Follow Us :

Analysis of Condonation of Delay Scheme, 2018 (CODS-2018) – Is it really a relief to all the disqualified Directors?

Post the Announcement of the Condonation of Delay Scheme -2018 (CODS-2018), we have been hearing of the News in vogue viz.,

Disqualified directors get 3 months to put house in order ]

Government set to provide relief for disqualified directors [ ]

Condonation of Delay Scheme only for bona fide directors [ ]

Defaulting cos get more time for regulatory compliance [ ]

Debarred directors: firms offered 1-time settlement [ ]

This article makes an attempt to take you through the insights of the Condonation Of Delay Scheme, 2018 and leaves it to the prudence of the reader to decide whether Condonation Of Delay Scheme, 2018 (CODS-2018) is a real boon for the corporate entities and disqualified directors by exploring the facts.

Infact, it is an Initiative by the Government to achieve the intended target of cleansing the system through . Let me explain more elaboratively:

The cloud of dilemma in industry wherein Companies which were inactive in filing of Financial Statements or Annual Returns for 2 years or more were already struck off/removed prior to Condonation Of Delay Scheme, 2018 then the question arises for which companies would this CODS-2018 will be helpful.

The Government earlier undertook striking of the Non-compliant companies and disqualified the directors of such companies but could not achieve its intention of cleansing of corporate system since some non compliant companies are still in existence despite the efforts of Ministry and hence paved way for CODS-2018.

Condonation Of Delay Scheme, 2018 has granted inconspicuous relief to some companies viz., which could not be removed from the register of companies under rule 3 of the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2014 pursuant to Power of Registrar to remove name of company from register of companies under Section 248.

The following categories of companies could not be removed from the register of companies under the Condonation Of Delay Scheme, 2018 viz.,

(i) listed companies;

(ii) companies that have been delisted due to non-compliance of listing regulations or listing agreement or any other statutory laws;

(iii) vanishing companies;

(iv) companies where inspection or investigation is ordered and being carried out or actions on such order are yet to be taken up or were completed but prosecutions arising out of such inspection or investigation are pending in the Court;

(v) companies where notices under section 234 of the Companies Act, 1956 (1 of 1956) or section 206 or section 207 of the Act have been issued by the Registrar or Inspector and reply thereto is pending or report under section 208 has not yet been submitted or follow up of instructions on report under section 208 is pending or where any prosecution arising out of such inquiry or scrutiny, if any, is pending with the Court;

(vi) companies against which any prosecution for an offence is pending in any court;

(vii) companies whose application for compounding is pending before the competent authority for compounding the offences committed by the company or any of its officers in default;

(viii) companies, which have accepted public deposits which are either outstanding or the company is in default in repayment of the same;

(ix) companies having charges which are pending for satisfaction; and

(x) companies registered under section 25 of the Companies Act, 1956 or section 8 of the Act.

And those companies which received Closure Notices (Form No. STK-1) from ROC prior to CODS-2018 and have replied requesting for Non Closure.

The prime motto of the Govt. to clean the system having only complaints companies has not been achieved only by striking of companies in mass action. However, companies falling under the above categories though inactive in annual filing still exist in the system.

Undoubtedly Condonation Of Delay Scheme, 2018 is a perfect relief to the remnant non-compliant companies (as stated above) and their directors which have escaped from the striking off, but CODS-2018 does not appear as a tool for removal of disqualification of the non compliant directors on Board of Struck off companies.

Despite of all these there are few ambiguities in the CODS-2018 which are unattended to which I feel, MCA should come out with clarifications soon.


1. Point No. 3 of CODS-2018– Overdue documents which were due for filing till 30.06.2017; ‘relevance of 30th June 2017’ in the said statement.

If it was to fit-in the criteria of 30+270 days (As per Section 403 of the Act, 2013) considering the due date for AGM on 30th September 2016 for the FY 2015-16 then the cut-off date should have been 27th July 2017.

I presume, perhaps 30th June 2017 was the date when data was integrated for ascertainment of default companies and disqualification of directors thereon.

2. Point No. 4 Clause (v) of CODS-2018: ‘revival under section 252 of the Act, 2013 up to the date of the Scheme.’

Prima facie CODS-2018 is not applicable to Struck off companies. But there is mention of those struck off companies who have made application for revival of company with NCLT up to the date of the Scheme, however, it is ambiguous whether such companies will be allowed to avail benefit of this Scheme. Also, After filing overdue documents, whether those companies are required to file e- Form CODS 2018 is still a question mark?

3. Point No. 4, Clause (iv) & Point No. 6 of CODS-2018 : Plain reading states that If the defaulting Companies have Not filed entire overdue documents including e-Form CODS-2018, then the DINs will be deactivated which indirectly conveys that the disqualifications of the Directors will be removed post compliance of CODS-2018 but there exists no direct clarity.

4. Point No. 6 of CODS-2018: Action under section 167(2): In all the case(s) wherein Disqualified director continues to be a director on Board till CODS- 2018 Scheme is announced and have signed/certified/filed all overdue document(s) along with e-Form CODS 2018. Will it amount to contravention under Section 167(2)*? there appears no immunity under Section 167(2) Post Condonation Of Delay Scheme, 2018 filing for such Directors.

*Excerpt from Section 167(2) of Companies Act, 2013: If a person, functions as a director even when he knows that the office of director held by him has become vacant on account of any of the disqualifications specified in subsection (1), he shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees, or with both.


The literal reading of the Section 164(2)(a) and subsequent action of Ministry has victimized innocent directors who without fault on their side are adjudged as Disqualified few examples as mentioned hereunder:

1) An individual, who has been appointed as an Additional Director/Director just before a day (or before a month/before an year or such other time) of declaration of ascertainment of defaulting companies and defaulting directors has suffered disqualification due to the literal interpretation of the Phrase in Section 164(2) of the Act, 2013 ‘who is or has been a director of a Company which …‘ the word ‘is’ here gives a grave meaning on being appointed, subsequently he becomes disqualified (for period of 5 years in all other companies). Such a retrospective responsibility/implication is not justified without any fault on his side. Though he shall be held responsible for Annual filings on being appointed, but he cannot be held responsible for overdue filings and consequent disqualification being entrusted to him.

To put in a nut shell immediately on being appointed on Board of a Defauting Company he becomes a Disqualified Director defacto.

2) In some companies few directors were appointed as Additional Directors and they hold office only up to ensuing AGM, and cease to be director thereafter. However, due to default of Companies for non filing of cessation of Office under Section 161 of Companies Act, 2013 or Section 260 of the Companies Act, 1956; those directors are also categorized as disqualified directors for no fault of theirs.

3) If e- Form CODS 2018 is filed will disqualification be removed? As there is no affirmative statement /confirmation in the Condonation Of Delay Scheme, 2018 ambiguity exists whether disqualification be removed or not post compliance of the Conditions as stated in CODS-2018.

4) There was no action initiated on defaulting companies under Companies Act, 1956 (Since Last 58 years) and sudden action may hamper the economic growth as the entrepreneurs may become deterrent and may avoid complex compliances of corporate entity. And may shift their business in unregulated and less compliance modules.

5) Private Companies were not falling under the purview of Section 274 (Disqualifications of directors) of the Companies Act, 1956 but under Companies Act, 2013 Private Companies are also brought under the ambit of Section 164(Disqualifications for appointment of director). As, Section 164(2)(a) is in force only from 01.04.2014 (i.e., 2 years) in such a case Financial Statements or Annual Returns of only 2 Preceding Financial Years would be pending and due for filing on or before the date of action initiated by the Govt. but third year Filings of Financials Statements or Annual Return are yet become due for filing. Hence, ascertaining or declaring such company’s directors as disqualified directors is not justifiable.

6) Declaration as disqualified directors retrospectively leaves confusion as to the sanctity of the actions taken by such directors in bona fide belief that they are directors.


1) Equal opportunity for similar Disqualification: With a view to give opportunity for the non-compliant defaulting Companies to rectify the default and consequent immunity to the directors Ministry has introduced the CODS-2018, While equal opportunity should have also been provided to the Disqualified directors of Struck off Company(ies) as the offence is same and CODS-2018 specifically excludes such struck off companies. Though there is provision for revival of Struck off companies under the Companies Act, 2013 many companies and their directors are unwilling to adopt such process as there was no business/operations in the Company(ies). Hence the Directors of Strike off companies should also be given one time opportunity for getting immunity from disqualification.

2) Another peculiar situation, wherein a company after receiving STK-1 filed all its due returns for 3 or more years and now in active status. But, all directors are marked disqualified and the Scheme is not applicable for this company. Hence, though due filings are done before, no relief from disqualification to such directors.

3) In a classical case where a disqualified director in on Board of defaulting Company as defined in the CODS-2018 and also in a Struck off company for which CODS-2018 is not applicable; upon compliance of CODS-2018 for the active defaulting Company will the disqualification of such director be removed?


1) One time amnesty scheme for the Disqualified Directors of Struck Off Companies.

A one-time amnesty scheme be provided for the disqualified directors of struck off Company in the form of Some penality may be specified lumpsum / per company.

Bona fide Director: Many News Articles have come which state that ‘Only bona fide directors’ will benefitted from the CODS-2018. However, it is not ascertaining whether director is of struck off of Company or active (defaulting) company, the point here is whether he is the director of defaulting company or not. Hence, equal opportunity should be provided for all the disqualified directors.

2) Removal of difficulties faced by the directors as envisaged above.

3) Delegation of powers U/s. 252 to ROC/RD: Considering the huge burden on NCLT the power u/s 252 (Revival of Struck off Companies) of the Act, 2013 may be delegated to ROC (review)/RD concerned for speedy disposal of cases.

4) Amendments in Section 164 & Section 167: The word ‘is**’ in Section 164 of the Act, 2013 be removed to clear ambiguity a

**Excerpts of Section 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)….

Vacation of Office of Director under Section 167 (1)(a) should be restricted to disqualification pursuant to Section 164(1) (individual specific) and not sub Section (2) (company specific).

5) Assets of Strike off Companies: A case wherein Struck of Companies has assets a special provision be made to alienate the assets of the Company without any cumbersome revival procedure of the same.

Disclaimer: The above views are the personal views of the author and the Readers are requested to exercise their due diligence before taking action.

  CS Kiran Kumar Bodla
BK & Associates

Company Secretaries
#502, Vipanchi Residency,
Lane beside Paradise Take Away,
Masab Tank, Hyderabad-500 028.
Mob  : +91-9293712271
Email :

Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.


  1. Mohit Dujari says:

    Glad that i subscribed Compliance Calendar and get to read such articles which are really meaningful and helpful in understanding the rules and acts with some in dept analysis.
    Cs Kiran has done tremendous analysis of the CODS scheme.

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Post by Date
May 2024