HOW TO REMOVE DISQUALIFICATION OF DIRECTORS WITHOUT REVIVAL OF COMPANY
REMOVE DISQUALIFICATION OF DIRECTOR- As we all know that In 2017 Govt. of India, struck off more than 2 Lakhs companies to remove all inoperative companies in India from its Register resulting in the disqualification of more than 3 Lakhs Directors and their DIN (Director Identification Number) was deactivated. The Govt took these measures. In respect of companies which were failed to file their financial statements or Annual returns (Profit & loss account and Balance sheet) as required under the Companies Act 2013 and 1956.
Understanding the term Disqualification of Director:
Disqualification of directors can be defined as a situation in which a person is restricting from holding the office of director in any company. Under disqualification, a person cannot be appointed as a director in any company in a specified time period. Before understanding the term in a detailed manner first need to understand the term Director of the company.
A Director is any person who acts on behalf of the company as the company is an artificial person and cannot work itself and cannot be entered into any transaction physically, there is no qualification which has been defined under the Companies Act any person can become a director of a company. Director can be considered as an agent of the company who works on behalf of the company.
Understanding the Disqualification of Directors
Section 164 of the Companies Act, 2013, contains the provisions in which the registrar can disqualify a person. The situations are as follows;
Following are the situations under which a person can not be appointed as a director:
- If he is of unsound mind ;
- If he is an undischarged insolvent;
- In case he has applied to be adjudicated as an insolvent;
- If sentenced for imprisonment for seven years or more;
- Any order of the court;
- Any offense of related party;
- Non-compliance of subsection (3) of section 152 of Companies Act, 2013;
- Non-compliance of sub-section (1) of section 165;
- Non-filing of annual returns or financial statements for a continuous period of 3 years;
- Failed to repay the deposits, pay to declare dividend;
- Other as may be defined in law;
Section 248 provides that the company can be struck off by the Registrar of Companies (ROC) if there is any default for filing of annual accounts for three consecutive years. A person will be disqualified from all active companies in case any company in which he is a director has not complied with the provision described above.
Consequences of disqualification:
A person once disqualified will be restricted to be appointed again as a director in any company for a period of 5 years. Further, his DIN shall be de-activated by the registrar of Companies. In other words, one can say that he cannot sign any document/forms which need to be uploaded on the MCA portal.
Reappointment of disqualified directors
There are no provisions for the reappointment of a disqualified director. Furthermore, he can only be reappointed after a period of 5 years ie., completion period of disqualification of the director. This means that once disqualification has been imposed on any director(s) in any company in which he is a director then he cannot be appointed as a director in any other active company. Further, he has to vacate his office immediately. A very harsh decision has been taken by my ministry of corporate affairs however thanks to the High court for giving such relief in order to remove the disqualification of the director(s).
How to Remove Disqualification of Director
Once the situation as mentioned earlier arises, Directors are required to request through a petition with NCLT in the state of jurisdiction. Once NCLT has been satisfied, an order will be issued and once the director receives the order, the same had to be complied with and consequently, the status shall be restored. A person can also reach to the high court to have relief for this he is required to file an application under Article 226 of our Indian Constitution. Also, most of the case the high court has passed stay order. Srinivasan Sandilya & Others Vs. Union of India and Bhagavan Das Dhananjaya Das Vs. Union of India, are some of the cases where the hon’ble court stated that order of ROC illegal, devoid of merit, arbitrary and quashed it as well. There are other judgments as well where the hon’ble court has passed such order in favor of the Director in order to save the rights which has been provided under the Constitution of India.
To conclude above, it can be said that there are various ways/remedies available to the directors in order to save himself if he has been disqualified by the ROC under the provisions mentioned under the Companies Act, 2013.
If you are still confused, how to file a writ petition, whom to contact, what is the remedy for the things done by the company in your absence, how to restore your DIN or require any other opinion/advice and want the consultation then LetsComply is the best choice.
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