Many companies are receiving notices under section 248 sub-section (1) from their respective Registrar of Companies. The main content of the notice is as follows:
“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 subsection (1) of section 10A”
The Registrar is issuing notice under Section 248 sub-section (1) clause (d). Section 248 subsection (1) provides power to the Registrar; to send notice to the company and all its directors about its intention to remove the name of the company from the Register of Companies and further request the representation of the company and its director on the following grounds:
“(a) a company has failed to commence its business within one year of its incorporation or;
(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 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.
(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 subsection (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.”
Under the case in hand, notices are issued under section 248(1)(d). It is pertinent to understand that the representation solicited by the Registrar needs to be sent within 30 days from the date of notice, as per sub-section (1). However, sub-section (5) stipulates that representation should be sent within the time frame specified under the notice.
Notices being received provide that representation must be sent within 30 days from receipt of the notice. The notice also provides that if the company fails to show any cause contrary to the cause shown in the notice, the company shall be removed from the Register of Companies. However, the directors of the companies shall remain liable for “appropriate action”.
Appropriate action means taking action under section 10A. As per section 10A(2), in case of default; the company shall be liable to pay the penalty of fifty thousand rupees, and every officer in default shall be liable to a penalty of one thousand rupees for each day during which such default continues but not exceeding one lakh rupees.
Under Section 248 subsection (1), the power of the Registrar is limited to sending notice and asking for representation from the company and all its directors. The power of the Registrar to strike off the company will be enforced under subsection (5) of section 248. Subsection 5 provides as follows:
“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.”
The word that acquires prime importance here is “Cause to the contrary”. The company and its directors must show in their representations why the Registrar should not remove the name of the company from the Register of Companies.
In the case where notice is issued under section 248 (1)(d), the company shall prove that subscribers have paid the subscription amount within the time limit and the company has filed the business commencement e-form INC-20A under section 10A within the time limit.
As per the Companies Act, 2013, there is no time limit for bringing the subscription amount. However, Section 10A provides that the company needs to file a business commencement eform within 180 days of incorporation, stating that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of making of such declaration. Hence, on the harmonious interpretation of the statue, we can conclude that we have to bring the subscription amount within 180 days.
Since notice is issued under section 248(1)(d), which refers to Section 10A, it is imperative to understand Section 10A and the circumstances in which section 10A provides that a company struck off under Section 248. We have to read Section 10A and 248 together to understand the provision in totality.
Section 10A provides following:
“(1) A company incorporated after the commencement of the Companies (Amendment) Ordinance, 2[2019] and having a share capital shall not commence any business or exercise any borrowing powers unless—
(a) a declaration is filed by a director within a period of one hundred and eighty days of the date of incorporation of the company in such form and verified in such manner as may be prescribed, with the Registrar that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of making of such declaration; and
(b) The company has filed with the Registrar a verification of its registered office as provided in sub-section (2) of section 12.
(2) If any default is made in complying with the requirements of this section, the company shall be liable to a penalty of fifty thousand rupees and every officer who is in default shall be liable to a penalty of one thousand rupees for each day during which such default continues but not exceeding an amount of one lakh rupees.
(3) Where no declaration has been filed with the Registrar under clause (a) of sub-section (1) within a period of one hundred and eighty days of the date of incorporation of the company and the Registrar has reasonable cause to believe that the company is not carrying on any business or operations, he may, without prejudice to the provisions of sub-section (2), initiate action for the removal of the name of the company from the register of companies under Chapter XVIII.”
As per section 10A(3), the Registrar may remove the name of the company from the Register of Companies under Section 248 due to non-filing of declaration to the Registrar under section 10A(1)(a) within 180 days of the date of incorporation of the company and Registrar has reasonable cause to believe that the company is not carrying on any business or operation.
So if the company can show to the satisfaction of the Registrar though it has defaulted in filing INC-20A, but it is operating up to the satisfaction of the Registrar, then the company may not be removed from the Register of Companies. So for removing the name from the Register of Companies due to default under section 10A, the company must also be non-operating. So for removing the name from the Register due to default under section 10A, the company must also be non-operating.
While representing to the Registrar, it is important to read the different circulars and notifications issued by the MCA and consider them before filing representation.
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