Calcutta High Court (Appellete Side)
Arun Seth vs Union Of India & Ors on 15 November, 2017
Author: Jyotirmay Bhattacharya
Bench: Jyotirmay Bhattacharya
IN THE HIGH COURT AT CALCUTTA
CIVIL APPELLATE JURISDICTION
Present:
The Hon'ble Acting Chief Justice Jyotirmay Bhattacharya
AND
The Hon'ble Justice Arijit Banerjee
M.A.T. 1874 of 2017
with
CAN 10479 of 2017
Arun Seth
versus
Union of India & Ors.
For the Writ Petitioner/Appellant : Mr. Jishnu Saha,
Mr. Ratnanko Banerjee,
Mr. Rishav Banerjee,
Mr. Gaurav Verma,
Mr. Souvik Mazumdar.
For the Respondent Nos. 1 & 2. : Mr. S. Prasad.
Heard On : 15-11-2017. Judgement On : 15-11-2017.
Arijit Banerjee, J. : A list published by the Registrar of Companies, West Bengal naming directors of companies who according to the Registrar have attracted disqualification under Section 164(2)(a) of the Companies Act, 2013 (in short "the said Act") with effect from 1st November, 2016 for a period of five years i.e. till 31st October, 2021, wherein the name of the petitioner figures, was challenged by the petitioner before the learned single Judge by way of a writ petition being W.P. No. 25916(W) of 2017.
The learned single Judge gave direction for filing affidavits, but declined to pass any interim order as prayed for by the writ petitioner. Being aggrieved, the writ petitioner/appellant has preferred the instant appeal.
Mr. Saha, learned senior counsel appearing for the writ petitioner/appellant submitted that the petitioner is a Director of various companies including the respondent no.3. The respondent no.3 never functioned since its incorporation. It was incorporated with the object of running a paediatric hospital, but the funds that were promised from abroad never came and hence, the respondent No.3 Company never had any business. Hence, annual returns have not been filed in respect of respondent no.3 since its incorporation. It is for non-filing of annual returns of the respondent no.3 for a consecutive period of 3 years that the petitioner has been sought to be disqualified from acting as Director of any company with effect from 1st November, 2016.
Mr. Saha submitted that firstly, Section 164(2) of the said Act came into operation with effect from 1st April, 2014. It cannot be given retrospective effect. The effect of Section 164(2) of the said Act can operate only from 1st April, 2017 and not for any period prior thereto. Secondly, he submitted that under Section 164(2) of the said Act, disqualification is as regards re-appointment or further appointment as director of a company. If a person who is a director of a company attracts disqualification under Section 164(2) of the said Act, he may cease to be a director of the defaulting company but in so far as other companies are concerned where he is a director, he does not automatically cease to be a director.
We have also heard Mr. Prasad, learned advocate appearing on behalf of the Union of India and the Registrar of Companies. He submits that Section 164(2) of the said Act refers to non-filing of annual return for 'any' continuous period of three financial years. It need not be a period after Section 164(2) of the said Act came into force. Hence, it can well be given retrospective effect. He further drew our attention to Section 167 (1) of the said Act. He then submitted that he requires some time to obtain instruction in the matter.
We have considered the rival contentions of the parties. We are, prima facie, in agreement with the submission of Mr. Saha. For the purposes of interim protection, we are of the view that an arguable case has been made out by the petitioner/appellant. It appears, prima facie, that disqualification under Section 164(2) of the said Act would not prevent the petitioner to continue to act as Director of other companies which are not in default. However, we are not expressing any opinion as to whether or not he will be eligible for re-appointment in any of the companies. We are also of the prima facie view that Section 164(2)(a) cannot be given retrospective effect, it being a penal or quasi-penal provision. We also feel that the balance of convenience is in favour of granting interim relief to the appellant/writ petitioner.
Accordingly, there will be an interim order in terms of prayers (b) and (c) of the stay petition which read as follows :-
"b) An order of injunction staying the operation of the impugned list of disqualified directors published by the Respondent No. 1 so far as it pertains to the Appellant herein.
c) An interim order allowing the Appellant to continue as director in all companies in which the Appellant has been serving as director."
However, this order will not be construed as entitling the appellant to continue as a Director of the respondent no.3 company since prima facie it appears to us that the appellant has ceased to be a Director of the said company by reason of Section 167(1)(a) of the said Act read with Section 164(2)(a) thereof.
As a consequence there shall also be an order directing the respondent nos. 1 and 2 to allow the writ petitioner/appellant to file necessary documents with the respondent nos. 1 and 2 using his Director Identification Number and Digital Signature Certificate.
We are of the view that since the writ petition is pending, the issues involved should be finally decided by the learned single Judge after exchange of affidavits. Let affidavit-in-opposition be filed before the learned single Judge within four weeks from date; reply thereto, if any, be filed by the writ petitioner/appellant within two weeks after reopening of the Court after the ensuing Christmas Vacation.
Liberty to mention before the learned single Judge after completion of affidavits.
The interim order, passed herein, shall continue until disposal of the writ application by the learned single Judge.
We make it clear that the view expressed in this order is purely prima facie in nature and the learned Judge shall be at liberty to decide the writ application without being influenced by any observation made in this order.
Since no affidavit has been called for, the allegations contained in the stay petition are deemed not to have been admitted by the respondents.
The appeal and the application for stay filed in connection with this appeal are, thus, disposed of.
Urgent photostat certified copy of this order, if applied for, be given to the parties as expeditiously as possible.
(JYOTIRMAY BHATTACHARYA, A.C.J.) ( ARIJIT BANERJEE, J. ) dc.