The National Company Law Tribunal (NCLT), Ahmedabad Bench, has held that while the Registrar of Companies (RoC) is required to examine objections and verify statutory compliance when processing Form DIR-12 relating to the removal of directors, it cannot reject the filing merely because there are inter se disputes between the parties.
The bench of Shammi Khan (Judicial Member) and Sanjeev Sharma (Technical Member) set aside the RoC’s decision to mark the DIR-12 as “Invalid – Not Taken on Record” and directed it to reconsider the filing in accordance with Section 169 of the Companies Act, 2013 and Rule 11 of the Companies (Registration Offices and Fees) Rules, 2014.
The proceedings arose from a company petition filed under Section 424 of the Companies Act, 2013 read with Rule 11 of the NCLT Rules, 2016. The dispute concerned the refusal of the RoC, Gujarat, to take on record e-Form DIR-12 filed for recording the cessation of two directors following resolutions passed at an Extraordinary General Meeting (EGM).
According to the company, a shareholder holding 19% of its paid-up share capital submitted a requisition dated November 21, 2024, seeking removal of the two directors under Section 169 of the Companies Act, 2013. The requisition and proposed resolutions were subsequently communicated to the directors, and a Board Meeting was convened on December 13, 2024.
The company further stated that the concerned directors were asked on January 1, 2025, to submit their representations regarding the proposed removal. Thereafter, notice of the EGM was issued, and the meeting was held on January 3, 2025, with shareholders representing 100% of the voting share capital. Ordinary resolutions were passed for removal of the two directors under Section 169.
Following the resolutions, the company filed e-Form DIR-12 bearing SRN AB2598155 on February 1, 2025, seeking to record cessation of the two directors. However, the RoC marked the filing as “Invalid – Not Taken on Record.”
RoC Refused to Take DIR-12 on Record Amid Objections
The company contended that the RoC had declined to process the DIR-12 because objections had been raised by the directors proposed to be removed and disputes existed between the parties.
The company argued that the RoC, while processing DIR-12, could examine statutory compliance but could not adjudicate upon inter se disputes between the management, shareholders and directors. It maintained that the statutory procedure under Section 169 had been followed and that the directors had been provided an opportunity to submit their representations.
The RoC, however, stated that objections and supporting documents had been received from the directors. According to the RoC, three DIR-12 forms had been filed for removal of the directors, but none was taken on record after considering the complaints and disputed issues placed before it.
The RoC also referred to allegations concerning maintenance of the company’s registered office and stated that proceedings under Section 454 of the Companies Act, 2013, were being initiated in relation to an alleged violation of Section 12.
Removed Directors Challenged the Validity of the Removal Process
The two directors opposed the company’s petition and disputed the validity of the process leading to their proposed cessation.
They stated that they were whole-time directors and did not hold shareholding in the company. According to them, their appointment in 2018 was connected with an understanding with another group concerning projects undertaken through the company, and funds had allegedly been infused into the company through unsecured loans. They contended that subsequent commercial disputes had led to the attempts to remove them from directorship.
They also challenged various aspects of the removal process, including the authority of the shareholder requisitioning the removal, the conduct of the Board Meeting, participation in the meeting, the notice and conduct of the EGM, and the authority of representatives of certain corporate shareholders. They further raised objections regarding the company’s registered office.
The directors argued that the RoC was required to examine the objections and verify whether the statutory requirements governing cessation of directors had been complied with before taking the DIR-12 on record.
NCLT Examines Scope of ROC’s Role Under Rule 11
The key question before the Ahmedabad Bench was whether the RoC had acted in accordance with the statutory procedure while refusing to take the DIR-12 on record.
The Tribunal noted that Section 169 permits removal of a director by ordinary resolution, subject to compliance with the prescribed requirements concerning special notice and an opportunity of being heard. The Bench observed that the company had placed on record documents relating to the requisition, communications, Board Meeting, notice of EGM, minutes and resolutions.
At the same time, the Tribunal noted that the directors had disputed the validity of the process and had raised objections concerning the requisitioning shareholder, Board Meeting, EGM, shareholder representatives and registered office.
The Tribunal then examined Rule 11 of the Companies (Registration Offices and Fees) Rules, 2014. It observed that the Rule specifically deals with DIR-12 filings concerning vacation or removal of directors and requires the Registrar to verify the correctness of the contents and adequacy of supporting documents before approving or invalidating the form.
ROC Cannot Mechanically Accept DIR-12, But Cannot Act as Adjudicating Court
The Tribunal clarified that the RoC is not required to mechanically accept every DIR-12 filed in connection with the cessation of a director.
However, the Tribunal simultaneously drew a clear distinction between statutory verification and adjudication of private disputes.
According to the Bench, the RoC cannot assume the jurisdiction of a Court or Tribunal to decide complex inter se disputes involving contractual rights, private arrangements, financial claims, title or the ultimate validity of disputed corporate acts.
The Tribunal also considered judicial decisions relied upon by both sides. The authorities cited by the company emphasised that the RoC cannot adjudicate disputed civil rights merely while processing statutory filings. However, the Tribunal held that this principle does not eliminate the specific verification obligation imposed by Rule 11 in cases involving removal of directors.
The Bench accordingly stated that the correct legal position is that the RoC must verify statutory compliance and supporting documents but cannot determine the underlying inter se disputes. Objections become relevant to the extent that they disclose a prima facie violation of the Companies Act or the applicable Rules.
RoC Failed to Identify Specific Statutory Non-Compliance
Applying this principle to the case, the Tribunal found that the RoC had stated that the DIR-12 was not taken on record after considering the objections and documents submitted by the directors.
However, the Tribunal noted a crucial deficiency in the RoC’s response: it did not specifically identify the statutory provision allegedly violated, the particular defect in the DIR-12, or the supporting document that was found deficient upon verification under Rule 11.
The Bench held that the mere existence of disputes between the parties, pendency of civil proceedings, alleged financial transactions, the Development Agreement or objections raised by the directors could not, by themselves, constitute sufficient grounds for refusing to process the DIR-12.
Such underlying disputes, the Tribunal observed, would have to be adjudicated by the forum having jurisdiction over them.
Registered Office Dispute Also Could Not Independently Justify Rejection
The Tribunal separately considered allegations relating to the company’s registered office and the proceedings stated to have been initiated under Section 454 of the Companies Act.
The Bench held that these were separate matters. In the absence of a specific finding establishing their impact on the validity of the EGM or the DIR-12, such issues could not independently justify rejection of the statutory filing.
The Tribunal also expressly declined to adjudicate the validity of the shareholder requisition, the Board Meeting, the EGM, the authority of shareholders or their representatives, the Development Agreement, or the alleged financial transactions. According to the Bench, deciding these questions would go beyond the limited statutory function involved in processing DIR-12.
NCLT Sets Aside “Invalid – Not Taken on Record” Decision
After considering the material placed before it, the Ahmedabad Bench concluded that the RoC was justified in considering the objections submitted by the directors. However, the Tribunal found that the decision to mark the DIR-12 as “Invalid – Not Taken on Record” was not supported by a specific finding of statutory non-compliance as required under Rule 11.
Consequently, the Tribunal set aside the RoC’s action concerning DIR-12 bearing SRN AB2598155.
The RoC was directed to reconsider and process the DIR-12 in accordance with Section 169 of the Companies Act, 2013 and Rule 11 of the Companies (Registration Offices and Fees) Rules, 2014, after carrying out the required statutory verification of the form and supporting documents.
The Tribunal further directed that if the RoC identifies any specific violation of the Companies Act or Rules during the verification process, it must proceed in accordance with Rule 11, including the prescribed procedure for reference to the Regional Director wherever applicable, and thereafter issue a reasoned decision.
NCLT Does Not Direct Immediate Removal of Directors
Importantly, the Tribunal did not directly order removal of the two directors from the statutory records.
The Bench clarified that it had not expressed any opinion on the validity of the resolutions passed at the EGM, the Development Agreement, financial transactions, authority of shareholders or representatives, registered office issues or other inter se disputes between the parties.
Accordingly, the company’s prayer seeking a direct direction to remove the names of the two directors from the statutory records was not granted at this stage. Their removal would depend upon the decision to be taken by the RoC after reconsideration and processing of the DIR-12 in accordance with law.
The Tribunal ultimately allowed the company petition in part and disposed of the matter without awarding costs.
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