Delhi High Court orders the reactivation of DIN of the disqualified dire...

Delhi High Court
orders the reactivation of DINs and DSCs of the disqualified directors within a
period of 3 working days

IN SANDEEP AGARWAL  VS UNION OF INDIA

SANDEEP AGARWAL &
ANR. ..... Petitioners

versus

UNION
OF INDIA & ANR. ..... Respondents

The name of Kushal
Power was struck off from the Register of the Companies on 30th June, 2017, due
to non-filing of financial statements and annual returns. The Petitioners,
being directors of Kushal Power were also disqualified with effect from 1st
November, 2016 for a period of five years till 31st October, 2021 under Section
164(2)(a) of the Companies Act,2013 (hereinafter, “Act”).

in respect of the
companies,in which the Petitioners were already directors, a conjoint reading
of Section

164(2) and 167(1)(a) of
the Companies Act,2013 would show that the disqualification would not apply in
a retrospective manner. Counsel relies upon the judgment of Delhi High Court in
Courtin Mukut Pathak & Ors. v. Union of India & Ors., 265 (2019) DLT
506.

Koksun Papers is
entitled to take benefit of the Companies Fresh Start Scheme (CFSS)
2020(hereinafter, “Scheme”) dated 30th March, 2020 introduced by the Ministry of
Corporate Affairs, whereby active companies are permitted to make good any
defaults in filing of documents and seek immunity from disqualification.

However, the
directors, who have to sign the papers for Koksun Papers, have been disqualified
and their DINs and DSCs have been deactivated. As a result, Koksun Papers is
not able to avail the benefit of the said Scheme.

Ld. counsel thus prays
that in view of the judgment in Mukut Pathak (supra) as also subsequent orders
where the said judgment has been followed, the disqualification of the
Petitioners be set aside.

On behalf of Ministry
of Corporate Affairs, Mr. George, ld. Counsel submits that the judgment in
Mukut Pathak (supra) has been challenged by way of an appeal by the Ministry
and the said LPA is pending, though no stay has been granted. Ld. counsel also
relies upon the recent order passed by the ld. Division Bench in two writ
petitions i.e. Anamika Devi v. Union of India. &
Anr.,[W.P.(C) 4356/2020, decided on 20th July, 2020] and

Gaurav Kumar v. Union
of India & Anr., [W.P.(C) 4357/2020, decided onm20th July, 2020] to argue
that the disqualification list having been notified in

2017, the challenge to
the same is extremely belated, hence the writ petition deserves to be
dismissed.

The judgment in Mukut
Pathak (supra), insofar as the merits of thecase is concerned, is squarely
applicable in the present case. The said judgment clearly holds that the
proviso to Section 167(1)(a) of the Companies Act 2013 cannot be read to
operate retrospectively. It was further held that the said proviso, being a
punitive measure with respect to the rights and obligations of directors,
cannot be applied retrospectively unless the statutory amendment expressly
provides so.

In order to enable the
Directors of Koksun Papers i.e. the Petitionersherein, to continue the business
of the active company Koksun Papers, in the fitness of things and also in view
of the judgment in Mukut Pathak (supra), the disqualification of the
Petitioners as Directors is set aside. The DINs and DSCs of the Petitioners are
directed to be reactivated, within a period of three working days.