2019 (5) TMI 1723 - Tri - Companies Law

Restoration of name of the company in the Register of Companies maintained by the Registrar of Companies - dissolution of appellant company - HELD THAT - The company did not generate any Income/Revenue from its operations since the financial year ending 31st March 2014 to 31st March 2017. Further it is also noted that the company did not spend any amount towards Employee Benefit Expenses for the above Financial Years and Fixed Assets of the company is Nil, Tangible Assets Nil as per the documents submitted by the petitioner company. All these Nil figures indicates that the company exists only on paper, not carrying on any business or operation which substantiates the criteria as laid down in section 248 of the Companies Act 2013, therefore, the action taken by ROC is justified and the Bench did not feel any ground to interfere with action of striking off by ROC. The Bench is also of the considered view that these type of companies only put burden on the system, Government/ROC, by way of record keeping, ensuring compliance by these companies and at times these companies may be used for various purposes other than the purpose/object for which the company was originally incorporated. It also puts burden on the company to comply with various regulatory/statuary compliances. The Bench has not found any justifiable/ reasonable grounds to interfere with the action taken by the Government of India/ROC in striking off Lakhs of companies including the Petitioner Company - petition dismissed.

Summary

Issues:
- Restoration of company name in Register of Companies
- Setting aside dissolution of the company
- Compliance with Companies Act, 2013
- Principles of natural justice
- Impact on shareholders and creditors

Restoration of Company Name in Register of Companies:
The petition sought relief to restore the company's name in the Register of Companies due to its striking off by the Registrar of Companies, Pune under section 248(5) of the Companies Act, 2013. The appellant highlighted that the company was engaged in business activities, had filed returns until 2014, and was a taxpayer. However, the respondent's actions were contested, alleging non-compliance with due process and principles of natural justice. The appellant emphasized that restoration was crucial for the company's survival, as it had business opportunities pending, including a bank guarantee affecting its financial operations.

Setting Aside Dissolution of the Company:
The appellant argued that the company's dissolution was unwarranted, emphasizing that the company was active, generating employment, and paying taxes. The appellant contended that the respondent's actions were detrimental to shareholders and creditors, as well as the directors facing disqualification. The appellant cited a judgment related to the restoration of a company's name, highlighting the importance of contesting the release of property from the custody of the official receiver upon restoration.

Compliance with Companies Act, 2013 and Principles of Natural Justice:
The appellant alleged that the respondent did not follow due process or principles of natural justice before striking off the company's name and dissolving it. The appellant argued that restoration was necessary to prevent irreparable losses and maintain the company's operations, emphasizing the importance of restoring the company's name in the interest of shareholders and creditors.

Impact on Shareholders and Creditors:
The appellant stressed that the restoration of the company's name was vital to prevent harm to shareholders and creditors. The appellant argued that the company's activities, tax payments, and employment generation would be adversely affected if the respondent's decision was not set aside. The appellant highlighted the potential prejudicial impact on stakeholders if the company remained dissolved, underscoring the need for restoration to safeguard their interests.

In the final judgment, the bench dismissed the petition, concluding that the company did not meet the criteria under section 248 of the Companies Act, 2013 for restoration. The bench noted that the company had not generated income or revenue, spent on employee benefits, or had tangible assets, indicating that it existed only on paper without actual business operations. The bench emphasized that such companies burden the regulatory system and may be misused, supporting the respondent's decision to strike off the company. The bench found no justifiable grounds to interfere with the government's action in striking off numerous companies, including the petitioner company, based on practical considerations and compliance issues.