2013 (10) TMI 570 - HC - Companies Law

Striking off of name - Defunct company - Held that - petitioner-company has made out a case for the invocation of the powers of this Court under sub-section (6) of section 560 of the Companies Act. The amount of Rs. 14.80 lakhs was undisputedly advanced by the petitioner-company as loan to the respondent-company. The loan has not been repaid. It was not also disclosed in the balance sheet filed with the ROC. At the stage of examining the application for striking off the name, the ROC adopts a summary procedure and if the necessary documents furnished, he may strike off the name of the company from the register. But that does not mean that he condones any fraud or malpractice. Mr K S Pradhan has drawn my attention to the provisions of section 628 of the Companies Act, which provides for penalty for false statements made in any return, report, certificate, balance sheet, statement or other document filed by the company for the purposes of any of the provisions of the Act if it is false in any material particular or omits any material fact deliberately and with the knowledge that it is false or material. Imprisonment for a term which may extend to two years is provided. The provisions of sub-section (6) of section 560 are overriding in nature and the action of striking off name of the company from the register is not conclusive. Any creditor can make an appropriate application to the company court before the expiry of 20 years from the publication in the official gazette seeking restoration of the name of the company in the register so that it can pursue its remedies which are available to it under the law for recovery of the amount from the company whose name was struck off - name of the company should be restored to the register. I direct accordingly. It would be open to the petitioner-company to take any action, if it is so advised against Nicholson Export and Import Pvt. Ltd. for recovery of the amount due. The aforesaid company as well as all other persons are restored to the same position, as if the name of the said company has not been struck off - If any other statutory formalities are to be complied with by the petitioner-company consequent to the restoration of the name of the respondent-company in the register of members, the same shall be done within a period of one month from the date on which the name is restored. This includes formalities under the Companies Act, 1956 and the applicable rules - Petition allowed.

Summary

Issues:
1. Restoration of company name and investigation into its affairs.

Analysis:
The petitioner sought to set aside the order striking off the name of a company and restore its name, along with requesting an investigation into the company's affairs. The respondent company applied for striking off its name under the Easy Exit Scheme, 2011, without repaying a loan of Rs. 14.80 lakhs to the petitioner. The petitioner alleged fraud by the directors of the company in dissipating funds and preventing action against them. The Deputy Registrar of Companies defended the ROC's actions under the scheme, stating that no deeper examination was required at that stage.

The court considered the petitioner's case and invoked its powers under section 560(6) of the Companies Act. It found that the loan was not repaid, not disclosed in the balance sheet, and the ROC's summary procedure did not condone fraud. The court highlighted section 628, providing for penalties for false statements in company documents. It emphasized that the action of striking off a company's name is not conclusive, and creditors can seek restoration within 20 years for recovery. The court decided to restore the company's name to the register, allowing the petitioner to pursue recovery against the company.

The court directed the company to file statutory documents with the ROC within two months of name restoration, with personal oversight by the directors. Any other statutory formalities required post-restoration were to be completed within one month. The judgment concluded by disposing of the petition in the specified terms, ensuring the restoration of the company's name and compliance with statutory obligations.