Disposed

Prof.M. K. Sanoo v. State of Kerala

Kerala HC10 Jan 2022WA/602/2021

Case brief

AI extract

What is this about?

This Court disposed of two writ appeals against a single judge's judgment and an order in review regarding director disqualification under the Companies Act. Parties consented that the duty to investigate and decide the disqualification lies with the competent authority (IGR). The Court disposed of the appeals without hearing merits.

What did the court decide?

Disposed of writ appeals without traversing merits; direction for competent authority to decide disqualification.

Prof.M. K. Sanoo Vs State of Kerala — Company and Corporate | Kerala HC (2022)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

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THE HONOURABLE THE CHIEF JUSTICE MR.S.MANIKUMAR

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THE HONOURABLE MR. JUSTICE SHAJI P.CHALY

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MONDAY, THE 10^TH DAY OF JANUARY 2022 / 20TH POUSHA, 1943

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WA NO. 602 OF 2021

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APPELLANTS:

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PROF.M. K. SANOO AGED 93 YEARS S/O. MANGALATH M. C. KESAVAN, 'SANDHYA', KARIKKAMURI,

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KOCHI - 682 011.

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BY ADVS. P.B.KRISHNAN SRI.SABU GEORGE SRI.P.B.SUBRAMANYAN SRI.MANU VYASAN PETER

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RESPONDENTS:

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1 STATE OF KERALA, REPRESENTED BY THE CHIEF SECRETARY, SECRETARIAT, THIRUVANANTHAPURAM, PIN - 695 001.

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2 INSPECTOR GENERAL OF REGISTRATION EX-MAYOR R. BALAKRISHNAN NAIR ROAD, NEAR DISTRICT COURT, VANCHIYOOR, THIRUVANANTHAPURAM, PIN - 695 035.

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3 ARUVIPURAM SREE NARAYANA DHARMA PARIPALANA YOGAM REPRESENTED BY ITS GENERAL SECRETARY, V. K. NATESAN, S/O. KESAVAN, SNDP YOGAM HEAD OFFICE, P. B. NO.512, JAWAHAR NAGAR, KARBALA, KOLLAM, PIN - 691 001.

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4 V. K. NATESAN S/O. KESAVAN, GENERAL SECRETARY, SNDP YOGAM HEAD OFFICE, P. B. NO.512, JAWAHAR NAGAR, KARBALA, KOLLAM, PIN - 691 001., VELLAPPALLIL HOUSE, KANCHUKULANGARA P. O., CHERTHALA, ALAPPUZHA - 688 582.

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5 DR. M. N. SOMAN PRESIDENT, SNDP YOGAM HEAD OFFICE, P. B. NO.512, JAWAHAR NAGAR, KARBALA, KOLLAM, PIN - 691 001.

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W.A.Nos.602 & 688 of 2021

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6 THUSHAR

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S/O. V. K. NATESAN, VICE PRESIDENT, SNDP YOGAM HEAD OFFICE, P. B. NO.512, JAWAHAR NAGAR, KARBALA, KOLLAM, PIN - 691 001., VELLAPPALLIL HOUSE, KANCHUKULANGARA P. O., CHERTHALA, ALAPPUZHA - 688 582.

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7 SANTHOSH @ ARAYAKKANDIL SANTHOSH DEVASWOM SECRETARY, SNDP YOGAM HEAD OFFICE, P. B. NO.512, JAWAHAR NAGAR, KARBALA, KOLLAM, PIN - 691 001. BY ADV SRI.A.N.RAJAN BABU FOR R3 TO R7 SRI.K.P.HARISH, SENIOR GOVERNMENT PLEADER FOR R1 & R2

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THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 10.01.2022, ALONG WITH WA.688/2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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W.A.Nos.602 & 688 of 2021

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

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THE HONOURABLE THE CHIEF JUSTICE MR.S.MANIKUMAR

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THE HONOURABLE MR. JUSTICE SHAJI P.CHALY

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MONDAY, THE 10^TH DAY OF JANUARY 2022 / 20TH POUSHA, 1943

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WA NO. 688 OF 2021

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AGAINST THE ORDER IN RP 113/2021 OF HIGH COURT OF KERALA

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APPELLANT:

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PROF. M.K.SANOO AGED 93 YEARS

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S/O. MANGALATH M. C. KESAVAN, 'SANDHYA', KARIKKAMURI,

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KOCHI - 682 011.

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BY ADVS. P.B.KRISHNAN SRI.SABU GEORGE SRI.P.B.SUBRAMANYAN SRI.MANU VYASAN PETER

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RESPONDENTS:

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1 STATE OF KERALA REPRESENTED BY THE CHIEF SECRETARY, SECRETARIAT, THIRUVANANTHAPURAM, PIN - 695 001.

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2 INSPECTOR GENERAL OF REGISTRATION EX-MAYOR R. BALAKRISHNAN NAIR ROAD, NEAR DISTRICT COURT, VANCHIYOOR, THIRUVANANTHAPURAM, PIN - 695 001.

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3 ARUVIPURAM SREE NARAYANA DHARMA PARIPALANA YOGAM REPRESENTED BY ITS GENERAL SECRETARY, V. K. NATESAN, S/O. KESAVAN, SNDP YOGAM HEAD OFFICE, P. B. NO.512, JAWAHAR NAGAR, KARBALA, KOLLAM, PIN - 691 001.

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W.A.Nos.602 & 688 of 2021

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4 V. K. NATESAN S/O. KESAVAN, GENERAL SECRETARY, SNDP YOGAM HEAD OFFICE, P. B. NO.512, JAWAHAR NAGAR, KARBALA, KOLLAM, PIN - 691 001., VELLAPPALLIL HOUSE, KANCHUKULANGARA P. O., CHERTHALA, ALAPPUZHA - 688 582.

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5 DR. M. N. SOMAN

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PRESIDENT, SNDP YOGAM HEAD OFFICE, P. B. NO.512, JAWAHAR NAGAR, KARBALA, KOLLAM, PIN - 691 001.

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6 THUSHAR S/O. V. K. NATESAN, VICE PRESIDENT, SNDP YOGAM HEAD OFFICE, P. B. NO.512, JAWAHAR NAGAR, KARBALA, KOLLAM, PIN - 691 001., VELLAPPALLIL HOUSE, KANCHUKULANGARA P. O., CHERTHALA, ALAPPUZHA - 688 582.

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7 SANTHOSH @ ARAYAKKANDIL SANTHOSH DEVASWOM SECRETARY, SNDP YOGAM HEAD OFFICE, P. B. NO.512, JAWAHAR NAGAR, KARBALA, KOLLAM, PIN - 691 001.

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BY ADV SRI.A.N.RAJAN BABU FOR R3 TO R7 SRI.K.P.HARISH, SENIOR GOVERNMENT PLEADER FOR R1 & R2

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THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 10.01.2022, ALONG WITH WA.602/2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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W.A.Nos.602 & 688 of 2021

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JUDGMENT

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Dated this the 10^th day of January, 2022

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S. MANIKUMAR, CJ.

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Being aggrieved, by the judgment dated 5.1.2021 in W.P.(C) No.19266 of 2020, and the order in Review Petition No.113 of 2021 dated 08.03.2021 in the aforesaid

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writ petition, instant appeals are preferred by the petitioner in the writ petition.

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Writ petition was disposed of with certain observations, directing the

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Inspector General of Registration to consider and pass orders on Exhibit P4 representation dated 18-08-2020 submitted by the appellant. The followings were the reliefs sought for in the writ petition:

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“(i) Declare that respondents 4 to 7 are disqualified under Section 164(2) of the Companies Act, 2013 to act as the Directors/office bearers of respondent No.3 Yogam;

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(ii) Pass an order restraining respondent Nos.4 to 7 from functioning as Directors of respondent No.3 Yogam.

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(iii) Appoint an Administrator to manage the day to day activities of respondent No.3 Yogam and to conduct election to its Board of Directors/office bearers in accordance with law and under the supervision of this Hon'ble Court;

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W.A.Nos.602 & 688 of 2021

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(iv) Issue a writ of Mandamus or any other appropriate writ or direction commanding respondent No.1 to consider and pass orders on Ext.P4 after hearing the petitioner within a time frame as may be fixed by this Hon'ble Court.

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After considering the rival submissions, the following observations and

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findings were rendered by the learned Single Judge:

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“21. Now the question is whether the Directors of the 3^rd respondentYogam have defaulted in filing annual returns and are disqualified to hold office by operation of Section 164(2) of the Companies Act. Section 164(2)(a) makes it clear that a Director of a company which has not filed financial statements or annual returns for any continuous period of three financial years shall not be eligible to be reappointed 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. Section 167(1)(a) mandates that the office of a Director shall become vacant in case he incurs any of the disqualifications specified in Section 164. It is evident from the said provisions that disqualification of such Directors occurs by operation of law and is automatic and an administrative decision is not required in that regard.

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Then the question will be whether any of the Directors of the 3^rd respondent-Yogam have incurred the disqualification due to non-filing of annual returns/financial statements for a continuous period of three years. It is evident from the pleadings that the annual returns of the Yogam from the year 2006-'07 to 2016-'17 were filed paying the penalty imposed by the Non-trading Company Registrar, Kerala only after 24.09.2020. The amended provisions of the Companies Act came into force with effect from 12.09.2013. Therefore, if financial statements/annual returns for the years 2013-'14, 2014-'15 and

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W.A.Nos.602 & 688 of 2021

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2015-'16 were not filed, such of the Directors who were in office during the period will be disqualified for reappointment as Directors in the Yogam for the next five years.

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The pleadings in the writ petition would show that the Secretary of the Yogam sought to file annual returns for the year 2006-'07 on 17.02.2009 and the Non-trading Company Registrar as per Ext.R3(c) informed the Yogam that requisite registers were not available with his office and the Non-trading Company Registrar has requested the Registrar of Companies, Cochin to make available the registers of the Yogam.

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Ext.R3(d) letter dated 11.10.2010 of the Assistant Registrar of Companies, Kerala would show that the Assistant Registrar has required the Yogam to file returns before the office of the Inspector General of Registration, Trivandrum as per the procedure laid down under the Kerala Non-trading Companies Act, 1961.

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Ext.R3(e) order dated 09.02.2009 of the Hon'ble High Court of Delhi would show that the Central Government on 23.08.2005 found that the appropriate authority in respect of the Yogam would be the State Government under the Kerala Non-trading Companies Act, 1961 and the Hon'ble high Court of Delhi has set aside the said order and directed the Central Government to decide the issue afresh after giving appropriate notice to the parties.

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Ext.R3(f) letter dated 18.10.2011 of the Deputy Registrar of Companies, Kerala would show that the entire records of the Yogam have been transferred to the Inspector General of Registration in January, 2009. Ext.R3(g) letter dated 18.12.2012 of the 4^th respondent would show that balance sheet and income and expenditure account along with audit report and annual report was forwarded to the Registrar of Non-trading Corporation on 18.12.2012 Therefore, it is evident that the Yogam had made some attempts

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W.A.Nos.602 & 688 of 2021

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to file annual returns/financial statements during the years 2009 to 2012. However, there are no materials to indicate that the Directors of the Yogam took any effective steps to file annual returns/financial statements during the period from 2013-'14 to 2015-'16. Even if such attempts were made unsuccessfully, that my not be sufficient to avert disqualification because the disqualification under Section 164(2) is by operation of law and automatic. Since the Yogam has not filed annual returns/financial statements from the year 2013-'14 to 2015-'16 for a continuous period of three years, the Directors who were holding the office during the period would be disqualified for reappointment for the next five years.

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Now, the issue to be considered is whether respondents 4 to 7 in the writ petition are liable to be declared as having incurred the disqualification under Section 164(2) of the Companies Act, 2013, by this Court. Going through the pleadings in the writ petition, I find that there is no positive assertion anywhere in the writ petition that respondents 4 to 7 were Directors of the Company during the three consecutive years since 2013-'14, except in the case of the 4th respondent. A reference with regard to the tenure of the 4th respondent can be found only in Ext.P4 complaint preferred by the petitioner before the Inspector General of Registration, which is as follows:-

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“The present General Secretary of the SNDP Yogam took charge in 1997. From that year onwards, he is not functioning in accordance with the provisions of the law, rules and other circulars governing in the Companies Act.”

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The pleadings in the writ petition leaves this Court to presume that the 4th respondent has been the General Secretary of the Yogam during the years 2013-'14 to 2015-'16. As regards respondents 5 to 7, there is no pleading in the writ petition asserting that they were Directors of the Company during the

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W.A.Nos.602 & 688 of 2021

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said period.

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Disqualification of Directors for reappointment or appointment in any Company is a serious matter affecting rights of Directors to hold office of the Director not only in the defaulted company but also in other companies. Therefore, it will not be advisable and would indeed be improper to declare that respondents 4 to 7 are disqualified for reappointment in the Yogam, in view of Section 164(2) of the Companies Act, 2013 in the absence of sufficient pleadings Furthermore, there are other Directors of the Yogam also, as is evident from the cause title shown in Ext.P4 complaint, who are not parties to this writ petition, who may also be disqualified for reappointment as Directors in the Yogam. In the circumstances, this Court finds that it will not be appropriate to declare that respondents 4 to 7 are disqualified to be reappointed as Directors of Yogam, in this writ petition.

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However, this Court finds that the allegations made by the petitioner have strong legal footing and the petitioner had brought this issue before the competent authority. The issue therefore, has to be examined by the competent authority. The petitioner has approached the 2^nd respondent filing Ext.P4 petition seeking to remove the disqualified Directors of the Yogam, including respondents 4 to 7, in the light of Section 164(2) of the Companies Act, 2013.”

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W.A.Nos.602 & 688 of 2021

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In the review petition, observations made in the judgment dated 5.1.2021 in W.P.(C) No. 19266 of 2020, based on Section 164(2) of the Act 2013, and the facts have been deleted. Besides, taking into consideration, the date from which section 164(2) of the Companies Act, 2013 has come into force on 01.04.2014, writ court directed the authority to consider as to whether respondents 4 to 7 in W.P.(C) No.19266 of 2020, were disqualified or not, for the reason of non filing of returns for a period of three years from the year 2014 onwards, in contrast to the finding in the judgment in the writ petition from the year 2013 onwards. The learned Single Judge after appreciating the rival contentions in the review petition held as follows in the order:

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“ 7. It may be noted that in the writ petition, this Court has not finally decided the question of disqualification as Directors, of the review petitioners. This Court directed the 3^rd respondent to consider the issue, with notice to affected parties. Therefore, even if the observations of this Court are erroneous, it will not affect the review petitioners. This Court does not find that the judgment is liable to be reviewed in view of the decisions of the Hon'ble High Court of Judicature at Madras.

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However, there is some force in the argument of the learned counsel for the review petitioners that the financial year should be counted from the year 2014-'15 for the purpose of disqualification of Directors. Since in the judgment in writ petition, the issue of disqualification is left to be decided by the 3^rd respondent, this Court does not deem it necessary to review the judgment. The

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W.A.Nos.602 & 688 of 2021

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review petition can be disposed of directing the 3^rd respondent to consider the issues untrammelled by the observations/findings of this Court.

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In the circumstances, the review petition is disposed of making it clear that the 3^rd respondent shall consider Ext.P4 petition as directed in the judgment untrammelled by any observations contained in the judgment.”

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However, on this day, when both the writ appeals came up for hearing, Mr.A.N.Rajan Babu, learned counsel for respondents 3 to 7, in both the writ appeals, fairly submitted that during the relevant period, respondents 4 to 7 in W.P.(C) No. 19266 of 2020, were Directors of the company, though the findings in the judgment in the writ petition was otherwise, basically holding that there is no definite pleading with respect to the said aspect .

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Inviting attention of this Court to Exhibit P2 G.O.(Rt.)No.989/2019/TAXES dated 26.12.2019 and proceedings of the Deputy Inspector General of Registration (Licensing) & Registrar of Non-Trading Companies dated 5.11.2021, Mr.A.N.Rajan Babu, learned counsel for respondents 4 to 7 in the writ petition, submitted that as per Exhibit P2 Government Order dated 26.12.2019, the Deputy Inspector General(Licensing) was appointed as the adjudicating officer to adjudicate in respect of the returns of the Yogam from 2006-2007 to 2016- 2017. The delay in submission of the returns for the previous years, has been adjudicated and that, a fee of Rs.6,600/- has been paid for filing annual returns of the Aruvippuram Sree Narayana

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W.A.Nos.602 & 688 of 2021

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Dharma Paripalana Yogam for the financial years 2006-2007 to 2016-2017. Exhibit R2(b) dated 5.11.2020 is relevant to the context and it is reproduced hereunder:

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“Immunity Certificate under CFSS, 2020

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Government of India

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Ministry of Corporate Affairs

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Deputy Inspector General (Licencing) & No Trading Company Registrar (Kerala)

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Thiruvananthapuram

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Corporate Identity Number (CIN)-U74999KL1903NPL000995

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Certificate for grant of Immunity from prosecution or imposition of penalty under

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Companies Fresh Start Scheme (CFSS), 2020

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Whereas Aruvippuram Sree Narayana Dharma Paripalana Yogam (herein

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referred to as the Non Trading Company) has filed the documents mentioned

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below and has filed an application under the CFSS, 2020 for grant of immunity

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from prosecution, under the Companies Act, 2013.

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SRN	Form Number(s)	Normal fees charged under CFSS, 2020 (in Rs.)
1	3(2006-07)	600/-
2	3(2007-08)	600/-
3	3(2008-09)	600/-

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W.A.Nos.602 & 688 of 2021

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4	3(2009-10)			600/-
5	3(2010-11)			600/-
6	3(2011-12)	5.11.2020	5.11.2020	600/-
7	3(2012-13)			600/-	6600
8	3(2013-14)			600/-
9	3(2014-15)			600/-
10	3(2015-16)			600/-
11	3(2016-17)			600/-
Total	33			6600/-

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And whereas the company has also declared that no petition or appeal was filed against any notice issued or complaint filed before any Court or NCLT or NCLAT or Regional Director or any other adjudicating authority for violation of the provisions under the Act in respect of the above mentioned document(s), or where filed, has withdrawn such appeal.

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Now, therefore, in exercise of the powers conferred under CFSS, 2020 the undersigned hereby issues this certificate to the said company granting immunity from prosecution or imposition of penalty under the Act subject to the provisions contained in the scheme in respect of aforesaid document(s) converted in the application.

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Sd/-

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Deputy Inspector General(Licencing)n & Non Trading Company Registrar (Kerala) Thiruvananthapuram

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W.A.Nos.602 & 688 of 2021

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Mailing address as per record available in Registrar of Companies Office :[email protected] Aruvippuram Sree Narayana Dharma Paripalana Yogam S.N.D.P Yogam, Aruvippuram P.O., Thiruvananthapuram - 695126

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*Note: Immunity Certificate has been generated on the basis of the declaration made in the Form, which may be subject to verification at an appropriate stage. Immunity under the Companies Act, 2013 shall be available strictly in accordance with the terms and conditions mentioned in the Companies Fresh Start Scheme (CFSS), 2020 and will be limited to any default associated with the delay in filing of documents in the registry.”

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Taking note of the subsequent events, learned counsel for both parties, fairly submitted that the delay in submission of the returns for the financial years 2006-2007 to 2016-2017, has been condoned, evidencing submission and acceptance of the returns for the above said period.

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Both the learned counsel for parties also consented that let the Inspector General of Registrations consider as to whether disqualification of respondents 4 to 7 in the writ petition as directors of the company under section 164(2) of the Companies Act, 2013, would arise after the financial year 2014-2015 when the delay in submission of the returns is condoned, when the returns were filed in bulk for the years in question.

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At this juncture, Mr. Mr.A.N.Rajan Babu, learned counsel for respondents 4 to 7/Directors of the Companies, submitted that election is notified on 5.2.2022.

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W.A.Nos.602 & 688 of 2021

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Having regard to the date of elections, the Inspector General of Registrations has to consider the petition submitted by the appellant and pass appropriate orders as expeditiously as possible and at any rate before 30.1.2022.

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Heard learned counsel for parties and perused the pleadings and materials on record.

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In the light of the consensus, we are of the view that there is no need to traverse into the merits of the appeals, and consider as to whether the deletion of the observations in the review order is right or wrong. As parties have consented to restrict their contentions as pointed out, it is open to the parties to produce materials before the Inspector General of Registration, only to the extent as indicated.

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Writ appeals are disposed of accordingly.

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Sd/- S.MANIKUMAR CHIEF JUSTICE

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Sd/- SHAJI P.CHALY JUDGE

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smv

Prof.M. K. Sanoo v. State of Kerala

Case brief

What is this about?

What did the court decide?

Prof.M. K. Sanoo v. State of Kerala

Case brief

What is this about?

What did the court decide?

What the court decided

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