2014 (2) TMI 64 - HC - Companies Law

Petition for restoring the name of company for continuing suit against the company - earlier the petition was dismissed by the trial court on the ground that name of the company was stuck down and no suit can continue against non existing company - who can apply for restoration of name of the company - whether the petitioner is Member or Creditor of the erstwhile company - Held that - The transfer of shares from the petitioner to Quli having been held by this Court to be collusive and the orders under which it was done having been declared to be a nullity the petitioner never ceased to be a member of the company. Even if the petitioner cannot be considered as a member of the company he is certainly a creditor who can file the petition. Company court has the power to order restoration of the company s name to the register of companies on the application made by the company itself or its member or creditor. Such an application can be made at any time before the expiry of 20 years from the publication of the notice for striking off the name published in the official gazette. There are only two circumstances in which the company court can exercise the power. The first is when it is satisfied that the company was at the time of the striking off of its name from the register carrying on business or was in operation. The second circumstance is when it appears to the company court that it is otherwise just that the name of the company be restored to the register. Obviously the petitioner is not the company itself and therefore he has to be either a member or creditor. It was submitted on behalf of the ROC that the petitioner is neither a member nor a creditor of the company. The respondent has received monies from the petitioner. He was entrusted with the job of finding a house for the petitioner in Delhi. The averments in the petition prima facie indicate that the property Jodhpur Gardens was purchased not in the name of the petitioner but in the name of the company. The shares held by the petitioner in the company were also taken away from him without his knowledge or consent. The settlement entered into between Quli and Singhania by which the shares were transferred to Quli was held by this Court to be collusive. These are disputes which are pending in the trial court. The company is a defendant in the trial court. If its name is not restored it would cause injustice to the petitioner and also cause prejudice to the trial as a whole. The message sent to the society as a whole if the name of the company is not restored to the register would be quite disturbing. The petitioner has to be protected in the litigation pending before the trial court - Therefore there is every reason to hold that it would be just to restore the name of the company to the register of companies. The Registrar of Companies is directed to do so - Decided in favour of Petitioner.

Summary

Issues Involved:
1. Restoration of the company's name to the register of companies.
2. Locus standi of the petitioner to file the restoration petition.
3. Interpretation of the term "just" under Section 560(6) of the Companies Act, 1956.

Issue-wise Detailed Analysis:

1. Restoration of the Company's Name to the Register of Companies:
The petitioner filed a petition under Section 560(6) of the Companies Act, 1956, seeking the restoration of M/s. Alfa Impex Pvt. Ltd.'s name to the register of companies. The petitioner argued that the company's name should be restored to enable him to pursue his legal remedies against the company for the loss caused to him. The Registrar of Companies (ROC) had struck off the company's name on the grounds that it was not carrying on any business, as confirmed in the director's and auditor's reports.

2. Locus Standi of the Petitioner to File the Restoration Petition:
The ROC contended that only the company, a member, or a creditor could file a restoration petition under Section 560(6), and the petitioner did not fall into any of these categories. However, the court found that the petitioner was indeed a member of the company as he had been allotted shares in 1989-90, which were later transferred to Mr. Quli without the petitioner's consent. The court held that the petitioner never ceased to be a member as the transfer of shares was collusive and declared null by the court. Even if the petitioner was not considered a member, he was deemed a creditor entitled to file the petition, as he had a claim for the loss sustained due to the company's actions.

3. Interpretation of the Term "Just" under Section 560(6) of the Companies Act, 1956:
The court addressed the ROC's argument that the term "just" should be narrowly construed and limited to situations where the company was carrying on business. The court rejected this interpretation, stating that the term "just" must be understood in a broader sense, encompassing equitability, fairness, and reasonableness. The court emphasized that the presence of the words "or otherwise" in the subsection allowed for a broader interpretation, enabling the court to order restoration if it appeared "just" to do so, even if the company was not carrying on business at the time of striking off.

The court cited various judgments to support its interpretation of "just," highlighting that the term denotes equitability and fairness, and should be considered from the perspective of society as a whole. The court concluded that it would be "just" to restore the company's name to the register, as failing to do so would cause injustice to the petitioner and prejudice the trial of the pending suit. The court directed the ROC to restore the company's name to the register, ensuring that the petitioner could pursue his legal remedies.

Conclusion:
The petition for the restoration of the company's name to the register of companies was allowed. The court held that the petitioner had the locus standi to file the petition as a member and creditor of the company. The term "just" under Section 560(6) was interpreted broadly to include situations where restoring the company's name was equitable and fair. The ROC was directed to restore the company's name to the register, ensuring that the petitioner could continue to seek legal remedies for the loss caused to him.