Disqualified By ROC under Section 164(2) of Companies Act, 2013 /Disqualification of Director– How To Become A Director Again/ How to Remove Disqualification?

As per sec 164(2) (a) of the Companies Act, 2013, a Company not filed financial statements or annual returns for any three consecutive years, ROC has power to list the directors of default company as Disqualified Directors by DIN deactivation and Director shall not be eligible for appointment /reappointment for a period of 5 years.

SL. NO. PARTICULARS INFORMATION
1. Grounds- Disqualifications for Appointment of Director Section 164 of Companies Act 2013 relates to disqualification towards appointment of Directors under the following circumstance,

(1) If the Director is –

(a)  Unsound mind and the same is declared by competent court

(b)  Undischarged insolvent

(c)  Under adjudication process of insolvency

(d)  Convicted of an Offence

    • Convicted by court of any offence or moral turpitude and imprisoned for more than 6 months & 5 years not been completed from expiration of imprisonment
    • Convicted for any offence and sentenced for imprisonment for 7 years or more.

(e) An order in force passed by court or Tribunal

(f) Not paid any calls in respect of shares held by him individually or jointly and 6 months have been lapsed from the due date of calls

(g)  Convicted for offence of Related party transaction u/s 188 in the last 5 years

(h)  Not obtained Director Identification Number (DIN)

(2) Present and Past Director in the defaulting companies shall not be eligible for appointment or re-appointment for a period of 5 years

(a) Not filed financial statement/returns for three continuous financial years

(b) Failed to repay or redeem on due date

    • Deposit or its interest
    • Debentures or its interest
    • Dividend declared and continuous in all the above issues for 1 year or more

(3) Any other disqualifications as per articles of the company for appointment of a Director

2. Effects of Disqualification
  • Not eligible for being appointed as Director for any company.
  • This restriction is imposed for a period of five years or as the case may be.
  • Since 2017, the Ministry of Corporate Affairs (MCA) has been strictly enforcing these provisions of the Companies Act and has published the names of the disqualified Directors MCA portal
3. Remedy 1. Appeal with NCLT u/s 252 for restoration (For struck off Company)

  • File a petition u/s 252 of the Companies Act 2013.
  • Applicable to companies whose name got struck off in disqualification.
  • Appeal to be made before the National Company Law Tribunal (NCLT) to recover the name of the company with Registrar of Companies (ROC).

2. Appeal with High Court by Filing Writ Petition (For Disqualified Directors)

  • Article 226 of the Indian Constitution provides that such disqualified directors can file a writ petition in the concerned High Courts to seek relief.
  • This solution has been explored since 2017 by many of the disqualified directors in High Courts & the judgements have given a new lease of life to a Director’s career.
4. Activation of DIN After the regulatory bodies of NCLT and Hon’ble High Court passes the orders for revival of struck off company & DIN re-activation. the appellant requires filing of Statutory documents with ROC for restoration of disqualified DIN. Also, file the annual returns of the last three years with Income-Tax Authority.

Conclusion: Several Directors of the Companies approached the High Court/National Company Law Tribunal (“NCLT”) in order to revive their DIN’s and Companies under Article 226 of the Constitution of India (for issuance of Writ of Certiorari) and under Section 252 of the Companies Act, 2013

This article is co-authored by Asha Diwakar (Practicing Company Secretary) who is co-founder and Designated Partner of M/s CLAAT Corporate Advisors LLP (Chhota CFO).

Chhota CFO offers a range of services and integrated solutions in the areas of India corporate regulations, compliance, accounting and taxation for Start-ups, SMEs and Corporates – right from incorporating new companies, statutory registrations, secretarial compliance, bookkeeping and accounting, tax consulting & filing, audit & assurance and other associated professional services to start, maintain and grow your business.

Mrs. Asha Diwakar may be contacted at asha.diwakar@chhotacfo.com/connectus@chhotacfo.com.com and +91 973 973 6999 (www.chhotacfo.com)

Priyanka Sethia Asha Diwakar

Disclaimer: Utmost care has been taken to prepare the article. However, inadvertently if any error occurs, please note that the authors shall not be held responsible for any such cause. The content published is only for educational purpose and shall not be construed as rendering of any professional advice in any manner. The readers must exercise their own judgement and refer the original source before any implementation. 

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5 Comments

  1. MAYUREE HALDER says:

    HELLO… I am PCS. And my query is
    Can new directors take cessation of the disqualified directors u/s 164(2)(a) without removing their DISQUALIFICATION status.

    As now under CFSS 2020 the company has made the default good. So what is the role of those disqualified directors in the board?
    Further company wants to file INC-22A but before filing this it is to be ensured that all the directors must have DIN Status as “APPROVED”.

    so how to remove disqualified directors without removing their disqualification in order to get benefit of filing INC-22A under CFSS?

  2. SOMA MULLICK says:

    Good article. I have a query. Section 164 (2) talks about disqualification of directors under certain grounds and the consequences thereof. But nowhere in the section or In the Act it is mentioned that the disqualification of a director can lead to deactivation of DIN. If any director fails to file DIR 3 KYC ( Appointment and Qualification of Director Rules 2014) in that event DIN can be deactivated. So the step taken by the Govt in deactivating DIN is not correct as decided by the Hon’ble High Court of Delhi in the case of Mukut Pathak ‘s case.

  3. Pooja Jain says:

    Hi

    Can the Directors appeal only High Court for seeking relief for restoration of DIN as Director.

    The Directors who are unwilling for restoration of Struck Off Company.

    Or is it mandatory to appeal NCLT also??

    Awaiting for your response.

    Thanks.
    CS Pooja Jain

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