual has been adjudicated an insolvent; Provided that before cancellation or deactivation of DIN pursuant to clause (b),an opportunity of being heard shall be given to the concerned individualian opportunity of being heard shall be given to the concerned individuali (f)on an application made in Form DIR-5 by the DIN holder to surrender hisor her DIN along with declaration that he has never been appointed as director inany company and the said DIN has never been used for filing of any document withany authority, the Central Government may deactivate such DIN;Provided that before deactivation of any DIN in such case, the CentralGovernment shall verify e-record:;.

Explanation: for the [purposes ]of clause (b) - The Lerms "wrongful manner" means if the DIN is obtained on thestrength of documents which are not legally valid or incomplete documents arefurnished or on suppression of material information or on the basis of wrongcertification or by making misleading or false information or by m lsrepresentatio n;

(i)

(ii) the term "fraudulent means" means if the DIN is obtained withan intent to deceive any other [person ]or any authority includingthe Central Government.an intent to deceive any other [person ]or any authority includingthe Central Government.

28. Clauses (a) to (f) of Rule 11, extracted above, provides for thecircumstances under which the DIN can be cancelled or deactivated. Thesaid grounds, are different from the ground envisaged under Section 164(2)(a) of the Act. Therefore, for the alleged violation underSection 164 of the Act, DINS cannot be cancelled or deactivated, except inaccordance with Rule 11 of the Rules.

29. Learned Single ludge of the Gujarat High Court in the decisioncited 2 supra, held as under:

"29. This takes the Court to the next question as to whether the respondentscould have deactivated the DINS of the petitioner as a consequence of the impugnedlist? In this regard, it would be appropriate to refer to the relevant provisionscontained in the Act and the said Rules. Section 153(3) provides that no personshall be appointed as a Director of a company, unless he has been allotted theDirector Identification Number under Section 154. Section 153 requires everyindividual intending to be appointed as Director of a Company to make anapplication for allotment of DIN to the Central Government in such form and manneras may be prescribed. Section 154 states that the Central Government shall withinone month from the receipt of the application under Section 153 allot a DIN to anapplicant in such manner as may be prescribed. Section 155 prohibits anyindividual, who has already been allotted a DIN under Section 154 from applying foror obtaining or possessing another DIN. Rules 9 and 10 of the said Rules of 2014prescribe the procedure for making application for allotment and for the allotment ofDIN, and further provide that the DIN allotted by the Central Government under thesaid Rules would be valid for the life time of the applicant and shall not be allotted toany other person.

30, Rule 11 [provides ]for cancellation or surrender or deactivation of DIN.Accordingly, the Central Government or Regional Dlrector or any authorized officerof Regional Director may, on being satisfied on verification of [particulars ]ofdocumentary proof attached with an application from any [person, ]cancel ordeactivate 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 CentralGovernment or with the authorized officer or Regional Director to cancel ordeactivate the DIN allotted to the Director, nor any of the clauses mentioned [in ]thesaid Rules contemplates cancellation or deactivation of [DIN ]of the [Director ]of [the]"struck off company" or of the Director having become ineligible under Section 164of 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 CentralGovernment, 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 cancelled or deactivated.

31. In that view of the matter, the [Court is of ][the ][opinion ][that the ][action of the]respondents in deactivating the DINS of the [petitioners ]- [Directors along ]with [the]publication of the impugned list of Directors of "struck off" companies underSection 248, also was not legally tenable. [Of ][couTse, ]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 [prescribed ]time [in ][Form DIR-6, however, ][if ][that ][is not ][done,]the DIN could not be cancelled or deactivated. [The cancellation ][or ][deactivation of]the DIN could be resorted to by the conceTned [respondents ]only as [per ][the]provisions contained in the said Rules."

30. In view of the above facts and circumstances and the [judgment]

referred to supra, the deactivation of the DINs of the [petitioners ]for allegedviolations under Section 164 of the Act, cannot be sustained.

31. For the foregoing reasons, the impugned orders in the [writ]petitions to the extent of disqualifying the petitioners underSection 16a(2)(a) of the Act and deactivation of their DINS, are set aside,and the 2nd respondent is directed to activate the DINs of the [petitioners,]enabling them to function as Directors other than in strike off companies.

32, It is made clear that this order will not [preclude ]the 2ndrespondent from taking appropriate action in accordance with law forviolations as envisaged under Section 164(2) of the Act, glving the saidprovision prospective effect from 07.O4.20L4 and for necessary actionagainst DIN in case of violations of Rule 11 of the Rules.

33. It is also made clear that if the petitioners are aggrieved by theaction of the respondents in striking off their companies under Section 248 ofthe Act, they are at liberty to avail alternative remedy under Section 252 ofthe Act.

34. All the writ petitions are accordingly allowed to the extentind icated above.

35. Interlocutory applications [pending, ]if any, shall stand closed. [No]order as to costs.

DATE: 18-07-2019AVS

A.RAJASHEKER REDDY,J