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Madras High Court quashes ROC action deactivating DINs of all disqualified Directors [Read Judgment]

Madras High Court - quashes - ROC - action - deactivatin - DINs - disqualified Directors - taxscan

The Madras High Court held that the Registrar of Companies (ROC) is not empowered to deactivate the Director Identification Number (DIN) under Companies (Appointment and Qualifications of Directors) Rules, 2014 (AQD).

The batch of writ appeals were filed arising out of a common order whereby the separate writ petitions filed by each Appellant to quash the respective disqualification by the ROC and for consequential reactivation of the DIN or permission for appointment or reappointment as director were dismissed.

As regards the deactivation of the DIN, the learned single Judge concluded that the DIN can only exist during the period when an individual holds office as a director and, therefore, the deactivation of the DIN is a logical corollary of disqualification, which was challenged.

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 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 example, would be required to retain the DIN so as to make good the deficiency by filing the respective documents.

The division judge bench headed by Chief Justice A.P. Sahi held that 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.

Therefore, the court concluded that the DIN of the respective directors shall be reactivated within 30 days of the date of receipt of a copy of this order.

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