Case Note & Summary
The petitioner, a Nidhi company, filed an application in Form NDH-4 on 15.04.2020 seeking declaration as a Nidhi under the Companies Act, 2013. The second respondent, Deputy Director, Ministry of Corporate Affairs, rejected the application on 23.06.2023, well beyond the prescribed 45-day time limit for disposal. The petitioner submitted a reply dated 14.07.2023 explaining the defects, but no further action was taken. Aggrieved, the petitioner filed two writ petitions under Article 226 of the Constitution. W.P.No.23402 of 2024 sought certiorarified mandamus to quash the rejection order and direct fresh consideration of the application after providing a hearing. W.P.No.23408 of 2024 challenged the constitutional validity of the amendment to Section 406 of the Companies Act, 2013 effected by the Companies (Amendment) Act, 2017, and the insertions of Rules 3A and 23A to the Nidhi Rules, 2014 by the Nidhi (Amendment) Rules, 2019 and 2022, contending that requiring existing Nidhi companies to obtain a fresh declaration was illegal, excessive, arbitrary and unconstitutional. Before the High Court, the petitioner's counsel restricted the prayer to the procedural irregularity in W.P.No.23402, submitting that the rejection order was passed beyond the 45-day time limit and without considering the petitioner's reply. The respondents argued that the rejection was on merits and opposed the larger prayer of unconstitutionality. The Court, noting the restricted prayer, disposed of the writ petitions by passing the following order: the petitioner was permitted to submit a fresh reply regarding compliance of defects stated in the impugned order within four weeks. Upon receipt of such reply, the second respondent was directed to provide an opportunity of hearing to the petitioner and thereafter pass appropriate final orders on merits and in accordance with law as expeditiously as possible. The Court expressly left open the legal issue regarding the validity of the provisions. Consequently, the connected miscellaneous petitions were closed. No costs were awarded.
Headnote
A) Company Law - Nidhi Companies - Application under Form NDH-4 - Disposal within 45 days - Companies Act, 2013, Section 406; Nidhi Rules, 2014, Rules 3A, 23A - The second respondent rejected the petitioner's application for declaration as Nidhi beyond the prescribed 45-day time limit without considering the petitioner's reply dated 14.07.2023 - The Court directed the petitioner to submit a fresh reply and the second respondent to provide an opportunity of hearing and pass a fresh order on merits, while leaving the constitutional validity of the provisions open - Held that the petitioner is entitled to fresh consideration of the application on merits (Paras 2-5).
Issue of Consideration
1. Whether the rejection order dated 23.06.2023 is arbitrary and violative of natural justice. 2. Whether the amendments to Section 406 of the Companies Act, 2013 and Nidhi Rules are unconstitutional.
Final Decision
The writ petitions are disposed of; petitioner is at liberty to submit a fresh reply regarding compliance of defects; second respondent to provide opportunity and pass fresh order on merits; legal issue regarding validity of provisions left open; no costs.
Law Points
- Legal points not extracted
- Applications under Form NDH-4 must be decided within 45 days
- failure to do so entitles applicant to re-consideration with opportunity of hearing
