ANUJ MITTAL & ANR.  Vs UNION OF INDIA & ANR.

W.P.(C) 281/2021 Page 1 of 5$~9
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: 15thJanuary, 2021
+ W.P.(C) 281/2021
ANUJ MITTAL & ANR. ….. Petitioners
Through: Mr. Nikhil Kumar Verma, Advocate
(M: 9818143481).
versus
UNION OF INDIA & ANR. ….. Respondents
Through: Mr. Nawal Kishore Jha, Senior Panel
Counsel (M: 9810442918).
Mr. Santosh Kumar, Registrar of
Companies, Delhi.
CORAM:
JUSTICE PRATHIBA M. SINGH
Prathiba M. Singh, J. (Oral)
1. This hearing has been done by video conferencing.
CM APPL. 711/2021 (for exemption)
2. Allowed, subject to all just exceptions. Application is disposed of.
W.P.(C) 281/2021 & CM APPL. 712/2021 (for interim directions)
3. The Petitioners were directors in Nalini Pic and Pac Private Limited
(hereinafter, ‘Nalini Limited’) . Due to alleged non-compliance/default in
Nalini Limited under Section 164(2)(a) of the Companies Act, 2013 i.e.,
non-filing of financial statements or annual returns for any continuous period
of three financial years, the said Petitioners were disqualified as directors
from 1stNovember, 2017 to 31stOctober, 2022. Their DINs and DSCs were
de-activated. Nalini Limited has also been struck off from the Register of
Companies. The Petitioners claim to be Directors in other active companies
and also now wish to start a fresh business.
4. This Court has considered the legal position relating to activation of
2021:DHC:183W.P.(C) 281/2021 Page 2 of 5DIN/DSC numbers of directors of defaulting companies in Anjali Bhargava
& Anr. v. UOI & Anr. [W.P.(C) 11264/2020, decided on 6thJanuary, 2021].
The relevant portion of the said order reads:
“4. There are four categories of Directors that are
approaching Courts seeking setting aside of
disqualification and activation of DIN/DSC numbers.
(a)Directors who have been disqualified prior to 7th May
2018, qua other companies in addition to the defaulting
company:
As per the proviso to Section 167 (1) (a) of the Companies
Act, 2013, once a director is disqualified qua one company
i.e., the defaulting company, the office of the said director
would become vacant in all companies. The said proviso,
has, however, come into effect only on 7th May, 2018. In
Mukut Pathak (supra) it was held that this proviso cannot
have retrospective effect and would only apply if the
disqualification took place after 7th May 2018. Paragraph
98 of Mukut Pathak (supra) reads as under:
“98. In view of the above, the petitioners would not
demit their office on account of disqualifications incurred
under Section 164 (2) of the Act by virtue of Section
167(1)(a) of the Act prior to the statutory amendments
introduced with effect from 07.05.2018. However, if they
suffer any of the disqualifications under Section 164(2) on
or after 07.05.2018, the clear implication of the provisos
to Section 164(2) and 167(1)(a) of the Act are that they
would demit their office in all companies other than the
defaulting company.”
Since there is no stay on the judgment in Mukut Pathak
(supra) , it continues to hold the field. Thus, in cases where
directors have been disqualified prior to 7thMay, 2018, the
proviso to Section 167(1)(a) would not apply and the
directors would continue to be directors in companies
other than the defaulting company. The disqualification of
such directors qua active companies would therefore be
liable to be set aside and their DIN and DSC’s reactivated.
2021:DHC:183W.P.(C) 281/2021 Page 3 of 5(b)Directors who have been disqualified post 7th May
2018, qua other `active’ companies:
As held in Mukut Pathak (supra), in all cases where the
directors have been disqualified on or after 7thMay, 2018,
the proviso to Section 167 (1) (a) would apply and such
directors would cease to be directors in all companies
including the defaulting company. In March, 2020, in light
of the COVID- 19 pandemic, the Ministry of Corporate
Affairs vide General Circular No. 12/2020 introduced
CFSS-2020 to allow a fresh start for defaulting companies
and directors of such companies. This Court, in Sandeep
Agarwal (supra) has analyzed CFSS-2020 to conclude
that the purpose of the scheme is to provide an
opportunity for ‘active’ companies i.e., companies whose
names have not been struck off, who may have defaulted
in filing of documents, to put their affairs in order.
…
Applying the scheme to the facts of the case, this Court in
Sandeep Agarwal (supra) directed reactivation of the
DINs and DSCs of directors of two companies – one
whose name had been struck off and one, which was still
active. Thus, the DINs and DSCs of disqualified directors
of struck off companies, who are also directors in active
companies, may be reactivated qua the active companies,
in line with the spirit of the CFSS-2020.
(c)Directors of ‘active’ companies who have been
disqualified:
In cases where directors of ‘active’ companies have been
disqualified, CFSS-2020 would squarely apply. Such
directors would be entitled to avail of CFSS-2020 and file
documents of the defaulting company. In Radhika Byrn
(supra) , the Court permitted reactivation of the DINs and
DSCs of the directors of active companies under
CFSS-2020.
(d)Disqualified directors of struck off companies seeking
appointment as directors in other/new companies:
2021:DHC:183W.P.(C) 281/2021 Page 4 of 5The purpose of CFSS-2020 has been elucidated in the
circular of the Ministry of Corporate Affairs as follows:
“In furtherance of the Ministry’s Circular No 11/2020,
dated 24th March, 2020 and in order to facilitate the
companies registered in India to make a fresh start on
a clean slate, this Ministry has decide to take certain
alleviative measures for the benefit of all companies.”
This scheme has been introduced in view of the COVID-19
pandemic with the aim to enable a fresh start to defaulting
companies and directors of such companies. The
disqualification of defaulting companies was a step which
was taken sometime in 2016-17 in order to ensure that
filing of regular returns and compliances are undertaken
strictly as per the provisions of the Act. It was also meant
to be a measure to ensure that entities that are not
conducting businesses are not misused as `shell
companies’ for any improper activities. A substantial part
of the disqualification period has already been completed.
The introduction of the CFSS is itself a step for `providing
a fresh start’. Under such circumstances, continuation of
the disqualification would defeat the Scheme and its
purpose.
5. In furtherance of the purpose of this scheme,
directors of struck off companies who seek to be appointed
as directors of other/new companies, ought to be provided
an opportunity to avail of this scheme, provided that they
have undergone a substantial period of their
disqualification. The scheme clearly seeks to provide a
fresh start for directors of defaulting companies who seek
appointment in other companies or wish to start new
businesses. Therefore, if a substantial period has passed
since the disqualification of such directors, they ought to
be given an opportunity to avail of the scheme.”
5. Mr. Santosh Kumar, Registrar of Companies, Delhi was requested to
join the proceedings. He has joined the proceedings today. On a specific
query from the Court, he has informed the Court that the Companies Fresh
2021:DHC:183W.P.(C) 281/2021 Page 5 of 5Start Scheme-2020 has expired as on 31stDecember, 2020. However, he
submits that in case struck off companies are willing to file their annual
returns and balance sheets, the restoration of these companies is being
considered by the ROC. He further informs the Court that in the case of more
than 2000 companies, restoration of the struck off companies has been
permitted by the NCLT and the jurisdiction for restoring the struck-off
companies rests with the NCLT.
6. Accordingly, in terms of the judgment in Anjali Bhargava (supra) the
Petitioners would fall in category ‘d’. Further, since the disqualification of the
Petitioners is prior to 7thMay, 2018, the Petitioners would also fall in category
‘a’. In terms of the judgment in Mukut Pathak & Ors. v. Union of India &
Ors., 265 (2019) DLT 506 andAnjali Bhargava (supra) , the DINs and DSCs
of the Petitioners shall be re-activated within a period of ten days. If, in
addition, the Petitioners wish to seek restoration of the struck off company,
the Petitioners are permitted to seek their remedies in accordance with law
before the NCLT.
7. The petition is disposed of in the above terms. All pending applications
are also disposed of.
8. The digitally signed copy of the order shall be treated as the certified
copy of the order for being filed before the ROC.
PRATHIBA M. SINGH
JUDGE
JANUARY 15, 2021
Rahul/T
(corrected and released on 19thJanuary, 2021)
2021:DHC:183