Madras High Court sets aside the ROC’s order for disqualifying Private Directors.

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Madras High Court sets aside the ROC’s order for disqualifying Private Directors.

Context : Section  164(2)(a) of Companies Act, 2013 sated that Directors of Company will disqualify if Company has not filed financial statements or annual returns for any continuous period of 3 Financial Years.

Section 164 enforced with effect from 01.04.2014

Matters:

The Madras High Court has set aside the disqualification of directors of private companies by the Registrar of Companies for non-filing of financial statements for a period of three continuous financial years.

The directors were disqualified under Section 164(2)(a) of the Companies Act, 2013. The court said that since Section 164 came into effect from April 1, 2014, the respondents(ROC) cannot disqualify the petitioners for the financial years 2013-14, 2014-15, 2015-16, as it would tantamount to giving retrospective effect.

The Section says that if the financial statements are not filed for three continuous financial years, then the director can be disqualified. However, if Section 2(41), which defines ‘financial year’ is taken into account, then the first financial year would end on 31.3.2015, the second financial year on 31.3.2016 and the third on 31.3.2017.

Principle of Natural justice

Petitioners had contended that even though the Section did not contemplate a show-cause notice before taking any action, since the disqualification had civil consequences, the principle of natural justice had to be adhered to.

Benami Transactions (Prohibition) Amendment Act, 2016

Context: The prosecution of accused persons in almost 100 confirmed cases instituted under the Benami Transactions (Prohibition) Act has been scuttled as the special courts meant for the purpose have not yet been set up across the country.

What’s the issue?

The Act provides that the Central government, in consultation with the Chief Justice of the respective High Courts, will establish special courts through notification. Such Courts are to be constituted to ensure that the trials are conducted “as expeditiously as possible”.

However, the required special courts have not been set up yet. Therefore, despite the fact that investigations in almost 100 cases have been completed by the I-T Department in different States, including confirmation of attachment of properties by the Adjudicating Authority, the prosecution of accused persons has not started.
  
About the Benami Act:

The Benami Transactions (Prohibition) Amendment Act, 2016, designed to curb black money and passed by parliament in August, came into effect on November 1, 2016. The new law amends the 1988 Benami Transactions Act.

Highlights of the Act:

·         The law provides for up to seven years’ imprisonment and fine for those indulging in such transactions.

·         The law prohibits recovery of the property held Benami from benamdar by the real owner. As per the Act, properties held Benami are liable for confiscation by the government, without payment of compensation.

·         An appellate mechanism has been provided under the act, in the form of an adjudicating authority and appellate tribunal.

·         According to the government, the four authorities who will conduct inquiries or investigations are the Initiating Officer, Approving Authority, Administrator and Adjudicating Authority.

What is Benami transaction?

A Benami transaction is one where a property is held by one person and the amount for it is paid by another person. Therefore, in a Benami transaction, the name of the person who paid the money is not mentioned. Directly or indirectly, the Benami transaction is done to benefit the one who pays.

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This is nothing but knowledge sharing initiative of author among the professional and not intend to accost any one in any manner or for any other purpose whatsoever. Source has been taken from the “ The Hindu” Whereas deep care has been taken by author to ensure the correctness and completeness of the information provided.
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