Debangsu Basak, J.:— The petitioner assails the vires of Section 164(2)(a) of the Companies Act, 1956. The petitioner also assails a notice published by the Registrar of Companies in listing the petitioner as a person disqualified to act as a director under Section 164(2)(a) of the Act of 2013.
2. Learned senior advocate for the petitioner submits that, Section 164(2)(a) of the Act of 2013 is prospective in nature. The impugned notice of the Registrar of Companies speaks of non-filing of returns by the defaulting company for the financial year 2013 to 2016. The provisions of Section 164(2)(a) of the Companies Act, 1956 came into effect from April 1, 2014. According to him, the financial year 2013 to 2014 is beyond the purview of the Act of 2013. The alleged non-filing of return for such period cannot be construed or taken into consideration for the purpose of infraction of the provisions of the Companies Act, 2013. The Act of 2013 cannot be given retrospective effect. He submits, referring to the decisions passed by other Courts that, a person similarly situated and circumstanced as that of the petitioner has received interim relief from the Hon'ble High Court at Delhi as also from the Hon'ble High Court of Judicature at Hyderabad. He submits that, the Act of 2013 being the Central Act and in view of the principles of comity of Court, this Hon'ble Court should grant similar order of stay as done by the other Hon'ble High Courts.
3. On instructions, learned senior advocate for the petitioner submits that, the last annual return of the defaulting company was filed for the year ended March 31, 2013. The balance sheet of such year shows that the defaulting company had an asset valued of about Rs. 32,000/- and a cash in hand of about Rs. 1,50,000/-. The accumulated net loss of the defaulting company is about Rs. 7,50,000/-. He submits that, the petitioner is carrying the annual returns of the defaulting company for the defaulted years and that, if permitted, the petitioner would be able to file the same with the Registrar of Companies. He seeks directions in that regard. He further submits that, his client is willing to deposit a sum of Rs. 10,00,000/- with the Registrar General of this Hon'ble Court in order to cover the asset value as also the net accumulated loss of the defaulting company, to establish the bona fides of the petitioner. He submits that, the petitioner is standing for election as a director for Hindusthan Club and that the election is scheduled to commence from November 1, 2017. Unless interim protection is granted, the petitioner will suffer irreparable loss which may not be compensated subsequently.
4. Learned Additional Solicitor General appearing for the Registrar of Companies submits that, the Act of 2013 cannot be said to have retrospective effect with regard to defaults already committed by a defaulting company. In support of such contentions, he relies upon (2010) 14 SCC 230 (Ishwar Nagar Cooperative Housing Building Society v. Parma Nand Sharma). He submits that, the petitioner had adequate opportunity to file the returns in respect of the defaulting company within the time prescribed by the law then prevailing. Nonetheless, after the Act of 2013 had come into effect, there was a window of opportunity made available to the petitioner to avail of for the purpose of filing such returns. The petitioner did not choose to do so. At this stage, at least by way of an interim relief, the Court should not allow the petitioner to file such returns. He draws the attention of the Court to the orders passed by the Delhi High Court and submits that, provisions of Section 167 of the Act of 2013 have not been taken into consideration. He submits that, in view of Section 167(1)(a) of the Act of 2013, the disqualification incurred by a director is automatic. Therefore, without deciding the vires of the provisions of Section 164(2)(a) of the Act of 2013, neither the prima facie case nor the balance of convenience can be said to be in favour of the petitioner warranting grant of interim relief, as prayed for.
5. I have considered the rival contentions of the parties and the materials made available on record.
6. As noted above, the vires of Section 164(2)(a) of the Act of 2013 is under challenge in the present writ petition. The same is required to be dealt with after allowing the respondents an opportunity of filing affidavits. Apart from the challenge to the vires of such section, the petitioner has also challenged a notice issued by the Registrar of Companies placing the petitioner as one of the directors who have incurred this qualification under Section 164(2)(a) of the Act of 2013 due to non-filing of returns for the financial year 2013-2016 in respect of the defaulting company.
7. The defaulting company in the present case is the respondent no. 3. The name of the respondent no. 3 stands struck off from the Registrar of Companies on June 30, 2017. The petitioner was a director of such company. In view of the provisions of Section 164(2)(a) read with Section 167(1)(a) of the Act of 2013, the petitioner stands disqualified as a director and is not entitled to stand for election or reelection as a director in any other company for a period of five years from the date of default in filling the returns. In the present case, the petitioner seeks to be appointed in a company recognised under the Companies Act, 2013 in the category of a director.
8. The Delhi High Court, in an order dated October 10, 2017 passed in W.P (C) 8876 of 2017 (Srinivasan Sandilya v. Union of India) has granted an interim stay of the order directing disqualification of the petitioners therein as directors. The reasoning given is that prima facie Section 164(2)(a) of the Act of 2013 does not provide for immediate disqualification of directors. A similar order of stay was granted by the Division Bench of the Delhi High Court in an order dated October 10, 2017 passed in WP (C) 8896 of 2017. However, the same is without any reasons. The Hon'ble High Court of Judicature at Hyderabad has passed an order dated October 6, 2017 in W.P No. 32575 of 2017 (Dr. Reddy's Research Foundation v. The Ministry of Corporate Affairs) directing restoration of the DIN number of the directors to enable such directors to submit annual returns in respect of the defaulting company for the years 2011 and 2016.
9. The issues raised in the writ petition are such that, an opportunity should be afforded to the respondents to file affidavits.
10. Let affidavit-in-opposition be filed within three weeks from date; reply thereto, if any, be filed a week thereafter. The writ petition will be treated as ‘ready for hearing’ immediately on completion of the time period prescribed for filing affidavits. Liberty to the parties to mention for early listing under the heading ‘’For Hearing”.
11. So far as interim order is concerned, it appears that persons similarly situated and circumstanced as that of the writ petitioner have received orders directing stay of the disqualification order issued by the Registrar of Companies. On the principle of comity of Court, although the orders of the other Courts referred to by the learned senior advocate for the petitioner are interim orders and not binding upon this Court, the petitioner has made out a prima facie case requiring grant of interim protection, however, on terms.
12. In such circumstances, there will be an unconditional stay of the impugned order of the Registrar of Companies limited to the petitioner for a period of one week from date. The petitioner will deposit a sum of Rs. 10,00,000/- with the Registrar General of this Hon'ble Court who is requested to keep the same in interest bearing fixed deposit account in any nationalised bank. Such deposit will abide by the result of the writ petition. The appointment or re-appointment of the petitioner as a director of any company recognised under the Act of 2013 subsequent to today will abide by the result of the writ petition. The stay will continue for a period of 6 months or until further order, whichever is earlier, upon the petitioner depositing the sum of Rs. 10,00,000/- within seven days from date.
13. Urgent certified website copies of this order, if applied for, be made available to the parties upon compliance of the requisite formalities.
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