Kerala High Court stays removal of Vellapally Natesan as SNDP General Secretary

The Kerala High Court on Monday stayed the operation of an order of a single-judge who had directed the removal of Vellapally Natesan and others from his post as General Secretary of Sree Narayana Dharma Paripalana Yogam (SNDP Yogam) [VK Natesan & anr v Dr K Reghu Anchayil & ors].

A Division Bench of Chief Justice Soumen Sen and Justice Syam Kumar VM passed the order on appeals filed by Vellappally Natesan, his son Thushar Vellappally, and other SNDP directors challenging the single-judge ruling that declared them disqualified from directorship and ordered their removal.

In the March 12 order, the single-judge had found that SNDP Yogam had failed to file its financial statements for three consecutive years. It also found that the directors did not possess valid Director Identification Number (DIN). The judge, therefore, held that its directors, including its general secretary Nateshan, stood disqualified from directorship under Section 164 (2) of the Companies Act, the single judge held.

The single-judge had also directed the State government to appoint new directors to manage the affairs of the SNDP Yogam.

The Division Bench today opined that prima facie, the directors can't be held liable for any contravention of the Companies Act as rules with regard to registration of DIN have not yet been framed for the State of Kerala.

"Prima facie it appears that the present appellants had DIN and it would appear from the report of the inspector general of registration that rules with regard to the DIN as applicable to the State of Kerala has not yet been farmed and as such the present appellants cannot be held guilty of contravening any provisions of the Companies Act by which they can be asked to provide the DIN, although they possess a DIN under the Companies Act, 2013," the Division Bench said.

The Bench further stated that directors can be disqualified only if it was by the reason of the failure of the directors that the company failed to file returns.

In this case, several records of the company was entangled in various litigation from 2009-2019 and as such, the delay in filing returns by prima facie does not appear to have been unreasonable or unjustified, the Bench said.

The Division Bench passed the order on appeals filed by Natesan and his son challenging the single-judge ruling by filing a joint appeal before the High Court's Division Bench.

The appeal contended that the single-judge's conclusion regarding the non-filing of returns was factually incorrect.

According to them, annual returns and financial statements had in fact been regularly submitted but were not formally taken on record due to administrative complications. The administrative complications cited included the non-availability of original records, which remained in sealed custody pursuant to certain court proceedings for several years.

The appellants also submitted that the single judge committed a serious jurisdictional error by deciding issues relating to the disqualification of directors and the internal affairs of a company, which fell within the domain of the National Company Law Tribunal (NCLT).

Such disputes concerning the management of a company cannot be heard by a High Court in the exercise of its writ jurisdiction, it was argued.

"Any intrusion into the jurisdiction of statutory tribunals, specifically established for deciding such questions of fact, would violate judicial discipline and cause chaos to the administration of justice. The impugned order is therefore bad in law on this ground also," the appeal stated

The plea further submitted that the single-judge ruling violated a binding Division Bench judgment, which had earlier held the SNDP Yogam to be a private company that cannot be subject to a challenge under writ jurisdiction.

The appellants have also disputed a finding regarding Director Identification Number (DIN), stating that a valid DIN issued under the Companies Act was already produced before the Court.

They added that the single-judge himself recorded that no State rules existed for the issuance of DINs. Yet the single judge proceeded to hold the appellants to be disqualified for not possessing a DIN, Natesan and others pointed out.

Last week, the Division Bench passed an interim order directing the State government not to take further steps for the nomination of new directors.

After hearing the parties at length today, the Bench deemed it fit to pass another interim order staying the operation of the single-judge order.

Vellappally Natesan and Tushar Vellappally were represented by advocates Chandapillai Abraham PG, Isaac Thomas, Paul P Abraham and John Vithayathil. 

[Read Live Coverage]