How To Remove Director Disqualification Without Revival of Company

There was a major wobbling in the industry when around 3 lakhs of Directors were disqualified by Registrar of Companies (ROC) under Section 164(2) and Section 167(1) (a) of the Companies Act, 2013. Additionally, around 2.30 lakh companies were struck off by ROC branding them as ‘Shell Companies’. So what was the radical reasoning behind them, it was just on account of non-compliance by the companies or was there any other reasoning behind that and is there any way to Remove Director Disqualification?

Important provision of companies acts for Director Disqualification and Strike up of Companies:

Before proceeding further lets understand apropos provisions of Director Disqualification and Strike up of Companies.

“164 (2) (a) 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; declared and such failure to pay or redeem continues for one year or more, 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.

248. Power of Registrar to remove name of company from register of companies

(1) Where the Registrar has reasonable cause to believe that—

(a) a company has failed to commence its business within one year of its

incorporation;

(c) a company is not carrying on any business or operation for a period of two

immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company under section 455,”

Due to forgoing provisions, ROC disqualified directors of the companies in two criteria:

1. The companies which were still active and viable but failed to file annual compliances and annual returns for last 3 years;
2. The companies which were incorporated but there was no commencement of business within 1 year of its incorporation;

In the first category, as the company was still operational, and management was willing to revive the company, so they had option to approach National Company Law Tribunals (NCLT) for Revival of the Struck off company under Section 252 of the Companies Act, 2013, simultaneously approaching Hon’ble High Court for Removal of Director Disqualification under Article 226 of the Constitution of India. However, what about the companies in second category, where there was no commencement of business since incorporation and even management is not willing to Revive the company and do the annual compliances. Here the main issue is for directors who were holding directorship in multiple companies and one of the said companies failed to comply with prescribed provisions as imposed by the Companies Act, 2013.

What is procedure for DIN Reactivation without Reviving Struck Up Company?

Wherefore, the disqualified directors who were just inclined towards removing director’s disqualification without reviving the name of the company with ROC and not amenable to file statutory documents and do annual compliances, Writ Petition in respective High Court is a way out.

Sequential procedure for DIN Reactivation or Director Disqualification Removal:

Here is the step by step procedure for Director Disqualification removal without reviving the name of the struck off company:

Step-1: Drafting and filing of Writ Petition before the respective High Court where strike up companies Registered Office is present under Article 226 of the Constitution of India. This procedure takes 3-4 working days from drafting till filing of the petition;

Step-2: Listing for first date of hearing;

Step-3: Court may ask ROC to file Report/ reply to the respective Writ petition;

Step-4: Getting of Stay Order from respective High Court;

Step-5: Filing of application with ROC for reactivation of DIN;

Step-6: Reactivation of DIN;

Step-7: Do the required compliances and payment of penalty amount as imposed by Court/ROC;

Step-8: Getting of final order from Hon’ble High Court

Conclusion:

Hon’ble High Court via its orders given relief to innumerable directors in various states by giving stay to the notification of ROC in which names of directors were disqualified, subsequently directing ROC to reactivate the DIN of directors. However, this stay order of High court has given certain easement to disqualified directors; still the ultimate decision is to be made by Hon’ble Supreme Court.

If you have any other query in regards to Director Disqualification, please feel free to contact at LawyerINC.