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Judgment
The present Appeal under Section 421 of the Companies Act, 2013, has been filed by the Appellant being aggrieved and dissatisfied by the order dated 31.08.2021 passed by the National Company Law Tribunal (New Delhi Bench, Court-II) in Appeal No. 491/252/ND/2020 whereby and whereunder appeal filed by the Appellant for restoration of the name of the Company in the Register maintained by the Registrar of Companies (RoC), NCT of Delhi & Haryana was dismissed by the Tribunal.
The facts giving rise to this Appeal are as follows:
The Appellant company - M/s M Kumar Syntex Private Limited ("Company' or "the Company") was incorporated under the Companies Act, 1956 on 10.04.1987 as a Private Company as Limited by Shares with the Registrar of Companies, NCT of Delhi and Haryana, for the purposes of activities related to textile having weaving work. The Company diligently filed its returns till the year ended 31st March 1999. The Company is owned by Mr. Mahendra Kumar, Mr. Jai Kumar (Son) and Mrs. Madhu Rani (Wife). Mr. Mahendra Kumar, Mr. Jai Kumar and Mrs. Madhu Rani are also the Directors of the Company. Mr. Mahendra Kumar was involved in the day-to-day operational activities of the Company.
ii) All key managerial decisions of the company is taken by Mr. Mahendra Kumar however, due to his old age and suffered from various ailments and was not aware about the compliances that were required to be undertaken under the Companies Act, 1956 and hence the compliances required to be undertaken by the company were not followed/adhered to (only for relating to filling of Annual returns and Balance Sheets otherwise auditor appointments etc. were done on regular basis and board meetings and AGM were done on time) including obtaining the status of a dormant company U/s 455 of the Act.
iii) Mrs. Madhu Rani, wife of Mr. Mahendra Kumar has been a homemaker all her life and was not involved in the operations of the Company. She being the Shareholder of the Company with 33% of total shares. The Company could not file its Financial Statements for the Financial Years ended 31st March 2002 till 31st March 2020 with the Registrar of Companies, NCT of Delhi and Haryana as no one director was aware about the Compliances to be done and due to ill health and old age of Mr. Mahendra Kumar. The audited financial statements for the year 2001-2002 to 2003-2004 were ready but could be filed with the Registrar of Companies.
iv) The Company has been in active operation only with the security of that lease hold property and intends to start the textile business again with his son Mr. Jai Kumar and proposed investors and continue to carry out its business objectives and that the Company holds lease hold property the motive of restoration is not only to get property as lease hold property cannot be sold. However, if the use of this assets starts again in the textile business, it will be a huge possibility to generate employment and grow business on profit basis. Mr. Mahendra Kumar and Mr. Jai Kumar also having a suit shop in the area of Chandni Chowk hence both the current directors have experience in textile business. Further, the lease hold property is issued by the UPSIDC for 90 years since 02.05.1987. Thus, non-restoration of the company would result in irreparable loss and prejudice to the appellants, its contributories and creditors. The result in the fixed assets of the Appellant company going into a limbo/deadlock resulting in wastage of property, which is also contrary to the public policy. Some pictures showing some activities still going on in Chandni Chowk shop and also the picture of outside the factory, temple located in the factory on lease hold land located in Kosi.
The Company did not receive any show cause notice, nor was it afforded any opportunity of being heard before the aforesaid action was taken by the Respondent. The company is also holding a plot of leased hold land Plot No B-3, industrial area Kosi, Distt. Mathura. The area of plot is 6000 sq. Mtrs. The allotment of this plot is made by U.P. SIDC to M KUMAR SYNTEX PVT LTD for 90 years through an allotment letter dated 02.05.1987.
vi) The Annual General Meeting of the Company were held by the company on time as this is the closely held company and all the income tax returns has been filed by Mr. Mahendra Kumar on or after the due dates.
vii) The Registrar of Companies in utter disregard of the statutory requirement of serving notice under form STK1 in terms of Section 248, struck off the Company's name of the Register due to defaults in statutory compliances, mainly, failure to file Financial Statements & Annual Returns. Consequently, the Registrar of Companies initiated proceedings under Section 248 of the Companies Act, 2013, for the purpose of striking off the name of the company of the Register maintained by the Registrar of Companies. Aggrieved by the order of the RoC, the Appellant company approached before the Tribunal against the struck off order passed by the Respondent No. 1 /RoC and after hearing the parties, the Tribunal passed the order impugned dated 31.08.2021 which led to filing of this Appeal.
CS Bharti Kashyap appeared on behalf of the Appellant company and during the course of argument and also grounds mentioned in memo of Appeal submitted that Mr. Mahendra Kumar, main director of the company were in ill health and not able to handle the continuous business. The Company bearing losses, and they stop the manufacturing unit at Kosi industrial area and continue their trading of suit through Chandni chowk shop. Both Mr. Mahendra Kumar and his Son Jai Kumar conveniently carry on their business through sale of suit etc. The Company was filling all necessary documents with NCLT with ROC till 1999. The Company is also holding a plot of land bearing Plot No. B-3, industrial area Kosi, Distt. Mathura. The area of plot is 6000 sq. Mtrs. The allotment of this plot is made by U.P. SIDC to M KUMAR SYNTEX PVT LTD for 90 years through an allotment letter dated 02.05.1987.
It is further submitted that the directors of the company going to starts its business of manufacturing of textiles and want to generate employment. Both the directors Mr. Mahendra Kumar and Mr. Jai Kumar agree to file all its pending Annual returns with additional fees as per section 92 of the Companies Act, 2013. The Tribunal as well as the Registrar grossly erred in law by coming to the conclusion that the company was not a going concern.
It is further submitted that the Act seeks to achieve by making service of notice mandatory on the part of the Registrar is twofold i.e., in consonance with principles of natural justice and to give an opportunity to the Company/its directors to substantiate that the company in question is a going concern and is carrying out its business operations. However, in the present case no notice was served upon the company at its registered address or at the addresses of the directors of the company and hence the Appellant never got an opportunity to substantiate if the company is a going concern. Further, in the present case while passing an impugned order U/s 248(5) the Registrar has failed to take note of the requirements enumerated under sub-clause (6) of Section 248 which specifically states that before passing an impugned order to strike-off the name of the Company, the Registrar should first satisfy himself that sufficient provision has been made for the realization of all amounts due to the company and for the payment or discharge of its liabilities within a reasonable time. In the present case the company has various liabilities and assets.
It is further submitted that the Company also holds plot of land bearing Plot No. B-3, industrial area Kosi, Distt. Mathura. The area of plot is 6000 sq. Mtrs. The allotment of this plot is made by U.P. SIDC to M KUMAR SYNTEX PVT LTD for 90 years through an allotment letter dated 02.05.1987. Thus, non-restoration of the company would result in irreparable loss and prejudice to the appellant company its contributories and creditors. It would also result in the fixed assets of the appellant company going into a limbo/deadlock resulting in wastage of property, which is also contrary to the public policy. This Hon'ble Appellate Tribunal can revive/restore the name of the company in light of the undertaking given that the company shall file all the statutory documents i.e financial statements and annual returns for the financial years ending 31st March 2002 till 31st March 2020 along with filing fee and additional fee in terms of Section 92 of the Act. Further, a lenient view may be granted by this Appellant Tribunal in view of the purpose that the Appellant seeks to achieve subsequent to revival of the company i.e to make more investment and generate employment. Based on above submissions, the impugned order is fit to be set aside and the Appeal may be allowed.
On the other hand, the Respondent No. 1 / Registrar of Companies in his reply stated that as per available records on MCA 21 Portal, the Appellant Company-M Kumar Syntex Private Limited was incorporated on 10.04.1987 under the provisions of Companies Act, 1956 and the last Directors of the Appellant Company namely Mahender Kumar, Madhu Rani and Jai Kumar. The last available Balance Sheet & Annual Return as filed by the Company is shown for the Financial Year 1999 before it was considered to be struck off. Hence, this office had reasonable cause to believe that the company was not in operation and therefore, the name of the company was considered for striking off from the Registrar of Companies. The name of the company was identified for striking off under Section 560(1) of the Companies Act, 1956 and company was strike off in terms of Section 560(5) of the Companies Act, 1956 on 23.06.2007.
It is further submitted that the action of striking off of the present company was legal and justified and was the result of the operation of the law, as the company was not carrying on any operations for a period of two immediately preceding financial years (as indicated by non-filing of the financial statement of the company for two or more years).
It is stated in his reply that as per the information provided by the Appellant, it is observed as under:
| 1. | Revenue from operation | In terms of Petition the Petitioner has not enclosed any Balance Sheet and Profit & loss A/c for previous two financial year’s viz. 2004-05 & 2005-06 prior to the date of strike off. Therefore, this office is unable to comment further on this. |
| 2 | Financial Statements | Submitted with the petition for the financial year 2015-16, 2016-17 and 2017-18 at pages, 61-75. (However, the profit & Loss has shown zero revenues from the operation in the above-mentioned F.Y.) |
| 3 | Income Tax Returns | Acknowledgement of Income Tax Returns submitted for the Assessment Year 2012-13 to 2019-20 at pages 76-83. |
| 4 | Property Details | Lease deed executed between the Petitioner/appellant and U.P. State Industrial Development Corporation Limited dated 13.11.1987 attached with petition at pages 46-60. |
It is further submitted that the Balance Sheets filed for the Financial Years from 2015-16 to 2017-18 (which too show ‘NIL’ income from its operations) and the Income Tax Returns produced for the Assessment years from 2012-13 to 2019-20 has not relevance, since these pertain to the post-striking off period. Further, the lease deed of the Appellant Company with UPIDCL does snot give any ownership rights to the Appellant Company. In nutshell, there is nothing placed on record, which could suggest that the Company was either in operation or carrying out its business or it is otherwise just to restore the name of the Company in the register of ROC.
In view of the above, the Appellant Company not having any valid submissions, therefore, the Appeal may be dismissed as the Respondent No. 1 has duly complied the law and the Tribunal has passed the appropriate order in public interest.
After hearing the parties, going through the pleadings made on behalf of the parties and in view of the fact that the Appellant Company having valid property Lease Deed from UPSIDC and still activities are going on in Chandni Chowk shop. Further, Balance Sheet filed for the Financial Year 1998-99 and Acknowledgement of Income Tax Return of the Company filed till the Annual Year 2019-20 shows that the Appellant Company is having substantial movable as well as immovable assets. Therefore, it cannot be said that the Appellant Company is not carrying on any business or operations. Hence, we are of the view that the order passed by the National Company Law Tribunal (New Delhi Bench, Court-II) as well as Registrar of Companies, NCT of Delhi & Haryana is not sustainable in law.
In view of the aforenoted, we set aside the impugned order dated 31.08.2021 passed by the National Company Law Tribunal (New Delhi Bench, Court-II) in Appeal No. 491/252/ND/2020. The name of the Appellant Company be restored to the Register of Companies subject to the following compliances:
Appellant Company shall pay costs of Rs. 1,00,000/- (Rupees One Lakh) to the Registrar of Companies, NCT of Delhi and Haryana within eight (8) weeks from the passing of this judgment.
ii) After restoration of the Company's name in the Register maintained by the RoC, the Company shall file all their Annual Returns and Balances Sheets. The Company shall also pay requisite charges/fee as well as late fee/charges as applicable.
iii) Inspite 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.
The instant Appeal is allowed to the above extent.
Registry to upload the Judgment on the website of this Appellate Tribunal and send the copy of this Judgment to the National Company Law Tribunal (New Delhi Bench, Court-II), forthwith.