Delhi High Court gives directors of defaulted companies to start afresh

Delhi High Court gives directors of defaulted companies to start afresh

The Court allowed reactivation of DIN and DSC of defaulting companies under Companies Fresh Start Scheme

The Delhi High Court allowed the Petitioners to reactivate their Director Identification Number (DIN) and Digital Signature Certificate (DSC).

The matter titled Anant Narain & Anr. v Union Of India & Anr, was placed before a single-judge Court of Justice Pratibha M. Singh in the High Court of Delhi.

The factual background was that the Petitioners were the directors in M/s Innowin Info Solutions Private Limited, which was struck off due to non-filing of the company's financial statements or annual returns for a continuous period of three financial years. The Petitioners sought to reactive their DIN and DSC as they were disqualified and their DIN and DSC, were also deactivated.

The Court considered the judgments, which dealt with the legal aspects arising out of disqualification of directors under Section 164 and 167 of the Companies Act, 2013 and the deactivation of their Director Identification Number and Digital Signature Certificate. It classified four categories of Directors that are approaching Courts seeking setting aside of disqualification and activation of DIN/DSC numbers while relying on the judgments. They are as follows:

a) Directors who have been disqualified prior to 7 May 2018, qua other companies in addition to the defaulting company.

b) Directors who have been disqualified post 7 May 2018, qua other `active' companies.

c) Directors of 'active' companies who have been disqualified.

d) Disqualified directors of struck off companies seeking appointment as directors in other/new companies

The Court observed that these directors were qualified to take benefit of the Companies Fresh Start Scheme, 2020 (CFSS-2020), which was introduced to allow a fresh start for defaulting companies and directors of such companies.

The Court further observed that the introduction of the CFSS was itself a step for `providing a fresh start' and under such circumstances, a continuation of the disqualification would defeat the Scheme and its purpose.

The judge made the following conclusion:

"In furtherance of the purpose of this scheme, directors of struck off companies who seek to be appointed as directors of other/new companies ought to be provided an opportunity to avail of this scheme, provided that they have undergone a substantial period of their disqualification."

The Court noted that the Petitioners satisfied condition (d) since the Petitioners wished to start a new business and their DIN/DSC ought to be reactivated within a period of one week to enable them to conduct their fresh business in accordance with the law.

The writ petition was disposed of with the directions to file the relevant documents and seek condonation of delay in accordance with the applicable laws and regulations.