Importance And Relevance Of Din: An Analysis

As a legal entity, the company has no physical features. It needs natural persons to conduct its business, directors of a company are such people, they are the next most crucial individuals for a prospective corporation, after promoters and subscribers to the memorandum. The first legally required action once a promoter chooses the first proposed directors for a company is to confirm that they are in possession of a Director Identification Number (DIN).  This is because the names of a company's proposed first directors must be disclosed in the incorporation paperwork.

According to section 153 of the Companies Act, 2013, Every person who wants to be appointed as a director of a firm must apply to the Central government for a Director Identification Number (DIN). A DIN is an 8-digit number known as the Directors Identification Number, it is a unique number allotted to each director and acts as legal documentation of that fact.

 After obtaining a DIN, the individual is qualified to serve as a director in numerous companies through this DIN. The Ministry of Corporate Affairs maintains the details and records of all directors, through the DIN number. A request for a DIN is submitted under Section 153 of the Companies Act, 2013. The DIN directory would include all director information, including name, PAN number, and current address.

Every current director must inform all the companies where they serve as a director of their Director Identification Number within one month of receiving it from the Central Government. (S.156)

Every company is required to provide the registrar with the Director Identification Number within fifteen days after receiving receipt of intimation from the director. A fine of not less than twenty-five thousand rupees but which may extend to one lakh rupees may be imposed on a company for failing to provide Director identification within the time frame required by Section 403. Each officer of the company who is in default may also be subject to a fine of not less than twenty-five thousand rupees but which may extend to one lakh rupees. (S.156)

In the case of Khushbu Dorab vs Union of India, it was held; A person cannot be appointed as a director of a company unless he has been allotted a Director Identification Number in accordance with the act. Each candidate for directorship proposed by the company at a general meeting or in another manner shall provide his Director Identification Number and a statement that he is not unqualified to serve as a director under this Act.

Sections 266A and 266B of the Companies Act of 1956 brought about the creation of DIN (as amended vide Act No 23 of 2006). It was discussed on 15th May 2006 in a Lok Sabha Debate, that the Director Identification Number (DIN) allotment, would be beneficial in numerous ways. It would aid in paperless transactions, the e-filing facility, which includes the incorporation of new companies, filing of Annual and other Statutory Returns, registration and verification of charges, and applying for various approvals and clearances. These were the then main changes anticipated by the amendment bill. Additionally, the MCA-21 portal can be used for document inspection, certified copy requests, and investor complaint reporting.

It happens frequently that a company is founded, it receives funding from investors and the general public, and then the Director and the company vanish, leaving no trace. Chit fund providers have in the past promised customers of various Indian cities unmatched profits, only to flee with their money to a different location.

Directors of financial institutions and businesses are typically said to be responsible for different financial scams and irregularities. A company director might devastate a corporation financially, but because he also serves as a director of another corporation, he might borrow money. However, the government provides a Director's Identification Number, this is where the government maintains a DIN holder’s database so that it would be simple for the general public and the companies to identify this individual as a fraudster from another instance. This would act as a deterrent for persons who become directors of many businesses, preventing fraud and other irregularities.

In the case of Mohd. Tariq Siddiqui &Anr. Vs Union of India, where a Director Identification Number was de-activated by the opposite party due to the disqualification of the director in one company, and this was therefore affecting the DIN in other companies, in which he is a director. A writ petition was then filed by the petitioner to challenge the de-activation of his director identification Number. It was held in this case that; the writ petitions to challenge the Director Identification Number's deactivation is allowed. It was deactivated because the director identification number for the other firms was affected by the disqualification in one company. The Director Identification Number must be activated by the opposing parties for usage with another firm. However, the opposing parties would be free to file a lawsuit against the petitioners for any legislative violation or noncompliance with the Act of 2013's regulations. A director may float a company but he would continue to use the same DIN if he later became a director of another company. This obligation exists so that it is easy for authorities or persons to identify and track him. 

The Director Identification Number not only aids in establishing the Director's identity but also links his history and present involvement with other companies. 

Therefore, a director identification number boosts openness, assists regulators in tracking director affiliations with companies, aids in the identification and elimination of director involvement in illegal behaviour, and promotes a more equitable corporate climate for everyone.

Learn the practical aspects of CrPC HERE, CPC HERE, IPC HERE, Evidence Act HERE, Family Laws HERE, DV Act HERE