2011 (2) TMI 1267 - HC - Companies Law

Restoration of the name of company - Defunct company - right to recover the damages - Held that - As the company became defunct in the year 2004, the petitioner has acquired a right to recover the damages in view of the transaction of sale in respect of the property of which the first respondent had no title. In the circumstances, as the petitioner intends to initiate the proceedings against the company for the recovery of damages, it is just and proper to restore the name of respondent No. 1 company in the register maintained by the Registrar of Companies. Hence, the petition is allowed. The name of respondent No. 1 company M/s. Kayesess Constructions (P.) Ltd., is ordered to be restored in the register of respondent No. 4, i.e., the Registrar of Companies with immediate effect.

Summary

Issues: Restoration of company name on register, Fraudulent inducement, Jurisdiction of court, Locus standi of petitioner, Defective cause title, Share capital of the company

Restoration of company name on register:
The petitioner sought restoration of the respondent company's name on the register. The company had closed its business, and the petitioner claimed to be entitled to recover the loss due to fraudulent acts by the company and its directors. The court found that as the company became defunct in 2004 and the petitioner had a right to recover damages, it was just and proper to restore the company's name on the register maintained by the Registrar of Companies. The petition was allowed, and the name of the company was ordered to be restored with immediate effect.

Fraudulent inducement:
The petitioner alleged that the directors of the company induced him to purchase the property by fraud and misrepresentation, concealing the fact of acquisition proceedings initiated by the Bangalore Development Authority. The petitioner claimed to have suffered losses due to this fraudulent act. The court considered the petitioner's claim and found that the company had no title to sell the sites due to the land acquisition by the City Improvement Trust Board. The court held that the petitioner, as a person to whom the site was allotted, was entitled to claim the loss occasioned by the sale transaction.

Jurisdiction of the court and Locus standi of petitioner:
Respondent No. 1 and 2 objected to the petition, arguing that the court had no jurisdiction to entertain it and that the petitioner lacked locus standi as a creditor. They contended that the Tribunal had jurisdiction to pass such orders. The court examined the arguments and held that the petitioner, being one of the persons to whom the site was allotted, had the right to claim losses due to the sale transaction. The court also clarified that the word "Tribunal" in the Companies Act, 1956, should be considered as the court until the amended provisions were given effect to. The objections raised by respondent No. 1 and 2 were not accepted by the court.

Defective cause title and Share capital of the company:
Respondent No. 1 and 2 raised objections regarding defective cause title and the share capital of the company being less than Rs. 1 lakh. The court found that the cause title issue was adequately explained in the plaint, and the representation of the company by its directors was clear. Regarding the share capital, the court noted that the memorandum of association stated the share capital of the company to be Rs. 25,00,000, which made the petition filed before the court legal and valid. Respondent No. 4 did not object to the grant of relief subject to certain conditions, and the court considered all arguments before allowing the petition for restoration of the company's name on the register.