1. A person shall not be eligible for appointment as a director of a company, if—
a. he is of unsound mind and stands so declared by a competent court;
b. he is an undischarged insolvent;
c. he has applied to be adjudicated as an insolvent and his application is pending;
d. he has been convicted by a court of any offence, whether involving moral turpitude or otherwise, and sentenced in respect thereof to imprisonment for not less than six months and a period of five years has not elapsed from the date of expiry of the sentence:
Provided that: if a person has been convicted of any offence and sentenced in respect thereof to imprisonment for a period of seven years or more, he shall not be eligible to be appointed as a director in any company;
e. an order disqualifying him for appointment as a director has been passed by a court or Tribunal and the order is in force;
f. he has not paid any calls in respect of any shares of the company held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call;
g. he has been convicted of the offence dealing with related party transactions under section 188 at any time during the last preceding five years; or
h. he has not complied with sub-section (3 ) of section 152.
2. No person who is or has been a director of a company which—
a. has not filed financial statements or annual returns for any continuous period of three financial years; or
b. has failed to repay the deposits accepted by it or pay interest thereon or to redeem any debentures on the due date or pay interest due thereon or pay any dividend declared and such failure to pay or redeem continues for one year or more, shall be eligible to be re-appointed as a director of that company or appointed in other company for a period of five years from the date on which the said company fails to do so.
3. A private company may by its articles provide for any disqualifications for appointment as a director in addition to those specified in sub-sections (1 ) and (2 ):
Provided that: the disqualifications referred to in clauses (d ), (e ) and (g ) of sub-section (1 ) shall not take effect—
i. for thirty days from the date of conviction or order of disqualification;
ii. where an appeal or petition is preferred within thirty days as aforesaid against the conviction resulting in sentence or order, until expiry of seven days from the date on which such appeal or petition is disposed off; or
iii. where any further appeal or petition is preferred against order or sentence within seven days, until such further appeal or petition is disposed off.
Legal Commentary & Landmark Judgments: Section 164
Section 164 prescribes the statutory disqualifications for directorship, including insolvency, conviction for moral turpitude, and the automatic 5-year debarment under Section 164(2) for default in filing annual returns or financial statements.
Section 164(2) triggered the largest regulatory debarment in Indian corporate history, disqualifying over three lakh directors of non-compliant companies. The disqualification is automatic and immediate; neither the ROC nor MCA is required to issue an advance show-cause notice before activating the DIN debarment flag. In M&A and venture capital investments, background due diligence requires comprehensive Section 164(2) certifications from all incoming promoter and nominee directors.