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Delhi HC permits Director with frozen DIN and DSC to avail Companies Fresh Start Scheme 2020 after seeking condonation of delay [Read Order]

DIN - DSC - Companies Fresh Start Scheme 2020 - condonation - Taxscan

The Delhi High Court permitted the  Director with frozen Directors Identification Number (DIN) and Digital Signature Certificate (DSC) to avail Companies Fresh Start Scheme 2020 after seeking condonation of delay in respect of  Delhi Control Devices Private Limited (DCDPL).

The Petitioner, Mr. Ashish Gupta is a director in three companies namely (i) DCDPL ABMR Tradex Private Limited (ABMR), and DCD Grand Power India Private Limited (DCD Grand).

He has been disqualified as a director under Section 164 of the Companies Act, 2013 with effect from 1st November 2017, due to the alleged non-compliance by DCDPL in filing its returns from 2014-2017. The DIN and DSC of the Petitioner have also been frozen, though the name of the company, DCDPL has not been struck off and it continues to be an active company.

The director prayed before the court that the publication of the name of the Petitioner in the list of disqualified directors ought to be set aside and quashed and that the Petitioner should not be treated as a disqualified director under Section 164 of the Act.

The counsel for the petitioner contended that in so far as two of the Companies i.e. ABMR and DCD Grand are concerned, in terms of Mukut Pathak case, the Petitioner would not demit their office.

As far as DCDPL is concerned, since this is the defaulting company, they would also be permitted to continue as directors and file their records with the Registrar of Companies (ROC). The counsel relied upon the Companies Fresh Start Scheme (CFSS) 2020 dated 30th March, 2020 introduced by the MCA to argue that under the Scheme, if the defaulting company is active, the ROC has permitted the defaulting company to file its documents.

In the present case, there are three aspects to be considered.

Firstly, whether the DIN of the Petitioner is liable to be activated for the two companies ABMR and DCD Grand.

Secondly, whether the Petitioner can be considered as a Director of DCDPL.

Thirdly, whether DCDPL ought to be permitted to avail of the Scheme and filed its documents and if so, can the company do the filings through the Petitioner, signing as a director.

The single judge bench consisting of Justice Prathibha M. Singh while addressing the issue in respect of activating DIN held that the DIN of the Petitioner was deactivated and he was disqualified prior to the proviso to Section 167(1)(a) taking effect. Thus, qua ABMR and DCD Grand, the director’s disqualification is not sustainable on the ground that the ROC disqualified the Petitioner as a director with effect from 1st November 2017. On the said date, the Proviso to Section 167 (1)(a) did not exist.

The court while addressing second issue rejected the stand of the ROC’s that the shareholders can nominate a new director and approval for the same can be sought, would not be an answer, as the same could in effect result in dummy directors being appointed to Companies, which is exactly what the new provisions may have intended to avoid. In any event, so long as the present case, the Petitioner does not demit office and would be entitled to act as a Director in DCDPL.

The court held that the petitioner would be entitled to avail of the Scheme to file documents of the defaulting company, which is still an active company whose name has not been struck off.

The court clarified that in respect of DCDPL, the Petitioner is permitted to avail of the Scheme, file the relevant documents and seek condonation of delay.

The court further clarified that in respect of the other two companies i.e. ABMR and DCD Grand, the DIN and DSC of the Petitioner would not be treated as suspended from the position of Director.

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