What is the Director Disqualification Delay Scheme?
In corporate compliance, director disqualification can be one of the most severe consequences for a company leader. In India, strict enforcement of statutory obligations under the Companies Act, 2013 has led to the disqualification of numerous directors whose companies have failed to file required annual returns or financial statements. To address this situation and offer affected individuals and businesses a path to compliance, the Director Disqualification Delay Scheme was introduced by the Ministry of Corporate Affairs (MCA).
The Director Disqualification Delay Scheme is a special regulatory initiative designed to provide disqualified directors with an opportunity to regularize statutory compliance and avoid extended or permanent disqualification. It allows directors — who have become disqualified primarily due to non‑filing of annual statutory documents — to rectify these defaults by submitting overdue forms within a limited timeframe.
The scheme also offers a temporary reprieve by suspending disqualification proceedings so that directors can come back into compliance and rehabilitate their corporate standing, avoiding the long‑term consequences of statutory disqualification.
Key Features of the Scheme
The Director Disqualification Delay Scheme incorporates several vital features:
Temporary Suspension of Disqualification:
During the scheme period, the MCA temporarily re‑activates the DIN of disqualified directors, enabling them to file overdue documents online.
Rectification of Compliance Defaults:
Directors and companies are permitted to file overdue returns — such as annual returns (MGT‑7) and financial statements (AOC‑4) — along with prescribed fees and additional charges before the deadline.
Filing of e‑CODS Form:
The scheme requires filing a specific form (often referred to historically as eCODS 2018) with a condonation fee (for example, ₹30,000 in previous schemes), after filing all overdue documents to regularize the company’s statutory position.
Targeted Statutory Filings Only:
The scheme focuses on core overdue documents such as:
- Annual returns (MGT‑7 or its variants)
- Financial statements (AOC‑4 and their XBRL versions)
- Compliance certificates (Form 66)
- Auditors’ appointment updates (Form ADT‑1)
Other filings outside this list are typically not covered.
Withdrawal of Prosecutions:
During the scheme period, MCA may withdraw pending prosecutions under applicable sections for the overdue filings completed under the scheme, offering relief from litigation risk.
Scheme Limitations:
The scheme does not absolve civil or criminal liabilities arising from the period when the director was disqualified for non‑compliance; those liabilities may still be pursued after filings are regularized.
Why Director Disqualification Happens
Under the Companies Act, 2013, every company is required to file annual financial statements and annual returns with the Registrar of Companies (RoC). These requirements serve for statutory purposes such as financial transparency, investor protection, and regulatory oversight.
Section 164(2) of the Companies Act
A crucial statutory provision that leads to director disqualification is Section 164(2) of the Companies Act, which states that a person shall be disqualified for appointment as a director if:
- Their company has failed to file annual returns or financial statements for three consecutive financial years; and
- This non‑compliance persists without rectification, resulting in automatic disqualification for a prescribed period.
When directors are disqualified, their Director Identification Number (DIN) is often de‑activated by the MCA, preventing them from acting as director in any company until the disqualification period expires or disqualification is removed through legal remedies.
Understanding the Logic Behind the Delay Scheme
Non‑compliance with statutory filings generates serious legal and operational consequences. Leading up to the scheme’s introduction, thousands of directors were disqualified due to technical or administrative oversights rather than deliberate default. These disqualifications not only affected directors’ ability to govern companies but also had knock‑on effects on business operations, investor confidence, and creditworthiness.
With many defaulting companies and directors on MCA records — and in response to industry representations and legal petitions — the government introduced a special transition mechanism known as the Director Disqualification Delay Scheme (also referred to in earlier practice as the Condonation of Delay Scheme).
At its core, the scheme acknowledges that compliance mistakes can happen and aims to strike a fair balance between statutory enforcement and rehabilitative flexibility for directors.
Legal Basis and Source of the Scheme
The scheme derives authority from multiple provisions of the Companies Act, including:
- Section 403: Empowering the central government to specify fees and forms and to provide for exemptions and waivers in certain circumstances.
- Section 459 and Section 460: Empower the central government to make transitional arrangements and special measures to facilitate compliance and to manage the enforcement of the Act.
Although the Companies Act itself does not contain a perpetual provision specifically titled “Director Disqualification Delay Scheme,” the scheme is notified through MCA circulars and government policy instruments, created to give a temporary window of compliance relief.
Scope and Applicability of the Scheme
The Director Disqualification Delay Scheme generally applies to:
- Defaulting Companies
These are companies that have failed to file annual returns and financial statements for consecutive years up to the specified cut‑off date. Under past iterations of this scheme, the cut‑off was aligned with compliance defaults up to 30 June 2017.
- Disqualified Directors
Directors whose DINs have been temporarily or permanently deactivated due to non‑compliance with statutory filings.
However, the scheme does not apply to companies that have been struck off the register of companies under Section 248, unless they have filed an application for revival with the National Company Law Tribunal (NCLT) before the scheme expiry date. In such cases, revival orders may be necessary for directors to benefit from scheme provisions.
Period and Timelines
Historically, the Director Disqualification Delay Scheme — such as the Condonation of Delay Scheme, 2018 — was operational for a limited period, usually between January 1 and March 31 (sometimes extended to April 30) of the relevant year. Within this window:
- DINs were re‑activated temporarily to facilitate compliance.
- Overdue documents were filed with fees and penalties.
- The eCODS form was submitted to seek condonation of delay.
The limited scheme duration underscores the importance of acting promptly during the open window. Deadlines are critical, and missing cutoff dates can result in continued disqualification with fewer options for relief.
Eligibility Criteria
To benefit from the Director Disqualification Delay Scheme, directors and companies generally must meet the following eligibility criteria:
- Active Status of Company in MCA Register
The company must not have been struck off the register of companies at the time of scheme. Revival through NCLT is required for struck‑off entities.
- Demonstrated Intent to Comply
Directors must show a genuine intent to comply with statutory filings and resolve defaults within the scheme’s timeframe.
- Overdue Filings Within Covered Period
Overdue documents should be due on or before the scheme’s specified cut‑off date.
Failure to meet these criteria generally disqualifies a director from availing benefits of the scheme.
Step‑by‑Step Process to Avail the Scheme
Here’s a practical process for directors and companies seeking relief under the Director Disqualification Delay Scheme:
Step 1: Review Default Status
Identify outstanding filings and compliance defaults that led to director disqualification (for example, missing annual returns or financial statements).
Step 2: Prepare Overdue Documents
Prepare all delayed e‑forms — such as MGT‑7, AOC‑4 (XBRL or non‑XBRL), Form 66, and ADT‑1 — with accurate financial and statutory data.
Step 3: Temporary Re‑activation of DIN
During the scheme’s operational window, MCA temporarily re‑activates the DIN of disqualified directors, allowing e‑filing of overdue forms.
Step 4: File Overdue e‑Forms
Submit the overdue returns via the MCA portal, paying normal fees and additional fees (penalty multiples as prescribed).
Step 5: Submit eCODS Form
After filing all overdue documents, submit the eCODS form with the appropriate condonation fee before the deadline.
Step 6: MCA Records Update
Once filings are accepted, MCA updates records, and the director’s DIN may be re‑activated beyond the scheme period, removing disqualification status.
Step 7: Post‑Scheme Compliance Monitoring
Monitor future compliance to avoid repeat defaults and maintain active director status.
This process requires diligence, accuracy, and adherence to deadlines.
Benefits of the Director Disqualification Delay Scheme
The Director Disqualification Delay Scheme offers key benefits:
- Protection Against Disqualification: Avoid the severe implications of disqualification, such as being barred from serving as a director in any company.
- Time to Rectify Compliance Issues: Gain the necessary time to address and resolve compliance lapses without immediate repercussions.
- Expert Guidance: Access to professional consulting services that simplify the process and help you understand your rights and obligations.
- Improved Corporate Governance: Strengthen your company’s governance framework by ensuring compliance with statutory requirements.
- Temporary Relief for Defaulting Companies: Companies can file overdue returns and correct compliance history, restoring standing with regulators.
- Re‑activation of DIN: Directors can regain active DIN status, enabling participation in corporate governance and new appointments.
- Simplified Filing Window: The window — though limited in time — gives a clear opportunity for rectification without punitive prosecution during the scheme period.
- Withdrawal of Pending Prosecutions: MCA may withdraw prosecutions for filings made under the scheme, reducing litigation risks.
Limitations and Risks
Despite benefits, the scheme has limitations:
- Time‑Bound Window: The scheme operates only for a fixed period and missing it can result in prolonged disqualification.
- No Relief from All Liabilities: Civil or criminal liabilities incurred during the period of non‑compliance are generally not extinguished by the scheme.
- Exclusions for Struck‑Off Companies: Directors of companies struck off without proper revival orders may not benefit without additional legal remedies.
- Scheme Not Recurrent by Default: The Government may introduce schemes occasionally, but they are not automatic or recurring; each scheme is distinct and time‑restricted.
Alternatives and Additional Remedies
If the director fails to avail the delay scheme, there are alternative legal options:
- NCLT Revival and Compliance
If the company is struck off, revival orders from the National Company Law Tribunal (NCLT) can enable re‑activation of DIN upon compliance by the company.
- High Court Relief
Disqualified directors may approach High Courts via writ petitions seeking judicial relief or interim stay orders.
- DIR‑10 Application Post‑Disqualification
A director may apply for removal of disqualification through Form DIR‑10 with regional director after the statutorily mandated period, subject to conditions.
These alternatives involve additional legal analysis and procedural steps.
Key Tips for Directors Facing Disqualification
To safeguard corporate careers, directors should:
- Stay current with annual filing deadlines and MCA schedules.
- Monitor DIN status regularly on the MCA portal.
- Engage professional advisors early when facing defaults.
- Prepare compliance calendars and reminders.
- Use transitional schemes when available to prevent long‑term consequences.
Proactive compliance helps avoid disqualification and the need for delay schemes altogether.
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Conclusion
The Director Disqualification Delay Scheme represents a vital compliance relief mechanism in the Indian corporate law landscape. Designed to assist directors and companies that have fallen behind on their statutory filings, it provides a structured and limited window to regularize defaults, restore active status, and avoid long‑term disqualification consequences. Through temporary DIN re‑activation, overdue filings, eCODS submission, and compliance regularization, eligible directors and companies can re‑establish their corporate standing.
However, the scheme’s time‑bound nature, limited scope, and the fact that civil or criminal liabilities remain untouched mean that directors must use it proactively and with professional guidance. Maintaining ongoing compliance, understanding statutory deadlines, and consulting qualified corporate advisors are indispensable practices for directors who wish to safeguard their leadership roles and protect their companies from compliance risk.