The opportunity given to disqualified Directors under Condonation of Delay Scheme, 2018 (CODS 2018) continued for 4 months, The Director Identification Numbers (DIN) of such disqualified directors were activated so that they can do the necessary filing under the Scheme. Now after 1st May the CODS 2018 is not in operation that means the opportunity has ended. It may also be said that this was a partial opportunity given to disqualified Directors; the directors who were associated with Struck off Companies were denied the benefits of this Scheme. But it is rightly said that where there is a will there is a way, keeping that in mind, some of the directors approached various High courts to remove their disqualifications. Various petitions were also filed in High court Delhi at various points of time during the period of CODS 2018; all such petitions sought relief under CODS 2018. The Major decision was passed by Delhi High Court. Justice Gita Mittal Acting Chief justice of Delhi High Court on 22nd March 2018. Although it was an interim order but will of the Court could easily be noticed. Further this interim order paved the way & gave a new option to disqualified directors seeking relief. There were around 120 petitioners who in a unanimous voice challenged the order of MCA for disqualification of their Directorship. Justice Gita Mittal passed an interim order (copy of order) putting a stay on disqualification of Directors & revival of DIN & DSC, Further the Ministry (MCA) was directed to file their reply & matter was posted on 24th July 2018. Now it remains to be seen on 24th July 2018 the final decision of the court. None the less this important judgment became the Precedent upon which similar petitions were decided. Broadly the High court divided the petitions onto two major categories.
I) Those petitioners who have filed Revival petition in NCLT
II) Those petitioner whose struck off Companies are defunct.
The Court directed that those directors who are associated with operational Companies should file a Revival Petition in NCLT, after getting the Revival order from NCLT they shall file their financial statements & Annual Return after that they will file eCODS form, which will permanently remove their disqualification. Till the date of Revival of Company, the DIN shall stand activated.
For those petitioners who are associated with non operational struck off Companies, The court directed that Since such companies cannot be revived therefore such companies shall be treated as voluntary struck off , The DIN shall stand activated. The final fate of such petitioners will be decided on 24th July 2018.
After these 4 months of CODS it is true that opportunity was given to remove the disqualification one way or the other. Disqualified Directors could have easily removed their Disqualification; Now after 1st May 2018 we are back at pre-CODS era, where no option is there to remove the disqualification. Even the High court route seems to be a risky proposition, because the high court can refuse to grant relief after expiry of CODS 2018. In Such circumstances one can approach the Apex Court for a speedy relief; what is going to be the outcome, that needs to be seen yet.
The Ministry will continue to strike off Companies, and directors will continue to get disqualification, after CODS as well, therefore such directors who incur disqualification after CODS have more reasons & justifications to approach appropriate judicial forms like high courts to seek relief.
Another serious issue which the companies are facing is when all the directors have vacated office under section 167 of Companies Act; Such Companies are facing a double trouble, on one hand they are not able to even do their Annual compliances, Due to such non compliances the threat of Strike-off is looming over them. The ideal thing to do in such circumstances is to appoint additional Directors by Share holders Resolution & physically filing DIR 12 (Appointment of Directors) with ROC. This practice used to be there before CODS 2018 after introduction of CODS 2018 the ROC Delhi discontinued this process. Now after expiry of CODS ROC may again allow physical filing of DIR 12 (Appointment of Directors)
Struck off Companies can continue to file applications in NCLT for Revival under Section 252 of Companies Act. Since the Companies Act 2013 itself provides a time period of 3 Years from the date of Strike off to make Revival petition to NCLT. It should be kept in mind that NCLT`s Jurisdiction is limited to Revival of Companies not removal of disqualification incurred by directors.
(Author- Shweta Gupta, Founder and CEO, MUDS can be reached at [email protected])