Removal of Disqualification of Director- Without Revival of Company: High Court

Short Summary:

In this Flash editorial, the author begins by referring the provisions of Removal of Disqualification of Director. While, MCA has issued Condonation of Delay scheme, 2018 as an opportunity to Disqualified Directors to remove their Disqualification. However, even after the scheme there are many questions/ difficulties in the mind of professionals and Corporates. In this article author endeavor to solve those queries. Like:

I. How to remove the Disqualification of Director, in situation:

• When a person having Directorship in Struck off Company / Companies only.
• When a person having Directorship in Struck off and Active Company both
• When a person having Directorship only in Active Companies

How to Remove the Disqualification of Director:

I. When a person having Directorship in “Struck off Company/ies”

First: There is no way out under Companies Act, 2013 for removal of Disqualification of Directors.

Second: As there is no way out under Companies Act, 2013, Ministry of Corporate Affairs came out with a scheme “Condonation of Delay Scheme, 2018”

According to this scheme a person by availing this scheme and if made compliance according to the scheme his Disqualification shall be removed by the ROC. However, even after the scheme a person having Directorship in the “Struck off Company” not able to get his disqualification removed. Because, this CODS is applicable on all the Defaulting Companies (Other than the Companies which have been struck off).

Third:  As Struck off Company can’t avail the CODS, 2018. However, they are having following below mentioned 2 (two) ways:-

1. To file an application with NCLT for revival of Company, if received revival order from NCLT then avail the CODS,2018.

2. If Director doesn’t want to revive the Company, however want to remove the disqualification. Then file a Writ Petition with “HON’BLE HIGH COURT”.

Above mentioned conditions can be understand easily by the below mentioned Chart.

Chart on Situation Third:

In this editorial author shall endeavor to through lights on the situation Third- Part II- If Director doesn’t want to revive the Company, however want to remove the disqualification.

In This Situation:

a) Company has been struck off by the ROC due to non filing of Financial Statement or Annual Return with ROC.

b) Directors don’t want to file application with NCLT for revival of Company as the Company not having any business from previous 3 financial year or directors don’t want to continue the business in the Company.

c) Directors want to avail the CODS scheme to remove their disqualification; however due to strike off status they are not able to do so.

d) Directors even want to Close / Strike Off the Company voluntarily also, if opportunity given to them.

Case Law

Court	Hon’ble Delhi High Court
Parties	Pradeep Jain V/s Union of India And ORS.
Hon’ble Justice	Mr. Justice Vibhu Bakhru
Even many other orders have been passed by the Hon’ble High Courts on the above mentioned issue on the same facts.

FACTUAL BACKGROUND:

I. Name of the petitioner has been mentioned in the list of Disqualified Director issued by the Registrar of Companies

II. The Company has not carried out business for past three years.

III. Company’s Bank Account is also not in operation for past three years.

IV. The petitioner also did not file the requisite returns as required under Companies Act, 2013.

V. The petitioner becomes disqualified u/s 164(2).

VI. The petitioner is desirous of availing of CODS, 2018. However, Company is struck off, it has been disable from availing the benefit of CODS-2018.

VII. The Company also not in position to seek revival, since admittedly the Company has not carried out any business and was liable to be struck off from the ROC

VIII. In fact company, would voluntarily seek dissolution of the Company u/s 248(2) of the Act, if it has opportunity to do so.

RELIEF PRAYED FROM THE HON’BLE HIGH COURT:

I. Allow the Company to avail CODS, 2018.

II. Allow the Company for voluntarily dissolution u/s 248(2)

III. Allow the Company to file all the pending documents with ROC.

IV. Remove the Disqualification of Directors Permanently.

DECISION OF HON’BEL “HIGH COURT”::

The Hon’ble High Court has passed the following order on the basis of above mentioned fact.  The Court directs as under:

Company shall file the below mentioned documents and application with Registrar of Companies in hard copies.

a) The petitioner may file all the requisite returns in relation to the company to avail the CODS-2018. (All the pending documents required to be filed with ROC with additional fees)

b) The petitioner may also file the necessary resolutions for voluntarily striking off the name of the Company as required under Section 248(2) of the Act. (Documents of voluntary Strike off Company)

c) The petitioner would also make a necessary application under CODS-2018 alongwith the requisite charges. (CODS form with fees Rs. 30,000/-)

According to the order above mentioned documents shall be file in Hard Copies with Registrar of Companies.

After filing ROC shall scrutinize the documents and if the same are found to be in order for strike off u/s 248(5) or availing benefit of CODS-2018.

The removal of Company from the Register u/s 248(1) would be deemed as striking off the Company /s 248(2), and application under CODS-2018 would be sympathetically considered by the Registrar.

Conclusion:

One can opine that if any director of struck off Company want to avail the benefit of CODS-2018 or want to remove its disqualification can file a writ petition in Hon’ble High Court for the same.

The author shall discuss the other questions as mentioned at starting of this article in its next article Series No. 319.

(Author – CS Divesh Goyal, ACS is a Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com)

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