Important provisions of Companies Amendment Act 2017, Duties, Disqualification of Directors and Vacation of Office, Condonation of Delay. Scheme 2018

1. NCLT Law & Practice
& Art of Advocacy
By CS Rahul Sahasrabuddhe
SPRS
AND CO.
CHANGING
Disqualification of Directors, Penalties
and Prosecution and CODS, 2018
At Bhopal Chapter of WIRC of ICSI
Saturday, February 10, 2018

2. 1
VIEWS EXPRESSED IN THIS
PRESENTATION ARE STRICTLY
PERSONAL AND NEED NOT
NECESSARILY BE VIEWS OF ANY OF
MY PAST OR PRESENT
ORGANISATIONS, I HAVE WORKED
OR AM WORKING WITH.
IN SHORT PAID OPINION MAY DIFFER
SPRS And Co., Company Secretaries

3. 2
CAA 2017
• Se 2 (6) Associate Co.
• Se 4(5)(i) Reservation of Name
• Se 42 Private Placement
SIRECL V SEBI
• Se 54 Sweat Equity
• Se 89, 90, 216 Decl of BO
• Se 92 Annual Returns
• Se 110 Postal Ballot
SPRS And Co., Company Secretaries

4. 3
CAA 2017
• Se 135 CSR
• Se 139 Ratification of Auditors
Removed
• Se 164(2) DisQ of Directors
• Se 185 Loan to Directors
• Se 188 Voting by RP
• Se 197 Mg Remu
• Se 403 Late Fees for filing ++
SPRS And Co., Company Secretaries

5. 4
Se 164
Vs
Se 167
Se 164
• DisQ at the time of Appt
Se 167
• Ground of vacation-when D
already
SPRS And Co., Company Secretaries

6. 5
Se 164
Disqualifications for Appointment of
Director
A person
1. Court Declared Unsound (mind)
2. Undischarged insolvent
3. Pending Insolvency application
4. Convicted-Offence-Moral
Turpitude-Min 6 Months and 5
years have not elapsed #
5. 7 years of Imprisonment ineligible
to be D in any Co. #
• “a Director of any Company”
SPRS And Co., Company Secretaries

7. 6
Se 164 (1)(d)
Disqualifications for Appointment of
Director
• What constitutes Conviction?
• Is imposition of penalty and
conviction same?
• Adjudication Vs. Prosecution
CIT Vs. Maduri Rajeshwar
SPRS And Co., Company Secretaries

8. 7
Se 164 (1)(d)
Disqualifications for Appointment of
Director
• What constitutes Conviction?
In Spies v. United States (317 US 492),
"The penalties imposed by Congress to
enforce the tax laws embrace both civil
and criminal sanctions. The former
consist of additions to the tax upon
determinations of fact made by an
administrative agency and with no
burden on the Government to prove its
case beyond a reasonable doubt. The
latter consist of penal offences
enforced by the criminal process in the
familiar manner. Invocation of one does
not exclude resort to the other."
SPRS And Co., Company Secretaries

9. 8
Se 164 (1)(d)
Disqualifications for Appointment of
Director
What constitutes Moral
Turpitude?
Anything contrary to
•Justice;
•Honesty;
•Modesty;
•Good Morals
Durga Sing V State (AIR 1955 Punj 97)
SPRS And Co., Company Secretaries

10. 9
Se 164 (1)(d)
Disqualifications for Appointment of
Director
What constitutes Moral Turpitude?
• Shock to moral conscience to
society
• Perpetrator considered to be a
depraved character
Mangali Vs. Chakki Lal AIR 1963 All 527
SPRS And Co., Company Secretaries

11. 10
Se 164 (1)(d)
Disqualifications for Appointment of
Director
What constitutes Moral Turpitude?
Black’s Law Dictionary
“Moral Turpitude is the conduct that is
contrary to justice, honesty or morality.
MT means in general shameful
wickedness – so extreme a departure
from ordinary standards of honest, good
morals, justice, or ethics as to be shocking
to the moral sense of the community. It
has also been defined as an act of
baseness, vileness, or depravity in private
and social duties which man owes to
another, or to society in general, contrary
to accepted and customary rule of right
and duty between people.”
SPRS And Co., Company Secretaries

12. 11
Se 164 (1)(d)
Disqualifications for Appointment of
Director
What constitutes Moral Turpitude?
Supreme Court - P In re Advocate, in AIR
1963 SC 1313.
“Which was rendered in context of
misconduct of an advocate was cited to
point out that the Supreme Court, in
paragraphs 7 and 8 of its judgment held
that wherever conduct proved against an
Advocate is contrary to honesty, or
opposed to good morals, or is unethical it
may be safely be held that it involves
moral turpitude.”
Quoted in Council Of ICAI vs P.C. Parekh on
14 February, 2003, 2003 129 TAXMAN 80
Guj
SPRS And Co., Company Secretaries

13. 12
Se 164
Disqualifications for Appointment of
Director
A person
6. Order by Court/T #
7. Calls unpaid for over 6
months
8. Offence-RTP in the last 5yrs #
9. Se 152(3) not complied (DIN
not allotted)
SPRS And Co., Company Secretaries

14. 13
Se 164 (2)
Disqualifications for Appointment of
Director
• No Person who is or has been
Director
–Not filed FS/AR for 3 years
–Failed to repay deposits/
–Interest or redemption of
Debentures
–Dividend for over 1 year
–Govt Companies exempted
Not ultravires to Art 14 – SC in
Snowcem Ind Ltd V UOI ((2005)
60 SCL 50)
SPRS And Co., Company Secretaries

15. 14
Se 164 (2)
Disqualifications for Appointment of
Director
• ELIGIBLE AGAIN ONLY AFTER 5
YEARS.
• NO DISQ. WITHIN 6 MONTHS
OF APPT. – Proviso to 164 (2)
#W.r.t – Se 162 (1) (d), (e) and
(g), DisQ continue even if
appeal is pending against
the order
SPRS And Co., Company Secretaries

16. 15
Se 164 (3)
Disqualifications for Appointment of
Director
• Private Company may have
additional DisQ – AoA
• Public Co may also have
additional DisQ – AoA
Saraswathi Vilasam Shanmughanandha
Nidhi Ltd Vs. Daivasigamani Mudliar
(1951) 21 CC 85
SPRS And Co., Company Secretaries

17. 16
Se 164 (2), Rule 14 Companies
(Appointment and Qualification of
Directors) Rules, 2014
• DisQ Directors u/s 164 (2)- inform to Co-
in Form DIR-8
• Co to file Form DIR-9 with RoC
• Application for removal of DisQ – Form
DIR 10
SPRS And Co., Company Secretaries

18. 17
Se 166 (3)
Duties of Director
• Due and reasonable care
• Diligence
• Exercise independent
judgment
SPRS And Co., Company Secretaries

19. 18
Se 166 (7)
Duties of Director
•Contravention of
Act
•Rs. 1 Lac-Rs. 5
Lac
SPRS And Co., Company Secretaries

20. 19
Se 167 (1)
Vacation of office of Director
• Disq u/Se. 164
CAA 17 – in other Companies
• Absence-Board Meets – 12
months without LoA
• Only if meetings held validly
• Proper notices served
Rajendrakumar Tekriwal Vs.
Unique Construction P Ltd
(2010) 159 CC 116
SPRS And Co., Company Secretaries

21. 20
Se 167 (1)
Vacation of office of Director
• Contravention of Se 184
• DisQ by Court/T order #
• Convicted-Offence-Moral
Turpitude-Min 6 Months #
# Vacation not effective
• 30 days from conviction
• Appeal or Petition is pending
SPRS And Co., Company Secretaries

22. 21
Se 167 (1)
Vacation of office of Director
• Removed
• Ceased to hold office in HC
SPRS And Co., Company Secretaries

23. 22
Se 463
Power of Court to Grant Relief in
Certain Cases
Contravention of Se 299 –
vacation u/s 283 of CA 56, Can
HC grant relief?
Held No in Verghese V
Thomas Stephen & Co Ltd
1970 40 CC 1131 (Cal)
SPRS And Co., Company Secretaries

24. 23
Se 167 (2)
Vacation of office of Director
Holding office inspite of
vacation
• Imprisonment upto 1 Yr
• Penalty Rs. 1-5 Lac
SPRS And Co., Company Secretaries

25. 24
Se 167 (3)
Vacation of office of Director
All Directors Disqualified
• Promoters/CG may
appoint new D.
• They shall hold office till
next GM
SPRS And Co., Company Secretaries

26. 25
Se 167 (3)
Vacation of office of Director
* Raj Shekhar Agrawal and
Another V. UOI Delhi HC WP(C)
No. 3296/2015 & CM No. 17927/2015
Se 167(3) does not entitle
every promoter of a company
to appoint a director. It may
be exercised only after due
process of law is followed.
SPRS And Co., Company Secretaries

27. 26
Se 167 (4)
Vacation of office of Director
Pvt Co. may have additional
Grounds of DisQ.
SPRS And Co., Company Secretaries

28. 27SPRS And Co., Company Secretaries

29. 28
CODS, 2018 • CLSS 2014
• Se 164 (2) read with Se 167
• Sep 2017 – Over 3 Lac
Directors were disqualified
SPRS And Co., Company Secretaries

30. 29
CODS, 2018 • Writs
• Opportunity to Cos
• Se 403 – Fee for filing, etc
• Se 459 – Powers of CG/T to
accord approval
• Condonation of Delay
SPRS And Co., Company Secretaries

31. 30
CODS, 2018 • Wef 01/01/2018 to 31/03/2018
• Financials/ AR covered
• Applicable to all defaulting
companies
SPRS And Co., Company Secretaries

32. 31SPRS And Co., Company Secretaries

33. 32
CODS, 2018 • All proceedings shall be
withdrawn by the Registrar
• Except action u/Se. 167(2)
• Action shall be taken against
companies continuing default
SPRS And Co., Company Secretaries

34. 33
CODS, 2018 • MCA has temporarily reactivated
DINs
• File all the overdue documents
• File e-CODS with fees of Rs. 30K
• Companies strike off –apply to
NCLT u/s 252 for revival
• e-CODS form shall be made
available by 20/02/2018
SPRS And Co., Company Secretaries

35. Contact Co-ordinates
CS Rahul P. Sahasrabuddhe
Founding Partner
SPRS And Co
Company Secretaries
Mobile No. 98 196 500 45
Email: RAHUL@SPRSCS.COM
THANK YOU 34SPRS And Co., Company Secretaries

36. 35SPRS And Co., Company Secretaries