Allowed

Sankaralingam Rajeshkumar v. Union of India

Madras HC11 Feb 2021WP/2840/2021

Case brief

AI extract

What is this about?

The petitioner challenged a disqualification order issued under the Companies Act, 2013, which effectively deactivated his Director Identification Number (DIN) due to default by a specific company. Relying on a Division Bench judgment, the court held that DINs cannot be deactivated under Section 164(2)(a) as it contradicts the statutory framework requiring DIN retention for defaulting companies. T

What did the court decide?

Set aside the disqualification order dated 07.12.2018 and reactivate the petitioner's Director Identification Number (DIN).

Sankaralingam Rajeshkumar Vs Union of India — Service and Employment | Madras HC (2021)

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IN THE HIGH COURT OF JUDICATURE AT MADRAS

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DATED: 11.02.2021

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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.2840 of 2021 &

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W.M.P.Nos.3174 & 3178 of 2021

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Sankaralingam Rajeshkumar ... Petitioner Vs. 1.Union of India, Represented by its Secretary, Ministry of Corporate Affairs, Shastri Bhavan, Dr.Rajendra Prasad Road, New Delhi – 110 001. 2.The Registrar of Companies, Stock Exchange Building, II Floor, 683, Trichy Road, Singanallur – 641 005. ... 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 07.12.2018 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 herein to permit the petitioner to get reappointed as Director of any company or appointed as Director in any company without any hindrance and reactivate the 06469012 Director Identification Number (DIN) of the petitioner.

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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 not submitted financial statements for three consecutive

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

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financial years. The petitioner has challenged the impugned order dated 07.12.2018 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.P.Yuvaraj, learned Central Government Standing Counsel accepts notice on behalf of the respondents. By consent of both parties, this writ petition is taken up for final disposal at the time of admission itself.

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Heard Ms.P.M.Vatsala, learned counsel for the petitioner and Mr.P.Yuvaraj, learned 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 07.12.2018 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

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

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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 without a DIN. Consequently, the director of 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.Zerosoft Technologies 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 07.12.2018 passed by the second respondent disqualifying the petitioner as Director of M/s.Zerosoft Technologies 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

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

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writ petition is allowed. No costs. Consequently, connected miscellaneous petitions are closed.

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Sd/Assistant Registrar(CS V)

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//True Copy//
Sub Assistant Registrar
nl
To
1.The Secretary,
Ministry of Corporate Affairs,
Shastri Bhavan, Dr.Rajendra Prasad Road,
New Delhi – 110 001.
2.The Registrar of Companies,
Stock Exchange Building,
II Floor, 683, Trichy Road,
Singanallur – 641 005.
W.P.No.2840 of 2021
ln[co]
srg 15/02/2021

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

Sankaralingam Rajeshkumar v. Union of India

Case brief

What is this about?

What did the court decide?

Sankaralingam Rajeshkumar v. Union of India

Case brief

What is this about?

What did the court decide?

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