MANU/WB/0447/2020

Equivalent/Neutral Citation: [2021]224C ompC as231(C al)

IN THE HIGH COURT OF CALCUTTA

W.P. Nos. 268 and 273 of 2019
Decided On: 18.03.2020
Imraj Ali Molla Vs. Union of India and Ors.
Hon'ble Judges/Coram:
Sabyasachi Bhattacharyya, J.
Counsels:
For Appellant/Petitioner/Plaintiff: Manju Agarwalla and Bajrang Manot
For Respondents/Defendant: Shiv Chandra Prasad
JUDGMENT
Sabyasachi Bhattacharyya, J.
1. The subject-matter of the writ petitions being common, both are taken up for hearing
together.
2 . The grievance of the petitioners, as directors of several companies, is that their
Directors Identification Numbers (DINs) were deactivated by the impugned action of the
respondent no. 3, the Registrar of Companies (RoCs) without following the due process
of law.
3 . It is submitted by learned counsel for the petitioners that although only one of the
companies was alleged to have committed default, the DIN of the petitioners was
deactivated in respect of the other companies, in which they were directors, as well,
which was de hors the law.
4. Moreover, even in respect of the defaulting company, the DIN of the petitioners could
not be deactivated without giving an opportunity of hearing to the petitioners on the
allegations made against them in respect of each company.
5. The disqualification of the company-in-question took place in the year 2014, that is,
prior to the 2018 Amendment of the Companies Act, 2013 (hereinafter referred to as
"the 2013 Act") and as such, the provisions of the 2018 Amendment would not be
applicable thereto.
6. By relying on the provisions of Section 164 of the 2013 Act, learned counsel for the
petitioners argues that the disqualification contemplated in the said section was
restricted to the defaulting company only and not to the other companies, in which the
directors of the defaulting company were also directors.
7 . By placing particular reliance on sub-section (2) of Section 164, learned counsel
submits that the restriction as to such director was limited to eligibility to be
"reappointed" as a director of the defaulting company but envisaged the expression
"appointed" in respect of other companies, both for a period of five years from the date

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of default.
8 . Distinguishing thus, learned counsel argues that, in any event, the petitioners' DIN
could not be deactivated in respect of the other companies than the alleged defaulting
company. The expression "reappointed" ex facie indicates that the petitioner has been a
director of the defaulting company while the expression "appointed", relating to other
companies, meant fresh appointments. As such, the existing directorship of the
concerned persons in the other companies was not touched by the said provision.
9. Learned counsel for the petitioner next argues that, in consonance with the principle
of Audi Alteram Partem enshrined in natural justice, the petitioners had to be given a
hearing prior to such disqualification as a director, which would prevent such decision
from being arbitrary and ex parte. In the present case, however, no hearing was given
to the petitioners at all.
10. Learned counsel for the petitioners cites, in this context, a division bench judgment
of the Allahabad High Court rendered on January 16, 2020 (unreported) in several
matters, including the Jai Shankar Agrahari vs. Union of India and another
(unreported). It was held therein, inter alia, that Section 248 of the 2013 Act does not
talk of disqualification which a director would suffer so as to incur disqualification
under Section 164(2), read with Section 167 of the said Act. The mere fact of striking
off of a company by itself cannot prejudice a director for the purpose of Sections 164(2)
and 167(1) of the 2013 Act. A prior notice, it was held, would be necessary to find out
whether the alleged disqualification which was incurred by the directors, as alleged by
the Registrar of Companies, was an undisputed fact or, if disputed, opportunity to the
concerned person was given to establish otherwise.
11. Moreover, if a director, despite knowing about his disqualification, continues to act
as a director, he would incur penalty, but the continuance of a person as a director, in
office of the director could not be said to be bad in law.
12. It was further held in the said judgment that various High Courts had examined
relevant statutory provisions on the aspect of whether there is any provision
empowering the RoCs to deactivate the DIN of the directors, allotted under Section 154
of the 2013 Act. The entire view was, that there is no such provision to deactivate the
DIN of a director only on the ground that a director has incurred disqualification under
Section 164(2)(a) or his office has become vacant under Section 167(1)(a). As such, it
was held that, in the absence of any such provision to deactivate the DIN of the
petitioners if they have incurred disqualification under Section 164 of the 2013 Act, the
action of the RoC in deactivating such DIN could not be sustained.
1 3 . That apart, three unreported judgments of a Single Judge of this Court, dated
November 22, 2019 in W.P. No. 21504(W) of 2019 [Chetan Chokhani vs. Union of India
and others], dated December 3, 2019 in W.P. No. 22071(W) of 2019 [Dhiraj Kumar
Mantri vs. Union of India and others] and dated January 22, 2020 passed in W.P. No.
700(W) of 2020 [Subhas Kumar Biswas vs. Union of India and others], along with a
bunch of several other writ petitions, were cited by the petitioner. The Single Judge in
the said judgments, had held that the DIN of a director could at best be disqualified in
respect of the defaulting company and not in respect of other companies, of which the
same person is a director. Relying on those judgments, learned counsel for the
petitioners argues that in the present case as well, the DIN of the petitioners could not
be deactivated in their entirety, thereby denuding the petitioners powers as a director in
companies other than the defaulting company.

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14. In reply, learned counsel for the respondents places reliance on a division bench
judgment of the Bombay High Court dated February 7, 2020 in W.P. No. 1224 of 2018
[Satish Kumar Gupta vs. Union of India and Anr.], wherein it was held tentatively that
at the time of admission of an appeal, the statutory provisions prevailed over the
government circulars. In this context, it was held that, prima facie, Section 164 could
operate retrospectively, in view of the filing of financial statements or annual returns of
a company, as contemplated in Section 164(2)(a) of the 2013 Act, being the basis of
disqualification. In the event the company did not file financial statements or annual
returns for a continuous period of three financial years, then the action is triggered.
Hence, in respect of such non-filing, the number of years preceding the disqualification,
would be taken into account to apply the rigour of Section 164(2)(a).
1 5 . Learned counsel for the respondents cites another judgment dated January 27,
2020 delivered by a learned Single Judge of the Madras High Court, where it was held,
inter alia, that an irrational interpretation cannot be given that the DIN can still attaches
itself to the individual after he resigns or is disqualified from the post of directorship or
vacates the office. Consequently, it was held, when a director is disqualified, it follows
that the DIN should be deactivated. Such disqualification automatically follows for non-
compliance of the requisite filings of annual returns/financial statements by the
defaulting company and could only exist during the life time of the post of director, and
not for the entire life of the individual.
16. Upon considering the arguments of both sides and the legal provisions-in-question,
it is evident that in the opinion of a division bench of the Allahabad High Court as well
as a learned Single Judge of this court in the four judgments cited by the petitioners,
the disqualification of the DIN of a director for the default of a particular company, of
which he is a director, cannot disqualify the said director from acting in the said
capacity in the other companies, which did not allegedly commit default.
17. As such, in any event, the disqualification of the DIN of the petitioners could not
operate in respect of other companies than the defaulting company. In the event the
DIN of a director is to be deactivated and not merely the name of the company struck
out from the RoC, the said person has to be given notice individually and heard and
given an opportunity to establish that he was not liable for the alleged default
committed by the company. Subscribing to such view, as iterated in the division bench
judgment of the Allahabad High Court cited by the petitioners, this court is of a similar
opinion that an opportunity of hearing had to be given to the petitioners prior to the
deactivation of their DINs, even in respect of the defaulting company, which has not
been given in the present case.
18. The division bench of the Allahabad High Court went one step further by holding
that the RoC cannot deactivate the DIN only on the ground that a director has incurred
disqualification under Section 164(2)(a) or his office has become vacant under Section
167(1)(a). Since such DIN is allocated under Section 154 of the 2013 Act, and there is
no provision in the Act for the deactivation of the DIN of a director only on the ground
of such disqualification under Section 164(2)(a) or Section 167(1)(a), the action of the
RoC in the present case, in deactivating the DIN of the petitioners on the ground of such
violation of Section 164(2)(a) of a particular company cannot confer a right on the RoC
to deactivate such DIN. In the absence of any such provision of deactivation of DIN in
the 2013 Act, the mere disqualification under Section 164(2)(a) of a company cannot
give rise to the consequence of deactivating the DIN, for which there is no provision in
the statute. In case of contravention of any of the provisions of Sections 152, 155 and
156, a punishment is provided under Section 159 of the 2013 Act. However, there is no

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scope of deactivation of an existing DIN on any ground whatsoever in the 2013 Act.
19. In view of the aforesaid findings, W.P. No. 268 of 2019 and W.P. No. 273 of 2019
are allowed, thereby setting aside the impugned orders of the RoC in the said respective
writ petitions, deactivating the DINs, bearing No. 00031327 of the petitioner in W.P. No.
268 of 2019 and No. 00031338 of the petitioner in W.P. No. 273 of 2019. The
respondents are directed to immediately reactivate and/or allocate new DIN numbers if
their previous numbers have been allocated to some other directors, within a fortnight
from the date of communication of this order by the respective petitioners in the writ
petitions to the respondents and to take all consequential action necessary to give effect
to such reactivation/allocation of DINs.
20. There will be no order as to costs.
21. Urgent certified website copies of this order, if applied for, be made available to the
parties upon compliance with the requisite formalities.
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