1. The Ministry of Corporate Affairs has come with the Companies (Incorporation) Amendment Rules,2019 (the Rules) vide notification dated 21st February, by which it has made filing of e-Form ACTIVE mandatory for all companies incorporated on or before 31st December,2017.
2. For the sake of ready reference and analysis later on the relevant parts of the Rules are reproduced as under:
(a) 'G.S.R. 144 (E).- In exercise of the powers conferred by sub-section (9) of section 12 and sub-sections (1) and (2) of section 469 of the Companies Act,2013 (18 of 2013), the Central Government makes the following rules further to amend the Companies (Incorporation) Rules,2014, namely:-…'
(b) '25A. Active Company Tagging Identities and Verification (ACTIVE).-(1) Every company incorporated on or before 31st December,2017 shall file the particulars of the company and its registered office , in e-Form-ACTIVE ( Active Company Tagging Identities and Verification) on or before 25.04.2019.'
3. It is needless to state that to make a rule under any Central Act, the Central Government must have either specific or general power in the Act itself therefore it can be seen in the opening part of the Rules as above the statement ' In exercise of the powers conferred by sub-section (9) of section 12 and sub-sections (1) and (2) of section 469…….'. Power under sub-section (9) of section 12 is specific as the section deals with a particular subject whereas power under sub-sections (1) and (2) of section 469 is general as it relates to entire Companies Act,2013 (the Act).
4. As the Central Government is claiming to have power under sub-section (9) of section 12 of the Act to make the Rules as above, relevant part of sub-section (9) of section 12 is reproduced below to understand what this sub-section (9) is about.
' (9) If the Registrar has reasonable cause to believe that the company is not carrying on any business or operations, he may cause a physical verification of the registered office of the company in such manner as may be prescribed……….'
5. On reading of above sub-section (9) it is understood that the sub-section(9) relates to power of the Registrar to cause physical verification of the registered office of a company and for that purpose Central government may make rules as to how physical verification be caused by the Registrar but the Rules as above made under the sub-section make it mandatory for all companies incorporated on or before 31st December,2017 to file e-Form-ACTIVE which has no connection at all with physical verification of the registered office of the company to be caused by the Registrar and therefore is totally irrelevant to sub-section (9). So, Sub-section (9) does not give power to the Central Government to make rules which will prescribe filing of e-Form-ACTIVE. Moreover sub-section 9 relates to a company, a particular company or a few company in view of the wordings ' the company…' that too in case the Registrar has reason to believe that a company is not carrying any business or operation whereas the Rules sweeps all companies incorporated on or before 31st December,2017 for e-Form-ACTIVE. Interesting implication of the Rules is, if the rule is under sub-section (9), that all companies incorporated on or before 31st December,2017 are not carrying any business or operation and the Registrar has reasonable cause to believe that. This implication is unimaginable.
6. The Central Government also claims to have powers under sub-sections (1) and (2) of section 469 of the Act to make the Rules as above therefore sub-sections (1) and (2) of section 469 are reproduced hereunder to understand whether such powers indeed exist.
'(1) The Central Government may, by notification, make rules for carrying out the provisions of this Act.'
'(2) Without prejudice to the generality of the provisions of sub-section (1), the Central Government may make rules for all or any other matters which by this Act are required to be , or maybe, prescribed or in respect of which provision is to be or may be made by rules.'
7. From the reading of sub-section (1) of section 469 one can understand that Central Government can make rules for carrying out the provisions of the Act. If one goes through section 1 to section 470 (the last section) he cannot find provision as to Active Company Tagging Identities and Verification (ACTIVE). Thus, the Central Government cannot make rules for a provision which does not exist in the Act.
8. If sub-section (2) is gone through it will be seen that the Central Government can make rules in respect of matters where it is stated by the Act itself that a rule be made in respect thereof or in respect of any matter the provisions for which is required by the Act to be made by rules. As there is no matter as ACTIVE (Active Company Tagging Identities and Verification) in the Act the question of Central Government making rules for the same does not arise at all. To make rules under this sub-section existence of matter in the Act is necessary. Provisions of section 469(2) though under general rule making power is infact very specific as to any matter or all matters where it is specifically 'required to be' or 'may be' prescribed, is stated.
In view of the above discussion I am of the view that the Companies (Incorporation) Amendment Rules, 2019 is without power and therefore unenforceable in the courts of laws and consequently e-Form-ACTIVE is illegal.
Source: The Companies Act,2013 and the Companies (Incorporation) Amendment Rules,2019.
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