Supreme Court stays Bombay HC order granting relief to disqualified directors

As a result of the Supreme Court order, other orders issued by various high courts in around 2,000 cases of disqualification of directors have also been stayed


The Supreme Court on Monday admitted a special leave petition of the Ministry of Corporate Affairs (MCA) and stayed a Bombay High Court order, which gave relief to directors of the companies struck off by the Registrar of Companies (RoC) last year.


The Bombay High Court had directed the RoC to accept physical documents of these struck-off companies and treat them as applications for voluntary striking off. This would essentially mean that the directors of these companies, who had been disqualified by the MCA, would no longer be considered disqualified.


As a result of the Supreme Court order, other similar orders issued by various high courts in around 2,000 cases pertaining to disqualification of directors stand stayed.


The Corporate Affairs Ministry, in September last year, had struck off 2.26 lakh registered companies and disqualified more than 3 lakh directors for failure to file financial statements and annual returns for three consecutive years.

The directors were also asked to vacate their offices in other companies, in accordance with Section 164 of the Companies Act, 2013.

“This admission of SLP will be seen as positive development for the government for its drive against defaulting companies and their directors who were stubbornly defying the law,” a source in the Ministry of Corporate Affairs told Moneycontrol.

After the directors were disqualified, they moved various high courts across the country seeking relief from the ministry’s decision.

The resultant high court orders were varied in nature; the Chennai High Court passed an order contrary to that of the ministry, while the Madhya Pradesh High Court upheld the MCA’s actions.

“The government has been generous in giving an opportunity to these companies initially in 2014 by bringing in Company Law Settlement Scheme, 2014 and giving an advance warning that continuous failure for 3 years shall attract disqualification of directors,” a source in the ministry said.

“Later the government gave another opportunity to the defaulting companies; the initiation of drive in 2017 by launching Condonation of Delay Scheme, 2018,” the source said.​