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The Calcutta High Court finally gave its judgment in Naresh Kumar Poddar v. Union of India, through Secretary, Ministry of Corporate Affairs and another (W.P.O. No. 493 of 2019) on Tuesday, 5th January. The matter was being heard by the Single Judge Bench of Justice Sabyasachi Bhattacharyya. The matter at hand is regarding a petition filed by a director of a private limited company, who had previously been disqualified, from their position of the director, by a notification issued in 2017. In the judgment, the Court held that the application of both the 2014 amendment to Section 164(2) of the Companies Act, 2013 and the 2018 amendment to the proviso to Section 167(1)(a) of the Companies Act, 2013 is prospective.
The amendments, concerned in this case, lay down that a director will be disqualified for five years if they fail to file the financial statements of the company for a continuous period of three years and/or if they fail to file the balance sheet of the company within thirty days of when the last Annual General Meeting (AGM) was held. The Court also ruled that if the application of the two amendments was made retrospective, then it would be unreasonable, absurd, and hold the potential to ruin the economy of the country. The Court reached this conclusion considering the very nature of these provisions and their consequences. The Court said that because these provisions are punitive in nature, not only will it be impossible to give them retrospective applicability but also it would have a huge impact on the economy of the country.
Justice Bhattacharyya also ruled on the penal nature of the provisions. He said that the provision was penal in nature even though the punishment is a disqualification for five years. The Court held for the petitioner, admitting the contention that they could not be disqualified by retrospective applicability of the amendments, and set aside the deactivation of their Director Identification Number (DIN).
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