2017 (11) TMI 1337 - Tri - Companies Law

Power of Registrar to strike defunct company off register - non enhancement of paid capital by assessee private comoany as per section 3 - Held that - It is evident from the perusal of sub-section 3 of Section 3 that every private company with a paid-up capital of less than one lakh rupees was required to enhance its paid-up capital to one lakh rupees within a period of two years from the commencement of Companies (Amendment) Act, 2000. The aforesaid amendment came into force w.e.f. 13.12.2000. The enhancement by the petitioner company to one lakh rupees or more was permissible upto 13.12.2002. There is no averment in the petition that any attempt was made for enhancement of its share capital which continues to be at ₹ 300 with 30 equity shares of ₹ 10 each. The consequence of not enhancing the paid-up capital are provided in sub section 5 of Section 3 namely, that such a company shall be deemed to be a defunct company within the meaning of section 560 and the Registrar is under a legal obligation to struck off from its register the name of such company. The objection taken by the Registrar is well founded and deserves to be upheld. The order passed by the Registrar of Companies is thus sustainable in the eyes of law and the petitioner No. 1-company is deemed to be a defunct company. In no case the petitioner No. 1-company can secure the relief it has prayed for. Accordingly, the Registrar of Companies has passed a valid order which is beyond pale of challenge.

Summary

Issues:
1. Petition for revival/restoration of a company's name on the register of the Registrar of Companies.
2. Failure to file annual returns leading to company's name being struck off.
3. Interpretation of Section 560(6) of the Companies Act, 1956 for revival of a struck-off company.
4. Compliance with the provisions of Section 3(3) regarding paid-up capital for private companies.

Analysis:
1. The petition sought revival of a company's name on the register of the Registrar of Companies after being struck off. The company, engaged in fabric trading, failed to file annual returns from 1998-2014, leading to its name being struck off in 2007. The company's authorized capital was &8377; 1 lakh, but the subscribed capital remained at &8377; 300, with 30 equity shares of &8377; 10 each. The petitioners requested restoration of the company's name and sought a direction for filing a certified copy of the order.

2. The Registrar of Companies' reply highlighted the company's non-compliance with annual return filings and the issuance of notices for striking off the company's name as per Section 560 of the Act. The Registrar stated that the company failed to meet the requirements of Section 560(6) and Section 3(3) of the Act, indicating the company's dormant status and inability to restore its name on the register.

3. Section 560(6) allows for revival of a struck-off company if it was carrying on business at the time of striking off. The Tribunal emphasized the need to prove the company's operational status at the time of striking off, which the petitioners failed to demonstrate. The absence of business activity explanations from 1998-2014 and the lack of evidence of ongoing operations post-2007 led to the dismissal of the petition.

4. Section 3(3) mandates private companies to enhance their paid-up capital to one lakh rupees within a specified period. The company's failure to increase its capital as required rendered it a defunct company under Section 560, justifying the Registrar's decision to strike off its name. The Tribunal upheld the Registrar's order, dismissing the petition and imposing costs of &8377; 20,000 on the petitioners for lack of merit and non-compliance with statutory provisions.

This detailed analysis of the judgment highlights the legal intricacies involved in the petition for revival/restoration of the company's name and the Tribunal's decision based on the provisions of the Companies Act, 1956.