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Judgment
O R D E R
[Per; Justice Rakesh Kumar Jain (JM)]
12.04.2023 M/s. Viking Ship Managers Private Limited (for short ‘The Company’) was incorporated on 18.05.2005, with the Registrar of Companies, Mumbai under the provisions of the Companies Act, 1956 (‘Act of 1956’) and is engaged in the business of Ship Brokering, Transport, Storage and Communication. The Company ran into losses and ceased its operations in the Year 2013 and also stopped filing Income Tax Returns. Since, the Company was not carrying on any business or was in operation for a period of two years immediately preceding the Financial Year 2017, the RoC (for short ‘Registrar’) issued a Public Notice in Form STK-5 dated 28.06.2017 to remove/strike off the name of the Company from the Register maintained by it. The said notice was published in the Gazette of India on 08.07.2017 and ultimately the name of the Company was struck off by an Order which was published in the Gazette of India on 06.08.2017. At the time when the name of the Company was struck off, it was being assessed to Income Tax under the Income Tax Act, 1961 (for short the ‘Act of 1961’). According to the Department of Income Tax, the assessment proceeding against the Company were pending for which the Assessing Officer issued a Notice dated 26.03.2018 under Section 148 of the Act of 1961 pertaining to the Assessment Year 2011-12. On this premise, the Income Tax Department (Respondent No. 2) filed an Appeal under Section 252 of the Companies Act, 2013 (‘The Act’) for restoration of the name of the Company on the Register of Companies maintained by the Registrar. The said Appeal was initially allowed on 11.11.2019 by the Tribunal and the name was restored but on an Appeal filed by the Appellant (‘Director of the Company’) bearing Comp. App. (AT) No.121/2020 before this Tribunal under Section 421 of the Act, the Order dated 11.11.2019 was set aside and the matter was remanded back to the Tribunal to decide the same again after hearing the Parties.
After the remand, the Tribunal has again passed the Order of Restoration on 07.05.2021, inter alia, on the ground that the Income Tax Officer has already passed the Order of Assessment which has in fact been passed on 24.12.2018 much earlier than the Impugned Order was passed. Although, it has not been specifically mentioned in the Impugned Order that the name of the Company has been restored in order to secure the dues of the Income Tax Department but it seems that this was the only reason for restoring the name of the Company to the Register of the Registrar against the wishes of the Company.
Aggrieved against the Order dated 07.05.2021, the present Appeal has been preferred under Section 421 of the Act.
Counsel for the Appellant has submitted that the Tribunal has erred in not taking into consideration various provisions of the Act of 1961 as well as of the Act as per which dues, if any, of the Income Tax Department are otherwise secured for which there is no need to restore the name of the Company on the Register of the Registrar as the Company is not doing any business from the last so many years and has the assets of a meagre amount of Rs.3,68,365/- as per the Income Tax Return filed for the Assessment Year 2012-2013 which has been produced before us during the course of hearing.
He has further submitted that the Order of Assessment dated 24.12.2018 has already been challenged by the Appellant by way of a statutory Appeal under the Act of 1961 which is pending adjudication.
It is further argued that in case of recovery in future, based upon the Order of Assessment dated 24.12.2018, the amount to be recovered by the Income Tax Department is fully secured in view of Section 179 of the Act of 1961 as well as Section 248(6), Section 248(7) and Section 250 of the Act, therefore, for this purpose alone the Tribunal should not have allowed the Appeal of the Department for the restoration of the name of the Company. In support of his submissions, he has relied upon a decision of this Court rendered in the case of ‘Pr. Commissioner of Income Tax, Delhi – 6’ Vs. ‘Registrar of Companies, Delhi & Ors.’ 2019 SCC OnLine NCLAT 1057 and the Judgement of Hon’ble Supreme Court in ‘Commissioner of Income Tax, Jaipur’ Vs. ‘Gopal Shri Scrips Private Limited’, (2020) 7 SCC 654.
No one has put in appearance on behalf of the Income Tax Department (‘Respondent No. 2’) to argue this Appeal but for the Counsel for Respondent No. 1, who has appeared and submitted that the contesting party in the Department of Income Tax and he is appearing only to assist the Court.
We have heard Counsel for the Parties and perused the record with their able assistance.
Before we refer to the facts and deal with the merit of the case, it would be relevant to refer to certain provisions of the Act. Section 2(20) of the Act defines Company which means ‘a Company incorporated under this Act or under any previous Company law’. Section 2(74) defines the Register of Companies which ‘means the Register of Companies maintained by the Registrar on paper or in any electronic mode under this Act’. Section 7 of the Act deals with the incorporation of Company in which Section 7 sub-Section (2) is relevant which provides that ‘the Registrar on the basis of documents and information filed under sub-section (1) shall register all the documents and information referred to in that sub-section in the register and issue a certificate of incorporation in the prescribed form to the effect that the proposed company is incorporated under this Act’. Section 7 sub-Section (3) further provides that ‘on and from the date mentioned in the certificate of incorporation issued under sub-section (2), the Registrar shall allot to the company a corporate identity number, which shall be a distinct identity for the company and which shall also be included in the certificate’. Section 9 of the Act deals with the effect of registration which provides that ‘from the date of incorporation mentioned in the certificate of incorporation, such subscribers to the memorandum and all other persons, as may, from time to time, become members of the company, shall be a body corporate by the name contained in the memorandum, capable of exercising all the functions of an incorporated company under this Act and having perpetual succession and a common seal with power to acquire, hold and dispose of property, both movable and immovable, tangible and intangible, to contract and to sue and be sued, by the said name’. Section 12 sub-Section (1) provides that ‘a Company shall, on and from the fifteenth day of its incorporation and at all times thereafter, have a registered office capable of receiving and acknowledging all communications and notices as may be addressed to it’.
The resume of the aforesaid provisions would show that a Company acquire certain rights after incorporation and registration.
Chapter XVIII deals with the provisions of removal of the name of Companies from the Register of Companies.
In this Chapter, Section 248 deals with the power of Registrar to remove the name of a Company from the Register of Companies. There are four grounds provided for removal of name in Section 248, namely;
where the Registrar has reasonable cause to believe that a Company has failed to commence its business within one year of its incorporation; or
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;
the subscriber to the memorandum has not paid the subscription, undertaking the plea at the time of incorporation of a Company and a declaration to this effect has not been filed within 180 days of its incorporation under sub-Section (1) of Section 10-A or;
the Company is not carrying on any business or operation as reveal after the physical verification carried out under sub-Section 9 of Section 12.
The aforesaid four grounds empowers the Registrar of Company to send a notice to the Company and to all the Directors of the Company of his intention to remove the name of the Company from the Register of Company and requesting them to send their representations alongwith copies of relevant documents, if any, within a period of 30 days from the date of Notice. After the due procedure, if the Registrar comes to the conclusion that any one of the grounds exists, provided under Section 248, for the removal of the name of Company from the Register of Companies then an appropriate Order can be passed by him for the said purpose and it has to be made public by way of publication in the Gazette.
The effect of the Company, whose name is removed from the Register of Companies is provided in Section 250 of the Act which states that ‘where a Company stands dissolved under Section 248, it shall on and from the date mentioned in the notice under sub-Section (5) of that Section cease to operate as a Company and the Certificate of Incorporation issued to it shall be deemed to have been cancelled from such date except for the purpose of realising the amount due to the Company and for the payment or discharge of the liabilities or obligations of the Company’. Section 252 provides a remedy to any person who is aggrieved by the Order of Registrar, notifying the Company as dissolved in terms of Section 248 whereas Section 252(3) provides the same remedy of an Appeal to the Company, Member, Creditor or Workman if they feel aggrieved by striking-off the name of Company from the Register of Companies.
In the present case, the Appeal has been filed against the striking off the name of the Company under Section 252 by the Income Tax Department as “any person”. The cause of concern for the Income Tax Department for filing the Appeal for setting aside the Order passed by the Registrar of Companies under Section 248 is only to secure the amount, to be recovered from the Company, on the basis of the Order of Assessment dated 24.12.2018.
The Learned Tribunal has passed the Order, keeping in view only this aspect of the matter that if the Company is not restored then the amount which is likely to be recovered by the Department of Income Tax may not be recovered in future, however, the Tribunal did not look into other aspect of the matter that the dues of the Income Tax Department, if any, are fully secured not only by virtue of Section 179 of the Act of 1961 but also in view of Section 248(6), Section 248(7) and Section 250 of the Act. In this regard we may also refer to Section 179 of the Act of 1961 read thus:
‘Section 179 of the Act of 1961 provides that ‘Notwithstanding anything contained in the Companies Act, 1956 (now replaced by Act of 2013), if any tax due from a private company in respect of any income of any previous year, every person who was a director of the private company at any time during the relevant previous year shall be jointly and severally liable for the payment of such tax.
Explanation to Section 179 also provides that tax due would include penalty, interest, fee, or any other same payable under the Act. Besides a clear provision in the Act of 1961, the Act also provide a safeguard to the presence of the Income Tax Department’.
Sections 248(6), 248(7) & 250 also read thus:
The proviso of Section 248(6) ‘notwithstanding the undertakings referred to in this sub-section (6), 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’ and Section 248(7) imposes ‘the liability upon 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) of Section 248 to pay off the liability of the Company as if the Company had not been dissolved’. Similarly, Section 258 says that ‘though the effect of Order passed under Section 248(5) shall be the dissolution of the Company and that it will cease to operate, dissolution of the Company and that the certificate of incorporation issued to it shall be deemed to have been cancelled but an exception is provided therein for the purpose of realising the amount due to the Company and for the payment of discharging the liability or the obligation of the Company’.
The Order of Assessment dated 24.12.2018 has already been challenged by the Appellant by way of Appeal, which is pending.
In the case of ‘Pr. Commissioner of Income Tax, Delhi – 6’ (Supra), this Court has also made the following observations:
“8.Yet another aspect cannot be overlooked while parting with this judgment. Striking off the Company which was a Private Company, from the Register of Companies, indisputably does not absolve its erstwhile Directors who are liable as provided under Section 179 of the Income Tax Act, 1961 to pay the amount of Tax leviable in respect of income of any previous year. Why, in presence of such mechanism within the legal framework available to Revenue, insistence is on restoration of Company without laying any proof of its being possessed of any assets and liabilities and without any evidence of the Company being in operation, is a question that can be best answered, though has not been answered by the Revenue. We refrain from making any comment on this question lest the same prejudices the Revenue.”
Thus, from the aforesaid discussion it is quite apparent that the reason which has been given by the Tribunal for restoration of the Company which is not doing any business or is in operation for a long time is not “otherwise just” to secure the dues of the Income Tax Department especially when the dues, if any, of the Department are fully secured in terms of the other provisions of the Act as well as the Act of 1961.
No other arguments have been raised.
In view of the aforesaid facts and circumstances, the present Appeal is found meritorious, the same is hereby allowed and the Impugned Order is set aside. No costs.