In September 2017, Ministry of Corporate Affairs (MCA) identified many directors associated with the companies that had failed to file financial statements or annual returns for a continuous period of three financial years 2013-14, 2014-2015 and 2015-2016 and consequently they became disqualified as per sec 164 (2) of the companies act 2013, to act as Directors. Due to the Directors became disqualified to act as Director, the other companies which were active and running their business were also suffered who have on their board the aforesaid disqualified Directors.

Against the move of the MCA, various representations from industry, defaulting companies and their directors seeking opportunity for the defaulting companies to become compliant and normalize operations were made. Certain affected persons have also filed writ petitions before various High Courts seeking relief from the disqualification.

In view of this, the Central Govt introduced a Scheme namely “Condonation of Delay Scheme 2018” [CODS-2018] with effect from 01.01.2018 to 31.03.2018 facilitating the defaulting company to file their pending financial statements and annual returns to rectify their defaults. After this compliance, disqualification of the concerned directors under section 164 (2) is gone out. However, the scheme is not applicable to the defaulting companies which have been struck off from the register of companies under section 248(5) of the Act.

Hon’ble Bombay High Court in respect of the various Writ petitions filed in this regard has made Order on 22nd March, 2018 for the convenience of stakeholders.

Conclusion

The High Court Order is mainly to provide convenience to the struck off companies and their directors to make filing and to come out from the disqualification remark and to the other active and running companies whose directors have become disqualified, as the CODS 2018 is not covering the struck off companies and also not providing relief to the directors of the struck off companies and the other concerned active and running companies.

Struck off companies to revive for any purpose are required to appeal to NCLT under section 252 of the Companies Act, 2013.The High Court Order has facilitated time period of seven days for struck off companies to revive for completing the filing, without approaching NCLT.

Regulators may consider empowering ROC in future to activate struck off companies for the limited purpose of completing pending filing compliances, on the application of the concerned company or its directors. This will help the directors to remove the tag of disqualification without approaching High Court or Tribunal.

 

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