2019 (6) TMI 1676 - Tri - Companies Law

Seeking restoration of name of the company in the Register of Companies maintained by the Registrar of Companies, Pune - failure to file Financial Statements and Annual Returns for the period of 5 years i.e. 2011-12 to 2015-16 - Section 248 (5) of the Companies Act, 2013 - HELD THAT - Upon analysis of the Balance Sheet, Profit and Loss Account of the Company, it is observed that the company did not generate any Income/Revenue since incorporation. Further it is also noted that Revenue From Operations Nil, other income Nil, Employee Benefit Expenses Nil, Cash and Cash Equivalents is a negligible amount of Rs.14,888/-for the year ending 31.03.2017, further revenue from Operations Nil, for the financial years 2016-17 as per the documents submitted by the petitioner company. All these Nil figures indicates that the company currently 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 the name of the company 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/statutory 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 names of Lakhs of companies including the Petitioner Company - Appeal seeking restoration of the company s name in the Register of company maintained by the ROC, Pune is dismissed.

Summary

Issues:
1. Restoration of company's name in the Register of Companies maintained by the Registrar of Companies, Pune.
2. Compliance with statutory requirements for filing Financial Statements and Annual Returns.
3. Justifiability of striking off the company's name by ROC under section 248 of the Companies Act, 2013.
4. Lack of business operations and income generation by the company.
5. Burden on the system and regulatory compliance due to non-operational companies.

Issue 1: Restoration of company's name in the Register of Companies
The petition was filed seeking relief against the respondent to restore the name of the company in the Register of Companies maintained by the Registrar of Companies, Pune. The petitioner claimed that the company was active since incorporation and had been maintaining all requisite documentation as per the Companies Act, 2013. However, the company failed to file Financial Statements and Annual Returns for five consecutive years, leading to the striking off of its name by ROC under section 248 (5) of the Companies Act, 2013.

Issue 2: Compliance with statutory requirements
The petitioner argued that the failure to file necessary documents was not willful but due to a lack of professional expertise. The company admitted to not carrying on any business operations and stated that the purpose of restoration was to comply with statutory requirements and remove directors' names from the list of disqualified directors exhibited by MCA. The respondent submitted detailed explanations regarding the sequence of events leading to the striking off of the company's name and highlighted that the company did not make any application to be classified as a "Dormant Company" under section 455 of the Companies Act, 2013.

Issue 3: Justifiability of striking off the company's name by ROC
Upon analyzing the company's financial documents, the Bench observed that the company had not generated any income or revenue since its incorporation. The company existed only on paper and did not engage in any business operations, leading to the conclusion that the action taken by ROC in striking off the name was justified. The Bench emphasized that such companies put a burden on the system, government, and ROC in terms of compliance and record-keeping, without serving the intended purpose for which they were incorporated.

Issue 4: Lack of business operations and income generation
The financial analysis revealed that the company had negligible income and no revenue from operations, indicating its non-operational status. The Bench found that the company's existence was merely on paper, further supporting the ROC's decision to strike off its name under section 248 of the Companies Act, 2013.

Issue 5: Burden on the system and regulatory compliance
Considering the practical aspects and lack of justifiable grounds, the Bench dismissed the appeal for restoration of the company's name in the Register of Companies. It was noted that interfering with the action taken by the government/ROC to strike off names of non-operational companies, including the petitioner company, was not warranted. The decision was based on the view that such companies impose unnecessary burdens on the regulatory system and fail to fulfill their intended purposes, thereby justifying the ROC's action.