NCLT restore name of Striked-Off Company subject to Payment of Cost

Striking off the name of a company and restoration of a struck-off company’s name by NCLT on payment of the cost.

Sections 248 to 252 of the Companies Act, 2013 (the Act) provide the procedure for striking off company names by the ROC or voluntarily by the company. Striking off a company’s name means closing a defunct company in a faster manner and is the simplest way to dissolve a company.

Striking off the name of a company is an alternative mechanism for closing the operations of the company. The Registrar of Companies (ROC) can issue a notice to strike off the company name from the Register of Companies for certain reasons. The company can also apply for the ROC to strike off its name from the Register of Companies.

Any individual aggrieved by the ROC order notifying that a company is dissolved under Section 248 of the Act can file an appeal to the NCLT within three years from the ROC order date.

NCLT passes an order to restore the company name in the Registrar of Companies if it believes that the removal of the company name is not justified due to the absence of the grounds on which the ROC passed the order. The tribunal should give a reasonable opportunity to the ROC, the company, and all the concerned persons to make representations and be heard.

The company is required to file a copy of the order passed by the tribunal with the ROC within thirty days from the tribunal order date. Upon receipt of the order, the ROC shall restore the company name in the Register of Companies and issue a fresh certificate of incorporation.

However, an aggrieved party has the right to prefer an appeal to the NCLT for the restoration of a company. In one such case, the NCLT Kochi bench admitted an application for the restoration of a company.

The case is analyzed as follows: Paulose Paily Palannatiil vs. ROC, Kerala & Lakshadweep (Company Appeal C/Act/5/KOB/2023).

NCLT allowed an appeal filed by one of the shareholders cum directors (appellant) of a company seeking restoration of the struck-off company’s name in the ROC, subject to payment of Rs. 4.25 lakh as a cost in the matter of Paulose Paily Palannatiil vs. ROC, Kerala & Lakshadweep (Company Appeal C/Act/5/KOB/2023).

Defenses before NCLT:

1. ROC unlawfully struck off the company’s name from the Register of Companies in contravention of Section 248(1) since neither the company nor its directors were served with any notice, due to which the company is not in a position to continue business.
2. The directors have invested over Rs. 1 crore in the company.
3. Unless the company is reinstated, it will be unable to fully benefit from the long and hard-fought legal battles, potentially infringing upon their fundamental rights under Articles 14, 19, 21, and 300A of the Constitution of India.

Considering that the company has received the arbitration award amounting to Rs. 3 crore, NCLT opines that it is imperative to restore the status of the company to realize the balance amount, if any, and for continuing its business.

NCLT directed the company to file all pending statutory documents, including annual accounts and annual returns, along with prescribed fees/additional fees/fines as decided by the respondent. It clarifies that this order will not come in the way of the respondent taking appropriate action in accordance with the law for any other violations/offenses, if any, committed by the company prior to or during the period its name remained struck off.

FULL TEXT OF THE ORDER OF NATIONAL COMPANY LAW TRIBUNAL KOCHI BENCH

1. This Company Appeal has been filed by one of the shareholders cum director of M/s. Pan India Engineering Construction Company Private Limited (CIN: U74210KL1989PTC005282), Mr. Paulose Paily Palannatiil, under Section 252(3) of the Companies Act, 2013 for restoration of name of the Struck Off Company in the Register of Companies, maintained in the office of the Registrar of Companies, Kerala. The name of the Company was struck off vide STK-7 Notice dated 17th September, 2018.

2. The averments made by the Appellant are summarized as under: –

i. The Company was incorporated on 27.01.1989 with (CIN: U74210KL1989PTC005282) having registered office at XII/386, Kalappilayil, Kunnukuzhy, Trivandrum, Kerala-695037. The main objective of the company is “to carry on any part of the world the trades, business or profession of civil, mechanical, electrical, electronic, refrigeration and air conditioning of nuclear engineers and contractors and as designers, fabricator, consultants, architects, builders and interior decorators”.

ii. The name of the company was struck off by the Respondent on the ground that the company was neither carrying on any business or operation for period of 2 immediately preceding financial years nor obtained status of dormant company as per section 248 of Companies Act, 2013.

iii. The appellant states that the company had entered into contracts with Messrs Konkan Railway Corporation Limited (KRCL) for civil construction works related to construction of minor bridges pursuing two agreements dated 24.07.1991 and 07.10.1991. Subsequently company was pushed into litigation and after several rounds of litigation, pursuant to the order of Hon’ble High Court of Bombay, the Company received a favourable award dated 03.01.2022 granting an amount of INR 3 crores against the claim of INR 6 crores. While the award amount has been transferred to company’s bank account with Canara Bank, Trivandrum, it was informed by the bankers that the company’s account has been temporarily frozen. It is asserted that unless the Company is reinstated, it will be unable to fully benefit from the long and hard-fought legal battles, thereby potentially infringing upon their fundamental rights under Article 14, 19, 21, and 300A of the Constitution of India. The Company’s bankers also requested the appellant to provide a copy of the Permanent Account Number (“PAN”). Following this request, the appellant company applied to the Income-tax Department for the allocation of a PAN but the same was denied due to the Company’s struck-off status. It is stated that the audited financial statements have been filed with ROC only up to financial year ending 31.03.2005. However, the appellant has produced the management accounts for FY 2018-19, 2019-20, 2020-21. It is further stated that the directors have invested over INR 1 crore in the Company, The Company has also filed an appeal against these awards, which is currently pending before the Hon’ble District Court, Ratnagiri to increase the award amount.

iv. The appellant contends that the respondent unlawfully struck off the company’s name from the registrar of companies in contravention of Section 248(1) since neither the company nor its directors were served with any notice due to which company is not in a position to continue its business.

v. The appellant undertakes to comply with the statutory requirements under the Companies Act as well as the Income Tax Act, once the status of the company was restored. The appellant also undertakes to pay such cost as directed by this tribunal for non-compliances.

vi. Moreover, the appellant relies on order of this tribunal in Abraham Mathew Vs Registrar of Companies, Kerala [2020] 162 SCL 774 and judgement of Hon’ble Delhi High court in Kesinga Paper Mills Private Limited Vs Ministry of Corporate Affairs [2010] 101 SCL 321 to support his case.

vii. The company falls under the jurisdiction of ROC, Kerala. The application has been filed by the shareholder cum director of the company and comes within the period of limitation as per section 252(3) of the companies Act, 2013.

viii. The ROC, Kerala filed its observation on 27.04.2023 and by further report dated 02.08.2023, states that as per section 248-252 of Companies Act, 2013 read with official communication from Ministry of Corporate Affairs dated 16.04.2018, the strike off action against the appellant company was initiated for the reason of non-filing of financial statements and annual returns of company for the financial years 31.03.2006 till 31.03.2022 as per Section 92 and 137 of the Act, and that it has failed to acquire status of dormant company under section 455 of the Act. ROC further state that notice in form STK-1 was issued to the company and its directors on 17.05.2018, but no positive response received. After that Form STK-5 was published in Official Gazette on 28.07.2018 and newspaper publications in Form STK-5A was made in English daily and Malayalam daily on 23.06.2018 and 24.06.2018 respectively. And finally Form STK-7 notice dated 17.09.2018 was published in official gazette on 29.09.2018 after due notices. It is contended that the strike off was triggered due to negligence and non-discharge of statutory duties by the company and its officials.

3. We have considered the submissions made by Learned Counsel for the Appellant, as well as the ROC report and other material available on record. The name of the company was struck off from Register of Companies on 17.09.2018 for the reason that the company did not file its annual returns or audited financial statements of company for financial years from FY 2005-06 till FY 2021-22 with the ROC within the due date as per Companies Act. It is an admitted fact that the company has failed to comply with the said relevant provisions of the Act.

4. On 14.07.2023, this tribunal sought from the appellant relevant proof to justify whether the company was functioning at its registered office, the appellant vide memo filed on 01.09.2023, complied with the said order and filed, a) notarized copy of letter from landlord dated 14.08.2023, b) copy of utility bills for the period January 2018 to December 2018, c) Anotarized copy of lease agreement dated 14.01.2022 entered into by the company, d) copy of letter from current landlord, Mr Samkutty Koshy dated 04.08.2023, e) Copy of judgement of Hon’ble District court in Civil Misc Application no 4 of 2023 dated 06.05.2023 as proof of its registered address. It is noticed from the Annexure 10 management accounts of the company for FY 2020-21 that company has noncurrent assets amounting to Rs 71,139/- and current assets amounting to Rs. 39,39,598/- and nil revenue from operations. We also consider the fact that the company has received the arbitration award amounting to approximately 3 crores INR and it is imperative to restore the status of the company to realise the balance amount if any and for continuing its business. It is noted that the company is functioning at its registered office. It is stated by the appellant that the non-filing of the statutory annual filing documents for said period with the ROC, Kerala is an inadvertent default and hence we feel a lenient view needs to be taken in the matter.

5. In view of the above facts and relying on the judgements placed before us, we consider that, it is just and proper to restore the name of the company in the Register of Companies from date of its striking off, subject to payment of cost for non-compliance with section 92 and 137 of the Companies Act, 2013. Accordingly, we allow the present appeal and pass the following orders: –

a. The Registrar of Companies, Kerala, the respondent herein, is directed to restore the original status of the appellant company as if the name of the Company had not been struck off from the Register of Companies with the resultant and consequential actions like changing status of appellant company from ‘struck off’ to ‘Active’.

b. The appellant Company is directed to file all pending statutory document(s) including Annual Accounts and Annual returns along with prescribed fees/additional fee/fine as decided by Registrar of Companies, Kerala within 45 days from the date on which its name is restored on the Register of Companies maintained by the Registrar of Companies, Kerala.

c. The restoration of the Company’s name is also subject to the payment of cost of Rs.4,25,000/ (Rupees Four Lakhs Twenty-Five Thousand only) towards cost payable in the account of the “BHARAT-KOSH” Fund within thirty days from the date of receipt of the copy of this Order

d. The appellant is directed to deliver a certified copy of this order with Registrar of Companies, Kerala within thirty days of the receipt of this order.

e. On such delivery and after due compliance with the above directions, the Registrar of Companies, Kerala is directed to publish the order in the Official Gazette under his office name and seal;

f. This order is confined to the violations, which ultimately led to the impugned action of striking off the name of the Company, and it will not come in the way of Registrar of Companies, Kerala to take appropriate action(s) in accordance with law, for any other violations/offences, if any, committed by the appellant company prior to or during the period the name of the Company remained struck off.

6. This Company Appeal (C/Act)/ 05/KOB/2023 stands allowed and disposed of accordingly.

7. The Registry is directed to send e-mail copies of the order forthwith to all the parties inclusive of the Counsel.

8. Urgent certified copy of this order, if applied for, be issued upon compliance with all requisite formalities.