In this instance, the failure to comply with section 164(2)(a) of the Companies Act, 2013, which requires the filing of financial statements or annual returns for any continuous period of three financial years, resulted in the disqualification of the directors of a company called "Nalini Limited" from 1 November 2017 to 31 October 2022. Their DINs and DSCs were consequently turned off.
The petitioners were having issues in other operating companies as a result of their disqualification. They were chosen as directors since they aspire to be directors of other operating companies and want to launch a new venture.
In the instant case titled Anuj Mittal v. Union of India. The issue raised for clarification before the Delhi High Court were:
Whether directors continue to be directors?
With regard to this issue, In Anjali Bhargava v. UOI [W.P. (C) No. 11264 of 2020, dated 6-1-2021], the Court considered the legal position relating to the activation of DIN/DSC numbers of directors of defaulting companies. also made reference to the MCA's CFSS scheme while stating that directors of businesses that have been struck off should be given the chance to apply for CFSS before being appointed as directors of other/new firms. The plan aims to give directors of defaulting companies a new beginning when they apply for positions in other companies or want to launch new ventures.
The Court noted that because the petitioners' disqualification occurred before 7/5/2018, they would be directors of other businesses in addition to the defaulting firm who were already disqualified, and the proviso of section 167(1)(a) would not apply. Directors would continue to serve as directors of businesses other than the defaulting company, which would result in the reactivation of petitioners' DINs and DSCs within ten days. The Petitioners are allowed to pursue their legal remedies before the NCLT if they wish to request the restoration of the firm that was struck off.
The Court categorically stated that,
“In furtherance of the purpose of this scheme, directors of struck off companies who seek to be appointed as directors of other/new companies, ought to be provided an opportunity to avail of this scheme, provided that they have undergone a substantial period of their disqualification. The scheme clearly seeks to provide a fresh start for directors of defaulting companies who seek appointment in other companies or wish to start new businesses. Therefore, if a substantial period has passed since the disqualification of such directors, they ought to be given an opportunity to avail of the scheme."