Prabhat Jain vs Registrar Of Companies And Ors

Dr. V.K. Subburaj, Member (T)

This is an appeal which has been preferred u/s 252 of the Companies Act, 2013 by the Appellant Company in relation to an order of striking off the name of the Appellant Company passed by the Respondent No. 1 with effect from 08.08.2018 under the provisions of Section 248(5) of the Companies Act, 2013. Learned counsel for the Appellant Company represents that the Appellant Company was incorporated under the provisions of Companies Act, 1955 and has its registered office at 4th Floor Wing B, Statesman House, Barakhamba Road, New Delhi- 110001. The Company is engaged in the business of providing human resource related service including assisting clients in their recruitment of personnel and/ or executive search, providing consulting services including management appraisal and evaluation of employees, providing leadership consulting to the employee in their personal career planning both in Indian and abroad. Learned counsel for the Appellant Company represents that the Appellant company has been active since incorporation and has also been maintaining all the requisite documentation, as per the provisions of the Companies Act, 1956/2013. However, compliance in relation to the provisions of Companies Act, 2013 with the Respondent RoC by filing annual returns and financial statements has been omitted to be complied with but the said omission is not mala fide.

Upon notice to the Registrar of Companies ("RoC"), the RoC has filed its reply on 05.09.2019 and stated that the company has been struck off from the register of the companies in terms of provision of Section 248(5) of the Companies Act, 2013 read with Rule 9 of the Companies Rules, 2016 vide notice dated STK-7 dated 08.08.2018. ROC has also submitted that the present company was struck off by ROC because the company had not filed its Financial Statement since financial year ended on 31.03.2016 due to which the Respondent No. 1 had reasonable cause to believe that the Appellant Company was inactive and the action for striking off had been initiated.

We have considered the plea of the Appellant and the representations of RoC. It is evident from the plea of the Appellant that it admits the default and questions the due process undertaken by the RoC in striking off the name of the Appellant Company as envisaged under Section 248 of the Companies Act, 2013. However, the Appellant is seeking restoration of its name in the register as maintained by RoC relying on the ground that the Appellant as of date is in active business and in the circumstances, it is just that the name of the Company should be restored on the register of RoC as maintained by the Respondent. In order to sustain the said plea, the Appellant has placed before us the following documents :-

i. Copy of the audited balance sheets for the financial year ending 31.03.2016 to 31.03.2018 with details of current liabilities to an extent of Rs. 1,86,384.73 as on 31st March, 2017 and Revenue from operations of Rs. 5,19,969.73 as on 31.03.2017.

ii. Copy of the statement of Bank Account of No. of the HDFC Bank for the period of 01.04.2016 to 31.12.2018 with details of closing balance of Rs. 5,08,575/- as on 31.12.2018.

iii. Copy of the acknowledgement of Income-Tax Return for the financial year ended on 31st March, 2015 and 31st March 2016.

iv. Copies of challans with respect to deposit of service tax/ GST.

v. Copy of the Invoices with respect to Sales.

On perusal of the documents referred to in the paragraph above, reflects that the appellant has business operations which necessitate restoration of its name in the Register of Companies. The assumption of RoC that the company was not in operation was merely on grounds of non-filing of the Financial Statement since financial year ended on 31.03.2016. The Act itself provides for redressal of these defaults. A step as stringent as what has been taken at least requires an opportunity to the appellant to take remedial measures. Merely to disallow restoration on grounds of its failure to file financial statement would neither be just nor equitable in the eye of Law. As per several decisions of various Courts it should only be in exceptional circumstances that Courts should refuse restoration where the company has been struck off for its failure to file Financial Annual Return as that would be excessive or inappropriate penalty for that oversight.

The notice was also issued to the Income-Tax Department for filing of reply in the matter in response of the said notice the Income Tax Department, Department of Revenue, Government of India however, no specific objections/issues have been raised by the Income-Tax Department regarding the restoration of the Company till date.

The Company owns substantial assets and has extensive business potential and intends to carry out the business in future. The act of the striking shall jeopardize the economic interest of the company and its share-holders. The appellant has also stated in the appeal that the matter regarding with this petition has been made is not pending before any Tribunal of law or any other authority or any other Tribunal.

Accordingly, the appeal is Allowed subject to payment of costs of Rs. 25,000/- to the Prime Minister Relief Fund and Rs. 25,000/- to the Ministry of Corporate Affairs. The restoration of the Appellant Company's name in the Register will be subject to their filing all outstanding financial statements and other documents for the defaulting years as required by law and completion of all formalities, including payment of any late fee or other charges which are leviable by the Respondent for the late filing of statutory returns. The name of the Appellant Company shall then stand restored in the Register of the RoC, as if the name of the company had not been struck off.

The direction for freezing the bank account(s) of the Appellant Company, if on this ground, shall consequently be also set aside immediately to enable the company to carry out its business operation. Compliance of this order for restoration shall be made by the Respondent with all its consequential effects within one week of compliance by the Appellant.

The appeal is allowed accordingly. Let the copy of the order be served to the parties.