In Mukut Pathak and Ors. v. Union of India and Ors. 13 (judgment text accessible here), the Hon'ble Delhi High Court ("Court") decided inter alia on the application and interpretation of Sections 164(2)(a) and Section 167 of the Companies Act.

In relation to the question on whether Section 164(2)(a) of the Companies Act operates retrospectively, the Court held that though the aforesaid section takes into consideration violations of the periods preceding the date of notification of Section 164(2)(a) of the Companies Act, the provision does not operate retrospectively. Further, as regards the requirement of giving the concerned directors a prior hearing before disqualification, the Court held that an opportunity of prior hearing before disqualification is not required to be given because the disqualification of a director under Section 164(2)(a) of the Companies Act does not involve a governmental authority taking a qualitative decision. Further, on the question of whether a director incurring disqualification under Section 164(2)(a) of the Companies Act would automatically vacate office in all companies in which he was appointed as a director on account of Section 167 of the Companies Act, the Court held that a director's office would not be vacated automatically on account disqualification under Section 164(2)(a) of the Companies Act. However, this benefit would be available only until the enactment of the amendments to Sections 164(2) and 167(1) of the Companies Act vide Companies (Amendment) Act, 2017 which came into effect from May 7, 2018. In terms of the aforesaid amendment, a director incurring disqualification under Section 164(2) of the Companies would vacate office as a director in all companies other than the company which is in default of the requirement to file its annual returns and/or financial statements for 3 consecutive years. Further, in terms of the aforesaid amendment, a director would incur disqualification under Section 164(2) of the Companies Act only on the elapse of six months from the date of his appointment. With effect from May 7, 2018 (i.e. the date on which the aforesaid amendment came into force), a director would automatically vacate his office in all companies other than the company which is in default of the requirement to file its annual returns and/or financial statements for three consecutive years. As regards a company which is in default of the aforesaid requirement, the concerned director would vacate office on the elapse of six months from the date of his appointment if aforesaid default is not rectified within such period.

Footnote

13 W.P. (C) 9088/2018, CM Appln. No. 35006/2018, W.P. (C) 4353/2018, CM Appln. No. 16864/2018, W.P. (C) 4352/2018, W.P. (C) 3658/2019 and CM Appln. No. 23830/2019 (decided on November 4, 2019).

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