2010 (4) TMI 899 - HC - Companies Law

Restoration of the name of the company to the Register of Companies seeked - Held that - For the Court to now take the view that it would be just and proper for such a company to be given an opportunity to raise the share capital to the minimum required after being restored to the Register of Companies, would, to my mind, amount to a travesty and cannot be permitted. Petition dismissed.

Summary

Issues:
Petition seeking restoration of company's name to Register of Companies under section 560(6) of the Companies Act, 1956.

Analysis:
The judgment addresses the issue of restoring a company's name to the Register of Companies under section 560(6) of the Companies Act, 1956. The company in question had its name removed from the Register as it did not meet the minimum paid-up share capital requirement of Rs. 1 lakh as mandated by the Companies (Amendment) Act, 2000. The Court highlighted that the company had the opportunity to increase its share capital within two years but chose to have its name struck off instead. The Court emphasized that a company not meeting the minimum paid-up share capital requirement cannot be restored to the Register, even if it undertakes to increase the share capital post-restoration. The statutory mandate under section 3(3) of the Companies Act, 1956 requires private companies to enhance their paid-up capital to Rs. 1 lakh within two years, failing which the company is deemed defunct and its name is struck off the Register by the Registrar of Companies.

The judgment further discusses that allowing the restoration of a company with insufficient paid-up share capital would set a precedent contrary to the statutory provisions. It rejects the petitioner's argument that equity should override the legal requirements, emphasizing that the law prohibits the incorporation or continuation of a company with inadequate paid-up share capital. The Court also dismisses the notion of restoring the company for the purpose of later increasing the share capital, deeming it unjust and a potential abuse of the legal framework. The judgment underlines the importance of upholding statutory provisions and legal principles, stating that equity must align with the law. Consequently, the petition seeking restoration of the company's name is dismissed.