Karnataka High Court Clarifies Director Disqualification Under Section 164 and Vacation of Office Under Section 167

The Karnataka High Court in Dilipraj Pukkella Vs Union of India has revisited and modified its earlier ruling on how Section 164(2) and Section 167(1) of the Companies Act 2013 operate, particularly in relation to directors of a defaulting company versus non-defaulting companies. The decision, rendered in review jurisdiction, draws a clear statutory distinction and provides crucial guidance for directors whose Director Identification Number (DIN) has been disabled due to disqualification under Section 164(2).

This order does not merely reiterate the earlier reasoning; it substantially adjusts key conclusions in the original judgment in W.P. No.3465 of 2021 (GM-RES) dated 25.07.2025, especially paragraphs 11.13 to 11.18 and 13.1, to align more closely with the legislative intent underlying Section 164 and Section 167.

Background of the Review Petition

Procedural Context

  1. The review petition arose from the earlier order dated 25.07.2025 in Writ Petition No.3465 of 2021 (GM-RES).
  2. The assessee approached the High Court with IA No.1/25, seeking condonation of a short delay of 4 days in filing the review petition.
  3. The Court allowed IA No.1/25 and condoned the delay, thereby opening the door to reconsider specific findings in the original writ order.

Reliefs Sought in Review

The petitioners requested:

  • Review of the earlier order dated 25.07.2025 passed in W.P. No.3465 of 2021 (GM-RES); and
  • Appropriate consequential directions, particularly in relation to the operation of Section 164 and Section 167 and reactivation of the DIN after expiry of the disqualification period.

The core grievance was that certain critical aspects of the statutory scheme under Section 164(2) and Section 167(1) had not been properly highlighted or addressed in the original hearing, leading to conclusions which, according to the petitioners, did not accurately capture the distinction between defaulting and non-defaulting companies.

Petitioners’ Main Contention

The petitioners, through learned Senior Counsel, argued that:

  • The Companies Act 2013 draws a fundamental distinction between:
    1. The company in default under Section 164(2); and
    2. All other companies in which the same individual is a director but which are not in default.
  • In the defaulting company, despite the director incurring disqualification under Section 164(2), the director continues to hold office and does not vacate his position.
  • In contrast, in non-defaulting companies, once disqualification under Section 164(2) is attracted, Section 167(1) triggers vacation of office in those other companies.

The petitioners submitted that this differentiation is not merely technical but substantive to the statutory scheme.