IN THE HIGH COURT OF JUDICATURE, AT PATNA

(CIVIL WRIT JURISDICTION)

C.W.J.C. NO. ____ OF 2019

In the matter of a Writ Petition under

Article 226 of the Constitution of

India.

And

In the matter of:

Sushil Kumar bearing DIN No.: 01802054, aged about years, Gender

Male, s/o and resident of

….. PETITIONER

VERSUS

1. Union of India Through Ministry of Corporate Affairs having its

office at ‘A’ Wing, Shastri Bhawan, Rajendra Prasad Road, New
Delhi – 110001

2. Registrar of Companies, Kanpur having office at 37/17,

Westcottt Building, The Mall, Kanpur-208001

….. RESPONDENTS
To,

The Hon’ble Chief Justice of Hon’ble High Court of Judicature

at Patna and his companion justices of the Hon’ble Court.

The Humble petition on behalf of

petitioner above named.

MOST RESPECTFULLY SHOWETH

1. That by way of filing the instant Writ Petition, the Petitioner

herein craves the indulgence of this Hon’ble Court on the

captioned Writ Petition seeking the following reliefs: -

(i) Issue a writ of certiorari or any other writ, order or

direction declaring section 164 (2)(a) of the Companies

Act, 2013 and the press release/impugned order dated

12.09.2017 as unconstitutional and ultra vires;

(ii) Issue a writ of mandamus or a writ of any other nature or

direction declaring that the publication of the name of the

Petitioner on the list of disqualified directors uploaded and

 published on the website of Respondent, is arbitrary and

illegal and quashing the list to the extent pertaining to the

Petitioner;

(iii) Issue a writ of mandamus or a writ of any other nature or

any other direction/order directing the Respondent not to

treat the Petitioner as “disqualified director” under Section

164 of the Companies Act, 2013 and for any consequential

measures and/or effects arising / contemplated there from;

(iv) Issue a writ of mandamus or a writ of any other nature or

any other direction/order directing the Respondent to

change the status of the Petitioner in the records of the

Respondent No. 2 from “disqualified director” and

consequently directing Respondent to activate the

Directors Identification Number and Digital Signature

Certificates of the Petitioner, thereby enabling the

Petitioner to act as Director and to file the documents and

returns on behalf of the companies on which such

Petitioner serves as a director;

 (v) Pass any such other / further writ of any nature, direction,

order as this Hon’ble Court may deem fit in the facts and

circumstances of the present case;

2. Aggrieved by the impugned acts of the Respondent, the

Petitioner herein is constrained to prefer the present petition,

raising, inter-alia, following substantial question of law and

grounds and crave liberty to modify and raise such additional

grounds as may deem appropriate. Each ground is without

prejudice to the others.

A. BECAUSE the act of Respondent to treat the Petitioner as

“disqualified director” with effect from 01.12.2017 under

Section 164(2) of the 2013 Act, is without application of

mind, is perverse and illegal;

B. BECAUSE the Respondent being State within the

meaning of Article 12 of the Constitution of India is bound

to act in a manner which is non-arbitrary, non-

 discriminatory, reasonable, fair, just and in strict

adherence to the Rule of law;

C. BECAUSE no Show Cause Notice or any other prior

notice or intimation was served on the Petitioner and

Respondent has prepared the impugned list and

disqualified the Petitioners with effect from 01.12.2017

without any prior notice;

D. BECAUSE the impugned list has been issued by

Respondent without any proceeding, judicial or

administrative, without giving the Petitioners a hearing

with respect to the same, and without following even the

most basic principles of natural justice, which constitute

the rule of law under our constitutional scheme;

E. BECAUSE admittedly the act of placing the Petitioner on

the impugned list is penal and will cause severe prejudice

and hardship. The first penal consequence is the loss of

office of director – the Petitioner do not only cease to be

director of the defaulting Company which has allegedly

 defaulted under Section 164 (2) (a), but they also stand

disqualified as directors from any and all other companies.

The second adverse consequence of being placed on the

impugned list is the harm caused to the reputation of the

Petitioner. The third consequence is that usage of the

Director Identification Number (“DIN”) and the Digital

Signature Certificate (“DSC”) by the Petitioner has been

disabled. This measure has an immediate and direct

adverse effect on the ability of Petitioner to discharge any

of his obligations as director in all the companies he serve

as director and which in turn exposes him to non-

compliances under the Companies Act, 213 which entails

penal consequences;

F. BECAUSE in view of the severe penal consequences of

the act of Respondent on the Petitioner as individuals as

well as on their position in other companies, it is a mandate

of the Rule of Law that such Petitioner ought to have been

at the least given an opportunity to be heard before

imposition of such severe consequences;

G. BECAUSE the act of Respondent is in violation of

established principles of natural justice. It has been held in

catena of judgments that the acts of the Government must

be transparent and in adherence to the principles of natural

justice. The said principle has been applied on various

occasions by the Courts suggesting that the principles of

natural justice and opportunity of being heard / right to

hearing may not be worded explicitly in every provision of

law which attracts penal / punitive consequence against a

person (natural/juristic) by State, however, such principles

are implied to be a part thereof and applicable in all such

cases;

H. BECAUSE admittedly, the impugned act is not preceded

by a Show Cause Notice or notice of any kind which is a

severe violation of the principles of natural justice. In the

present case, since, the effect of non-compliance of a

Company attracts punitive measures in the nature of

disqualification on another person (Director), it is implicit

 that an opportunity of being heard is granted to such person

(Director). However, the Respondent has resorted to such

measures in haste, secrecy and without application of mind

without even issuing a Show Cause Notice to the

Petitioner;

I. BECAUSE there has been no attempt on the part of

Respondent to provide any reason as on what basis have

they placed the Petitioner on the impugned list;

J. BECAUSE to the best of the Petitioner’s knowledge, the

impugned list disqualifies lakhs of persons in one stroke

without ascertaining individually, whether the persons

placed on the list are covered by Section 164(2)(a) or not;

K. BECAUSE Section 164(2)(a) is a special provision

dealing with non-compliance of a certain kind, alongwith

providing for the consequence of such non-compliance, it

constitutes a complete code in itself;

L. BECAUSE the effect of the disqualification in terms of

Section 164(2), is limited to the extent of “fresh

appointment” in any company other than the non-

compliant company. With respect to other companies, the

sub-section uses the word “appointment”. Hence for any

other companies in which such person serves as a director,

they shall continue to be the directors and also be eligible

for reappointment;

M. BECAUSE the sequence of dates preceding the

disqualification starting with the press releases dated

12.09.2017 related to actions that will be taken by the

Respondent no. 1 against shell companies which were

indulging in laundering of black money. The publication

of list disqualifying the petitioners after the press release

dated 12.09.2017 makes it clear that the Petitioner has been

disqualified after being categorised as directors of shell

companies involved in the laundering of black money. It is

submitted that such a categorisation is extremely

prejudicial to the reputation and interest of the Petitioner.

 Compounding the impugned action of the Respondent is

the fact that no notice have been served upon the Petitioner

or any opportunity of hearing was granted to him before

such categorisation and disqualification as Director;

N. BECAUSE a bare perusal of Section 164 (2) of the

Companies Act, 2013 shows that it if a Director were to

suffer disqualification under the section then such a

director is not eligible to be re-appointed as a Director of

that company or be appointed in any other company for a

period of 5 years from the date such company fails in this

statutory compliances as contemplated under Section 164.

The section in no way envisages immediate vacation of

office by such disqualified Director. Under Section 164 (2)

the Petitioner is allowed to continue as Director in the

defaulting company as well as in all such companies where

he is a Director.

O. BECAUSE the provision for vacation of office of the

Director is in Section 167 of the Companies Act, 2013.

Section 167 states as follows

(1) The office of the Director shall become vacant in case

(a) he incurs any disqualification specified in section 164

Provided that where he incurs disqualification

under subsection (2) of section 164, the office of the

Director shall become vacant in all the companies, other

than the company which is in default under that sub

section. …

Section 167, as it stood prior to The Companies

(Amendment) Act, 2017 nowhere states that the office of

the Director in other companies will be vacated in

acquiring disqualification under Section 164. A combined

reading of Section 164 (2) and Section 167 (1) (a), as it

stood prior to the insertion of proviso in Section 167 (1)

(a) with effect from 7.5.18, makes it clear that on incurring

a disqualification under Section 164, a Director does not

immediately vacate his office in other companies where he

is serving as a Director and is permitted to complete his

present tenure. The disqualification sets in only at the time

of his re appointment to the defaulting company or the

 other companies where he was serving as a director at the

time of his disqualification.

P. Because the impugned action of the Respondents have

resulted in immediate vacation of office from the post of

Director by a person who held the position of a Director in

any defaulting company. It is submitted that the legislature

never intended the Director to immediately vacate all the

offices he held in various companies once a

disqualification under Section 164 is suffered as he is duty

bound to discharge a number of mandatory statutory

obligations on all the companies where he is serving as

Director under The Companies Act, 2013.

Q. BECAUSE Section 92, 96, 134 and 137 of the Companies

Act, 2013 refers to mandatory obligations of the Directors

and failure to discharge such obligations attracts

punishment which is not limited to fine alone but also

extends to imprisonment. It is submitted that in case a

Director who incurs disqualification under Section 164 of

the Companies Act, 2013 in respect of one defaulting

company has to immediately vacate the office of Director

in all other companies then he will be unable to discharge

any of the statutory obligations referred to hereinabove

which will have a domino effect on all the other companies

where he is a Director. First, he will have to face

punishment including imprisonment for his failure to

discharge the obligations referred to hereinabove in

respect of the non-defaulting companies. Second, since

the Director will be unable to discharge any of the

obligations referred to above the non-defaulting company

where he is also a Director which was functional till then

will also become a defaulting company as without its

directors it will be unable to file returns or financial

statements. This will be especially true for a one person

company, which has only one director, or companies

where all the directors may have been disqualified under

Section 164. The inability to file returns by such a

company will result in striking off of the presently

functional company. This will again entail disqualification

 under Section 164 for the Director resulting in him being

punished multiple times for one act of a defaulting

company.

R. BECAUSE the impugned action of the Respondent in

disqualifying the Petitioner and deactivating his DIN has

crippled smooth functioning, including compliance of

other companies where Petitioner is a director and has

exposed him to punishment under various sections of the

of the Companies Act, 2013.

S. BECAUSE the impugned action of the Respondents in de–

activating the DIN of the Petitioner is also in complete

violation of The Companies Act, 2013 and The

Companies (Appointment and Qualification of Directors

Rules), 2014. The Companies Act, 2013 nowhere states

that a disqualification under Section 164 will cause

immediate deactivation of the DIN of the Directors. Nor is

such a provision present in The Companies (Appointment

and Qualification of Directors Rules), 2014. Rule 11 of

The Companies (Appointment and Qualification of

 Directors Rules), 2014 states the circumstances under

which DIN can be cancelled, surrendered and deactivated

and the same has no reference to de activation of DIN in

case of disqualification under Section 164.

T. BECAUSE it is settled law that a person cannot be

prosecuted or penalised for an act / omission by a Law that

was not in effect at the time of commission of such

act/omission. In other orders, the cardinal principle of law

is that no act/omission which did not constitute an offence

under the enactment prevalent at the time of the

commission of such act/ omission, can be treated an

offence under a new enactment. In the present case, in

order to include any non-compliance under the 1956 Act,

it was the obligation of the Respondent Nos. 1 and 2 to

examine whether such non-compliance attracted any

consequences under the 1956 Act. Unless satisfied with

the same, the Respondent or any Government Authority

cannot saddle any person (natural/legal/juristic) with any

 penal / punitive consequences under the new Act, i.e., in

the present case, the 2013 Act.

U. BECAUSE the acts of the Respondent is ultra vires the

Constitution of India and impinge on the fundamental

rights of the petitioners recognized under Articles 14,

19(1) (g) and 21 of Constitution of India.

V. BECAUSE Section 164(2) (a) treats un-equals equally and

is violative of Article 14 of the Constitution of India

because by virtue of this provision a director of a

defaulting companies apart from being disqualified as a

director of the defaulting companies, is also disqualified as

a director of any other such companies which is fully

compliant with Section 164(2)(a).

W. BECAUSE the consequence of this provision is that a

person who is a director of the defaulting company, by

operation of law, ipso facto, ceases to be a director of any

other company even though such other company may be

the perfect example of corporate governance and has never

 defaulted. The section treats a company that has

committed no default at par with a company that has

defaulted under Section 164(2) (a), and removes the

person as Director of the non-defaulting companies.

X. BECAUSE the illegal acts of the Respondent not only

penalise the person in capacity of a director of a non-

compliant company but also penalise him as an individual

and his capacity of being director in all other

unrelated/unconnected companies as well without there

being any “non-compliance” by such other companies.

Y. BECAUSE the Respondent has misapplied Section 164 to

act as a blanketed, non-individuated provision which

imposes serious civil consequences without segregating

between individuals on material distinctions. Section 164

as applied by the Respondent does not make distinction on

basis of intelligible differentia between different

categories of directors and hence is an arbitrary act and

violates Article 14.

 The construction sought to be placed on Section 164 would

cause all Directors to be saddled with no-fault, no-

causation liability as an outcome of non-compliance which

may have occurred even without their knowledge or

participation, which transgresses the rights granted under

Article 14 and Article 21 of the Constitution of India.

Z. BECAUSE the acts of the Respondent transgress the

cardinal principle of law that a person (natural or juristic)

can be punished only after establishing their direct nexus

with the alleged offence through a judicial process. The

manner in which Respondent indirectly fetters companies

with severe repercussions as bystanders.

AA. BECAUSE acts of Respondent have rampant repercussion

on unrelated companies solely on the basis of a common

directorship with an alleged non-compliant company.

Hence, the functioning of a company which may be

dealing with massive public undertakings would come to

a grinding halt on the arbitrary ground of non-compliance

 in some other company where a common person is

Director. Such acts are arbitrary and would merit to be

struck down for violation of Article 14.

BB. BECAUSE the act of the Respondent operates in an

arbitrary and non-segregated manner against all companies

without distinguishing the nature of companies involved.

It is submitted that irrespective of whether noncompliance

was done in an active company or in a dormant company

which has not commenced business or has lost substratum,

Section has been operated in same manner to cause

disqualification from all other companies where person is

a Director;

CC. BECAUSE the acts of Respondent in disqualifying the

Directors have adverse effect on the smooth functioning of

such other Companies - which are “compliant” - in which

the Petitioner or similarly situated persons are serving as

Directors. It is submitted that such arbitrary and illegal acts

of the Respondent have the effect of leading such innocent

 “compliant” companies to become “non-compliant” for no

fault of theirs, solely because the Directors, as the

Petitioner, has been disabled from exercising their powers

as directors. Hence the acts of the Respondent lead to a

repugnant situation where Directors and non-compliant

companies are compelled to be involuntarily subject

themselves to further non-compliances irrespective of their

intention to avoid non-compliance. Such acts are in

violation of the right under Article 19(1)(g) and right under

Article 21 to a fair process under law of the directors,

shareholders and all stakeholders.

3. The present Writ Petition has been preferred assailing the press

release dated 12.09.2017 and the corresponding list of

disqualified directors uploaded and published on the website of

the Respondent No. 1, www.mca.gov.in and the consequent

insertion of the name of the Petitioner in the list of disqualified

directors (disqualified with effect from 01.12.2017 to

30.11.2022) disqualifying the petitioners as directors for the

period of 5 years under Section 164 (2) (a) of the Companies Act,

2013 (hereinafter referred to as the “Act”).

That by way of the present writ petition, the Petitioner most

humbly seeks directions in the nature of writ of certiorari or any

other writ for quashing of the press release dated 12.09.2017 and

the list of disqualified directors published by the Respondents

(hereinafter referred to as impugned orders). The Petitioner

further seeks directions in the nature of writ of mandamus to

restore his position as Directors in all companies wherever he is

Director.

A copy of the press release dated 12.09.2017 is annexed hereto

and marked as Annexure P-1.

A true and correct copy of the relevant extract of the list of

disqualified directors published in public domain on the web

portal of the Respondent is annexed hereto and marked as

Annexure P-2.
4. The Petitioner is also impugning consequential steps taken by the

Respondents declaring/advising the enlisted Director not to act

as Directors during the period of their disqualification and not to

file any documents or application with the Respondent using their

Director Identification Numbers (“DIN”) and the Digital

Signature Certificates (“DSC”) as the same would be summarily

rejected, thereby disabling the Petitioner from certifying any

form and making any compliance as Director in any of the

companies wherein the Petitioner holds the position of Director.

It is most humbly submitted that M/s. Darsh Vision Pvt. Ltd.,

owing to certain contingencies failed to comply with the statutory

obligations of filing of Annual Returns and Financial Statements

for the Financial Years 2013-14, 2014-15, 2015-16 and 2016-17.

5. That it is submitted that the disqualification of Petitioner under

Section 164 (2) (a) of the Act is unreasonable, unjustified,

arbitrary, unconstitutional and in gross violation of the principles

of natural justice. The impugned action of the Respondents,

disqualifying the Petitioner, was passed without any notice and

without affording any hearing to the Petitioner. It is pertinent to

note that the list of disqualified directors was published and

uploaded on the website of the Respondent No. 1 pursuant to

press release dated 12.09.2017 wherein it was stated that the

directors of shell companies which have not filed returns for 3

years or more will be disqualified from being appointed in any

other company as Director or for being reappointed as Director

in any of the companies where they had been directors thereby

resulting in vacation of office. Pursuant to the press releases

dated 12.09.2017, the Respondent No. 1 published an advisory

on its website that any person disqualified under Section 164 (2)

of the Act is advised not to act as Director during the period of

disqualification and not to file any document or application with

the Ministry of Corporate Affairs as the same shall be summarily

rejected. Following the publication of the list of disqualified

directors and the aforesaid advisory, the Petitioner’s Directors

Identification Number (DIN) has been de–activated.

Consequently, the Petitioner is unable to use its digital signature

to sign any document or comply with the statutory requirements,

inter alia, under the Companies Act, 2013. Consequently, any

digital signatures by the Petitioner on annual reports, financial

 statements and other documents are not being accepted by the

Respondent. The action of the Respondents is not only ultra vires

the Companies Act, 2013 but the said action also seeks to defeat

the legal and fundamental rights of the Petitioner.

6. The Petitioner, namely Mr. Sushil Kumar is an Indian citizen a

person of high repute in the industry. At the time of his

disqualification, the Petitioner was serving as director in two

other companies namely M/s. Darsh Digital Network Pvt Ltd.

and M/s. Darsh Datacom Pvt. Ltd. and his disqualification has

adversely affected the functioning of these two companies. The

Director Identification Number of the Petitioner as issued by the

Respondent is 01802054. A true and correct copy of the Director

Master Data of Petitioner is annexed herewith and marked as

Annexure P-3.

7. That M/s. Darsh Vision Pvt. Ltd. is a Company registered under

the Companies Act, 1956. A true and correct copy of the

Company Master Data as available on the website of Respondent

is annexed herewith and marked as Annexure P-4.

8. That the Respondent No.1 is the Union of India through Ministry

of Corporate Affairs which has issued and published the

impugned list disqualifying the Petitioner Director. The

Respondent through Ministry of Corporate Affairs falls within

the definition of “State” in accordance with Article 12 of the

Constitution of India and is thus amenable to Writ jurisdiction of

this Hon’ble High Court.

9. Respondent No. 2 is the Registrar of Companies for State of

Bihar.

10. M/s. Darsh Vision Pvt. Ltd. i.e. the defaulting Company is a

limited company registered and incorporated under the

Companies Act, 1956 on 08.07.2010. The defaulting Company

has authorised share capital of Rs. 10,00,000/- and paid up share

capital of Rs. 1,00,000/-.

11. The brief facts leading to the filing of the present petition as

under:
(a) The defaulting Company was incorporated on 08.07.2010

under the provisions of the Companies Act, 1956 as a

private Limited Company by shares.

(b) The defaulting company was established with the primary

object of inter alia, to plan, establish, develop, provide,

operate, maintain and market various services, including

cable or satellite based communications and networking

services or broadcasting or broadcasting content services,

direct-to-home services, satellite based transmission

services and maintain telecommunication networks,

systems, services including telephones, internet, telex,

message, relay, data transmission, facsimile, television,

telematics, value added network services, paging cellular,

mobile, audio and video services, maritime and

Aeronautical communication services and other

telecommunication services as are in use elsewhere or to be

developed in future and to act as satellite based service

provider and carry on the business of generation,

distribution, redistribution, reception, transmission, re-

transmission of audio, video, data and radio signals, to

receive, buy, sell, procure, develop, produce, commission,

decrypt, aggregate, turnaround, encrypt and distribute

various kinds of entertainment contents/software

(programmes), data for their aggregation, exhibition,

distribution and dissemination on TV channels / TV signals

/ video and audio signals, be it satellite TV channels or

terrestrial TV channels or cable channels or through any

other mode or through encryption, decryption of signals /

channels using existing and/or emerging technologies,

including distribution via internet, distribution via internet

protocol or webcasting or exhibition in cinema and/or video

theater in all forms, be it an analogue signals or digital

signals or through sale of physical material like cassettes

including audio cassettes, video cassettes, digital video

discs, CD ROM’s etc. and any emerging technology and to

carry on the business as advertising agents, advisers,

consultants, agents for promotion of sales, or other business

interests of any person and for that purpose to carry out

 market surveys, researches, training programmes and

purchasing or otherwise acquiring advertising space or time

in hoardings, newspapers, cinemas, television or any other

media of advertisement and making the same available to

customers. A true and correct copy of the Memorandum of

Association of the defaulting Company is annexed herewith

and marked as Annexure P-5.

(c) It is most humbly submitted that owing to reasons beyond

the control of the Petitioner, the defaulting company failed

to comply with the statutory requirements of filing of the

Annual Returns and Financial Statements of the Company

for the Financial Years 2013-14, 2014-15, 2015-16 and

2016-17 and consequently, the defaulting company was

struck off by the Respondents. A copy of the Annual

Returns and Financial Statements of the Company for the

Financial Years 2013-14, 2014-15, 2015-16 and 2016-17 of

the defaulting company are collectively annexed hereto and

marked as Annexure- P-6.

(d) That there are 2 directors in the Defaulting Company, one

being the Petitioner and the other being Mr. Nilesh Kumar

Sinha having DIN No. 01511009. A copy of the DIN

Master Data is annexed hereto and marked as Annexure P-

7.

(e) That in the month of April 2017, the Respondent with the

intention of cracking down on shell companies stated that

appropriate action will be initiated against the companies

which are non-operative and have been established only for

the purposes of utilization of black money. Accordingly, a

list of companies where prepared striking off on the basis

that such companies have not been carrying on any business

activities for a period of two years. The Respondent no. 1

had struck off the name of the Defaulting Company from

the ROC records maintained by it, vide the “List of

Companies Struck-off”, uploaded on its website M/s. Darsh

Vision Pvt. Ltd. features at serial number _______ in the

list. It is however, most strenuously submitted that the

defaulting company is neither a shell company and has not

 at any point of time indulged in any activity of laundering

black money. It is most humbly submitted that the

Petitioner was unaware about the striking off of the

defaulting company as no notice was received by the

Petitioner.

(f) That intensifying its position against shell companies, the

Respondent No. 1 decided to debar directors of shell

companies to any position in any other company or to get

reappointed in the same. On 06.09.2017, the Respondent

No. 1 by a press release stated that the directors of the shell

companies which have not filed returns for 3 years or more

will be disqualified from being appointed in any other

company as a Director or from being reappointed as

Director in any of the companies when they had been

Directors, thereby compelling them to vacate office. By a

press release on the same issue dated 12.09.2017, the

Respondent No. 1 stated that it was identifying the

defaulting directors of the shell companies and a list would

be prepared.
(g) That the Respondent No. 2 prepared a purported list of

disqualified directors and published the same in public

domain on the web portal of the Respondent No.1.

Petitioner features at sequence number ____ in the

impugned list thereby suggesting that the Petitioner be

treated as “disqualified to be a director” due to alleged non-

compliance / default on part of Defaulting Company under

Section 164 (2) (a) of the 2013 Act; i.e., non-filing of

financial statements and/or annual returns for financial

years 2013-14, 2014-2015, 2015-16 and 2016-17. It is

submitted that from the above sequence of facts, it is clear

that the Petitioner has been disqualified by being

categorised as Director of shell companies involved in the

laundering of black money. It is submitted that such a

categorisation is extremely prejudicial to the reputation and

interest of the Petitioner. Compounding the impugned

action of the Respondent is the fact that no notice has been

served or any opportunity of hearing was granted to the

Petitioner before such categorisation and disqualification.

(h) The Respondent No.1 thereafter published a declaration to

the effect that the persons featuring on the purported list of

disqualified directors are advised not to act as Directors and

documents filed by them through their Director

Identification Numbers and the Digital Signature

Certificates would be summarily rejected. The declaration

appearing on the web portal of the Respondent

(http://www.mca.gov.in/) reads as follows:

“Any person disqualified under section 164(2) of the

Companies Act, 2013 [the Act] is advised not to act

as director during the period of the disqualification

and not to file any document or application with

MCA as the same shall be summarily rejected.

However, this shall be without prejudice to the

liability of the said person for violation of section

164(2) read with section 167 of the Act including the

action under section 448 r/w 447 of the wherever

warranted.”
(i) That it is stated that as a consequence of disqualification of

the Petitioner, his digital signature has been blocked and no

filing of any form could be carried out by the Petitioner.

(j) That the Petitioner became aware of the disqualification

only on March 2019 when he had to file documents for

other companies.

(k) That various representations were made by the industry,

chambers and stakeholders of such aggrieved companies of

the disqualifying directors. It may be mentioned that Writ

Petitions were also filed before the Hon’ble High Courts

challenging the act of the Respondent and about its

subsequent consequences.

(l) That thereafter, the Respondent issued the Condonation of

Delay Scheme 2018 (“CODS 2018”) vide General Circular

No. 16/2017 dated 29.12.2017, whereunder it was provided

that defaulting companies may complete compliances and

make an application in the prescribed form with the

 prescribed fee, for condonation of delay in compliance,

following which the DIN and DSC of the directors of the

said company would be restored. Clause/Paragraph 3 of

said Scheme entails that it is applicable to all defaulting

companies (other than the companies which have been

stuck off/ whose names have been removed from the

register of companies under section 248(5) of the Act). The

name of the defaulting Company herein is struck off from

the names of the Register of Companies and therefore could

not be availed of the Condonation of Delay Scheme, 2018.

12.That the Petitioner has been disqualified under Section 164 (2)

(a) of the Companies Act, 2013. For ease of reference, the

relevant extract of Section 164 of the 2013 Act (effective from

01.04.2014) is reproduced as under:

“(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 continuous period of three financial years;

or

(b) ….

Shall be eligible to be re-appointed as a director of

that company or appointment in other company for

a period of five years from the date on which the

said company fails to do so.”

13.It is submitted that a bare perusal of Section 164 (2) of the

Companies Act, 2013 shows that it if a Director were to suffer

disqualification under the section then such a director is not

eligible to be re-appointed as a Director of that company or to be

appointed in any other company for a period of 5 years from the

date such company fails in this statutory compliances as

contemplated under Section 164. The section in no way

envisages immediate vacation of office by such disqualified

Director. Therefore, it is most humbly submitted that Section 164

(2) permits the Director to serve his tenure in all such companies
 where he is presently a Director. Under Section 164 (2) the

Petitioners are allowed to continue as Director in the defaulting

company as well as in all such companies where they are

Directors but only prohibits re appointment in such companies.

This is furthermore, evident from Section 167 of the Companies

Act, 2013 as it stood prior to the insertion of a proviso in May

2018.

14.That the provision for vacation of office of the Director is at

Section 167 of the Companies Act, 2013. Section 167 states as

follows:

(1) The office of the Director shall become vacant in case

(b) he incurs any disqualification specified in section 164

Provided that where he incurs disqualification under

subsection (2) of section 164, the office of the Director shall

become vacant in all the companies, other than the company

which is in default under that sub section. …

(2) If a person, functions as a Director even when he knows that

the office of the Director held by him has become vacant on

 account of any of the disqualifications specified in sub section

(1), he shall be punishable for a term which may extend to one

year or with fine which shall not be less than one lakh rupees but

which may extend to five lakh rupees or with both.

15.It is submitted that Section 167, as it stood prior to The

Companies (Amendment) Act, 2017 and at the time of

disqualification of the Petitioner nowhere stated that the office of

the Director in other companies will be vacated immediately on

acquiring a disqualification under Section 164. The proviso to

Section 167 (1) came into effect by way of an insertion to Section

167 (1) (a) only on 07.05.2018. It is submitted that the new

proviso can only have prospective operation and cannot govern

disqualification of directors under Section 164 (2) made prior to

its coming into effect. The new proviso which came into

operation only in May 2018 cannot be relied upon by the

Respondents to cause immediate vacation of office of directors

for disqualification made in December 2017 or if the

disqualification has been incurred prior to 07.05.2018.

 It is however, further submitted that proviso to Section 167

(1) (a) is ultra vires the provisions of the Companies Act, 2013

and the Constitution of India but the validity of the same have not

been challenged in this petition as the Petitioner has been

disqualified prior to the said proviso coming into effect. The

Petitioner, however, reserves its right to challenge the vires of the

proviso to Section 167 (1) (a) of the Companies Act, 2013 at a

later stage, if considered necessary by this Hon’ble Court.

16.That a combined reading of Section 164 (2) and Section 167

(1)(a), as it stood at the time of the Petitioner’s disqualification

makes it clear that on incurring a disqualification under Section

164, a Director does not immediately vacate his office in other

companies and is permitted to complete his present tenure. The

disqualification sets in only at the time of his re appointment to

the defaulting company or to the other companies where he was

serving as a director.

17.That there cannot be any immediate vacation if a disqualification

is suffered in respect of one company, is also apparent from the

different statutory obligations cast upon the Director under The

Companies Act, 2013 and which are enumerated herein:

a. Under Section 92 of the Companies Act, 2013 the annual

returns of the company has to be signed by a director and the

same have to be filed with the Registrar. In case the company

fails to file the annual returns the same is punishable with fine

and also with imprisonment.

b. Section 96 of the Companies Act, 2013 provides that every

company other than a One person company shall in addition

to other meetings hold an annual general meeting and the

failure to do so will be punishable with fine under Section 99.

c. Section 134 and 137 of the Companies Act, 2013 provides

that a Board Report has to be prepared by the Board of

Directors and the financial statements have to be signed by

two directors out of which one will be managing director and

in case of one person company by the sole director for

submission to the auditor for his report thereon. The financial

statements have thereafter to be adopted by the Directors and

filed with the Registrar of Companies. Failure to comply with

the requirements of rearing, adopting and filing financial

 statements is punishable not only with fine but also with

imprisonment.

18.It is submitted that the above refers to mandatory obligations of

the Directors and failure to discharge such obligations entails

punishment which is not limited to fine alone but extends to

imprisonment also. It is submitted that in case a Director who

incurs disqualification under Section 164 of the Companies Act,

2013 in respect of one defaulting company has to immediately

vacate the office of Director in all other companies then he will

be unable to discharge any of the statutory obligations referred to

hereinabove which will have a domino effect. First, he will have

to face punishment including imprisonment for his failure to

discharge the obligations referred to hereinabove in respect of the

non defaulting companies. Second, since the Director will be

unable to discharge any of the obligations referred to above the

other company which are functional now will also become a

defaulting company as without its directors it will be unable to

file returns or financial statements. This will be especially true

for a one person company, which has only one director, or

companies where all the directors may have been disqualified

 under Section 164 for defaults of other companies. The inability

to file returns by such a company will result in striking off of the

presently functional company. This will again entail

disqualification under Section 164 for the Director resulting in

him being punished multiple times for one act of a defaulting

company.

19.It is submitted that all the forms to be filed by the companies are

required to be filed online, using the Director Identification

Numbers and/ or Digital Signature Certificates of its Directors as

the case may be. However, owing the impugned acts of the

Respondent, the Petitioner has been disabled from using Director

Identification Number and Digital Signature Certificate for filing

any form before ROC in respect of all such companies in which

Petitioner is also a director. The repercussion of the aforesaid

arbitrary act of the ROC has crippled smooth functioning,

including compliance of other companies where Petitioner is a

director and has exposed him to punitive actions under various

sections of the of the Companies Act, 2013.

20.It is submitted that the impugned action of the respondents in de–

activating the DIN of the petitioners is also in complete violation

of The Companies Act, 2013 and The Companies (Appointment

and Qualification of Directors Rules), 2014.The Companies Act,

2013 nowhere states that a disqualification under Section 164

will cause immediate deactivation of the DIN of the Directors.

Nor is the same provided in The Companies (Appointment and

Qualification of Directors Rules), 2014. Rule 11 of The

Companies (Appointment and Qualification of Directors Rules),

2014 enumerates the circumstances under which DIN can be

cancelled, surrendered and deactivated. The grounds on which

DIN can be cancelled, surrendered and deactivated are

i. when the DIN is found to be in duplicate¸

ii. when DIN was acquired by wrongful or fraudulent

manner,

iii. On the death of the concerned individual,

iv. when the concerned person has been declared by a

competent court to be a person of unsound mind,

 v. if the concerned person has been adjudicated as

insolvent, vi. On an application made by the

concerned person to surrender his or her DIN

The impugned action of the Respondent in deactivating the DIN

of the Petitioner on acquiring a disqualification under Section

164 is therefore clearly not permissible.

21. It is thus submitted that the press release dated 12.09.2017 and

the list dated 07.09.2017 disqualifying the Petitioner and then

seeking immediate vacation of office by deactivation of DIN is

arbitrary, illegal and ultra vires the provisions of the Companies

Act, 2013. It is further submitted that the Petitioner has been

rendered remediless.

22. That the Petitioner is holding the position of director in other

companies and the disqualification has caused severe hardship to

him and the companies where he is serving as a Director. The

Respondents have acted arbitrarily, irrationally and without the

 mandate of law and by violating the legal and fundamental rights

guaranteed to the Petitioners.

23. That at present the disqualification of the Petitioner is creating

severe impediments in carrying out business activities in other

companies where he is a Director.

24. It is submitted that the Petitioner herein do not have any other

efficacious alternate remedy against the acts of the Respondents

other than filing of the present writ petition.

25. It is submitted that Petitioner has not filed any similar petition /

suit / appeal on filing of the present writ petition in any court of

law. It is submitted that the Petitioner became aware of the

disqualification only around March 2019 when he had to file

documents for other companies and thereafter sought legal

advice immediately.

26. It is submitted that this Hon’ble Court has jurisdiction to entertain

the present petition as the impugned acts have been done by the

Respondent no. 1 wherein, Respondent No. 2 is located in Patna,

within the jurisdiction of this Hon’ble Court.

 PRAYER

27. In view of the premise stated hereinabove, it is most respectfully

prayed that this Hon’ble Court may be pleased to:

(i) Issue a writ of certiorari or any other writ, order or

direction declaring section 164 (2)(a) of the Companies

Act, 2013 and the press release/impugned order dated

12.09.2017 as unconstitutional and ultra vires;

(ii) Issue a writ of mandamus or a writ of any other nature or

direction declaring that the publication of the name of the

Petitioner on the list of disqualified directors uploaded and

published on the website of Respondent, is arbitrary and

illegal and quashing the list to the extent pertaining to the

Petitioner;

(iii) Issue a writ of mandamus or a writ of any other nature or

any other direction/order directing the Respondent not to

treat the Petitioner as “disqualified director” under Section

 164 of the Companies Act, 2013 and for any consequential

measures and/or effects arising / contemplated there from;

(iv) Issue a writ of mandamus or a writ of any other nature or

any other direction/order directing the Respondent to

change the status of the Petitioner in the records of the

Respondent No. 2 from “disqualified director” and

consequently directing Respondent to activate the

Directors Identification Number and Digital Signature

Certificates of the Petitioner, thereby enabling the

Petitioner to act as Director and to file the documents and

returns on behalf of the companies on which such

Petitioner serves as a director;

(v) Pass any such other / further writ of any nature, direction,

order as this Hon’ble Court may deem fit in the facts and

circumstances of the present case;

AND FOR THIS ACT OF KINDNESS, THE PETITIONER SHALL

AS IN DUTY BOUND, EVER PRAY.

 PETITIONER

THROUGH

ADVOCATES FOR THE PETITIONER

SHARMA & SHARMA
ADVOCATES & LEGAL CONSULTANTS
C-53/54, LOWER GROUND FLOOR,
LAJPAT NAGAR – I,
PLACE: NEW DELHI NEW DELHI – 110024
DATE: .05.2019 T: (011) 4596 0980