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Delhi HC orders reactivation of DINs and DSCs of Directors alleged for non-filing of Financial Statements and Annual Returns [Read Order]

DINs - DSCs - Financial Statements - Annual Returns - Delhi High Court - Taxscan

The Delhi High Court ordered the reactivation of Director Identification Numbers (DINs) and Digital Signature Certificates (DSCs) of persons alleged for non-filing of financial statements and annual returns, within 3 working days.

The Petitioners, Mr. Sandeep Agarwal and Ms. Kokila Agarwal, both of whom are directors in two companies namely Koksun Papers Private Limited and Kushal Power Projects Private Limited. 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 for a period of five years under Section 164(2)(a) of the Companies Act, 2013. Consequently, their DIN and DSC have also been cancelled.

In view thereof, they are unable to carry on the business and file returns etc. in the active company Koksun Papers. By the present petition, the disqualification is challenged and quashing is sought of the impugned list of disqualified directors.

The petitioner while relying upon Sections 164(2) and 167(1)(a) of the Act to submit that the said sections were materially amended by the Companies Amendment Act, 2018, and introduction of the disqualification in proviso under Section 167(1)(a), comes into effect only on 7th May, 2018. Thus, in respect of the companies, in which the Petitioners were already directors, a conjoint reading of Section 164(2) and 167(1)(a) would show that the disqualification would not apply in a retrospective manner.

The Ministry of Corporate Affairs argued 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 Single Judge bench of Justice Pratibha M.Singh observed that considering the COVID-19 pandemic, the MCA has launched the Fresh Start Scheme-2020, which ought to be given full effect. It is not uncommon to see directors of one company being directors in another company. Under such circumstances, to disqualify directors permanently and not allowing them to avail of their DINs and DSCs could render the Scheme itself nugatory.

“In order to enable the Directors of Koksun Papers i.e. the Petitioners herein, 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, 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,” the bench said.

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