Skip to main content

Disqualified Directors Seek Reprieve from Ministry

Disqualified Directors Seek Reprieve from Ministry
Disqualified directors have started knocking on the doors of the Ministry of Corporate Affairs (MCA) seeking reprieve from the debarment ordered by the government last month, with several of them explaining to the government that they have been wrongly disqualified and that they were not associated with the struck-off companies.

The government could consider coming up with some solution for the aggrieved directors since no recourse is currently available under the Companies Act 2013. While companies can approach the National Company Law Tribunal (NCLT), directors have no such option. “The directors have got disqualified by the operation of law. We had sent notices to the companies before we struck off their names. We are seeing what can be done now...discussions will start soon,“ a senior official told ET.

Chartered accountants and company secretaries have also met government officials over the disqualification of directors. Many CAs have also raised the issue of directors not receiving any prior notice before the disqualification. The senior official ET spoke to clarified that since a director gets disqualified “under the operation of law“ no notices were required to be sent to them but only to the companies which were found non-compliant.

As far as the struck-off companies are concerned, the government has assured that it will “take all aspects into account and hear the stakeholders to provide some redressal mechanism“.

“Not all companies removed from the Registrar of Companies list are shell but simply non-compliant. We will listen to their cases,“ the senior official explained.

Ministry of corporate affairs has struck off more than 2 lakh companies and disqualified 3 lakh directors as part of an ongoing exercise of cleaning up Corporate India and a crackdown on shell companies. Several public sector companies and their directors have also been named in the list made public by the government.“There's some recourse for public listed companies but not for the directors of those companies,“ another senior official said. Following the disqualification by MCA, directors have been barred from using their digital signature to sign any document.
The National Stock Exchange, taking note of the development, has also asked about 200 listed companies to consider whether directors who have been disqualified by the ministry of corporate affairs should continue on their boards. As per Section 164 of the Companies Act, 2013, a director in a company which has not filed financial statements or annual returns for three years in a row will not be eligible for reappointment as a director in that or any other company for five years.

ET VIEW Amend The Rule

More legal disputes are avoidable, given that disqualified directors of shell companies can move courts to seek legal recourse. The government can amend the rules to give them a chance, but it should be accompanied by a stern warning that there will no errant conduct in the future. Enforcement agencies must also swiftly complete investigation of shell companies to establish whether or not there has been malfeasance.

The Economic Times, New Delhi, 04th October 2017

Comments

Popular posts from this blog

Budget: Startup sector gets new Fund of Funds, FM to allocate Rs 10K cr

  The Indian startup sector received a boost with Finance Minister Nirmala Sitharaman announcing the establishment of a new fund of funds (FoF) in the Budget 2025. The minister unveiled a fresh FoF with an expanded scope, allocating Rs 10,000 crore. The initial fund of funds announced by the government with an investment of Rs 10,000 crore successfully catalysed commitments worth Rs 91,000 crore, the minister said.   “The renewal of the Rs 10,000 crore commitment to the Fund of Funds for alternative investment funds (AIFs) is a significant step forward for the Indian startup and investment ecosystem. The initial Rs 10,000 crore commitment catalysed Rs 91,000 crore in investments, and I fully expect this fresh infusion to attract an additional Rs 1 lakh to Rs 1.5 lakh crore in capital,” said Anirudh Damani, managing partner, Artha Venture Funds.   Damani further added that this initiative will provide much-needed growth capital to early-stage startups, further strengthenin...

After RBI rate cut, check latest home loan interest rates of top banks for loans above Rs 75 lakh

  The Reserve Bank of India (RBI) has reduced the repo rate by 25 basis points from 6.50% to 6.25% in its monetary policy review as announced on February 7, 2025. After the RBI repo rate cut, banks such as SBI, Canara Bank, PNB, and Union Bank among others have cut their repo linked lending rates. Most other banks are also expected to cut their lending rates in line with the RBI rate cut. After banks cut their lending rates, their home loan borrowers will have to pay less interest. Normally, when a lender cuts the lending rate, borrowers get two options: Either to go for a reduction in EMIs or reduce the tenure of the loan. The second option will help the borrowers clear their home loan outstanding faster. In case, the borrower goes for reduction in EMI then the lower lending rate of the lender would mean lower Equated Monthly Installment (EMI) for borrowers.   EMI is the amount you will pay on a specific date each month till the loan is repaid in full.A repo rate-linked home ...

GST collections rise 9.9% to exceed Rs 1.96 trillion in March 2025

  Gross GST collection in March grew 9.9 per cent to over Rs 1.96 lakh crore, government data showed on Tuesday. GST revenue from domestic transactions rose 8.8 per cent to Rs 1.49 lakh crore, while revenue from imported goods was higher 13.56 per cent to Rs 46,919 crore. Total refunds during March rose 41 per cent to Rs 19,615 crore. After adjusting refunds, net GST revenue stood at over Rs 1.76 lakh crore in March 2025, a 7.3 per cent growth over the year-ago period.       - Business Standard 02 th March, 2025