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Judgment
ORDER
Oral Judgment: Justice Sharad Kumar Sharma, Member (Judicial):
This Company Appeal was taken up yesterday, the arguments continued and the matter has been fixed today for dictation of Judgment.
When the matter was taken up yesterday, none had appeared for Respondent No.2 who was newly impleaded in the Appeal. Today when the Company Appeal was taken up the Respondent No.2 appears, represented by Ms. Madhumitha, in brief of Mr. Raj Kumar Jhabakh. She submits that, she has filed a memo of pleadings on 05.12.2024, contending thereof that in principle, she would be having any objection as such in case if the Company Appeal is decided on merits. The said memo is taken on record.
The brief facts which are to be considered are, that in the instant Appeal, the Appellant puts the Challenge to the Order dated 31.05.2023, as it has been passed by the Ld. NCLT, Chennai Bench in CA No.7/2022. By virtue of the impugned Order, Ld. NCLT has rejected the application preferred by the appellant under Section 252 (3) of the Companies Act, 2013 to be read with Rule 11 of the NCLT Rules of 2016, to permit revival of the Registration of the company M/s. Kumaran Powders Pvt. Ltd of which the Appellant is a shareholder, stood rejected. Before venturing to deal with the factual aspects of the case, a reference to Section 252 of the Companies Act, which will be the subject to be considered by us, needs to be made, particularly because the implications of the same has been extensively argued yesterday by the Ld. Counsel for the Appellant, in the light of the provisions contained under Sub-section (3) of Section 252 of the Companies Act 2013. The Appellate Jurisdiction under Section 252, as contemplated under the Companies Act, is being invoked, by the Appellant being aggrieved against the order, which has been passed under Section 248 of the Companies Act, 2013. If the provisions contained under Section 248 of the Companies Act, 2013, is taken into consideration, basically it lays down the parameters, which are required to be adhered to, by the Registrar of Companies, before he proceeds further to remove the name of a Company from the register maintained by him. The parameters/ingredients provided under Sub-section (1) of Section 248, are required to be satisfied, before the Registrar of Companies (RoC), takes any decision of deregistering the company or removing the name of the company from the register of the Company. The parameters prescribed under Section 248, is extracted hereunder: -
“Section 248. Power of Registrar to remove name of company from register of companies.
(1)Where the Registrar has reasonable cause to believe that
(a)a company has failed to commence its business within one year of its incorporation;
(c)a company is not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company under [section 455; or]
[(d) the subscribers to the memorandum have not paid the subscription which they had undertaken to pay at the time of incorporation of a company and a declaration to this effect has not been filed within one hundred and eighty days of its incorporation under sub-section (1) of section 10A; or
(e)the company is not carrying on any business or operations, as revealed after the physical verification carried out under sub-section (9) of section 12.]
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 a period of thirty days from the date of the notice.
(2)Without prejudice to the provisions of sub-section (1), a company may, after extinguishing all its liabilities, by a special resolution or consent of seventy-five per cent. members in terms of paid-up share capital, file an application in the prescribed manner to the Registrar for removing the name of the company from the register of companies on all or any of the grounds specified in sub-section (1) and the Registrar shall, on receipt of such application, cause a public notice to be issued in the prescribed manner:
Provided that in the case of a company regulated under a special Act, approval of the regulatory body constituted or established under that Act shall also be obtained and enclosed with the application.
(3)Nothing in sub-section (2) shall apply to a company registered under section 8.
(4)A notice issued under sub-section (1) or sub-section (2) shall be published in the prescribed manner and also in the Official Gazette for the information of the general public.
(5)At the expiry of the time mentioned in the notice, the Registrar may, unless cause to the contrary is shown by the company, strike off its name from the register of companies, and shall publish notice thereof in the Official Gazette, and on the publication in the Official Gazette of this notice, the company shall stand dissolved.
(6)The Registrar, before passing an order under sub-section (5), shall satisfy himself that sufficient provision has been made for the realisation of all amount due to the company and for the payment or discharge of its liabilities and obligations by the company within a reasonable time and, if necessary, obtain necessary undertakings from the managing director, director or other persons in charge of the management of the company:
Provided that notwithstanding the undertakings referred to in this sub-section, the assets of the company shall be made available for the payment or discharge of all its liabilities and obligations even after the date of the order removing the name of the company from the register of companies.
(7)The liability, if any, of every director, manager or other officer who was exercising any power of management, and of every member of the company dissolved under sub-section (5), shall continue and may be enforced as if the company had not been dissolved.
(8)Nothing in this section shall affect the power of the Tribunal to wind up a company the name of which has been struck off from the register of companies”
The Appellant has come up with the case, that the Ld. Tribunal, by virtue of the impugned order dated 31.05.2023, has dismissed his Appeal Petition filed under Section 252(3) of the Companies Act, read with 87 A of NCLT Rules 2016 praying for restoration of the name of the Company on grounds that the Appellant, having voluntarily affirmed that there are no assets and liabilities with company and that it is not carrying on any business, based on which the Respondent No.1 (RoC) struck off the name of the Company from the Register of Companies, cannot now claim to be aggrieved of his own decisions and that the said order is arbitrary because despite his filing the petition well within the prescribed period as contemplated under Sub-Section (3) of Section 252 and giving sufficient grounds for considering his petition, Ld. Tribunal did not take into account his pleadings and passed orders on the premises which have already been decided otherwise by Higher Courts.
The Appellant’s case before the Ld. Tribunal was that, he was the Managing Director of a company, which stood registered under the Companies Act under the name and style of M/s. Kumaran Powders Private Limited, that because of outdated machinery, plant breakdown and lack of funds to invest in new machinery, the plant remained idle in 2006-2008 and that with the consent of Board of Directors he applied to RoC to strike off the name of the Company from the Register of Companies. Accordingly, the Respondent RoC initiated proceedings under Section 560 of Companies Act, 1956 and struck off the name of the said company from the register of Companies. However, this was done prior to transfer of immovable properties lying in the name of the company and on knowing the same, he had proposed to revive the company by utilizing the said properties and to engage in business of manufacture of non-ferrous metal powder to support another group company. He had pleaded that the application to strike off the name of the Company had been preferred by him in good faith and the fact of the company owning substantial immovable property was inadvertently overlooked and that if the company is restored to its original status, the said properties can be utilised to create additional business. To prove his bonafide, he had attached copy of sale deeds of the immovable properties along with certificate of the Auditor. He had also given his undertaking to cause the company to comply with the provisions of the companies Act, 2013 read with Rule 153 of NCLT Rules 2016 and to file all outstanding statutory returns from 2008-2009 to 2021-2022, upon restoration of the company. He had further pleaded that in views of the aforesaid, it would be just and proper and in the interests of the shareholders and the company itself that his application be allowed and the name of company is restored back to the Register of Companies.
However Ld. NCLT Passed the impugned order, drawing its inference from the pleadings of the Appellant itself that, when Appellant himself has affirmed that, the company has no assets and liabilities & it has not been carrying out the business and, when based on affirmation made by him only, the Respondent No.1 (RoC) has struck off the name of the company, it is incomprehensible as to how the Appellant can be aggrieved of his own decision and accordingly proceeded to dismiss the application, holding it to be bereft of merits. The Ld. Adjudicating Authority has further gone on to discuss the modalities of Fast Track Exit mode under Section 560 of the Companies Act, 1956, in para 7 of its order and has observed that the scheme is applicable to such companies who do not have any assets and liabilities and that, the strike-off in the instant case was voluntary based on the affidavit submitted by each director of the concerned company. Ld. NCLT has then gone on to evaluate the application made by the Appellant and has come to the conclusion that the Application is devoid of any merit. But. Ld. NCLT has not discussed as to how the guidelines of the said mode would be applicable under the given set of circumstances, so far as, it relates to the application of the present Appellant. Ld. NCLT had heavily relied on the affidavit allegedly submitted by the Appellant to RoC regarding zero assets and liabilities of the company and the fact of non-continuance of business, to come to its conclusion that exclusively on basis of the inference that since the company is not operational and is not having any immovable assets, the name of the company deserves to be struck off from the register of companies and there is no necessity of restoring the same which was being prayed for by the Appellant.
The Appellant has drawn attention of this Tribunal to the pleading he has made in para 2.6 and 2.7 of the petition preferred by him under section 252(3) of the Companies Act, before the NCLT Chennai Bench. Therein, he had pleaded that the struck-off company still has immovable assets which he wishes to utilize to restart the company’s operations and to prove his bonafide, he had attached 18 number of sale deeds in respect of a total land area of 13.39 acre, owned by the company, the details of payment of property tax and electricity due and the business plan for restarting the business as annexure to the said application. The Appellant further stated that even though Respondent No.1, the RoC in his report to Ld. NCLT has stated that the intention of the Appellant to revive the operation of the Company is not visible in the Application, he had reiterated his intentions of re-starting business in his rejoinder and the same should have been considered as to be an ‘honest’ undertaking for the purpose of deciding his appeal.
He has further contended that despite of there being sufficient materials placed by him before the Ld. NCLT and particularly his reply to the report of RoC that was submitted on 17.04.2023. the Ld. NCLT passed the Impugned Order, without assigning any reasons and without even recording any findings with regards to the assurance and the stand taken by the Appellant, that all efforts would be taken by the Appellant to revive the company, and therefore the Impugned Order may be set aside and orders may be passed for restoration of the name of the Company in the register of companies.
In these circumstances, when the primary objectives of the Companies Act, 2013 are to enhance corporate governance, protect investor interests, promote transparency and accountability and to facilitate ease of doing business, denial to restore the name of the company in the register of companies, particularly in the context of the undertaking given in clause 2.6, by the Appellant, in its Application preferred under Section 252(3) of the Companies Act and the material placed before Ld. Tribunal to prove his bona fide, seems to be in conflict with the objectives of the Act. This brings us to deliberate upon as to what are the principles that should govern the restoration of a company’s name in the register of companies. Section 252(3) lays down the said principles, that the Tribunal may, if satisfied that the Company was, at the time of its name being struck off, carrying on business or, in operation or otherwise it is ‘just’ that the name of the company be restored, order the name of the company to be restored to the register of companies. Section 252 of Companies Act is extracted hereunder: -
“252.Appeal to Tribunal.—(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 and if the Tribunal is of the opinion that the removal of the name of the company from the register of companies is not justified in view of the absence of any of the grounds on which the order was passed by the Registrar, it may order restoration of the name of the company in the register of companies:
Provided that before passing any order under this section, the Tribunal shall give a reasonable opportunity of making representations and of being heard to the Registrar, the company and all the persons concerned:
Provided further that if the Registrar is satisfied, that the name of the company has been struck off from the register of companies either inadvertently or on the basis of incorrect information furnished by the company or its directors, which requires restoration in the register of companies, he may within a period of three years from the date of passing of the order dissolving the company under Section 248, file an application before the Tribunal seeking restoration of name of such company.
(2)A copy of the order passed by the Tribunal shall be filed by the company with the Registrar within thirty days from the date of the order and on receipt of the order, the Registrar shall cause the name of the company to be restored in the register of companies and shall issue a fresh certificate of incorporation.
(3)If 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, the Tribunal on an application made by the company, member, creditor or workman before the expiry of twenty years from the publication in the Official Gazette of the notice under sub-section (5) of Section 248 may, if satisfied that the company was, at the time of its name being struck off, carrying on business or in operation or otherwise it is just that the name of the company be restored to the register of companies, order the name of the company to be restored to the register of companies, and the Tribunal may, by the order, give such other directions and make such provisions as deemed just for placing the company and all other persons in the same position as nearly as may be as if the name of the company had not been struck off from the register of companies”.
In the instant case, the company was not carrying on business or in operation, which has been admitted by the Appellant. Now it has to be seen whether if is ‘otherwise just’ to order restoration of the name as prayed for.
This aspect of under what circumstances revival of the registration of a company can be ordered, which has been otherwise struck off from the registrar of companies, by the RoC has been a subject matter of consideration, in a catena of Judgments rendered by the various High Courts and NCLAT. The Counsels appearing for the Appellant as well as, the Respondents have relied upon a number of judgments in support of their respective contentions, though in principle there is not much serious contest on the point that revival of the Company itself would be in the interest of all the parties to the Appeal.
The Ld. Counsel for the Appellant in support of her contention had submitted that the Judgment of this Tribunal as rendered in AVS Enterprises Pvt. Ltd Vs ROC, as reported in 2022, SCC Online NCLAT Page 2692, in its para 30 and 31 has specifically outlined, on the basis of earlier judgment rendered in Siddhant Garg and Ors. Vs Registrar of the Companies, as reported in 2012, 171 Company Cases 326, as to what would be the purpose and objective of the use of word ‘just’, so as to guide a Tribunal to order restoration of the name of a company in the register of companies which has been deregistered by the RoC. The aforesaid judgment lays down that the court should examine the justification of revival of registration of a company not from the perspective of a creditor or a member or a debtor alone, but from the perspective of the society as a whole. It further goes on to pronounce that Tribunal has the option to order restoration of the company’s name if it appears to it, to be ‘otherwise just’, and that deregistering a company on grounds of non-filing of returns will not create a bar in subsequent restoration if application for the same is filed within 20 years and the omissions/latches are cured with a levy of cost to secure the ends of justice. Para 30,31,45 and 46 of the said judgment are extracted hereunder: -
“30.In real sense, the term ‘Striking Off’ is alternate to ‘Winding Up’. The occurring of the words ‘or otherwise’ in Section 252(3) of the Companies Act, 2013 connotes that even when the ‘Company was not carrying on any Business’ or was ‘not in Operation’ at the time of striking off, the ‘Tribunal’ yet has the ‘option’ to order ‘restoration of a Company's name’ in the ‘Register of Companies’, if it appears to it, to be ‘otherwise ‘just’.
31.Added further, the ‘Tribunal’ can pass an order of ‘Restoration of a Company's name’ to the ‘Register of Companies’, if it is that, it is ‘Just And Proper’ to restore the name of the Company, then, ‘declining’ to grant relief just because of third person will be inconvenienced by it, will not be a proper one, in the earnest opinion of this ‘Appellate Tribunal’.
45.As far as the present case is concerned, even though, the 1 Respondent/Registrar of Companies' has come out with the plea that the 'Company' was incorporated on 25.08.1985 and the last Annual Return and Balance Sheet was submitted by the 'Company' to its office, before it was considered to be 'struck off', relate to the 'Financial Year' that ended on 31.03.2006 and later, no documents were filed by the 'Company' to claim the status of a 'Dormant Company' under Section 455 of the Companies Act, 2013, this 'Tribunal' taking note of the fact that the 'Company' has 'Assets and Liabilities' and more so, keeping in mind that the right to seek restoration' of the name of the 'Company' (to be entered in the 'Register of Companies') is not extinguished/lost as long as 20 years have not expired, and besides these, the 1st Respondent in its 'Reply' before the 'Tribunal' had mentioned that the 'Tribunal' may kindly issue directions to the 'Appellant'/'Petitioner' to file all documents of the 'subject company with it, of course, within the time specified by the 'Tribunal', in all 'Fairness' 'Reasonableness' and 'Equitableness' is of the earnest opinion that it is just and proper to restore the name of the Company and that the omissions/latches/failures on the part of the Management of the Company in not filing the 'Annual Returns' and 'Financial Statements' in time can be fastened with a levy of cause, to secure the 'Ends of Justice'. Otherwise, it will cost 'irreparable hardship' and 'Prejudice' to the 'Company', as opined by this 'Tribunal'. However, the converse view arrived at by the 'National Company Law Tribunal, New Delhi Special Bench (II)' in the 'Impugned Order' in Appeal No. 350/252(ND)/2020 is an incorrect and unsustainable one in Law. Looking at from that perspective, the 'Appeal' succeeds.
Conclusion:
46.In fine, the Instant Company Appeal (AT) No. 47 of 2021 is allowed. No costs. The Impugned Order dated 31.12.2020 in Company Appeal No. 350/252(ND)/2020 passed by the National Company Law Tribunal, New Delhi Special Bench, Court II is set aside by this 'Appellate Tribunal' for the reasons ascribed in this 'Appeal'. The 'Notice' of 'striking off' and 'dissolution' in the required Form No. STK-7 dated 21.08.2017 is set aside. It is abundantly made quite clear that the 'Restoration of the Name of the Appellant's Company' is subject to its filing of all outstanding documents required by Law and completion of all Statutory formalities, including payment of any late fee or any other charges which are leviable by the 1st Respondent for late filing of 'Statutory Returns' and also on payment of cost of Rs. 40,000/- (Rupees Forty Thousand only) to be paid to the 'Prime Minister Relief Fund'. The name of the Appellant Company' shall then, as a resultant effect, shall stand restored to the 'Register of the Registrar of Companies' as if the name of the Company was not 'struck off', in accordance with Section 248(5) of the Companies Act, 2013. All connected pending IA/IA's if any, is/are closed.”
In yet another Judgment relied on by the Appellant which has been rendered by the principal bench of NCLAT as reported in 2023 SCC Online NCLAT 1893, M/s. Parinda Buildcon Pvt Ltd. Vs. ROC, this Tribunal has ordered that the name of the concerned company should be restored back by the RoC because it has land and other immovable properties and has a business plant to carry out its activities. The Appellant states that his case is similar, that the struck-off company M/s Kumaran Powder has land, it has a business plan to utilise the said property and it is part of a group of companies which is fully operational, that it stopped operations because of obsolete machinery and fund crunch and that it can be made operational, to which effect he has already given an undertaking in Para 2.6 of the Application preferred under Section 252 of the Companies Act. Prospect of revival of the operation of the company would be one of the prime aspect which is to be considered while deciding on restoration of a company’s name in the light of the Judgment reported in 2023 SCC Online NCLAT 202 as rendered in the matters of Sudesh Gupta, Shareholder Vs ROC. The relevant para being para 9 is extracted hereunder:-
“9.After hearing the parties and going through the pleadings made on behalf of the parties, we observe that the Company has Commercial Property bearing Plot No. B-235, Sector 16, Noida which was allotted by New Okhla Industrial Development Authority (NOIDA) for the purpose of Auto Parts Shop Repair Workshop & Motor Garage and the Company was paying electricity bill regularly from July, 2017 to September, 2020. Further, the Respondent No. 1/Registrar of Companies in his reply before the NCLT has stated that it has no objection if the name of the Company is restored on proving by the Company that it was carrying on business or was in operation and the Company be also directed to file financial statements up to date with appropriate filing and additional fees. Keeping in view of the above facts, 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-II) as well as Registrar of Companies, NCT of Delhi & Haryana is not sustainable in law.”
Dealing with an almost similar issue pertaining to the restoration of the name of a company in the register of companies, this tribunal has observed that documents showing possession of assets and the utility bills or remittance of the taxes, rent bills etc. would be an evidence which would be sufficient enough to show that the company, whose name has been struck off, has assets, such assets coupled with a viable business plan along with undertaking given by the directors to revive the business/operation of the struck-off company should constitute a ‘just’ cause for restoring the name of the company in the register of companies, “provided it is not a shell company, or a company engaged in siphoning of the Funds, evading tax or, indulging in unlawful activities or not abiding by the statutory compliances” which has been prescribed by the ratio in Alliance Commodities Pvt. Ltd V. Office of Registrar of Companies, NCLAT CA(AT)(CH) No. 20 of 2019. The aforesaid Judgment has been pronounced in DD finance and Holdings Pvt. Ltd., Vs ROC as reported in 2024 (243) Company Cases 546, and the relevant paragraphs being para 12-16, 22 and 23 on which the Appellant has relied upon to support his pleadings are extracted below:-
The relevant para 12-16, 22 and 23 are extracted hereunder: -
“12.The company holds property and all the four directors are willing to give an undertaking for three years they will not sell the property, should the name of the company be restored on the rolls of the Registrar of Companies. The brothers as directors intend to use this asset by developing it and starting a home-stay business for their daily survival and livelihood. They have also received a proposal from Brentwood Hotel, annexed with the appeal.
13.Section 252(3) of the Companies Act, 2013 deals with the present situation and is as under:
"If a company, or any member or creditor or workmen thereof feels aggrieved by the company having its name struck off from the Register of Companies, the Tribunal on an application made by the company, member, creditor or workman before the expiry of twenty years from the publication in the Official Gazette of the notice under sub-section (5) of section 248, may, if satisfied that the company was at the time of its name being struck off, carrying on business or in operation or otherwise it is just that the name of the company be restored to the Register of Companies, order the name of the company to be restored to the Register of Companies, and the Tribunal may, by the order, give such other directions and make such provisions as deened just for placing the company and all other persons in the same position as nearly as may be as if the name of the company had not been struck off from the Register of Companies."
14.Now the term otherwise just and equitable under section 252(3) of the Companies Act, 2013 envisage revival/restoration of the company on the rolls of the Registrar of Companies if it is not a shell company or a company dealing with siphoning funds or advancing loan to sister concern. Rather they have a fixed substantial assets worth crores. The company is still sole absolute owner and in possession of the property situated at Bhakti Bhavan Estate, Kulri, Mussoorie and if the company's name is not restored then, of course, it would result to an irreparable loss and prejudice to the appellant and the fixed assets of company would be a deadlock and would result in wastage of property which is, of course, contrary to the public policy. Admittedly the property is free from all encumbrances.
15.Though the learned National Company Law Tribunal has relied upon the ratio of Alliance Commodities P. Ltd. v. Office of Registrar of Companies, West Bengal being Company Appeal (AT) No. 20 of 2019 which is also confirmed by the hon'ble Supreme Court in C.A. No. 7258 of 2019 but Alliance Commodities P. Ltd. (supra) deals with mala fide situation of illegal transactions made by shell company (loans advanced to sister concern) and its loan advances were terms as "being violative of section 186 of the Companies Act, meaning thereby that advancing loans for the purpose of siphoning of the funds and for evasion of tax" which is not the situation here. Rather the financial documents from 2011 onwards including balance-sheets, water bills, electricity bills, rent receipt were ready but could not be filed due to the fault of an earlier counsel.
16.Admittedly the impugned order was passed since the appellant had failed to produce documents to show it was still in possession of the asset and it had paid all water bills, electricity bills and rent receipt (s). It is submitted the financial statement could not be filed with the Registrar of Companies inadvertently since father of the present directors was old and ill and it being a joint family set up with an incomplete professional/legal guidance and even their chartered accounts had unfortunately expired.
22.For foregoing reasons, we are of the view that due to exceptional economic growth curve it shall be viable to run the appellant-company as an entrepreneurial start up venture since affordable housing options/home-stay business could be bright spot. Admitted the directors of the appellant-company are optimistic to carry out the operations given the assets and infrastructure of the appellant-company. Hence restart of housing business is very much possible, more so when an expression of interest has been received from Brentwood Hotels. Reference may also be drawn to Santa Claus Toys P. Ltd. v. Registrar of Companies; Deepsone Non Ferrous Rolling Mills P. Ltd v. Registrar of Companies, NCT of Delhi and Haryana and Sohal Agencies P. Ltd. v. Registrar of Companies, Delhi and Haryana.
23.We find though the annual accounts of the years stated above though were duly prepared but could not be filed, for the reasons stated above, the non-compliance appear to be inadvertent, non-deliberate and unintentional. Admittedly the appellant is ready to comply with all the statutory provisions once the name of the company is restored by the Registrar of Companies. Thus we find no reason why its name should not be restored as no prejudice would be caused to the Registrar of Companies if its name is restored. It is not the case of the Registrar of Companies that the appellant is a shell company or was at any time engaged in syphoning of funds”.
In all the references/judgments cited by Ld. Counsel for the Appellant, the name of the concerned companies were struck off by RoC because of non-filing of returns and non-compliance of other statutory provisions. None of these cases had situation where the deletion of name has been done on basis of the application by the Company itself.
However certain principles quoted in the judgment, AVS Enterprises Pvt. Ltd. Vs Registrar of Companies, Delhi and Anr., provided the necessary guidance. The first one in Re Priceland Ltd. Waltham Foresh London Borough Council Vs Registrar of Companies, (1997) 1 BCLC 467, 476, 477 (ch. D) (Companies Court) where it is observed and held as under:
“....In other words, the exercise of discretion only arises after the court has been satisfied that (a) the company was at the time of striking off carrying on business or in operation, or (b) otherwise that it is just that the company be restored. The first of these amounts to the court being satisfied that the registrars reasonable beliefs which were the basis for the original order striking the company off, were not in fact correct.
The second means that, prima facie, the court has been persuaded that it is just to restore. In either case it seems to me that, absent special circumstances, restoration should follow. Exercising the discretion against restoration should be the exception, not the rule," (Page 476)
Once the court has acquired jurisdiction on the basis that the new applicants interests make restoration just it would be harsh indeed to refuse the relief sought because some other third party may be inconvenienced by it.
These considerations lead me to the view that the court should be very wary of refusing restoration so as to penalize a particular applicant or in a possibly futile attempt to safeguard the special interests of a single or limited class of affected persons. It would need a strong case to justify a refusal on these grounds...... ..(Page 477)”
The second one is in the matter of Conti V. Uebersee Bank AG, 2000 BCC 172 (Scotland), it is observed as under:
“Where a company has been struck off the register at its own request, the officer of the company who had been instrumental in seeking such a striking off had sufficient locus-standi to apply for restoration. Clearly that officer could not claim that he was aggrieved at the time of striking off but a subsequent feeling of grievance would give him locus-standi. The language of the section points to a sense of grievance at the time of application to restore and not at the date of the dissolution”.
In the first case, it is opined that in the absence of special circumstances restoration should follow and that exercising the discretion against restoration should be the exception, not the rule. Truly, this is the credo of a liberal economy which our constitution professes to nurture. The second case (Supra) unequivocally answers the question raised by Ld. NCLT in the impugned order, that is the Appellant while furnishing the application for strike off in 2008 may not have been aggrieved, but he has a right to feel aggrieved at a later date on discovery of certain properties still lying in the name of the company and that right cannot be denied to him.
On the contrary, the Ld. Counsel for the Respondent had submitted that the contentions as extended by the Ld. counsel for the Appellant, may not be acceptable, because owing to the ratio as it has been propounded by the judgment of NCLAT, New Delhi in Rajneesh Ghei Vs Registrar of Companies & Ors, wherein it has held that the revival of the company under the concept of invocation of the Appellate jurisdiction under Section 252, ought not to be liberally construed, that it should be subject to satisfying certain conditions, and that the revival cannot be claimed as a matter of right by a de-registered company. The Ld. counsel for the Respondent had made a reference to para 18,19 & 20 of the said judgment in support of his contention, that the revival of the registration of the Appellant company, in the register of the Registrar of the Companies may not be permissible owing to the bar, which has been created by the provisions contained under Section 560 (6), which has been considered by the NCLAT, New Delhi, in matters of in Rajneesh Ghei Vs Registrar of Companies & Ors, (supra). He has relied on para 18, 19, 20 which is extracted hereunder: -
“18.Notably, if the name of the Company has been struck off following the procedure prescribed in sub-section (1) to (5) of Section 560 of the Companies Act, 1956, when the Company had itself voluntarily applied for striking off its name by filing an application under the Easy Exit Scheme, 2010, no appeal shall lie under Section 560(6) of the Companies Act, 1956.
19.We also follow the judgment of Hon'ble Gujarat High court in the matter of Pramod Kumar Sharma (Supra) where the scope of Section 560(6) has been expounded which is as follows:
“8.2.The sub-section (6) of Section 560 of the act is part of Section 560 as a whole i.e. Section 560(1) to Section 560(9) and it is connected and intertwined with all other sub-sections i.e. sub-section (1) to sub-section (5) and sub-section (7) to (9) and it is not an independent provision.
8.6.Looking to the facts of the present case, it cannot be said that in present case the ROC had, on his own motion, taken the action in question for any reason/s under Section 560(1) to (5) of the Act.
9.According to the provision i.e. Section 560(6) of the act when the action is not taken by RoC on his own motion and for any reason and/or circumstances mentioned under Section 560(1) to (5) of the Act then any application/petition for recalling or setting aside the action whereby the company got struck - off (at its own request) from the register, would not lie under Section 560(6).”
20.On the basis of the above discussion, it is quite clear that the Appellant is not a member of the R-3 company. Further we have not been shown any evidence by the Appellant that he made any sincere and diligent effort to get a succession certificate in his favour with regard to the shares held by his deceased parents and therefore, he is not entitled to the privileges and other facilities that are available to the member of a company under Companies Act. In this connection we note that an appeal under the Companies Act, 2013 would be available to a 'person' who is either a 'Member' of the Company or a 'Creditor' or a 'Director' and quite clearly the Appellant is none of these. On this basis we hold that the Appellant is not entitled to maintain an appeal before the NCLT.”
The observation, which has been made in para 20, of the said judgment shows that this judgment is not a ratio in rem rather it is a ratio in personam, which relates, to the particular case, where evidently the Appellant could not establish his intention, by evidence, with regards to the revival of the Company and in the absence of their being any reliable evidence, as such being brought on record, NCLAT, New Delhi, has taken a view that the revival of registration of the company in the register of Registrar of the Companies may not be tenable.
This is in variance with the instant case, as far as the instant Appeal is concerned, intention to revive the Company is very much apparent, in form of availability of assets, undertakings furnished, business plan submitted, and presence of group of companies whereas in case being dealt with by the judgment (Supra) the Appellant is not even a member of the Company sought to be revived and he has failed to bring on record any evidence to establish a confidence, that the operational activities of the company would be revived back. Further, the Judgement of the NCLAT, New Delhi, (Supra) has made reference to an earlier judgment of Pramod Kumar Sharma Vs Registrar of the Companies, as reported in 2014, SCC Online Gujarat Page 7261, wherein the division bench has also taken a contrary view, with regards to the aspect of the revival of the registration of the company with the Registrar of the Companies. If the said judgment is taken into consideration, it cannot be said to be laying down a ratio for the reason being that in para 4 of the said Judgment, it discusses the observations by the Ld. Company Judge. The relevant para is extracted hereunder: -
“[4] The findings recorded by learned Company Judge in
paragraph Nos. 6 to 7.16 read as under:-
6.I have heard Mr. Jain, learned Counsel for the petitioner at length and I have also considered the documents placed on record and the decisions relied on by the learned Counsel for the petitioner.
7.From the facts stated by the petitioner one important fact emerges and becomes clear viz. it was the company itself who had, on its own motion and to take benefit of the scheme more particularly the benefit of easy and quick exit without passing through the regular and detailed procedure voluntarily made an application under a scheme launched by the Ministry of Corporate Affairs and requested the ROC that it may be struck-off from the register in accordance with the terms of the scheme and it was in pursuance of the company's request and at the behest of the company that the ROC struck off the company from the register.
7.1Another important aspect which emerges from the record is that the application was made by the company under a scheme launched by the Ministry of Corporate Affairs and the company was not stuck-off by the Registrar from the register in ordinary course and not for any reason mentioned in Section 560(1) to Section 560(5) of the Act.
7.2It is pertinent to note that in present case the ROC had not issued any notice and not taken any action and did not pass any order on his own motion but the action was taken at the request of the company and under a special scheme and outside the purview of Section 560 of the Act.
7.3Now, after having voluntarily applied under specially launched scheme and after having voluntarily got itself struck-off from the register, present petition is taken out seeking above quoted relief.
7.4The scheme is not placed on record. However, it is not disputed even by the learned Counsel for the petitioner that the said scheme does not offer option/remedy to the company to subsequently, and at any time, make application under Section 560 (6) of the Act and ask for recalling the action of striking off the company from the register. It is not even urged by the applicant that the scheme provides such option/remedy by way of application under Section 560(6) of the Act. Unless any provision under the scheme expressly provide for such application under subsection (6) of Section 560 of the Act, remedy by way of an application request under Section 560(6) would not be available and so far as the scheme in question is concerned, it is not claimed even by the petitioner that the said scheme contains such express and specific provision.
7.5Such application would not lie under Section 560(6) of the Act, unless the scheme Itself specifically provides such remedy whereas in present case, it is not in dispute that the scheme does not provide for and does not permit a company who makes exit under the scheme to subsequently apply for re-entry and restoration by making an application under Section 560(6) of the Act.
7.6It is pertinent that it is not the case of the petitioner that the said scheme itself, as an inbuilt mechanism/provision, provide for re-entry or restoration of the company in the register after having made voluntary exit under the provisions of the scheme.
7.7Even if it is assumed that the scheme contains such option and provides for such avenue then also it would be an independent remedy i.e. the said remedy/said option would be under the scheme, and not under Section 560(6) of the Act inasmuch as even according to the petitioner the scheme does not specifically and expressly provide for an option to subsequently make (if the applicant company so desires) application under Section 560(6) of the Act to recall the action and to restore the company to the register. However, if the scheme, outside and dehors the Section 560 (6) of the Act provides as an inbuilt mechanism such option/remedy then the petitioner can make appropriate application under such provision in the scheme.
7.8In the aforesaid background and in view of the facts of present case, even if it is assumed, for sakeition examining the petitioner's request, that the application and request by the petitioner falls within the purview of sub-section (6) of Section 560 of the Act then also, the request will have to be tested on the touchstone of the two thiterion mentioned in the said subsection (6) of Section 560 of the Act viz. (a) at the time of striking off whether the company was carrying on business or whether it was in operation; and (b) whether it is just to restore the company to the register.
7.9According to the said provision satisfaction of the Court on the aforesaid two counts is necessary for entertaining and accepting the request made by virtue of application under sub-section (6) of Section 560 of the Act. This is evident from the language of the said subsection (6) of Section 560 of the Act, more particularly the expression "if satisfied" which connotes that the satisfaction of the Court would be necessary in considering and deciding the application made under Section 560(6) of the Act. The said sub-section also confers discretion on the Court, which is evident from the expression "it is just that the company be restored". When the provision confers discretion to the Court, the discretion has to be exercised judiciously and upon such judicious exercise of discretion the Court should be satisfied that the company be restored.
7.10In view of the fact that the petitioner has repeatedly asserted in the petition that the petition is taken out under sub-section (6) of Section 560 of the Act, it has to be treated as an application under said subsection and has to be considered in light of the said provision.
7.11So as to consider the petitioner's request it would be relevant and appropriate to take into account the fact that until the time the company voluntarily made the application and requested that it may be struck-off, the paid up and subscribed capital of the company was only Rs. 400/-.
7.12Even according to the petitioner, the provision under the Act requires that the private limited company must have minimum paid up capital of Rs. 1 lac. As against the said requirement the company's subscribed and paid up capital was only Rs. 400/-.
7.13Another relevant fact is that before it came to be stuck-off pursuant at its own request, the company was in existence as a "private limited" company which had only three Directors viz. Mr. Pramodkumar Sharma, Smt. Seema Sharma and Shri Sushil Kumar Sharma, and all of them appear to be family members. Thus, it was a very closely Private Limited Company.
7.14Moreover, it is also relevant to note that the petitioner company itself has admitted in the petition that much before time when the company made the request under the Easy Exit Scheme, it was not carrying business and was actually not in operation. The petitioner has averred in paragraph No. 6 of the petition that:
“…the company did well for some time and thereafter, the business fell and the company was not in a position to get more business for sustaining despite numerous efforts put by all the directors and hence, the company was not in a position to file its returns etc by with the diraice of the Registrar of Companies since 2006 and the company decided to take the office the Easy Exit Scheme of the Ministry of Corporate Affairs during the year 2011 and applied for being struck off....."
7.15Thus, since 2006, and particularly when the company made the application in 2011, the company was virtually not in operation and was virtually not carrying on business. Therefore, the first criteria under the said sub-section is not fulfilled.
7.16Now so far as the exercise of Court's discretion is concerned, the sub-section postulates that the Court should be satisfied that it would be just to restore the company. From the above referred facts i.e. inspite of statutory requirement that the paid up capital of the company should be at least Rs. 1 Lac, the subscribed and paid - up capital of the company was only Rs. 400/- and the fact that since long time the company was actually not in operation, and more important fact that except the stipulation by other two family members there is nothing on record to satisfy the Court that the company/petitioner has sufficient funds/capital to fulfill even minimum requirement prescribed by the Act, the Court, even otherwise, cannot be said that it would be just to restore the company.”
The division bench of the Gujarat High Court, in said para 4 as extracted above, had only extracted the observations which has been made in the impugned order, which was subject matter challenging before the division bench of the Gujarat High Court, in fact, the ultimate conclusion which has been drawn is contained in Para 5, is extracted hereunder: -
“[5] We have gone through the impugned judgment. We agree with the view taken by the learned Company Judge that the application under section 560(6) (6) of the Companies Act is not tenable. Moreover, the decision of the Madhya Pradesh High Court relied on by the appellant is distinguished. We do not find any illegality committed by the learned Company Judge in the judgment and order dated 23.10.2013 passed in Company Petition No. 267 of 2013.”
From the above, it cannot be said to be an adjudication of an issue pertaining to the revival of the Registration of the Companies and its consequential affect, in the light of the provisions contained under Section 252 of the Companies Act. Moreover the findings of the Company Judge as in Para 7.16 is that the petitioner does not have sufficient capital to fulfil the minimum requirement prescribed by the Act and hence it cannot be said that it would be just to restore the Company. Apart from the fact it is not a ratio decidendi, the said judgment was also considered by the NCLAT in the matters of Rajneesh Ghei Vs Registrar of Companies, which we have already dealt with above where a distinction has been carved out after assigning the reasons that the aforesaid principles may not have a universal applicability for denying the revival of registration of the company. The other judgments cited by the Respondents, namely Brij Fiscal Services Pvt. Ltd. Vs Registrar of Companies, Intec Corporation Private Limited Vs The Registrar of Companies, N.C.T. of Delhi and Haryana, Siddhant Garg and Ors. Vs Registrar of Companies and Ors., all have ruled in favor of restoration, where the name of the company was struck off based on application by the BoD/Management before the RoC on ground of the emergence of favourable circumstances & changes in a business environment and on the basis that restoration need to be allowed unless there are special circumstances to be contrary. In fact, in Siddhant Garg and Ors. Vs Registrar of Companies and Ors. – [2012] 171 Comp Cas 326 (Delhi), High Court of Delhi has held that it should be the Court’s endeavour to support revival of a Company rather than otherwise.
Owing to the above, the Company Appeal would stand ‘allowed’. The Impugned Order dated 31.05.2023 would hereby stand quashed. The Registrar of the Companies, Chennai is directed to revive back the registration of the Appellant Company in the register of the Companies, as maintained by the Registrar of the Companies. The needful is to be done within a period of 2 weeks from date of presentation of the certified copy of the order after compliance with all the codal formalities required under the rules.