Allowed

Ramaswamy Masilamani v. Union of India

Madras HC8 Feb 2021WP/2611/2021

Case brief

AI extract

What is this about?

Single Judge Bench allowed the writ petition and set aside the order disqualifying the petitioner from acting as a Director. The Court held that deactivating the DIN was violative of Companies Act provisions and quashed the disqualification order due to lack of prior notice.

What did the court decide?

Disqualification order dated 13.12.2019 set aside; connected miscellaneous petitions closed; no costs.

Ramaswamy Masilamani Vs Union of India — Company and Corporate | Madras HC (2021)

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IN THE HIGH COURT OF JUDICATURE AT MADRAS

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DATED: 08.02.2021

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C O R A M

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THE HONOURABLE MR. JUSTICE ABDUL QUDDHOSE

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W.P.No.2611 of 2021

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W.M.P.Nos.2939 & 2940 of 2021

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Ramaswamy Masilamani ... Petitioner Vs. 1.Union of India, Represented by its Ministry of Corporate Affairs, Shastri Bhavan, Dr.Rajendra Prasad Road, New Delhi – 110 001. 2.The Registrar of Companies, Tamil Nadu Chennai, Block No.6, B-Wing, 2^nd floor, Shastri Bhawan, 26 Haddows Road, Chennai – 600 006. ... Respondents

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PRAYER: Petition filed under Article 226 of the Constitution of India praying to issue a writ of certiorarified mandamus calling for the records of the second respondent relating to the impugned order dated 13.12.2019 uploaded in the website of the 1^st respondent in so far as the petitioner is concerned, quash the same as illegal, arbitrary and devoid of merits and consequently direct the respondents to forthwith withdraw the impugned disqualification in so far as it relates to the petitioner and unfreeze the petitioner Director's Identification Number (DIN No.06379445) and petitioner's Digital Signature Certificate, thereby permit the petitioner to get reappointed as Director of any company or appointed as Director in any company without any hindrance.

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For Petitioner :Mr.S.Giritharan For Respondents :Mr.R.Pragadish Additional Central Government Standing Counsel

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O R D E R

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This writ petition has been filed challenging the disqualification of the petitioner as Director under Section 164(2)(a) of the Companies Act, 2013 on the ground that he has https://hcservices.ecourts.gov.in/hcservices/ not submitted financial statements for three consecutive

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financial years. The petitioner has challenged the impugned order dated 13.12.2019 passed by the second respondent on the ground that without affording opportunity to the petitioner, the said order has been passed.

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Mr.R.Pragadish, learned Additional Central Government Standing Counsel accepts notice for the respondents. By consent of both the parties, this writ petition is taken up for final disposal at the time of admission itself.

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Heard Mr.S.Giritharan, learned counsel for the petitioner and Mr.R.Pragadish, learned Additional Central Government Standing Counsel for the respondents.

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It is contended by the learned counsel for the petitioner that the impugned order dated 13.12.2019 has been passed in violation of the provisions of the Companies Act, 2013 and therefore, the said order is bad in law.

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The issue raised in this writ petition was considered by the Hon'ble Division Bench of this Court by its order dated 09.10.2020 in W.A. No.569 & Ors. of 2020 in the case of Meetgelaveetil Kaitheri Muralidharan Versus Union of India & Another and in paragraphs 36 and 38, it has been held as follows :

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As is evident from the above, Rules 9 and 10 deals with the application for allotment of DIN. Rule 10 (6) specifies that the DIN is valid for the life time of the applicant and shall not be allotted to any other person. Rule 11 provides for the cancellation or surrender or deactivation of the DIN. It is very clear upon examining Rule 11 that neither cancellation nor deactivation is provided for upon disqualification under Section 164(2) of CA 2013. In this connection, it is also pertinent to refer to Section 167(1) of CA 2013 which provides for vacating the office of director by a director of a Defaulting Company. As a corollary, it follows that if a person is a director of five companies, which may be referred to as companies A to E, if the default is committed by company A by not filing financial statements or annual returns, the said director of company A would incur disqualification and would vacate office as director of companies B to E. However, the said person would not vacate office as director of company A. If such person does not vacate office and continues to be a director of company A, it is necessary that such person continues to retain the DIN. In this connection, it is also pertinent to point out that it is not possible to file either the financial statements or the annual returns https://hcservices.ecourts.gov.in/hcservices/ without a DIN. Consequently, the director of

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Defaulting Company A, in the above example, would be required to retain the DIN so as to make good the deficiency by filing the respective documents. Thus, apart from the fact that the AQD Rules do not empower the ROC to deactivate the DIN, we find that such deactivation would also be contrary to Section 164(2) read with 167(1) of CA 2013 inasmuch as the person concerned would continue to be a director of the Defaulting Company.

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In the result, these appeals are allowed by setting aside the impugned order dated 27.01.2020. Consequently, the publication of the list of disqualified directors by the ROC and the deactivation of the DIN of the Appellants is hereby quashed. As a corollary to our conclusion on the deactivation of DIN, the DIN of the respective directors shall be reactivated within 30 days of the date of receipt of a copy of this order. Nonetheless, we make it clear that it is open to the ROC concerned to initiate action with regard to disqualification subject to an enquiry to decide the question of attribution of default to specific directors by taking into account the observations and conclusions herein. No costs. Consequently, connected miscellaneous petitions are closed.

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The case on hand stands on the same footing. In the instant case also, no notice was given to the petitioner before disqualifying him as Director of M/s.Hyland Property Developers Private Limited.

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For the foregoing reasons, the ratio laid down by the Hon'ble Division Bench of this Court, dated 09.10.2020 in W.A. No.569 & batch applies to the facts of the instant case also.

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Accordingly, the impugned order dated 13.12.2019 passed by the second respondent disqualifying the petitioner as Director of M/s.Hyland Property Developers Private Limited under Section 164 (2) (a) of the Companies Act, 2013 is hereby set aside in the terms indicated in the aforesaid judgement and this writ petition is allowed. No costs. Consequently, connected miscellaneous petitions are closed.

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Sd/Assistant Registrar(CS-VI)

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//True Copy//

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Sub Assistant Registrar

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https://hcservices.ecourts.gov.in/hcservices/ nl

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1.The Secretary, Ministry of Corporate Affairs, Shastri Bhavan, Dr.Rajendra Prasad Road, New Delhi – 110 001.

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2.The Registrar of Companies,
Block No.6, B-Wing, 2 nd floor,
Shastri Bhawan, 26 Haddows Road,
Chennai – 600 006.
+1cc to Mr.S.Giritharan, Advocate SR.6759
W.P.No.2611 of 2021
SSD(CO)
CB(25/02/2021)

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https://hcservices.ecourts.gov.in/hcservices/

Ramaswamy Masilamani v. Union of India

Case brief

What is this about?

What did the court decide?

Ramaswamy Masilamani v. Union of India

Case brief

What is this about?

What did the court decide?

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