Set Aside Disqualification of Directors – Delhi HC to MCA

Set Aside Disqualification of Directors – Delhi HC to MCA

Case Covered:

Sandeep Agarwal

Versus

Union of India

Facts of the Case:

The present petition has been filed by the Petitioners – Mr. Sandeep Agarwal and Ms. Kokila Agarwal, both of whom are directors in two companies namely Koksun Papers Private Limited (hereinafter, “Koksun Papers”) and Kushal Power Projects Private Limited (hereinafter, “Kushal Power”). The name of Kushal Power was struck off from the Register of the Companies on 30th June 2017, due to the non-filing of financial statements and annual returns. The Petitioners, being directors of Kushal Power were also disqualified with effect from 1st November 2016 for a period of five years till 31st October 2021 under Section 164(2)(a) of the Companies Act, 2013 (hereinafter, “Act”).

Pursuant to their disqualification, their Director Identification Numbers (“DIN”) and Digital Signature Certificates (“DSC”) have also been cancelled. In view thereof, they are unable to carry on the business and file returns etc. in the active company Koksun Papers. By the present the petition, the disqualification is challenged and quashing is sought of the impugned list of disqualified directors.

Observations of the Court:

In view of the fact that in the present case, the Petitioners are directors of an active company Koksun Papers in respect of which certain documents are to be filed and the said company is entitled to avail of the Scheme, the suspension of the DINs would not only affect the Petitioners qua the company, whose name has been struck off but also qua the company which is active. Thus, the facts and circumstances of this case are different from the facts in the case before the ld. Division Bench.

Considering the COVID-19 pandemic, the MCA has launched the Fresh Start Scheme-2020, which ought to be given full effect. It is not uncommon to see directors of one company being directors in another company. Under such circumstances, to disqualify directors permanently and not allowing them to avail of their DINs and DSCs could render the Scheme itself nugatory.

The Decision of the Court:

In order to enable the Directors of Koksun Papers i.e. the Petitioners herein, to continue the business of the active company Koksun Papers, in the fitness of things and also in view of the judgment in Mukut Pathak (supra), the disqualification of the Petitioners as Directors is set aside. The DINs and DSCs of the Petitioners are directed to be reactivated, within a period of three working days.

The writ petition is allowed in the above terms. All pending applications are disposed of.

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