The Bombay High Court has disallowed an interim relief to directors who were disqualified under section 164(2) of the Companies Act 2013 for not filing Financial Statements and Annual Returns which is to be considered as Ministerial Acts of Directors.
The arguments advanced by the writ Petitioners was that Gujrat, Karnataka and Madras High Courts have held that provisions of Section 164(2) cannot be applied with retrospective effect.
Under section 164(2) Directors of a company which has defaulted in the filing of financial statements and annual returns can continue as directors in the defaulting company till their term expires and they cannot be appointed as directors in any other company. The intention of the law is further clarified as under section 167(1) of the Companies Act 2013. A disqualified director under section 164 will continue in the defaulting company but he will vacate his office as director in all other Companies.
Justice R.I. Chagla and Justice S.C. Dharmadikar held that “filing of financial statements and Annual Returns are ministerial or administrative acts and directors are disqualified for a period of 5 years if above documents are not filed for a continuous period blanket stay or a relief having far-reaching legal consequences as sought cannot be granted. However, the Section shall operate consistent with the observations by this Court in the foregoing paragraphs. The application for interim reliefs is disposed of in these terms.”
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