Disqualified from directorship by ROC under Section 164(2)(A)

WHAT IS SECTION 164(2)(a) OF THE COMPANIES ACT, 2013?
In accordance with the Section 164(2)(a) of the Companies Act, 2013; “no person who is or has been a director of a Company which has not filed financial statements or annual returns for any continuous period of three financial years shall be eligible to be re-appointed as a director of that Company or appointed in other Company for a period of five years from the date on which the said Company fails to do so.”

When a person is disqualified under section 164(2)(a)
Any person who has failed to file financial statements (e-Form AOC-4) or annual returns (e-Form MGT-7) for three consecutive financial years will be ineligible to be appointed as a Director of that company or any other company for the next five years.

For instance, the list of disqualified Directors in the year 2017 that was published on the Ministry portal, were the Directors disqualified from 2016 to 2020 for non-filing of financial statements or annual returns for the F.Y. 2013-14, 2014-15 and 2015-16. Similarly, the list published in the year 2018 were of the Directors which were disqualified from 2017-2021 for non-filing for the F.Y. 2014-15, 2015-16 and 2016-17.

In many cases, we've seen clients file either e-Form AOC-4 or e-Form MGT-7. It should be noted that the term "or" has been used, and hence, failure to file either AOC-4 or MGT-7 will result in the individual being disqualified as a Director under Section 164(2)(a).

On disqualification, the Directors disqualified under Section 164(2)(a) of the Companies Act, 2013 has only two following options:
1. Wait for five years for ROC to remove the disqualification
2. Move a write petition to Hon’ble High Court having jurisdiction for removal of disqualification

In case the Director opts for option no. 1, then the professional guidance required shall only be at the time when the period of five year has been elapsed. Whereas, in case the option no. 2 is opted by the individual to remove the disqualification on an urgent basis, a write petition with the Hon’ble High Court having respective jurisdiction shall be filed.

Solution
It is pertinent to note that every High Court has different opinions on removal of Director disqualification and thereby, it is very important to go through the precedents (i.e. previous judgements) in similar cases and then only move the petition.

Moreover, it is also important to check the High Court jurisdiction before moving any petition as otherwise, the time and energy of the applicant would be an utter waste. For instance, the Hon'ble High Court of Jaipur would have jurisdiction over directors disqualified by the ROC Rajasthan. Also, if the directors have been disqualified by the ROCs of Delhi and Haryana, but the company's registered office address is in Haryana, they must appeal to the Hon'ble High Court of Chandigarh to have the disqualification removed.

Once we have received the order (i.e. interim or final, whatsoever as may be considered by the Court) from the Court, the same needs to be submitted to the Registrar of Companies either physically or via email so as to enable them to approve and further, process the application to the Ministry for removal of disqualification.
To conclude, on removal of Director disqualification, the status of the DIN on “Enquire DIN Status” tab on MCA portal, shall change from “Disqualified by ROC u/s 164(2)(a) to “Active” and thereby, now the concerned individual can be the Director of any Company without any legal hurdle.