ROC Cannot Adjudicate Disputes Over Director Removal While Processing DIR-12: NCLT Ahmedabad

The Ahmedabad bench of the National Company Law Tribunal (NCLT) has ruled that the Registrar of Companies (RoC) can verify whether a director's removal complies with company law but cannot adjudicate disputes between parties while processing Form DIR-12.

Form DIR-12 is the filing through which a company reports a change in its directors to the RoC. In this case, it was filed to record the cessation of two directors after their removal by shareholders.

A bench of Judicial Member Shammi Khan and Technical Member Sanjeev Sharma observed, “Therefore, the correct legal position is that the Registrar has to verify the statutory compliance and supporting documents, but cannot decide the underlying inter se disputes between the parties. Any objection is relevant only to the extent it discloses a prima facie violation of the Companies Act or the Rules.”

The case arose after Satyanand Estate Private Limited sought to record the cessation of directors Deepak Assandas Makhija and Sunil Assandas Makhija under Section 169 of the Companies Act, 2013.

Section 169 permits shareholders to remove a director through an ordinary resolution, subject to safeguards including notice and an opportunity for the director to make a representation.

The company stated that its shareholders passed resolutions removing the two directors at an Extraordinary General Meeting (EGM) held on January 3, 2025.

Shareholders representing 100% of the voting share capital were involved in the meeting, according to the company.

It filed Form DIR-12 on February 1, 2025, seeking to record the cessation of the two directors. The RoC marked the filing “Invalid - Not Taken on Record” after receiving objections from the directors.

The objections challenged the removal process, including the authority behind the requisition, the conduct of the Board Meeting and EGM, and the authority of representatives of certain shareholders. The directors also questioned the company's registered office and raised disputes concerning a Development Agreement and financial transactions.

The RoC's reply recorded that it had considered the objections and documents before deciding not to take the DIR-12 on record. However, it did not specifically identify the statutory provision allegedly violated or any particular defect in the DIR-12 or a supporting document found deficient upon verification under Rule 11.

The tribunal examined Rule 11 of the Companies (Registration Offices and Fees) Rules, 2014. The rule requires the RoC to verify the correctness of the contents of DIR-12 and the adequacy of its supporting documents in cases involving vacation or removal of directors.

If the verification reveals a violation of the Companies Act or Rules, the RoC must follow the further procedure prescribed under the rule.

The NCLT held that the RoC is not required to mechanically accept every DIR-12. At the same time, it cannot assume the jurisdiction of a court or tribunal to adjudicate complex disputes involving contractual rights, private arrangements, financial claims or the ultimate validity of disputed corporate acts.

The tribunal further ruled that an objection is relevant only if it discloses a prima facie violation of the Companies Act or Rules.

The mere existence of disputes, pendency of civil proceedings, alleged financial transactions, the Development Agreement or objections raised by the directors could not, by themselves, justify refusing to process the DIR-12. Such disputes, where maintainable, would have to be adjudicated by the forum having jurisdiction.

The tribunal also dealt with allegations concerning the company's registered office.

It observed that these were separate matters and, without a specific finding establishing their effect on the validity of the EGM or DIR-12, they could not by themselves justify rejection of the filing.

It declined to adjudicate the validity of the requisition, Board Meeting or EGM, the authority of shareholders or their representatives, or disputes concerning the Development Agreement and alleged financial transactions.

The NCLT set aside the RoC's decision to mark the DIR-12 as “Invalid - Not Taken on Record”. It directed the RoC to reconsider and process the form in accordance with Section 169 and Rule 11 after undertaking the statutory verification prescribed under Rule 11.

If the RoC finds a specific violation of the Act or Rules during that exercise, it must follow Rule 11, including the procedure for reference to the concerned Regional Director wherever applicable, and take a reasoned decision.

The tribunal did not itself order removal of the two directors from the statutory records. That issue was left to the RoC to decide after reconsidering the DIR-12 in accordance with law.

The petition was accordingly partly allowed