Skip to main content

Debarred firm directors may approach courts

Debarred firm directors may approach courts
The government´s move to debar directors of companies that have not filled annual returns for three successive years is likely to be challenged in courts citing retrospective application of the Companies Act, 2013.

Asageneral rule, the law is always applicable prospectively unless any prior date is mentioned specifically, says Sumit Naib, associate director, Companies Act, 2013, that pertains to disqualification of directors due to nonfiling of financials and annual returns for three years, is applicable to all types of companies, including private ones, with effect from April 1, 2014. Prior to enactment of this new section under Companies Act, 2013, the corresponding section under the Companies Act, 1956, was applicable only to public companies.

The Ministry of Corporate Affairs earlier this month struck off the names of around from the records, found to be without any business activity or had not filed financial statements for three years or more.

Subsequently the directors, or the authorised signatories, of the debarred companies had been disqualified from being appointed in any other company in that position.

According to the government estimates, at least 200,000- 300,000 disqualified directors shall get debarred in the process.

Many directors feel the period of default being considered the list of is prior to the of section the Companies 2013.

“Accordingly, may approach seeking relief on says Naib.

Nabeel partner advisory firm, Grant Thornton India.

“One could takeaview that to the extent relates to by private companies, the law was introduced only with effect from FY 2014-15,” he says. However, if the director was appointed after introduction of the Companies Act, 2013, and at that point such noncompliance existed, he or she would still stand disqualified, points out Ahmed.

Legal experts note that during introduction of the new company law in 2014, the government had introduced a Company Law Settlement Scheme —a two month window —for companies that defaulted on filing statements to come good by payingalower fee.

However, for companies that took advantage of this scheme, the provisions of Section 164 (2) would apply only for prospective defaults, if any, says Ahmed.

According to the Companies Act, 2013, any aggrieved director could apply to the National Company Law Tribunal (NCLT) within three years of the debarment order.

If in the opinion of the NCLT, removal is not justified, it may order restoration of the name of the company in the Registrar of Companies.

The Business Standard, New Delhi, 21th September 2017

Comments

Popular posts from this blog

RBI minutes show MPC members flagged upside risks to inflation

RBI minutes show MPC members flagged upside risks to inflation Concerns about economic growth and easing inflation prompted five of the six monetary policy committee (MPC) members to call for a cut in the repo rate, but most warned that prices could start accelerating, show the minutes of the panel’s last meeting, released on Wednesday. The comments reflected a tone of caution and flagged upside risks to inflation from farm loan waivers, rise in food prices, especially vegetables, price revisions withheld ahead of the goods and services tax, implementation of house rent allowance under the 7th pay commission and fading of favourable base effect, among others. On 2 August, the panel chose to cut the repurchase rate—the rate at which the central bank infuses liquidity in the banking system—by 25 basis points to 6%. One basis point is one-hundredth of a percentage point. Pami Dua, professor at the Delhi School of Economics, wrote that her analysis showed “a fading economic growth outlook, as …

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…

Differential Tax Levy under GST: Food Firms May De-Register Trademarks

Differential Tax Levy under GST:Food Firms May De-Register Trademarks The government’s decision to charge an enhanced tax rate on trademark food brands is leading several rice, wheat and cereal manufacturers to consider de-registering their product trademarks. Irked by the June 28 central government notification fixing a 5 per cent goods and services tax (GST) rate on food items packaged in unit containers and bearing registered brand names, the industry has made several representations to the government to reconsider the differential tax levy, which these players say is creating an unlevel playing field within these highly-competitive and low-margin industries. Sources say that the move has affected the packaged rice industry the hardest and allowed the un-registered market leaders, India Gate and Daawat, to gain advantage as compared to other registered brands such as Kohinoor and Lal Qilla. Smaller players are even more worried with this enhanced rate of tax (against the otherwise …