CASE STUDY – Whether Company can be Restore if no business conducted since many years
In this Flash editorial, the author begins by referring the provisions of section 252 of Companies Act, 2013 relating to Revival of Companies Struck off from the record of the Registrar. The main thrust of the article, however, is upon the ‘WHETHER COMPANY CAN BE RESTORED IF NO BUSINESS CONDUCTED SINCE MANY YEARS”
In this editorial the author shall discuss the case law decided by National Company Law Tribunal, New Delhi Bench relating to restoration of Name of Company.
The companies which struck off by the ROC includes (i) Companies having Assets, (ii) Companies having liability (iii) Companies working but not met with ROC compliance (filing of AOC-4/ MGT-7) (iv) Non working Companies.
As the Companies which was not functioning are pleased with the decision of struck off their Companies by ROC itself, on the other hand Companies which was running or having assets or both are under difficulty to get it revive from the NCLT. Companies which have liabilities in these cases creditors get exaggerated by the decisions of ROC can file application with NCLT for revival and to claim amount from the Companies.
As due to such mass struck off by ROC many applications have filed by the Companies with NCLT for revival of Companies. Application should be on the basis of grounds mentioned in Section 252.
DECISIONS OF NCLT
A. Case Law Detail:
|Case Name||Rastogi Enterprises (P.) Ltd. Vs. Registrar of Companies|
|Bench Name||The National Company Law Tribunal (NCLT), Delhi Bench|
|Date of Order||7th August, 2017|
Fact of the Case:
It is appropriate to mention that Registrar of Companies, NCT of Delhi and Haryana has struck off the name of the petitioner company from its register after passing an order dated 31.05.2007 which was published in the official gazette dated 23.06.2007
I. Petitioner……….. The petitioner company was incorporated on 1-1-1991. It did not file any statutory returns from the financial years 2001 to 2014.
II. Petitioner……….. Objections by Petitioner:
Principle of Natural Justice:
There is another aspect concerning principles of natural justice assuming there is violation. When the Courts exercise jurisdiction to quash an order on the ground of violation of principles of natural justice then another mitigating principle comes in play. If the result of quashing an order would result in revival of an illegal order then jurisdiction to quash an order on the ground of violation of principles of natural justice need not be exercised.
If the order of the Registrar as published in the gazette is set aside it would give rise to activities which have become illegal as there is wholesome violation of the provisions of section 159 of the 1956 Act.
Decision of NCLT:
A perusal of the above cited provision would show that the Registrar is required to send by post a letter inquiring whether the company is carrying on business or in operation after ascertaining that there is a reasonable cause to believe so.
After bestowing our thoughtful consideration on the submissions made at the bar, we are of the view that the provisions of Section 560 (1) to (4) are deemed to be the whole procedure culminated in publishing a Notification dated 23.06.2017 followed. There is no room to doubt about any lapse on the part of the Registrar of Companies, The record being old has been shifted to Manesar and is reported to be untraceable.
A flimsy and tenuous explanation has been tendered which no reasonable person would accept. How can there be any directors if a company has no activity or operation. We may hasten to add that the provision relating to restoration are primarily intended for companies which were active at the time of their ‘mortal wound’ The other ground is discovery of outstanding unknown assets of the company which justifies the provision of seeking restoration after 20 years.
The basic ground available under Section 252(3) for restoring a company to its original name is completely impeded because the petitioner has admitted in para 12 of the petition that for the last twelve years no operation has been carried out by the company.
The company has not been carrying on business or in operation and therefore, the benefit of the grounds available for restoration cannot be extended to the petitioner.
THIS PETITION FAILS AND THE SAME IS DISMISSED.
(Author – CS Divesh Goyal, ACS is a Company Secretary in Practice from Delhi and can be contacted at firstname.lastname@example.org)