Writ Petition for Removal of Disqualification of Directors

The government regulates the operations of directors since the success of a company depends upon its competency. In the year 2017, MCA declared the disqualification of around 3.09 lakh directors for not complying with the regulations under Section 164(2) and 167(1)(a) of the Companies Act, 2013. The authority further blocked the Director Identification Number (DIN) of the disqualified directors. Many directors show their resentment and appeals for justice. It results in the formation of a Condonation of Delay Scheme. The scheme grants an opportunity to revive the DIN, while many companies took advantage of CODS, others were left discontent after the expiry of the scheme. Thereon, the companies urge for another substitute way to activate their DIN. MCA issue a new provision to writ petition for the removal of disqualification of directors and save their current position.

This blog will guide you about the CODS as well the latest provision under which you can apply for removal of disqualification.

An Overview of Condonation of Delay Scheme

As per the Companies Act, a company’s director has to file its financial returns with the Ministry of Corporate Affairs each year. In case, any director fails to do the same for three consecutive years; then he could get disqualified. Moreover, the concerned company shall also get entitled “Strike off” from “Active.” Being the victim of disqualification, many directors plead the National Company Law Tribunal and High Courts to restore their DIN and request for another chance.

Thereon, the Central Government came up with the disqualification delay scheme, namely, Condonation of Delay Scheme 2018. CODS become functional w.e.f 1st January to 30th May 2018. A considerable number of companies capitalize the scheme to restore their Director Identification Number. It was an efficient method used for the removal of disqualification of directors by merely filing all the statutory documents with the Registrar of Companies.

Removal of Disqualification of Directors under CODS

The CODS scheme enables disqualified directors to reactivate their DIN. Let’s perceive the ways in which the Condonation of Delay Scheme works:

Firstly, the disqualified directors need to file the due statutory documents with ROC to temporarily activate their DIN.

It requires the defaulters to file pending documents along with the statutory fee as inscribed under Section 403 of the Companies Act, 2013.

Thereby, the disqualified companies apply online under Condonation of Delay by filing e-CODS, 2018 form and pays a fee of ₹30,000/-.

Those directors who fail to leverage the opportunity and do not submit the due statutory documents with the specified fee until the expiry of the CODS scheme got disqualified again. Thus, MCA deactivated the DIN of defaulter directors.

Whereas, the defaulting companies that got struck off by the Registrar of Companies, they can only activate their director’s DIN after the NCLT issues an order to revive the company.

After NCLT passes the order; the ROC shall raise a ticket on MCA21 portal by (CRF) Change Requirement Form. Further, it uploads a copy of the NCLT order on the portal. After validating the truth, ROC will reactivate the DIN of the disqualified director.

Note – It is mandatory that a disqualified directors whose DIN got activated through CRF, he should not be a director of any other company who previously got stuck off. Moreover, the ROC has to proper verification of NCLT order and compliance.

Writ Petition for Removal of Disqualification of Directors

Follow these steps to file a writ petition for the removal of director disqualification:

Step 1- The first and foremost step that a disqualified director has to undertake is to file the Writ Petition under Article 226 of the Indian Constitution before the High Court. An applicant must include these pieces of information in his petition:

Affix a Notice of motion and urgent application;

Give reasonable justification for not complying to the filing of statutory documents;

List of date and events;

Stay application under Section 151 of CPC;

Current status of the directors and company who seeks restoration;

List of the companies, wherein the defaulted applicant is the director;

Mention the details such as the name, address, designation of each Memo of parties to the petition;

A copy of the Impugned Notice or Press Release that the ROC has issued, entailing all disqualified directors;

Lastly, attach a Prayer clause to dismiss those publications which were issued by the ROC under Section 164 (2) (a) of the Companies Act.

Step-2 The struck off companies to restore their name with ROC can also appeal before the National Company Law Tribunal (NCLT) under Section 252 of the Companies Act, 2013.

Step-3 Once the Hon’ble High Court and NCLT issue the DIN reactivation and company’s name revival orders, thereon, the applicant needs to file all statutory documents. Further, he must file an annual return of last three years with Income-tax authority of India.

Step-4 After the defaulter appellant fulfils all the required compliances and makes the payment of an imposed penalty. The ROC shall process the DIN activation. Thus, the Registrar of Companies will raise a ticket on MCA21 portal through (CRF) Change Requirement Form. ROC will also upload a copy of the order on the portal. Therefore, after the confirmation of CRF, the removal of disqualification of directors shall take place.

Conclusion

Generally, it is advisable for the directors to adhere to all the provisions and fill financial returns on time. As any kind of negligence can lead to hefty penalties and even imprisonment in some cases, so it’s better to be regular with filing compliances. MCA provides the best remedy to revive the name of struck off companies and for the removal of disqualification of directors in the form of Writ Petition. It is more simplistic methods than the Condonation of Delay Scheme. If you need legal support to draft the Writ Petition for your company, contact Swarit Advisors. We can help you file an application in the High Court; moreover, our Advocates can plead for the same.