Newage Commercial (P.) Ltd. and Another vs Registrar of Companies

I.P. Mukerji, J.—This is an application u/s 560(6) of the Companies Act, 1956 (''the Act''). The grievance of the Petitioners is that the name of the Petitioner-company has been wrongly struck off the register.

I notice that there is some procedural irregularity in the issuance of the notices u/s 560. Sub-sections (1), (2) and (3) of Section 560 contemplate two notices to be first given. The first notice is referred to in Section 560(1). Here, when the registrar has reasonable cause to believe that a company is not carrying on business or is not in operation he is to send out a letter to the company making such enquiry. If no reply is received within one month, he shall within 14 days of expiry of that period send another notice giving a further one month''s notice to the company to answer the requisition. If that notice is not answered or if the answer shows that the company is not carrying on any business, a publication is to be made in the Official Gazette and a third notice is to be sent to the company that at the expiry of three months from the date of that notice. The name of the company would be struck off the register, unless contrary cause is shown.

From the annexures to the affidavit-in-opposition I find that the first notice was issued on 24th March, 2006. The Petitioner denies that this notice was received by it. But I am not going into the controversy. The second notice is dated 30th December, 2006 stating that because the letter dated 24th March, 2006 was not replied to, the company would be deemed to be defunct u/s 560(3).

Here, there is a violation of the above statuary requirements. If the letter is treated as the second notice then according to the statute the second notice cannot declare the company to be ''defunct''. The third notice accompanying the publication in the Official Gazette is not forthcoming.

This step by step procedure for issue of notice is nothing but compliance with the rules of natural justice by the statute. Any breach of such rules would violate those principles. Any action taken in breach of such procedure will be illegal for being against the terms of the statute, including the rules of natural justice embodied therein.

Moreover, in my opinion, if any order is to be passed on the question whether a company is carrying on business or not, it should ordinarily be passed after hearing the representative of the company. Ex parte orders are not good. Naturally, only after hearing the company or at least giving it reasonable opportunity to be heard should any determination u/s 560 be made.

Therefore, the action taken to declare the company defunct should be set aside. All the entries made in the register or website to the effect should be reversed for the time being. The company should be given a hearing according to the notice mentioned in the affidavit-in-opposition. The company should be given an opportunity to show cause and to file a reply, if necessary. Thereafter the Registrar of Companies should pass a reasoned order after hearing the company in accordance with law. Such exercise should be completed within a period of three months from the date of communication of this order.

This application is allowed to the above extent.

All parties concerned are to act on a signed photocopy of this order on the usual undertakings.