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October 15, 2020

Name of Company struck off from ROC restored as appellant was carrying on its business regularly

by CA Shivam Jaiswal in Income Tax, MCA Circular

Name of Company struck off from ROC restored as appellant was carrying on its business regularly

Section 248 of the Companies Act, pertains to Power of Registrar to remove name of company from register of companies. According to Section 248, where the Registrar has reasonable cause to believe that:

  • a company has failed to commence its business within one year of its incorporation;
  • the subscribers to the memorandum have not paid the subscription which they had undertaken to pay within 180 days from the date of incorporation of a company and a declaration under section 11(1) to this effect has not been filed within 180 days of its incorporation or
  • a company is not carrying on any business or operation for a period of 2 immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company under section 455,

he shall send a notice to the company and all the directors of the company, of his intention to remove the name of the company from the register of companies and requesting them to send their representations along with copies of the relevant documents, if any, within 30 days from the date of the notice.

According to Section 252 of the Companies Act, a company struck-off under Section 248 of the Companies Act, 2013 can be restored in the Register of Companies by an order of the National Company Law Tribunal (NCLT).  According to Section 252(1), any person aggrieved by an order of the Registrar, notifying a company as dissolved under section 248, may file an appeal to the Tribunal within a period of three years from the date of the order of the Registrar. According to Section 252(3), a company, or any member or creditor or workman thereof feels aggrieved by the company having its name struck off from the register of companies can file application before the expiry of twenty years from the publication in the Official Gazette of the notice under section 248(5)

Let us refer to the case of Jaishree Dealcomm (P) Ltd v Registrar of Companies (NCLAT) (New Delhi) where the appellants filed an appeal against the order passed by the National Company Law tribunal (NCLT), who had affirmed the order of striking of the name of the appellant company from Register of Companies.

Facts of the Case:

  • There were 4 appellants in this case, Jaishree Dealcomm Pvt Ltd who is a company incorporated under the Companies Act, the holding company Ushmesh and Akhilesh Enterprises Pvt Ltd and the 2 directors of Jaishree Dealcomm Pvt Ltd namely Abhijeet Jagannath Bangad and Vinayak Kangaonkar
  • Appellant (main company) was served notice under section 248(1)(c) of the Companies Act, 2013 and the company’s name was struck off from the register of companies.
  • The order was challenged before the National Company Law Tribunal (NCLT).
  • However, NCLT dismissed the appeal on the ground of the maintainability that under section 252(3) of the Companies Act, 2013, a company, or any member or creditor or workman can file application for restoration of name of the company.
  • NCLT also observed that as per Section 164(2)(a) of the Companies Act, 2013, the 2 directors of the company (mentioned above) being disqualified cannot maintain the appeal.
  • Being aggrieved the appellants have filed an appeal before the National Company Law Appellate Tribunal (NCLAT).

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Submissions by Appellant

  • Appellant submitted thatUshmesh and Akhilesh Enterprises Pvt Ltd company holds 113400 equity shares of the Appellant company and Dinesh Kanti Lal Rathi being a director of Ushmesh and Akhilesh Enterprises Pvt Ltd signed the memo of appeal filed before the NCLT as well as before the NCLAT.
  • Ushmesh and Akhilesh Enterprises Pvt Ltd is a shareholder of the appellant company and in support a copy of the share certificate and affidavit of Dinesh Kanti Lal Rathi was annexed with Memo of Appeal.
  • Dinesh Kanti Lal Rathi being the director of Ushmesh and Akhilesh Enterprises Pvt Ltd was competent to maintain the appeal.
  • The appellant was regularly carrying on business as stated in the main object clause of Memorandum of Association of the company and was regularly filing income tax returns with the Income-tax Department.
  • However, inadvertently the company failed to file its audited financial statement and annual returns since the financial year 2013-14 onwards which were annexed with the Memo of Appeal.
  • From the Balance Sheets it was apparent that the Appellant was carrying on business.
  • ROC had not complied with the proper procedure and had not served the notice with the directors of the appellant and hence the order of ROC was liable to be quashed and the name of the company was pleaded to be restored to its original number.

Submissions by Respondent

  • ROC, submitted that it was not pleaded that Mr. Dinesh Kanti Lal Rathi was director of Ushmesh and Akhilesh Enterprises Pvt Ltd (the holding company) and that he could maintain the appeal being a director of shareholder company.
  • It was also submitted that the appellant company was gross negligent in not filing the annual returns and financial statements since financial year 2013-14.
  • Thus, the order of the NCLT/ROC should be upheld.

Observations of NCLAT

  • In the appeal filed before NCLT it was pleaded that the holding company is the shareholder of the main appellant company (whose name was struck off) and it held 113400 equity shares of appellant company.
  • This fact was supported by the share certificate and annual return of appellant company for the period 30-9-2013.
  • Thus, the holding company is the shareholder of appellant company. Undisputedly, Mr. Dinesh Kanti Lal Rathi had signed the memo of appeal being a director of the holding company.
  • Abhijeet Jagannath Bangad who is a director of the appellant comany is also shareholder of the company. In support of this fact they filed the share certificate and annual returns of appellant company for the period 30-9-2013.
  • Thus, NCLAT found that the director (Abhijeet) being a shareholder was competent to file the appeal as per Section 252(3) of the Companies Act, 2013.
  • The findings of NCLT that the appeal was not maintainable was incorrect.
  • Undisputedly the appellants had not filed the annual returns since the financial year 2013-2014 onwards.
  • The appellant company was regularly carrying on its business, in support filed the Auditor Reports and financial statement for the year ended 31st March, 2014 to 31st March, 2017.
  • NCLAT went through these reports and it was apparent that the appellant company was carrying on its business continuously.
  • Therefore, the order of striking of name of the company from the register of companies was certainly prejudicial to the shareholders of the company.
  • Therefore, the order of striking off the company name was set aside.

NCLAT passed the below order:

Impugned order was quashed and set aside. The name of Appellant company was directed to be restored to the Register of Companies subject to the following compliances:

  • Appellants shall pay costs of Rs. 25000 to the Registrar of Companies within 30 days
  • Within 30 days of restoration of the company’s name in the register maintained by the Registrar of Companies, the company will file all their annual returns and balance sheets due for the period ending 2013-14 to date. The company will also pay requisite charges/fee as well as late fee/charges as applicable
  • In spite of present orders, ROC will be free to take any other steps, punitive or otherwise under the Companies Act, 2013 for non-filing/late filing of statutory returns/documents against the company and directors

In conclusion, in accordance to Section 252(3), a company, any member, creditor or workman who feels aggrieved by the company having its name struck off from the register of companies can file application before the expiry of twenty years from the publication in the Official Gazette of the notice under section 248(5). After Submission of the documents the Tribunal shall hear the Petitioner and Respondent i.e. ROC and take note of the observations/objections.

After the hearing, the Tribunal will pass appropriate order i.e. either revival of the name of the company or dismiss the application, as it deems fit. Name of Company which was struck off from register of companies can be restored if the appellant was regularly carrying on its business as before.

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