No Proof of Resignation: Delhi HC Reduces Fine to ₹1L for Former Company Directors over Non-Filing of Financial Documents [Read Order]

The Delhi High Court recently reduced the compounding fine imposed on two former directors of a company for the company’s non-compliance with filing requirements. The fines imposed on each directed was reduced from ₹1.5 lakh to ₹1 lakh each, while affirming their liability for non-filing of statutory financial documents in the absence of concrete proof of their resignation during the period of default.

The case arose when Vimal Nanda and another petitioner, directors of M/s Ruchika Industries Pvt. Ltd. contested the rulings of the trial court and the Additional Sessions Judge through which they had imposed substantial fines on the directors for failure to file the company’s Balance Sheet, Profit & Loss Account and Annual Returns for the years including 2012-13.

The sessions judge had taken into account the submissions of the petitioner and the fine of ₹2 Lakh each had been reduced to ₹1.5 Lakh.

The petitioners, represented by Rishi Manchanda, Arun Kumar, Siddharth Mullick and Lakhan Gupta contended that they had submitted their resignations to the Board of Directors in June 2011 and had ceased to participate in the affairs of the company from then, arguing that the subsequent non-compliance was the responsibility of the new management.

They further asserted that the Board’s failure to file their resignations with the Registrar of Companies resulted in their continued reflection as directors, despite their departure from the company’s management.

The respondent, represented by Arnav Kumar, countered that official records showed the resignation forms were only filed in 2015, and that there was no evidence of the resignations being accepted or acted upon by the company’s Board in 2011.

Reliance was placed on legal precedents emphasizing proportionality and the need to consider whether breaches were technical or intentional, including Hindustan Steel Ltd. v. State of Orissa and Viavi Solutions Pvt. Ltd. v. ROC, NCT Delhi and Haryana.

Justice Neena Bansal Krishna upon examination found that while the petitioners may have submitted resignations to the Board in 2011, there was no documentary evidence or minutes showing acceptance by the Board or their removal from directorship at that time.

In fact, the petitioners’ own submissions that their resignations were forwarded to the ROC in June, 2015 belies the argument that the petitioners had ceased to become directors of Ruchika Industries in 2011.

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However, considering the protracted litigation, the petitioners’ advanced age, financial hardship and their bona fide efforts to resolve the dispute, the Court invoked its discretionary powers to further reduce the compounding fine to ₹1 lakh each, with the balance sum to be deposited within fifteen days, thus disposing of the petition.

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