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[Disqualification of Directors] 2014 and 2018 amendments to Companies Act are prospective: Calcutta High Court

Team SoOLEGAL 8 Jan 2021 4:26pm

[Disqualification of Directors] 2014 and 2018 amendments to Companies Act are prospective: Calcutta High Court

On 5th January, 2021, Calcutta High Court while hearing a case, Naresh Kumar Poddar v. Union of India[1], had held that, the 2014 and 2018 amendments of Section 164 (2) and proviso of Section 167 (1) of Companies Act, 2013, are predictive in nature. The Court was also of the view that, the retrospective application of these amendments would be unnatural and could have the ability to ruin the economy.

The said provisions of the Act deal with the disqualification of a Director of a company.  If a Director fails to file financial statement for a continuous period of three years and balance sheet for a period of 30 days then the Director would be disqualified for a term period of five years.

Justice Sabyasachi Bhattacharya while hearing a petition which was filed by a Director of a private limited company where the petitioner had stated that, he had been disqualified by a 2017 notification from 1st November, 2016, till 3rd October, 2021, had held that the provisions of the said Act can be applied in a prospective manner.

The Court had accepted the petition because the petitioner could not be disqualified by retrospective applications of the said provisions of the Act. The Court had clarified that, the amendment to Section 164 (2) was introduced on 1st April, 2014 and it must be applied in a prospective manner. The Court had also clarified that, the amended proviso to Section 167 (1) of the Companies Act, 2013, must be interpreted prospectively only after 7th May 2018. Thus the petition was allowed and the verdict of disabling the petitioner’s Directors Identification Number was set aside.

The Court was also of the view that, the 2014 amendment of Section 164 (2) of Companies Act, 2013, regarding disqualification for a time period of five years on default of filing financial statement is clearly penal in nature. The Court had also stated that, these types of disqualifications violate the fundamental rights of a Director.  The Court had also stated that, no power is given to the authorities regarding the disqualification of Directors. The principle of natural justice would have no role to play in these types of matters.



Tagged: Calcutta High Court   Companies Act   Justice Sabyasachi Bhattacharya   fundamental rights  
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