Union of India vs. H.S. Tuli and Sons Builders (P) Ltd.:

Rule 2(1) (d) of the Companies (Appointment and Qualification of Directors) Rules, 2014:-

"(d) "Director Identification Number" (DIN) means an identification number allotted by the Central Government to any individual, intending to be appointed as director or to any existing director of a company, for the purpose of his identification as a director of a company:

Provided that the Director Identification Number (DIN) obtained by the individuals prior to the notification of these rules shall be the DIN for the purpose of the Companies Act, 2013:

Provided further that "Director Identification Number" (DIN) includes the Designated Partnership Identification Number (DPIN) issued under section 7 of the Limited Liability Partnership Act, 2008 (6 of 2009) and rules made there under;"

A perusal of Section 266 A of the Companies Act, 2006 reveals that every person intending to be appointed as a Director of a company or a Director of Company appointed before commencement of the Companies Amendment Act, 2006 was required to make an application for allotment of Director Identification Number to the Central Government and that every director appointed before the commencement of the Companies Amendment Act, 2006 was required to make the application within 60 days of the commencement of the said Act to the Central Government.

Further Rule 2(1)(d) of the aforementioned Rules stipulates Director Identification Number as a requirement not only for any person to be appointed as Director but also for an existing Director of a company for the purpose of his identification as a Director of a company.

19. Further, Section 152(3) stipulates that no person shall be appointed as a Director of a company unless he has been allotted the Director Identification Number under Section 154. Section 152 (3) of the Act is reproduced as under:-

"(3) No person shall be appointed as a director of a company unless he has been allotted the Director Identification Number under section 154."

Section 164 of the Act, on the other hand stipulates the disqualifications for appointment as Director and inter alia provides that a person shall not be eligible for appointment as a Director of a Company if he has not complied with Section 152(3). Section 164 (1) (h) of the Act, which is relevant is reproduced as under:-

"(1) A person shall not be eligible for appointment as a director of a company, if- (h) he has not complied with sub-section (3) of section 152."

Thus, as per the provisions referred to above, a Director Identification Number is a requirement not only for a person to be appointed as Director but also for existing Director of a company i.e. even for a company which had been incorporated under the Companies Act, 1956.

20. Aforementioned aspect of the matter assumes significance in the context of Section 174 read with Section 167 of the Act. Although in terms of Section 174, the quorum for the meeting of the Board of Directors was complete while passing resolution dated 03.03.2016 yet the resolution passed in such meeting cannot be deemed to be a valid resolution in view of non possession of DIN by either of the Directors, as non possession of DIN would constitute a disqualifications under Section 164(1) (h), which lays down that a person not having been allotted a DIN under Section 154 cannot be appointed as a Director of a company and as per Section 167 the office of Director shall become vacant in case he incurs any of the disqualifications specified in Section 164. Section 167 of the Act is reproduced as under:-

"167. Vacation of office of director.-

(1) The office of a director shall become vacant in case-

(a) he incurs any of the disqualifications specified in. section 164:

(2) If a person, functions as a director even when he knows that the office of director held by him has become vacant on account of any of the disqualifications specified in subsection (1), he shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees, or with both.

(3) Where all the directors of a company vacate their offices under any of the disqualifications specified in sub-section (1), the promoter or, in his absence, the Central Government shall appoint the required number of directors who shall hold office till the directors are appointed by the company in the general meeting.

(4) A private company may, by its articles, provide any other ground for the vacation of the office of a director in addition to those specified in subsection (1)."

21. Thus, a person not possessing a DIN under Section 154 of the Act is not eligible to be appointed as a Director or to continue as a Director of a Company as he incurs a disqualification for appointment as a Director in terms of Section 164(1)(h) of the Act and in terms of Section 167 of the Act, the office of such a Director becomes vacant as he incurs the disqualification specified under Section 164 which inter alia includes ineligibility for appointment as a Director of a Company in the absence of allotment of DIN read with Rule 2(1)(d) of the Rules, which defines DIN as an identification number allotted to an individual intending to be appointed as director or to any existing director of a company for the purpose of his identification as a director of a company. Therefore, Shri Tuli purporting to act as Managing Director of M/s. H.S. Tuli & Sons Builders Pvt. Ltd. was not competent to function/exercise such powers as a Director in view of the aforementioned provisions as per which his office as director stood vacated for incurring disqualification under Section 164 for want of DIN.