Case Law Details
Yashodhara Shroff Vs. Union of India (Karnataka High Court)
(a) It is held that Section 164(2)(a) of the Act is not ultra vires Article 14 of the Constitution. The said provision is not manifestly arbitrary and also does not fall within the scope of the doctrine of proportionality. Neither does the said provision violate Article 19(1)(g) of the Constitution as it is made in the interest of general public and a reasonable restriction on the exercise of the said right. The object and purpose of the said provision is to stipulate the consequence of a disqualification on account of the circumstances stated therein and the same is in order to achieve probity, accountability, and transparency in corporate governance.
(b) That Article 164(2)(a) of the Act applies by operation of law on the basis of the circumstances stated therein, the said provision does not envisage any hearing, neither pre-disqualification nor post- disqualification and this is not in violation of the principles of natural justice and hence, is not ultra vires Article 14 of the Constitution.
(c) That Section 164(2)(a) of the Act does not have a retrospective operation and is therefore, neither unreasonable nor arbitrary, in view of the interpretation placed on the same.
(d) That there has been an arbitrary exercise of power by the respondent authority in disqualifying the petitioners as directors of public companies by taking into consideration the period prior to 01.04.2014 as well as subsequent thereto for the purpose of reckoning the continuous period of three financial years. It is observed that even in respect of public companies, having regard to the nature of the consequences envisaged under Section 164(2) of the Act as compared to Section 274(1)(g) of the 1956 Act, the period prior to 01.04.2014 and subsequent thereto could not have been considered for reckoning three continuous financial years for disqualifying the directors of public companies. Such disqualification is hence quashed.
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