Introduction: In the realm of corporate governance, adhering to statutory regulations is paramount. One such regulation, Rule 12(1) of the Companies (Appointment and Qualification of Directors) Rules, 2014, underscores the significance of keeping directorial particulars up-to-date. This rule mandates that individuals holding a Director Identification Number (DIN) must promptly intimate any changes in their details to the Central Government. While this rule is crucial, a recent adjudication order by the Registrar of Companies, Dadra & Nagar Haveli, has shed light on an intriguing question: What happens when a director’s registered permanent address is temporarily inaccessible due to various reasons?
Rule 12(1) Explained
Rule 12 (1) of the Companies [Appointment and Qualification of Directors] Rules, 2014 [‘Directors Rules’] states that,” (1)Every individual who has been allotted a Director Identification Number under these rules shall, in the event of any change in his particulars as stated in Form DIR-3 intimate such change(s) to the Central Government within a period of thirty days of such change(s) in Form DIR-6”. This provision casts a responsibility on the director holding valid DIN to intimate change in the particulars as stated in DIR-3 to central government within a period of 30 days from the date of such change. While submitting for DIR 3 director is required to mention his permanent address and also mention whether the permanent address and present residential address is same. The question that arises is whether the director shall always be residing or be available at the permanent address mentioned form DIR 3? Suppose due to exigency or due to some personal commitments director had to shift his residence or if a director is on a vacation would it mean that director is not residing at the permanent residence?
Background: In a recent adjudication order passed by Registrar of Companies, Dadra & Nagar Haveli [‘ROC’] penalties were imposed upon two directors for their failure to update change in their permanent addresses by filing form DIR-6. Let us understand this case by delving deep into the facts of the case to get a comprehensive understanding of the matter.
Brief Facts of the case: In this case, ROC had issued two inspection notices dated 29th March, 2019 & 14th May, 2019 under section 206 of the Companies Act, 2013 to the said two directors respectively. These two inspection notices were returned undelivered stating remarks as “Left”. Both these notices issued by ROC were sent through postal authorities on the addresses recorded with MCA of such directors. When the notices returned undelivered, ROC alleged that directors had not updated their permanent address with MCA by filing DIR-6 pursuant to Rule 12 (1) of the Directors Rules are not complied with by the said director. The return of the notice from the ROC indicated that there was no person available to receive or acknowledge official communications at the address maintained in ROC records.
Submissions made by the director’s representatives: Directors through their authorized representatives submitted before the ROC that sometimes for the sake of convenience the said directors would temporarily shift at their son’s residence for a few days and it might have happened that at that time the notice was issued and returned undelivered, but the said directors never left the registered address permanently. Also, there might be some technical mistake on the part of the postal authorities which resulted in the notices returning undelivered. Directors further submitted that during the covid period the directors had permanently shifted to the son’s residence and for this permanent shift in address the directors had filed the E Form DIR 6 dated 25th August,2020.
ROC penalizes the directors: ROC considered the submissions made by the directors. But ROC held that there was a non-compliance as there was no one present at the permanent address provided by the directors in DIR-3 when they temporarily moved to their son’s residence for convenience. The non-compliance observed in the said matter invoked the penalty provisions outlined under section 159 of the Companies Act, 2013. However, considering the circumstances of the case and since it was the said directors first time violation, ROC exercised its discretion and levied a penalty of Rs 5000 each on both the directors.
Conclusion: The significance of E form DIR 6 cannot be undermined as it is the mechanism through which individuals holding a DIN must diligently report any alterations in their directorial particulars as and when such changes occur.
Furthermore, it underscores the importance of ensuring that even in cases where director who is the DIN holder is temporarily unavailable at their registered address, provisions must be made to guarantee that any communications from regulatory authorities are duly acknowledged and do not result in their return. A robust approach to DIN KYC [Know Your Customer] emerges as the most effective means to consistently assess and update registered address and other particulars in the registrar’s records, thus promoting compliance and transparency within the corporate governance framework.
*****
This article is written by Mr. Shravan Pai – Intern and Mr. Aniruddha Kulkarni – Deputy Manager!
Author Bio
