Kerala High Court orders removal of Vellappally Natesan as SNDP General Secretary

The Kerala High Court on Thursday ordered removal of SNDP Yogam General Secretary Vellappally Natesan from his post after finding that the organisation failed to submits its financial statements within the stipulated time as per law [Prof MK Sanoo v State of Kerala & ors and connected cases]..Justice TR Ravi observed that the failure to file audited accounts for three consecutive years attracted disqualification of the directors of the Aruvippuram Sree Narayana Dharma Paripalana Yogam (SNDP Yogam), a non-trading company under Section 164(2) of the Companies Act, 2013.The Court observed that once a company fails to file its financial statements for the required period, then the statutory law automatically disqualifies its directors and this cannot be avoided even if the delay in filing the accounts is later condoned."In the light of the above discussions, I hold that the consequences spelt out in Section 164(2), which are statutory, will not be affected by the condonation of delay in filing the returns, whether under the Companies Fresh Start Scheme (CFSS), 2020 or under Section 460 of the 2013 Act," the Court held.Thus, the Court ruled that Natesan and the other directors cannot continue in their posts as they stood disqualified under the Companies Act."It is declared that respondents 4 to 7 are not eligible to be re-appointed as Directors in view of non-compliance with the requirements of Section 164(2) of the Companies Act, 2013," the judgment said..The Court was considering a series of petitions, including one filed by noted author-professor late MK Sanu, challenging the continuation of SNDP Yogam office bearers in their positions on the ground that financial filings had not been made for several years.The petitioners contended that SNDP Yogam, which is governed by the Companies Act of 2013, had failed to submits its audited financial statements to the authorities within the prescribed time, violating statutory requirements relating to financial transparency and accountability.It was pointed out that the Yogam had failed to file the annual financial statements and returns with authorities for a continuous period of three years, which under Section 164(2) results in automatic disqualification of directors for a specified period.Once such disqualification is incurred, the directors are barred from continuing in office and the office of director becomes vacant in terms of Section 167(1)(a) of the Companies Act.The petitioners thus stated that such failure made the directors ineligible to continue in office under the statutory provisionsHence, the petitioners sought disqualification of Natesan and other office bearers, including Yogam president Dr MN Soman, vice president Tushar Vellappally and Devaswom secretary Arayakkandil Santhosh. The Court examined the statutory framework and found that the directors were disqualified as per the provisions due to the prolonged failure to comply with filing obligations.At the same time, the Court also noted that the functioning of SNDP Yogam as an organisation should not be paralysed due to the disqualification of its directors.Accordingly, the Court directed the State government to take necessary steps under Section 167(3) of the Companies Act for appointing required number of directors to hold office until full-time directors are appointed by the Yogam through a general meeting.The Inspector General of Registration was directed to take actions for disqualification of Natesan and others and ensure that the positions are vacated..The petitioners were represented by advocates including Sabu George, PB Krishnan, PB Subramanyan and Manu Vyasan Peter.Advocate AN Rajan Babu appeared for the SNDP Yogam and its office bearers..[Read Judgment].Follow Bar and Bench channel on WhatsAppDownload the Bar and Bench Mobile app for instant access to the latest legal news.