The Interim relief on disqualification of directors carried on
The Madras High court issued a stay order from the Registrar of Companies (RoC), Chennai that prevents an individual from being the director of a joint stock company.
This was an order issued with reference to the Companies Act, 2013, which disqualified a single person being a director of a company. This order was issued for five years and will get over in 2021.
How Will Companies function?
The Registrar of Companies is the one who approves the inception of joint stock companies. A company can start functioning only if approved by the Registrar of Companies. If a company is struck out of the register of companies it means that the company is no longer operational.
The Ministry of Corporate Affairs is the one which governs all the companies in India. It formulates the Companies Act. The Registrar of Companies comes under the MoC.
There has to be a lot of documents submitted before the inception of a company. The promoter of a company carries out all the work regarding this and gets some remuneration in return. It is then that the Board of Directors of a company are elected. The Board of Directors forms an important place in the administration of the company. They are usually paid in cash and sometimes, are even shareholders in that company.
Strict Decisions Against The Companies
The Registrar of Companies has all the power to disqualify the Board of Directors of a company because it is the ultimate authority of the joint stock companies.
Mr. Ganapathi’s Vies
This disqualification of directors became a huge issue when the petition was first filed by Mr. Ganapathi. He was the director at three different companies- RSG Engineering and Constructions Pvt Ltd, Deccan Softlab Pvt Ltd and Project Marketing and Management Pvt Ltd. They were not functional and were omitted from the Register of Companies before 2010. In an order on 8th September 2017, he was named as a disqualified director by the RoC. It was done so because the order stated that he was a director in some other companies that did not file annual returns for three years.
He said that the order against him was illegal and untrue. He appealed to the Ministry of Corporate Affairs and the Registrar of companies for reappointing him as the director in any company without any obstacles.
He told that the Companies Act, 2013 was operational only from 1st April 2013 and that not filing the returns for three years from 2013 would be on 2017, which is when it would become an issue. Otherwise, it is null and void.
Also, the Registrar of companies never gave an opportunity for the disqualified director to be heard which was against the provisions of the Act, according to the corporate lawyer Kumarapal R Chopra.
He also stated that this has not only affected Mr. Ganapathi but around 45,000 individual directors in Chennai.
It was on the order given by the Central government that the directors of companies which didn’t file returns for three years and misused the books of accounts, were disqualified.
The Delhi High Court was in favor of the directors’ plea and issued a petition to the MoC and RoC regarding the disqualification of a lot of directors of shell companies.
Now, that issue is going to have a hearing on 23rd October 2018 in Delhi High Court with respect to a writ petition filed which concerns the disqualification of directors by the Ministry of Corporate Affairs (MoC). The interim stay (on all disqualified directors shall remain active) will be continued till the next date of hearing. The matter is still pending with Supreme Court of India where the Union of India has challenged the judgment of December 2017 with the Delhi High Court.