2010 (8) TMI 174 - HC - Companies Law

Defunct Company - restoration of the name of the petitioner company to the register of companies - Held that - The facts and circumstances of this case show that this is not a case where the interests of justice and requirements of the statute would be met merely by the payment of costs of the Registrar of Companies. Notwithstanding the personal troubles and health problems of petitioner No. 2 and his family the fact remains that sound business functioning is expected of companies. Filing of certain documents with the respondent is an obligation imposed by statute and every company is expected to comply. The non-filing of statutory documents with the respondent had also made it impossible for any interested party to find out about the financial health of petitioner No. 1 over a span of fourteen years. The facts and circumstances of this case show that this is not a case where the interests of justice and requirements of the statute would be met merely by the payment of costs of the Registrar of Companies. Notwithstanding the personal troubles and health problems of petitioner No. 2 and his family the fact remains that sound business functioning is expected of companies. Filing of certain documents with the respondent is an obligation imposed by statute and every company is expected to comply. The non-filing of statutory documents with the respondent had also made it impossible for any interested party to find out about the financial health of petitioner No. 1 over a span of fourteen years.

Summary

Issues:
Restoration of company name under section 560(6) of the Companies Act, 1956 due to defaults in statutory compliances.

Analysis:
The petition was filed seeking restoration of the petitioner company's name to the register of companies maintained by the Registrar of Companies under section 560(6) of the Companies Act, 1956. The company was struck off the register due to defaults in statutory compliances, specifically the failure to file balance sheets and annual returns for almost fourteen years. The petitioners claimed they did not receive show-cause notices or an opportunity to be heard before the action was taken. However, the court found that the petitioners' address on record was correct, and there was no merit in their contention. The petitioners argued that the company was not defunct and provided reasons for non-compliance, including personal tragedies and health issues affecting key individuals. The court noted that the petitioners were aware of the non-filing only in 2008, despite the company being operational. Counsel for the respondent did not object to revival, subject to filing outstanding documents and fees.

In considering the Company Law Settlement Scheme, 2010, the court found that the scheme did not apply to companies against which action had already been initiated under section 560(5) of the Act. As the respondent had taken action before the scheme's introduction, the petitioners were not entitled to its benefits. However, since the petition was filed within the statutory limitation period and in line with the Bombay High Court's decision, the court allowed the petition, subject to costs. The court highlighted the obligation of companies to comply with statutory requirements and the importance of financial transparency. The restoration was subject to payment of exemplary costs to the Official Liquidator's fund and additional costs to the Registrar of Companies. The company's name, directors, and members would be restored upon completion of all formalities.

The court granted liberty to the respondent to take penal action against the company for alleged non-compliance with section 162 of the Companies Act, 1956. The petition was disposed of with the restoration of the company's name subject to specified conditions and costs, emphasizing the importance of statutory compliance and financial transparency in business operations.