The Ministry of Corporate Affairs (MCA) had in September 2017 disqualified 3,09,614 directors associated with companies that had failed to file financial statements or annual returns for a continuous period of three financial years from 2013-14 to 2015-16 in terms of provisions of section 164(2) read with 167(1)(a) of the Companies Act, 2013 [the Act]. A list of such directors was published on the website of MCA.

Consequently, there has been a spate of representations from industry, defaulting companies and their directors seeking an opportunity to become compliant and normalize their operations.

Certain affected persons have also filed writ petitions before various High Courts seeking relief from the disqualification. The high courts of Delhi and Madras have given notices to the corporate affairs ministry and the RoC on petitions challenging the disqualification of these directors.

Various corporate bigwigs including Pawan Goenka, managing director of Mahindra & Mahindra Ltd, have managed to get an interim relief from court following their disqualification. Section 274 of the Companies Act of 1956 was limited to dealing with disqualification of directors of public limited companies. However, the Act was amended bringing in its purview private entities as well in 2014 through the Companies Act of 2013.

Legal Angle

Section 92 of the Act provides that every company shall prepare an annual return in the prescribed form containing the particulars as they stood on the close of the financial year within 60 days from the date on which AGM is held.

Section 164(2) provides that no person who is or has been a director of a company which has not filed financial statements or annual returns for any continuous period of three financial years shall be eligible to be re-appointed as a director of that company or appointed in other company for a period of five years from the date on which the said company fails to do so.

Section 167(1)(a) provides that the office of a director shall become vacant in case he incurs any of the disqualifications specified in section 164.

Therefore, failure to file annual returns for any continuous period of three financial years would lead to vacancy of office of director.

Further, Rule 14 of the Companies (Appointment and Qualification of Directors) Rules, 2014 provides that every director shall inform to the company concerned about his disqualification, if any, under section 164 (2) in Form DIR – 8.


In December 2017, the MCA announced the Condonation of Delay Scheme, 2018 that allowed defaulting companies to make good their defaults. This is a one-time settlement scheme that shall remain in force from January 1, 2018 through March 31, 2018.


This scheme is applicable for all defaulting companies which have failed to file its financial statements or annual return as required under the Companies Act, 1956 or Companies Act, 2013, as the case may be, and the Rules made thereunder for a continuous period of three years.

Only those financial statements or the annual returns or other associated documents which were due for filing till June 30, 2017 shall be eligible for filing under this scheme.

This scheme shall apply only to the following documents:

1. Form 20B/MGT-7: Form for filing Annual return by a company having share capital

2. Form 21A/MGT-7: Particulars of Annual return for the company not having share capital

3. Form 23AC, 23ACA, 23AC-XBRL, 23ACA-XBRL, AOC-4, AOC-4(CFS), AOC (XBRL) and AOC-4(non-XBRL): Forms for filing Balance Sheet/Financial Statement and profit and loss account

4. Form 66: Form for submission of Compliance Certificate with the Registrar

5. Form 23B/ADT-1: Form for intimation for Appointment of Auditors


1. The DINs of the disqualified directors shall be temporarily activated during the validity of the scheme to enable them to file the overdue documents.

2. The defaulting company shall file the overdue documents in the respective prescribed eForms paying the statutory filing fee and additional fee payable as per section 403 of the Act.

3. The defaulting company after filing documents under this scheme, shall seek condonation of delay by filing form e-CODS 2018 attached to this scheme along with a fee of Rs. 30,000/- (Rs. Thirty Thousand only) as prescribed under the Companies (Registration Offices and Fee) Rules, 2014 well before the last date of the scheme.


This is a very good one-time opportunity for disqualified directors and defaulting companies to make good their defaults. This scheme is expected to benefit over 3 Lakh disqualified directors. For Directors who fail to utilise this opportunity, their disqualification will be made final for a period of 5 years and other penalties as prescribed under Companies Act, 2013 will attract.

(The author of this post is a practicing Chartered Accountant and can be reached at +91 99454 45180 or [email protected])

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  1. Dhaval123 says:

    Availing Cods doesn’t remove disqualification of director. Only remedy available to disqualified director is to approach HC by way of writ petition. Pl correct your article otherwise it will misguide to any1

  2. GOVINDA PATIL says:

    I do agree. This scheme is not yet notified yet and is in draft scheme. Appears that this scheme is being filed as reply in the High Court of Delhi in the matter of Mr.Pawan Goenka.
    Further this scheme no where says that disqualification will be removed as disqualfication under section 164(2) is for five years.
    Further this does not help those directors who are on board of active companies whuch have not made any default but the directors ar disqualiied because other company inwhich they are directors have defaulted or have been struck off.
    In my view this is onemore opportunity to defaulting company to become clean, but now at a cost.

  3. luckynanwani says:

    Dear Aakash

    I Appreciate your affords to bring out the clarity on the issue, however, in my understanding, the Condonation of Delay Scheme, 2018 as available in media and public is merely a Draft Document and it has not yet rolled out by the Ministry of Corporate Affairs.

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