Bhumesh

Independent directors left high and dry

Bhumesh Verma 5 Dec 2017

Independent directors left high and dry

Contrary to media reports and public demand, the government of India seems to be in no mood to provide any relief whatsoever to de-registered companies or disqualified directors which have faced the government’s tirade.

In last few months, the Ministry of Corporate Affairs has become hyper active against dormant / shell companies and has deregistered about 225,000 of them for not filing their statutory returns. Not only this, over 309,000 individuals associated with these companies in the position of directors have been disqualified to act as directors.

Under ‘disqualified’ status, such individuals are barred from holding / accepting new directorships for a period of 5 years. This has created havoc in Indian corporate boardrooms as many stalwarts are included in the list issued by the Government of India on account or some or the other company whose board they adorn has not made requisite filings.

Many of these individuals are now approaching courts to set aside their disqualifications and some have apparently got temporary relief as well.

There were some media reports suggesting that the Ministry may take a sympathetic view in genuine cases and provide some relief. However, the concerned Minister has ruled out providing any relief for such companies or the disqualified directors as these actions were caused by the ‘operation of law’.

Now, therefore, the remedy lies for these two issues before the National Company Law Tribunal (regarding deregistered companies) and the High Courts (regarding disqualification of directors).

However, a departmental mechanism may be introduced for resolution of grievance instead of having to approach the National Company Law Tribunal for the de-registered companies.

While a blanket action against promoters who failed to adhere to prescribed corporate governance and timely filings, the action seems to be too harsh on independent directors, some of who may have nothing to do with such affairs.

So, the independent directors are left high and dry for the time being and the government seems to be hell bent to maintain its position as the biggest litigator in the country. 


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