2018 (12) TMI 1375 - AT - Companies Law

Striking off a company from register of ROC - whether procedure contemplated under Section 248(1) is complied with? - whether the appellant was not given an opportunity of being heard? - Held that - As seen the record and noted that the Notice dated 20.3.2017 was issued to the appellant and he was directed to submit his defence alongwith relevant documents in his defence within thirty days from the date of receipt of the notice. Further as per Section 248(1) and 248(4) and under second proviso to the Rule 7(1) of Companies Act, 2013, STK-5 notice was given for removal of names of companies from the Register of Companies, Publication of the said notice was given in both Vernacular and English Language. Therefore, it can not be said that proper procedure was not followed and no opportunity was given to the appellant of being heard and principles of natural justice has been complied with. As gone through the record and found that the appellant has not filed Balance Sheet and Annual Returns for the financial year 2011 onwards and its directors ought to have filed statutory returns in compliance of provisions of the Companies Act. In the absence of any material being placed by appellant before the ROC, we fail to understand how ROC would know if the company is doing any business - gone through the record and gave our considerable thoughts on this issue. From the record we observe that the company was incorporated in the year 1991 and since then the company is filing its Balance Sheet and Annual Returns and they have not filed the same from financial year 2011 onwards. Therefore, it can not be believed that the non-filing of returns was a result of lack of legal awareness of the director. The company petition and company appeal has been filed by Mr. Maickavel Ravichandran, Director on behalf of the appellant company and he has stated that he is director and promoter of the company since 26th September, 2011. As perused the Articles of Association of the appellant and find that Sh M. Ravichandran was the director of the company (Page 37) in the year 1991. Similarly Mr. S. Sekar who is also now one of the directors was also a director in the year 1991. Therefore the plea of the appellant that the default in filing the returns was as a result of lack of legal awareness of the Directors of the Appellant cannot be accepted as they have been filing the same uptill the year 2010 as also observed in the impugned order. The directors of the appellant are very well aware of the legal awareness. The other issue raised by the appellant is that NCLT has erred in treating payment of nil tax and incurring of loss as tantamount to not carrying on any business. If Income Tax Return is Nil it will have to be read as Nil Return of Business. We have gone through the Income Tax Returns Acknowledgement filed by the appellant at Pages 115 and 199. We further observe that the Income Tax for the Assessment Year 2014-15, 2015-16, 2016-17 and 2017-18 has been filed in the month of February/March, 2018. We do not find that there is any material or substance in those returns to show that the conclusion drawn by NCLT are perverse.

Issues Involved:

1. Compliance with Section 248 of the Companies Act, 2013.
2. Opportunity of being heard and principles of natural justice.
3. Allegations of non-business operations.
4. Default in filing statutory returns.
5. NCLT's interpretation of nil tax returns and business operations.

Issue-wise Detailed Analysis:

1. Compliance with Section 248 of the Companies Act, 2013:

The appellant argued that the Registrar of Companies (ROC) did not follow the necessary steps outlined in Section 248 of the Companies Act, 2013, before striking off the company's name. The appellant claimed that the ROC's action was premature and did not meet the conditions specified under Section 248.

Upon reviewing the records, it was found that the ROC issued a Notice dated 20.3.2017 to the appellant, directing them to submit their defense along with relevant documents within thirty days. Additionally, as per Section 248(1) and 248(4) and under the second proviso to Rule 7(1) of the Companies Act, 2013, an STK-5 notice was issued for the removal of the company's name from the register, and the notice was published in both vernacular and English languages. Therefore, it was concluded that the proper procedure was followed, and the principles of natural justice were complied with.

2. Opportunity of being heard and principles of natural justice:

The appellant contended that they were not afforded a reasonable opportunity to be heard before the ROC took action, which they claimed was a violation of the principles of natural justice.

The tribunal noted that the appellant was given a notice and directed to submit their defense within thirty days. The notice was published in both vernacular and English languages, ensuring that the appellant had the opportunity to respond. Consequently, it was determined that the appellant was provided with an opportunity to be heard, and the principles of natural justice were adhered to.

3. Allegations of non-business operations:

The appellant claimed that the NCLT's observation that the company was not engaged in any business was contrary to the facts, as evidenced by their financial statements and income tax returns.

The tribunal examined the records and found that the appellant had not filed balance sheets and annual returns for the financial years from 2011 onwards. Without any material evidence being provided by the appellant, the ROC could not ascertain whether the company was conducting any business. Therefore, the tribunal upheld the NCLT's observation that the company was not engaged in any business.

4. Default in filing statutory returns:

The appellant argued that the default in filing returns was due to a lack of legal awareness among the directors and was not done with any mala fide intent.

The tribunal observed that the company had been incorporated in 1991 and had been filing balance sheets and annual returns until 2010. The non-filing of returns from 2011 onwards could not be attributed to a lack of legal awareness, as the directors were well aware of their statutory obligations. The tribunal noted that the directors had been filing returns up to 2010 and were familiar with the legal requirements. Therefore, the appellant's argument was not accepted.

5. NCLT's interpretation of nil tax returns and business operations:

The appellant contended that the NCLT erred in treating the payment of nil tax and incurring of losses as evidence of not carrying on any business.

The tribunal reviewed the income tax returns filed by the appellant and noted that the returns for the assessment years 2014-15, 2015-16, 2016-17, and 2017-18 were filed in February/March 2018. The tribunal found no material or substance in those returns to contradict the NCLT's conclusion. Therefore, the tribunal upheld the NCLT's interpretation that nil tax returns indicated a lack of business operations.

Conclusion:

The tribunal found no merit in the appeal and dismissed it. The appeal was dismissed with no order as to costs.

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