Case Note & Summary
The petitioners, Mr. Yenugu Krishna Murthy, Mr. Devarunda Manjegowda Purnesh, and Mr. Manjunath Krishnarajanagar Manikyam, filed three writ petitions under Articles 226 and 227 of the Constitution of India before the High Court of Karnataka at Bengaluru. They sought a declaration that Section 164(2)(a) of the Companies Act, 2013 and a Press Release dated 6.9.2017 (Annexure-A) were unconstitutional and in violation of Part III of the Constitution, insofar as they applied to directors of private limited companies. The petitioners were directors of private limited companies and argued that the disqualification provision for non-filing of financial statements should not apply to them. The respondents were the Union of India and the Registrar of Companies. The Court, presided over by Dr. Justice Vineet Kothari, heard the matter on 26.02.2018. The petitioners were represented by Sri S. Vivekananda. The Court dismissed the petitions, holding that Section 164(2)(a) of the Companies Act, 2013 applies to all directors, including those of private limited companies, and that the Press Release was merely clarificatory and not a law that could be challenged as unconstitutional. The Court found no violation of fundamental rights and upheld the validity of the provision and the press release.
Headnote
A) Constitutional Law - Validity of Statute - Section 164(2)(a) Companies Act, 2013 - Disqualification of Directors - The petitioners challenged the constitutional validity of Section 164(2)(a) of the Companies Act, 2013 and a Press Release dated 6.9.2017, arguing that they were arbitrary and violated fundamental rights under Part III of the Constitution. The Court held that the provision and press release were not unconstitutional and dismissed the petitions. (Paras 1-15) B) Company Law - Disqualification of Directors - Section 164(2)(a) Companies Act, 2013 - Applicability to Private Limited Companies - The petitioners, directors of private limited companies, contended that the disqualification provision should not apply to them. The Court held that the language of Section 164(2)(a) does not distinguish between public and private companies and applies to all directors. (Paras 1-15) C) Constitutional Law - Press Release - Validity - Press Release dated 6.9.2017 - The petitioners challenged a Press Release issued by the Ministry of Corporate Affairs. The Court held that the Press Release was merely clarificatory and did not have the force of law, and therefore could not be struck down as unconstitutional. (Paras 1-15)
Issue of Consideration
Whether Section 164(2)(a) of the Companies Act, 2013 and the Press Release dated 6.9.2017 are unconstitutional and in violation of Part III of the Constitution of India qua directors of private limited companies.
Final Decision
The High Court of Karnataka dismissed the writ petitions, holding that Section 164(2)(a) of the Companies Act, 2013 and the Press Release dated 6.9.2017 are not unconstitutional and are valid in their application to directors of private limited companies.
Law Points
- Constitutional validity of Section 164(2)(a) of Companies Act
- 2013
- Press Note dated 6.9.2017
- Disqualification of directors
- Private limited companies
- Articles 226 and 227 of Constitution of India
