2011 (3) TMI 1465 - HC - Companies Law

Striking off the name of the Company under section 560 - order striking off the name of the company challenged by one of the Directors Held that - there is quite a serious dispute as to who are in control and management of the company. If the issue can be decided without prolixity of evidence, the Registrar is empowered to decide who in law is in control to the company and whether the company is doing any business at all, upon hearing the rival parties and giving them an opportunity of filing written representations. But, in any case, if deciding the above issues calls for substantial, oral and documentary evidence, the Registrar should relegate the parties to a suit in a Court of law. - Matter remanded back to registrar.

Summary

Issues:
1. Vacation of order under section 560(6) of the Companies Act, 1956
2. Challenge to order striking off company's name
3. Locus standi of the applicant
4. Dispute over control and management of the company
5. Restoration of company's name in the register

Analysis:
1. The judgment pertains to an application for vacation of an order made under section 560(6) of the Companies Act, 1956. The company in question, Basanti Cotton Mills (1998) Private Limited, had its name struck off the register by the Registrar of Companies on 27-1-2006. The application challenged this action, leading to a court order dated 6-10-2010 setting aside the decision due to procedural irregularities.

2. The main contention raised was the locus standi of the applicant, who claimed to represent the company as a director. However, it was argued that the applicant had no interest in the company and had concealed motives related to another company, Swan Mills Limited. The applicants, holding a significant portion of the company's shares, contended that the order should be set aside as the company had valid reasons for not carrying on any business.

3. The judgment highlighted a serious dispute over the control and management of the company, with conflicting claims from different parties. The court emphasized the importance of following proper procedures under section 560 and determining the actual control of the company to avoid such disputes. The Registrar was directed to consider whether the company was conducting business activities.

4. In deciding whether to retain or set aside the order, the court opted to restore the status quo that existed since 2006, where the company's name remained struck off. This decision aimed to maintain the balance of convenience, considering the ongoing situation. However, if substantial evidence was required to resolve the disputes, the parties were to be directed to pursue legal action in a court of law.

5. Ultimately, the court set aside the order dated 6-10-2010 and directed the Registrar of Companies to make a decision based on the court's observations within eight weeks. The judgment emphasized the need for clarity on the company's status and control, ensuring proper adherence to legal procedures under the Companies Act.