How to Remove Disqualification of Director?

CS Divesh Goyal | Last updated: 03 August 2021

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Quick Summary

Recent High Court rulings in August 2020 have introduced the possibility of an 'interim stay' on director disqualification, allowing directors to reactivate their Director Identification Number (DIN). While the Companies Act, 2013, typically enforces a 5-year disqualification period with no power for bodies like the NCLT or ROC to remove it, individuals can now file writ petitions with the High Court. If the court is satisfied with the grounds presented, it may grant an interim stay until a final decision is made.

Short Summary

In this Flash editorial, the author begins by referring to the provisions of Interim Stay on Disqualification of Director. High Court as per the latest judgments in August 2020 pronounced "Interim Stay" on the disqualification of Directors, which will help the directors to activate their DIN from the ROC.

Provisions

As per the Companies Act, 2013, once a director is disqualified u/s 164(2) the director so disqualified shall continue to be disqualified for a period of 5 years. Even the power is not vested with the NCLT, Regional Directors, Registrar of Companies to remove the disqualification of Directors. However, in the last 2-3 years, several writ petitions have been filed with the Hon'ble High Courts of India for the removal of the Disqualification of Directors. The Hon'ble High Court has passed several orders for the ‘interim stay' on the disqualification until the issuance of the final order from the Hon'ble Supreme Court.

Remove Director Disqualification: High Court Interim Stay

Process of Activation of DIN

The following process has to be followed to obtain a stay from the Hon'ble High Court on the disqualification of Directors and the Activation of the DIN from the Registrar of Company:

STEP I: Drafting of a Writ Petition

• The disqualified person shall draft a writ petition including:

- Facts of the Disqualification
- Reason for the relief from the disqualification etc.

• The disqualified person shall prepare an affidavit verifying the petition.

• The disqualified person shall authorize any professional for filing of the writ petition with the High Court.

STEP II: Filing of a Writ Petition

• The Authorized person shall file the writ petition with the Hon'ble High Court

• The Hon'ble High Court shall provide a date of hearing.

• An interim stay order shall be provided from the disqualification if, after the hearing, The Hon'ble High Court is satisfied on the grounds of the petition.

STEP III: Filing of the copy of the Order with the Registrar of the Company

• The disqualified person shall prepare an application regarding the High Court Order.

• Based on the High Court order, the Registrar of Companies shall change the status of the DIN from ‘disqualified' to 'Active'.

Note: If the disqualified director has not filed the DIR-3 KYC at the present date, then the ROC shall change the status of the DIN as "Deactivated due to the non-filing of DIR-3 KYC".

The disqualified director can file e-form DIR-3 KYC with the ROC and can get the status of DIN as "Active".

FAQ :

An interim stay is a temporary order from the High Court that halts the disqualification of a director, allowing them to continue their role or reactivate their Director Identification Number (DIN) while a final decision is pending.

No, according to the Companies Act, 2013, the NCLT, Regional Directors, or Registrar of Companies do not have the power to remove a director's disqualification once it has been imposed.

The process involves drafting a writ petition detailing the facts of disqualification and reasons for relief, filing it with the High Court, attending a hearing, and if granted, filing the High Court's order with the Registrar of Companies to reactivate the DIN.

Once the High Court grants an interim stay, a copy of the order must be filed with the Registrar of Companies (ROC). The ROC will then update the status of the Director Identification Number (DIN) from 'disqualified' to 'Active'.

If your DIN status is 'Deactivated due to non-filing of DIR-3 KYC', you can file the e-form DIR-3 KYC with the ROC to get your DIN status changed back to 'Active'.

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About the Author

CS Divesh Goyal

Practicing Compnay Secretary

CAREER PROFILE He is a Fellow Member of the Institute of Companies Secretaries of India having intense expertise in Corporate Law for the last 8 years. He is a young and progressive Practicing Company Secretary with zeal to dig deep into the nuances of Corporate Laws. Being a researcher at heart, he has done ... Read more

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How to Remove Disqualification of Director?

Short Summary

Provisions