CL: Report of Companies Law Committee dated February 2016 submitted to Union Minister of Finance, Corporate Affairs and I&B, prima facie opines that scope of disqualification of directors of companies under Rule 14 of Companies (Appointment and Qualification of Directors) Rules, 2014, for rectifying defect in filing annual return is required to be restricted to defaulting company only and not with respect to other companies.

[2017] 86 taxmann.com 236 (Hyderabad)

HIGH COURT OF HYDERABAD

Dr. Reddy’s Research Foundation

v.

Ministry of Corporate Affairs

WPMP NO. 40529 OF 2017
WP NO. 32575 OF 2017

OCTOBER  7, 2017

ORDER

1. Heard Sri R. Raghunandan, learned Senior Counsel appearing for the petitioners and Sri K. Lakshman, learned Assistant Solicitor General appearing for the respondents.

2. It appears that there is a lacuna in the procedure that is required to be followed by the Companies, which are defaulted in filing their annual returns and the consequent disqualification of the Directors to rectify the defect.

3. Rule 14 of the Companies (Appointment and Qualification of Directors) Rules, 2014, prima facie provides for rectifying the defect by enabling the defaulting companies to file their returns. However, the said Rule does not provide what is required to be done by the respective authorities. In the light of the fact that a defaulting company is allowed to rectify the defect by filing the returns which have not been filed earlier, the natural corollary of the same would be that the designated/competent authority is required to take the same into consideration. As the filing has to be done through e-platform, the same cannot be done unless access is provided to. The authorized individual/Director has to file the same, which obviously requires providing access by the authorities. As a matter of fact, the material placed before this Court, particularly, the report of the Companies Law Committee, dated nil.02.2016, submitted to the Hon’ble Union Minister of Finance, Corporate Affairs and I & B, discloses that the anomaly in relation to the same, particularly, with regard to the disqualification that is earned by an individual not only with respect to the defaulting company, but also with respect to the other companies, is noticed and the prima facie opinion of the Committee is that a rectification is required to be made restricting the scope of disqualification to the defaulting company.

4. In the light of the above discussion, there shall be a direction to respondent No.1 to restore DIN Numbers 00057433 and 00129701 of petitioners 2 and 3 insofar as petitioner No.1-Company, so as to enable them to submit annual returns of petitioner No.1 Company for the years 2011-12 to 2015-16 and further financial statements for the years 2012-13 to 2015-16 in compliance with Rule 14 of the afore-stated Rules read with Form DIR-8, Form DIR-9 and Form DIR-10.