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Remedy for director disqualification

Aditi Unadkat (Article Assistant) (8 Points)

04 July 2018

Help me regarding :-

There is an existing company of which 2 Directors have been disqualified. So, what is remedy to become qualified under Companies Act, 2013. To the best of my knowledge, we can go to NCLT. So, what is the procedure required to follow ?

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CA Sunil Kumar (Chartered Accountant) (4524 Points)
Replied 04 July 2018

Eliminate by compounding
it is not an offence and no penalty / fine is prescribed then it can't be compound under Section 441. Hence, disqualification can't be removed by compounding of offence.

Eliminate by 'NCLT':
As per the NCLT Rules nowhere under the rules power / process is given to NCLT for removal of disqualification of Directors u/s 164(2). Hence until unless there is any amendment in the provisiosn of Companies Act, 2013 or any clarification issued by the Central Government Hon'ble NCLT don't have any power to remove the disqualification of director.

Power of Central Government:
As per study of Section 164(2) and Rule 14 simultaneously 'one can opine that disqualification of Directors can be eliminating by filing of application in DIR-10 with Central Government. However, such application in DIR-10 can be made only at the end of the tenure of five years post his disqualification.'

Once a director is disqualified u/s 164(2) he shall continue disqualified for FIVE financial years.
There seems to be no remedy available as per the Companies Act, 2013, a Writ Petition can be made by the aggrieved director under Article 226 of the Constitution of India in the absence of any alternate remedy available.

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