Section 164(2) Companies Act Not Retrospective; Default Before 2014-15 FY Can’t Be Considered

Case: Zacharia Maramkandathil Mohan and Ors v. Union Of India

Coram: The Honourable Mr.Justice N.Nagaresh

Case No: WP(C) NO. 21628 OF 2020

Court Observation: “It is a settled proposition of law that no statute shall be construed to have retrospective operation unless such a construction appears very clearly in the terms of the Act or arises by necessary implication. Directors of private Companies cannot be disqualified for appointment / re-appointment as mandated under Section 164(2) if any of such three consecutive defaults in filing Annual Returns/Financial Statements, is before the financial year 2014-’15. “

“The provisos inserted below Section 164(2) and Section 167(1)(a) of the Act, 2013 by the Companies (Amendment) Act, 2017 with effect from 07.05.2018 are constitutionally valid and the same being clarificatory in nature, would apply retrospectively. However, the words ‘in all the companies’ appearing in the proviso to Section 167(1)(a) will have only prospective operation.”

“the DIN of the petitioners allotted under Rule 10 of the Companies (Appointments and Qualifications of Directors) Rules, 2014, are not liable to be deactivated or cancelled solely for the reason that the petitioners stand disqualified for appointment/reappointment as Directors of Companies by operation of Section 164(2).”

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