Prafful Lalwani


Condonation Of Delay Scheme – 2018

(Clean up the compliance issues and contribute to ‘Swachh’ Bharat)

  • Not filed annual return for a continuous period of three financial years??
  • Your Directors on the MCA identified list of 309614 directors??
  • As a consequence, they are disqualified and their DIN blocked??
  • Your company has not been deregistered.

Then this article is meant for you

The Companies Act, 2013 aiming to promote Corporate governance has armed the regulator with enormous powers. Exercising these, recently two major steps have been taken by the Registrar of Companies (RoC) in this respect  (i) Disqualified directors of the Company that had not filed annual return for continues 3 years, and (ii) the names of companies, prima facie not doing any business, were struck off.

After this MCA action, many representations have been made by the industry, defaulting companies and their Directors seeking an opportunity for the defaulting companies to make good this irregularity.

With a view to give opportunity to defaulting companies to file the Annual returns to become compliant, the Central Government has introduced the “Condonation of delay scheme 2018” (CODS-2018).

What did the MCA do in September 2017?

MCA identified the list of 3,09,614 directors who incurred disqualification u/s 164(2)(a) of the Companies Act, 2013 (the Act) and blocked their DIN numbers.

In addition, the MCA also removed, from the records of the Registrar, names of 2 lakh companies that have been inoperative.

What does Companies Act, 2013 talk about disqualification of Director?

Extract from Sec.164(2)(a) – Disqualifications for appointment of director

No person who is or has been a director of a company which has not filed financial statements or annual returns for any continuous three financial years, shall be eligible to be re-appointed as director of that company or appointed as director  in other company for a period of five years from the date on which the said company fails to do so.

Extract from Sec. 167(1) – Vacation of office of director

The office of a director shall become vacant incase he incurs any of the disqualifications specified in sec. 164 of the Act.

What is the background of CODS-2018?

Challenges by the Directors in various High courts for removal of disqualification. e.g.:

1. In Bhagvan das Dhananjaya Das Vs UoI (WP nos. 25455 & 25456 of 2017), Madras HC granted interim stay to MCA order disqualifying the petitioner from directorship u/s 164(2) of the Act.

2. In case of Dr. Reddy’s Research Foundation (WP nos. 40259 & 32575 of 2017), State of Telangana & Andhra Pradesh HC held that:

a) Rule 14 of Cos. (Appointment and Qualification of Directors) Rules, 2014 prima facie provides for rectifying the defect by enabling defaulting cos. to file returns and since this can only be via e-Filling, ordered restoration of DIN number of petitioners.

b) the Court also referred to the anomaly pointed out in the report of Company Law Committee (CLC) report that rectification ought to be made restricting the scope of disqualification to defaulting company.

What reliefs are provided by the Govt. to address the concerns?

1. Ministry of Corporate Affairs has introduced the CODS-2018 Scheme to give an opportunity for the non-compliant, defaulting companies to rectify the default and become complaint.

2. The Companies (Amendment) Act, 2017 which received Presidential assent on 3rd January, 2018 has following breathers to be notified:

a) Inserted a Proviso to the effect that director shall not incur disqualification u/s 164(2)(a) for a period of six months from the date of his appointment. Thus a new director gets time to rectify the default of the Company during this six months period.

b) Another Proviso inserted to Section 167(1)(a) provides that on incurring disqualification u/s 164(2), the office of the director becomes vacant in all the companies other than the company which is in default under that sub-section.

What is CODS-2018?

The Scheme provides for temporary restoration of DIN during the currency of the Scheme “with a view to giving  opportunity for the non-compliant, defaulting companies to rectify the default” and become compliant.

Who are eligible to opt for e-Form CODS, 2018 ?

CODS-2018 is for the defaulting companies whose status in the record of the Registrar of Companies (ROC) is active. In other words, the scheme is not applicable for those companies which have been struck off/ whose name have been removed from the record of ROC.

What is the Scheme period?

1st January, 2018 to 31st March, 2018 (three Months).

What are the various terminologies under CODS, 2018 ?

Over Due Documents
  • Financial Statements; or
  • Annual returns; or
  • Other associated documents, as applicable; or
  • Documents listed below in “Annexure-A” as Overdue documents
Defaulting Company Company which has not filed its

  • Financial statement; or
  • Annual return

As required under the Companies Act, 1956 or Companies Act, 2013, as the case may be, for a continuous period of 3 years.

Designated Authorities RoC having jurisdiction over the Registered office of the Company.

What are the Forms that only can be filed  under CODS-2018 (Over due documents) ? – “Annexure-A”

S.No. Description

Form No.

Companies Act, 1956 Companies Act, 2013
1. Annual return by company having share capital 20B MGT-7
2. Annual return by company, not having share capital 21A MGT-7
3. Form for filling of Balance sheet/ Financial statement and Profit and loss a/c 23AC, 23ACA, 23AC-XBRL, 23ACA-XBRL AOC-4 (XBRL, non-XBRL, CFS)
4. Compliance certificate with ROC 66
5. Intimation for appointment of Auditors 23B ADT-1

 What is the procedure to be followed under CODS-2018 ?

Get into action straight- away

Start preparing right away, begin advance preparations and file the ‘overdue documents’ so as to be able to file e-CODS as soon as it is available on the MCA site.

When will the e-CODS 2018 will be available?

The e-Form CODS 2018 would be available from 20th February 2018 or an alternate date, which will be intimated on

What is the disclosure/declaration that has to be made under e-CODS 2018?

What does defaulting company- whose name has been struck off / removed from the ROC do?

“Strike-off” is an action by the ROC to remove name from Register of Companies. This is done where the RoC is satisfied that company is not carrying on any business or operations for a period of two immediately preceding financial years.

Here remediless directors of struck-off Companies again started approaching to High courts and in couple of cases they are allowed to avail CODS-2018 scheme – in a case where the company has approached NCLT u/s 252 for revival and in another case where the company sought opportunity to seek voluntary dissolution u/s 248(2) of the Act.

What are the consequences of non-availing of CODS-2018 ?

The DIN of Directors associated with defaulting companies that have not done the below mentioned shall be liable to be de-activated on expiry of the scheme period; if

  • the over due documents have not been filed; and
  • the e-form CODS-2018 is not filed; and
  • these are not taken on record in the MCA21 registry; and
  • are still found to be disqualified on the conclusion of the scheme.

What is the Conclusion?

Best to avail the first opportunity to clean up on defaults.

File overdue documents.

Change status from non-compliant to a compliant Company.

“Plan now.

Please do not wait for availability of the e-CODS 2018 on MCA site.”

Author’s Details: Author Prafful Lalwani, B. Com., A.C.S. is associated with Surana & Surana International Attorneys, Chennai.

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June 2021