Procedure for removal of Disqualification of Director disqualified u/s 164(2) due to non-filing of Annual return of the Company.

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BASIS ON WHICH DIRECTORS CAN BE DISQUALIFIED?

 

Companies Act, 2013 provides disqualification of Director U/s 164(2), a director can be disqualified based on the following reasons

164. (1) A person shall be disqualified from appointment as a director of a company, if
(a) he is of unsound mind and stands so declared by a competent court;
(b) he is an undischarged insolvent;
(c) he has applied to be adjudicated as an insolvent and his application is pending;
(d) he has been convicted by a court of any offence, whether involving moral turpitude or otherwise, and sentenced in respect thereof to imprisonment for not less than six months and a period of five years has not elapsed from the date of expiry of the sentence:

Provided that if a person has been convicted of any offence and sentenced in respect thereof to imprisonment for a period of seven years or more, he shall not be eligible to be appointed as a director in any company;

(e) an order disqualifying him for appointment as a director has been passed by a court or Tribunal and the order is in force;
(f) he has not paid any calls in respect of any shares of the company held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call;
(g) he has been convicted of the offence dealing with related party transactions under section 188 at any time during the last preceding five years; or
(h) he has not complied with subsection (3) of section 152. Allotment of Director identification number.

(I) No person can hold Directorship in more than twenty Companies At a Time (out of them maximum public company directorship can be 10 only)

164(2) No person who is or has been a director of a company which—
(a) has not filed financial statements or annual returns for any continuous period of three financial years; or
(b) has failed to repay the deposits accepted by it or pay interest thereon or to redeem any debentures on the due date or pay the interest due thereon or pay any dividend declared and such failure to pay or redeem continues for one year or more,

shall not be eligible to be re-appointed as a director of that company or appointed in other company for a period of five years from the date on which the said company fails to do so.]

MCA has disqualified 5.12 lakh directors so far to become a director in any Company for 5 years under section 164(2) and 167(1)(a) of the Act. 

HOW DISQUALIFICATION UNDER SECTION 164(2) CAN BE REMOVED

Earlier a Condonation of delay scheme was initiated by the Ministry of Corporate affairs where temporary activation of DIN was Initiated through which Company can file his Annual return and pending Document and can make default good.

PROCESS OF REMOVAL OF DISQUALIFICATION OF DIRECTOR AND STRIKE OFF STATUS OF COMPANY?

An appeal can be made to the High court for removal of Disqualification declared by ROC under section 164(2)

After the expiration of CODS, disqualified directors can appeal to the High Court independently for the DIN revival and National Company Law Tribunal (NCLT) to restore their Company name.

TO FILE A WRIT PETITION– The first and foremost step that a disqualified director needs to take is to file a Writ petition. The Writ Petition is filed under Article 226 of the Indian Constitution before the High Court. An appellant must accompany these set of information in correspondence to the said Writ petition:

  • Memo of parties to the petition comprising the name, designation, address, etc.;
  • A Notice of Motion with an urgent application;
  • Explain the factors which lead to the non-compliance of filing of statutory documents;
  • Also, include a synopsis of the list of date and events;
  • Current status of the company and directors seeking restoration;
  • A list of all the companies in which the appellant is the director;
  • A copy of Press Release or Impugned Notice which the ROC has issued, listing all disqualified directors;
  • Stay application under Section 151 of CPC;
  • And a Prayer clause to discard the publication issued by the ROC under Section 164 (2) (a) of the Companies Act, 2013. 

APPEAL UNDER SECTION 252- The next step is to file a petition under Section 252 of the Companies Act. It applies to those companies whose name got struck off in disqualification. Such an appeal is made before the National Company Law Tribunal (NCLT) to recover the name of the company with ROC.

FILE STATUTORY DOCUMENTS- After the regulatory bodies of NCLT and Hon’ble High Court passes the orders of DIN reactivation and revival of struck off the company. The appellant requires to file Statutory documents with ROC. Also, file the annual returns of the last three years with Income-Tax Authority.

ACTIVATION OF DIN- Once the appellant meets all the necessary compliances and pays off any imposed penalty, the ROC takes the course of action. Thereby ROC raises a ticket on MCA21 portal via Change Requirement Form (CRF) and uploads a copy of the concerned order on the portal. Thus, after validation of CRF, the deactivated DIN shall get reactivated again.

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