Since all the writ petitions are connected and have been heard
together, they are decided by this common judgment.
2. This batch of writ petitions has been filed to challenge the
de-activation of the Director Identification Number by invoking
Section 164(2) of the Companies Act, 2013 (hereinafter referred to
as 'the Act of 2013') with a direction to activate the Director
Identification Number allotted to the petitioners. The activation of
the Director Identification Number is required, as the petitioners
were dis-qualified to be Director for any of the Companies in
reference to the dis-qualification occurred in one company.
3. Similar controversy was raised in other High Courts and after
considering the issue at length, the Gujarat High Court decided
batch of petitions led by Special Civil Application No. 22435 of
2017 by its order dated 18.12.2018. The Special Civil Application
has been allowed. Therein also, the name of the petitioner was
struck off from the list of Director of various companies. The
publication of which was made under Section 248 of the Act of
5
2013. A direction to activate the Director Identification Number of
the petitioner forthwith has been given, if not activated so far. It
was however with the liberty to take legal action against the
petitioner for any statutory default or non-compliance of the
provisions of the Companies Act.
4. In the light of the aforesaid and taking into consideration that
the similar issue has been decided by eight other High Courts
taking similar view, we need to refer certain paras of the judgment
of its application in this case also.
5. The relevant paras of the judgment of the Gujarat High Court
in Special Civil Application No. 22435 of 2017 are quoted
hereunder:.
20. So far as Section 164 of Act of 2013 is
concerned, it is titled as “Disqualifications for
appointment of Director”. On close reading of the
said Section 164, it transpires that Sub-section (1)
thereof speaks about the ineligibility or
disqualification of a person to be appointed as a
director in future, whereas Sub-section (2) speaks
about the ineligibility of the director, who is
already working as a director or has worked as a
director in the past, in the company which has
committed defaults as mentioned therein, to be
reappointed as a director of that company or
appointed in other company. As such, there is no
procedure required to be followed by the
respondent authorities for declaring any person
or Director ineligible or disqualified under the
said provision. A person would be ineligible to be
appointed as Director, if he falls in any of the
Clauses mentioned in Sub-section (1) and the
person is or has been a Director in a company,
and the company makes defaults as contemplated
in Clause (a) of (b) of Sub-section (2) thereof, he
would be ineligible to be reappointed in the said
defaulting company and appointed in any other
company. The ineligibility is incurred by the
person/director by operation of law and not by
any order passed by the respondent authorities,
and therefore, adherence of principles of natural
6
justice by the respondents is not warranted in the
said provision, as sought to be submitted by
learned Advocates for the petitioners. As such, as
per Rule 14 of the said Rules of 2014, the
Director has to inform the company in Form DIR-
8 and the company has to inform the Registrar in
Form DIR-9, when its director incurs
disqualification under Section 164(2) of the Act.
However, the question still remains to be
examined as to whether the respondents could
have shown the status of the petitioners as
disqualified in the impugned list?
21. As per Clause (a) of Sub-section (2) of Section
164, 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 shall be eligible to
be reappointed as a Director of that company or
appointed in any other company for a period of
five years from the date on which the said
company fails to do so. The said provision has
come into force w.e.f. 1.4.2014. Hence, three
financial years, if counted from the said date
would be the financial years 2014-15, 2015-16,
and 2016-17. At this stage, it is pertinent to note
that the Companies Act, 1956 has stood repealed
in view of Section 465 of the Act of 2013, and the
corresponding Section 274 of the Act of 1956
regarding disqualification of the directors did not
prescribe disqualification for the Directors of a
private company for not filing financial
statements or annual returns for continuous
period of three financial years. Of course, it was
incumbent on the part of every company not
having a share capital, to file with the Registrar
annual returns as per Section 160 and failure to
file such returns entailed penal consequences as
per Section 162 of the Act of 1956. However, no
such disqualification as under Section 164(2) of
the Act of 2013, was being incurred by the
Directors of private company under Section 274
of the Act of 1956, inasmuch as, Clause (g) of
Sub-section (1) of Section 274 of the Act of 1956
contemplated disqualification of a Director of a
public company only. It is only by virtue of
Section 164(2) the Director of any company
7
would become ineligible to be reappointed as
Director in the defaulting company or appointed
as Director in other company, if the defaults
under the said provision applied. The said
provision having come into force w.e.f. 1.4.2014,
the three financial years contemplated in the said
provision would be 2014-15, 2015-16, and 2016-
17 only. The submission of Mr. Devang Vyas for
the respondents that filing of documents due after
1.4.2014 would include the documents to be
submitted for the year 2013-14 as well, and
therefore, failure to file the documents
continuously for three financial years for the
purposes of Section 164(2)(a) would be 2013-14,
2014-15, and 2015-16, could not be accepted, as
it would tantamount to giving effect to the Section
164(2)(a) retrospectively.
22.It cannot be gainsaid that every statue is
prima facie prospective, unless it is expressly or
by necessary implication made to have
retrospective operation. As this juncture, it would
be useful to reproduce the general principles
concerning retrospectivity, as narrated by the
Supreme Court in case of Commissioner of
Income Tax (Central)-I, New Delhi Vs. Vatika
Township Private Limited, reported in (2015) 1
SCC 1 :-
“General Principles concerning retrospectivity:
27. A legislation, be it a statutory Act or a
statutory Rule or a statutory Notification, may
physically consists of words printed on papers.
However, conceptually it is a great deal more
than an ordinary prose. There is a special
peculiarity in the mode of verbal communication
by a legislation. A legislation is not just a series
of statements, such as one finds in a work of
fiction/non fiction or even in a judgment of a
court of law. There is a technique required to
draft a legislation as well as to understand a
legislation. Former technique is known as
legislative drafting and latter one is to be found
in the various principles of ‘Interpretation of
Statutes’. Vis-à-vis ordinary prose, a legislation
differs in its provenance, layout and features as
also in the implication as to its meaning that arise
8
by presumptions as to the intent of the maker
thereof.
28. Of the various rules guiding how a legislation
has to be interpreted, one established rule is that
unless a contrary intention appears, a legislation
is presumed not to be intended to have a
retrospective operation. The idea behind the rule
is that a current law should govern current
activities. Law passed today cannot apply to the
events of the past. If we do something today, we
do it keeping in view the law of today and in force
and not tomorrow’s backward adjustment of it.
Our belief in the nature of the law is founded on
the bed rock that every human being is entitled to
arrange his affairs by relying on the existing law
and should not find that his plans have been
retrospectively upset. This principle of law is
known as lex prospicit non respicit : law looks
forward not backward. As was observed in
Phillips vs. Eyre, a retrospective legislation is
contrary to the general principle that legislation
by which the conduct of mankind is to be
regulated when introduced for the first time to
deal with future acts ought not to change the
character of past transactions carried on upon
the faith of the then existing law.
29. The obvious basis of the principle against
retrospectivity is the principle of 'fairness’, which
must be the basis of every legal rule as was
observed in the decision reported in L’Office
Cherifien des Phosphates v. YamashitaShinnihon
Steamship Co.Ltd. Thus, legislations which
modified accrued rights or which impose
obligations or impose new duties or attach a new
disability have to be treated as prospective unless
the legislative intent is clearly to give the
enactment a retrospective effect; unless the
legislation is for purpose of supplying an obvious
omission in a former legislation or to explain a
former legislation. We need not note the
cornucopia of case law available on the subject
because aforesaid legal position clearly emerges
from the various decisions and this legal position
was conceded by the counsel for the parties. In
any case, we shall refer to few judgments
containing this dicta, a little later.
9
30. We would also like to point out, for the sake of
completeness, that where a benefit is conferred by
a legislation, the rule against a retrospective
construction is different. If a legislation confers a
benefit on some persons but without inflicting a
corresponding detriment on some other person or
on the public generally, and where to confer such
benefit appears to have been the legislators
object, then the presumption would be that such a
legislation, giving it a purposive construction,
would warrant it to be given a retrospective
effect. This exactly is the justification to treat
procedural provisions as retrospective. In
Government of India & Ors. v. India Tobacco
Association, the doctrine of fairness was held to
be relevant factor to construe a statute conferring
a benefit, in the context of it to be given a
retrospective operation. The same doctrine of
fairness, to hold that a statute was retrospective
in nature, was applied in the case of Vijay v. State
of Maharashtra & Ors. It was held that where a
law is enacted for the benefit of community as a
whole, even in the absence of a provision the
statute may be held to be retrospective in nature.
However, we are confronted with any such
situation here.
31. In such cases, retrospectivity is attached to
benefit the persons in contradistinction to the
provision imposing some burden or liability
where the presumption attaches towards
prospectivity. In the instant case, the proviso
added to Section 113 of the Act is not beneficial to
the assessee. On the contrary, it is a provision
which is onerous to the assessee. Therefore, in a
case like this, we have to proceed with the normal
rule of presumption against retrospective
operation. Thus, the rule against retrospective
operation is a fundamental rule of law that no
statute shall be construed to have a retrospective
operation unless such a construction appears
very clearly in the terms of the Act, or arises by
necessary and distinct implication. Dogmatically
framed, the rule is no more than a presumption,
and thus could be displaced by out weighing
factors.
10
32. Let us sharpen the discussion a little more. We
may note that under certain circumstances, a
particular amendment can be treated as
clarificatory or declaratory in nature. Such
statutory provisions are labeled as “declaratory
statutes”. The circumstances under which a
provision can be termed as “declaratory
statutes” is explained by Justice G.P. Singh in the
following manner:
“Declaratory statutes
The presumption against retrospective operation
is not applicable to declaratory statutes. As stated
in CRAIES and approved by the Supreme Court :
“For modern purposes a declaratory Act may be
defined as an Act to remove doubts existing as to
the common law, or the meaning or effect of any
statute. Such Acts are usually held to be
retrospective. The usual reason for passing a
declaratory Act is to set aside what Parliament
deems to have been a judicial error, whether in
the statement of the common law or in the
interpretation of statutes. Usually, if not
invariably, such an Act contains a preamble, and
also the word 'declared' as well as the word
'enacted'. But the use of the words 'it is declared'
is not conclusive that the Act is declaratory for
these words may, at times, be used to introduced
new rules of law and the Act in the latter case will
only be amending the law and will not necessarily
be retrospective. In determining, therefore, the
nature of the Act, regard must be had to the
substance rather than to the form. If a new Act is
'to explain' an earlier Act, it would be without
object unless construed retrospective. An
explanatory Act is generally passed to supply an
obvious omission or to clear up doubts as to the
meaning of the previous Act. It is well settled that
if a statute is curative or merely declaratory of
the previous law retrospective operation is
generally intended. The language 'shall be
deemed always to have meant' is declaratory, and
is in plain terms retrospective. In the absence of
clear words indicating that the amending Act is
declaratory, it would not be so construed when
the preamended provision was clear and
unambiguous. An amending Act may be purely
11
clarificatory to clear a meaning of a provision of
the principal Act which was already implicit. A
clarificatory amendment of this nature will have
retrospective effect and, therefore, if the principal
Act was existing law which the Constitution came
into force, the amending Act also will be part of
the existing law.”
The above summing up is factually based on the
judgments of this Court as well as English
decisions."
33. A Constitution Bench of this Court in
Keshavlal Jethalal Shah v. Mohanlal
Bhagwandas & Anr., while considering the nature
of amendment to Section 29(2) of the Bombay
Rents, Hotel and Lodging House Rates Control
Act as amended by Gujarat Act 18 of 1965,
observed as follows:
“8. ...The amending clause does not seek to
explain any pre-existing legislation which was
ambiguous or defective. The power of the High
Court to entertain a petition for exercising
revisional jurisdiction was before the amendment
derived from Section 115, Code of Civil
Procedure, and the legislature has by the
amending Act attempted to explain the meaning
of that provision. An explanatory Act is generally
passed to supply an obvious omission or to clear
up doubts as to the meaning of the previous Act.”
34. It would also be pertinent to mention that
assessment creates a vested right and an assessee
cannot be subjected to reassessment unless a
provision to that effect inserted by amendment is
either expressly or by necessary implication
retrospective.
35. We would also like to reproduce hereunder
the following observations made by this Court in
the case of Govinddas v. Income-tax Officer,
while holding Section 171(6) of the Income Tax
Act to be prospective and inapplicable for any
assessment year prior to 1st April, 1962, the date
on which the Income Tax Act came into force:
“11. Now it is a well settled rule of interpretation
hallowed by time and sanctified by judicial
12
decisions that, unless the terms of a statute
expressly so provide or necessarily require it,
retrospective operation should not be given to a
statute so as to take away or impair an existing
right or create a new obligation or impose a new
liability otherwise than as regards matters of
procedure. The general rule as stated by
Halsbury in Vol. 36 of the Laws of England (3rd
Edn.) and reiterated in several decisions of this
Court as well as English courts is that
‘all statutes other than those which are merely
declaratory or which relate only to matters of
procedure or of evidence are prima facie
prospectively and retrospective operation should
not be given to a statute so as to affect, alter or
destroy an existing right or create a new liability
or obligation unless that effect cannot be avoided
without doing violence to the language of the
enactment. If the enactment is expressed in
language which is fairly capable of either
interpretation, it ought to be construed as
prospective only.'"
36. In the case of C.I.T., Bombay v. Scindia
Steam Navigation Co. Ltd., this Court held that
as the liability to pay tax is computed according
to the law in force at the beginning of the
assessment year, i.e., the first day of April, any
change in law affecting tax liability after that
date though made during the currency of the
assessment year, unless specifically made
retrospective, does not apply to the assessment for
that year.”
23. So far as the issue involved in the present
petitions is concerned, as discussed earlier, no
disqualification was attached to the directors of
private companies for not filing the annual
returns and the financial statements by the
concerned companies under the Act of 1956. Such
provision of disqualification for the director of a
company – public or private company, has been
incorporated for the first time in Section 164(2)
of the Act of 2013. Such being the case, the said
provision has to be construed as having
prospective effect. If retrospective effect is given
to it, that would destroy, alter and affect the right
13
of the Directors of private company existing
under the Act of 1956. It is also a settled legal
position that Section 6 of the General Clauses
Act, saves a right accrued and/or a liability
incurred, under the repealed Act, whenever any
Act is repealed. Learned Advocates for the
petitioners have also rightly relied upon the
decision of the Supreme Court in case of Dilip
Kumar Sharma and Ors. Vs. State of M. P.
(supra) and in case of Tolaram Relumal and
Anr. Vs. The State of Bombay (supra), in which
it has been held inter alia that when two
interpretations are possible, one favouring the
subject ought to be made applicable especially in
case of penal statute. It is also held by the
Supreme Court in case of Madhya Pradesh Vs.
Narmada Bachao Andolan and Anr. (supra) that
an interpretation, which is just, fair and sensible
should be made and not an interpretation which
results in drastic consequences.
24. In the light of the said legal position, it is
required to be held that Sub-section (2) of Section
164 of 2013 could be made applicable only
prospectively and not retrospectively. Therefore,
the financial years contemplated in the said
provision have to be counted from 1st of April
2014 i.e. financial years 2014-15, 2015-16, and
2016-17. The disqualification under the said
provision would be attracted, or the Director of a
company would become ineligible to be
reappointed as the Director of the defaulting
company or appointed in other company for a
period of five years, only if the company in which
he was the Director had not filed the financial
statements or annual returns for continuous
period of three financial years from 2014-15.
25.As discussed herein above, the annual general
meeting has to be held within six months from the
date of closing of the financial year. In case of
Financial Year 2016-17, AGM could be held up to
30th September 2017, and the annual returns
could be filed within 60 days and financial
statements within 30 days of holding of such
AGM i.e. up to 30th of November and 30th of
October 2017 respectively, even if the benefit of
14
additional period available under Section 403
was not availed of. Under the circumstances, the
Director would incur disqualification or would
become ineligible to be reappointed as a Director
of a company or appointed in other company for
a period of five years, for the defaults under
Clause (a) of Subsection (2) of Section 164, only
after 30th of October or 30th of November, as the
case may be, of the year 2017. Hence, the
impugned list dated 12.9.2017 showing the
petitioners as disqualified for a period of five
years from 1.11.2016 to 31.10.2021, therefore,
appears to be not only premature, but untenable
at law.
26. Of course, such disqualification as
contemplated under Section 164 would take place
automatically on any of the eventualities as
mentioned therein taking place, and therefore,
would be incurred by operation of law. As rightly
submitted by Mr.Vyas, as such no declaration is
required to be made or any action required to be
taken or any order required to be passed by any
authority under the Act. However, the action of
the respondents in publishing the impugned list
on 12.9.2017 of the Directors associated with the
“struck off companies” under Section 248,
showing the concerned Directors of the
companies, including the petitioners as
disqualified for a period of five years from
1.11.2016 to 31.11.2021 by no stretch of
imagination is justified, and could not be said to
be in consonance with the provisions contained in
Section 164(2) of the Act of 2013. Neither the
replies filed by the respondents to the petitions
contain any explanation, nor Mr.Vyas in his
submissions was able to explain as to how the
petitioners could be shown as disqualified
Directors for the period from 1.11.2016 to
31.11.2021, when even according to him, the
provisions contained in Section 164(2) were
applied prospectively, and the default would start
after 1.4.2017. The Court, therefore, is of the
opinion that the impugned list published on
12.9.2017 by the respondent No.1 deserves to be
quashed and set aside.
15
29. This takes the Court to the next question as to
whether the respondents could have deactivated
the DINs of the petitioners as a consequence of
the impugned list ? In this regard, it would be
appropriate to refer to the relevant provisions
contained in the Act and the said Rules. Section
152(3) provides that no person shall be appointed
as a Director of a company, unless he has been
allotted the Director Identification Number under
Section 154. Section 153 requires every
individual intending to be appointed as Director
of a company to make an application for
allotment of DIN to the Central Government in
such form and manner as may be prescribed.
Section 154 states that the Central Government
shall within one month from the receipt of the
application under Section 153 allot a DIN to an
applicant in such manner as may be prescribed.
Section 155 prohibits any individual, who has
already been allotted a DIN under Section 154
from applying for or obtaining or possessing
another DIN. Rules 9 and 10 of the said Rules of
2014 prescribe the procedure for making
application for allotment and for the allotment of
DIN, and further provide that the DIN allotted by
the Central Government under the said Rules
would be valid for the lifetime of the applicant
and shall not be allotted to any other person.
30.Rule 11 provides for cancellation or surrender
or deactivation of DIN. Accordingly, the Central
Government or Regional Director or any
authorized officer of Regional Director may, on
being satisfied on verification of particulars of
documentary proof attached with an application
from any person, cancel or deactivate the DIN on
any of the grounds mentioned in Clause (a) to (f)
thereof. The said Rule 11 does not contemplate
any suo motu powers either with the Central
Government or with the authorised officer or
Regional Director to cancel or deactivate the DIN
allotted to the Director, nor any of the clauses
mentioned in the said Rule contemplates
cancellation or deactivation of DIN of the
Director of the “struck off company” or of the
Director having become ineligible under Section
164 of the said Act. The reason appears to be that
16
once an individual, who is intending to be the
Director of a particular company is allotted DIN
by the Central Government, such DIN would be
valid for the lifetime of the applicant and on the
basis of such DIN he could become Director in
other companies also. Hence, if one of the
companies in which he was Director is “struck
off”, his DIN could not be cancelled or
deactivated as that would run counter to the
provisions contained in the Rule 11, which
specifically provides for the circumstances under
which the DIN could be cancelled or deactivated.
31. In that view of the matter, the Court is of the
opinion that the action of the respondents in
deactivating the DINs of the petitioners-
Directors along with the publication of the
impugned list of Directors of “struck off”
companies under Section 248, also was not
legally tenable. Of course, as per Rule 12 of the
said Rules, the individual who has been allotted
the DIN, in the event of any change in his
particulars stated in Form DIR-3 has to intimate
such change to the Central Government within
the prescribed time in Form DIR-6, however, if
that is not done, the DIN could not be cancelled
or deactivated. The cancellation or deactivation
of the DIN could be resorted to by the concerned
respondents only as per the provisions contained
in the said Rules.
32. Much reliance was placed by the learned ASG
Mr.Vyas on the condonation of delay scheme
dated 29.12.2017 introduced by the Ministry of
Corporate Affairs after the publication of the
impugned list, however, the said scheme would
not justify the action of the respondents, in
publishing the impugned list, which was
absolutely contrary to the provisions of the Act of
2013 and the Rules made thereunder. The said
scheme was in force from 1.1.2018 to 31.3.2018,
which was extended up to May 2018, under which
the Directors associated with the “struck of
companies”, which had failed to file financial
statements or annual returns continuously for a
period of three financial years from 2013-14 to
2015-16 were granted an opportunity to rectify
17
the default, by following the procedure laid down
therein. However, this Court has held hereinabove
that the provisions of Section 164(2)(a) having
come into force from 1.1.2014, three financial
years for the purpose of the said provision would
be financial years 2014-15, 2015-16 and 2016-17
only, and not 2013-14, 2014-15, and 2015-16. In
any case, due to deactivation of the DINs, the
concerned Directors were unable to take benefits
of the said scheme also. Hence, the said scheme
could not be pressed into service for justifying the
publication of the impugned list.
6. The similar view has been taken by Madras High Court as
well as High Court of Madhya Pradesh.
