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The government may announce an amnesty or a settlement scheme to provide relief to some of the three lakh company directors disqualified in a sudden decision in September.
Several high-profile independent directors were among those disqualified. Many have obtained favourable high court orders staying the government decision. However, a stay order only provides temporary relief.
Sections of India Inc have been pleading with the government for a settlement scheme to give companies an opportunity to update their records and pay a compounding penalty for failure to file returns, said sources in industry and corporate law. A settlement scheme would essentially give companies a few weeks to update their records and pay a penalty to rectify the position.
More worrying for corporate India is the interpretation of the provision in the Companies Act on disqualification; one such interpretation requires the disqualified directors to vacate all board positions. While not all agree with this, the government has offered no clarification.
The government had said that it was applying Section 164 (2) of the Companies Act, 2013, which calls for disqualification of all directors — executive, non-executive and independent — of companies that had failed to file their annual returns and financial statements with the Registrar of Companies for three continuous years. The government suspects that many of the companies that have not filed their returns are shell companies, and that some of them have indulged in illegal activities, particularly after last year’s demonetisation exercise.
Indications from the government are that while it does not want to penalise some of these independent directors, it wants to be tough on defaulters, particularly if their offence is significant. If the government does not provide relief, disqualified directors cannot be reappointed to board positions until November 1, 2021.
Big names
The original list of disqualified directors included former ICICI executive and prominent woman director Ramni Nirula, top corporate lawyers Berjis M Desai and Bahram N Vakil, bankers Udayan Bose and Srinivasan Sridhar, retired bureaucrat Subbaraman Narayan, and Eicher group chairman Srinivasan Sandilya, according to the website watchoutinvestors.com.
A check on the status of the director identification number of these individuals on the Corporate Affairs Ministry website shows that Nirula, Narayan and Sandilya are “Approved”, meaning they have either got a stay order, or succeeded in proving an error by the RoC in disqualifying them.
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