Companies Act Section 155

Companies Act Section 155: Prohibition to Obtain More Than One Director Identification Number (DIN)

Section 155 of the Companies Act, 2013 deals with the issue of ensuring that no individual holds or possesses more than one Director Identification Number (DIN). The DIN is a unique identification number allotted to individuals intending to be appointed as directors of companies, and its primary purpose is to track and regulate individuals serving in such roles. The intention behind this section is to maintain transparency and prevent confusion, fraud, or abuse within the corporate governance system.

1. Prohibition on Possessing More Than One Director Identification Number (DIN)

Under Section 155, it is clearly stated that no individual who has already been allotted a DIN under Section 154 of the Companies Act can apply for, obtain, or hold any additional DIN. This provision establishes a strict prohibition on the possession of more than one DIN by any individual. Once an individual has been allotted a Director Identification Number, they are permitted to hold only one such number throughout their career as a director of various companies.

The primary objective of this restriction is to prevent any fraudulent activity or manipulation that might arise from an individual holding multiple identities or engaging in multiple directorial roles under different identities. Having a unique DIN for each individual ensures accountability, clarity, and reduces the risk of mismanagement, fraud, and illegal activities by directors.

2. The Purpose of a Single DIN for Every Director

The concept of a single Director Identification Number (DIN) for each individual is rooted in the idea of simplifying the regulatory framework for tracking directors across all companies. The DIN is essentially a unique identification number, which allows the Registrar of Companies (RoC) and other regulatory authorities to trace the directorial history of individuals easily. This includes:

The company or companies where the individual has served as a director.

The number of times they have been appointed or removed.

Their qualifications, disqualifications, and any legal or regulatory issues they may have faced.

This single DIN system helps to maintain transparency in corporate governance and ensures that each individual is only accountable under one identity when fulfilling their directorial roles in various companies. It is a mechanism to ensure that fraudulent practices such as the use of fake or multiple identities are kept in check, contributing to the overall integrity of corporate operations.

3. Enforcement of the One-DIN Rule

This section establishes that once a DIN has been allotted to an individual, the person cannot apply for or hold any additional DIN. The Registrar of Companies (RoC), through the Ministry of Corporate Affairs (MCA), has the authority to enforce this provision. If an individual is found to hold multiple DINs, the MCA can take corrective action, including the cancellation of the extra or fraudulent DINs.

The enforcement of the rule ensures that the DIN system remains efficient, effective, and transparent. The prevention of multiple DINs helps to eliminate the possibility of individuals evading regulatory scrutiny, such as in cases where a director might want to hide from past offenses or liabilities by applying under a new identity.

4. Legal Implications and Consequences of Violating Section 155

If an individual violates the provisions of this section and applies for or holds more than one Director Identification Number, they may face legal consequences, which could include:

The cancellation or removal of any extra DIN obtained fraudulently.

A potential penalty or fine under the Companies Act, as this behavior is considered non-compliant with the regulatory framework.

Further disqualification as a director if the individual has engaged in fraudulent activities that involve the misuse of multiple DINs.

This prohibition aims to ensure that all directorial appointments are in full compliance with the legal framework, and directors remain accountable for their actions within the corporate world. Regulatory authorities, including the MCA and the RoC, have mechanisms in place to detect and rectify cases where an individual holds more than one DIN.

5. Measures for Verification and Compliance

To ensure compliance with the prohibition on possessing more than one Director Identification Number, various measures are implemented:

Cross-verification of records: The Registrar of Companies periodically conducts audits and cross-verifies the records to detect any instance of individuals holding multiple DINs.

Public Database: The MCA maintains an updated public database of DINs and the directors associated with each number. This allows for easy access to verify whether an individual holds one or more DINs.

Application Scrutiny: When an individual applies for a DIN under Section 153, their details are thoroughly checked to ensure that they do not already possess an existing DIN. If it is found that the individual already holds a DIN, the new application will be rejected, and corrective actions will be taken.

Additionally, when a person applies for the DIN, the system in place checks the applicant’s information against existing records in the MCA database, preventing the allotment of a new DIN if the individual already possesses one. This ensures strict adherence to the rule that no one can have more than one DIN.

6. Practical Implications of the Prohibition

The prohibition on obtaining multiple DINs has several practical implications:

Prevention of identity fraud: This section helps in preventing identity manipulation or fraud in the corporate sector. It ensures that individuals are correctly identified as directors and held accountable for their actions.

Reduction of corporate fraud: By restricting the issuance of multiple DINs, this provision reduces the chances of fraudsters using different identities to manipulate company structures or hide their track records from regulatory bodies.

Streamlined corporate governance: The system of one DIN per director ensures that the roles and responsibilities of directors are clearly defined and traceable. It simplifies the management of corporate records, making it easier for authorities to ensure compliance with the Companies Act.