2019 (5) TMI 825 - AT - Companies Law

Restoration of name of the Company - allotment of land - appellant submitted that even though the appellant company is not carrying on any business, the appellant company should be considered to be fully operating and that the same is sufficient in view of Section 252(3) of the Companies Act to restore the appellant company - HELD THAT - The appellant is continuously taking efforts to set up industry and also observing that the appellant had applied for land and submitted project report in 2013 and the land was allotted in 2016. Further the company is depositing balance instalments towards the allotment of land. However, we observe that the amount deposited by the appellant has not been reflected in the Balance Sheets but as the appellant argued that the amount has been invested by the Directors, therefore, the same should have been reflected in the Balance Sheet. We expected that the Balance Sheets to be filed with the ROC are true and fair reflecting all transactions of the company. We have come to the conclusion that in the light of huge investment made by the directors/company and the appellant is continuously making efforts to set up the industry and also still depositing the instalments towards land, it would be just that the name of the company is directed to be restored. - appeal allowed.

Summary

Issues Involved:
1. Legality of the Registrar of Companies (ROC) striking off the appellant company's name.
2. Compliance with Section 248(1) of the Companies Act, 2013.
3. Whether the appellant company was operational or not.
4. Impact on shareholders and the company if the name is not restored.
5. Appellant's efforts to set up a business and investments made.

Issue-wise Detailed Analysis:

1. Legality of the Registrar of Companies (ROC) striking off the appellant company's name:
The appellant challenged the ROC's action of striking off its name from the Register of Companies, claiming that the procedure prescribed under Section 248(1) of the Companies Act, 2013 was not followed. The ROC, however, argued that they had reasonable cause to believe the company was not operational and issued notices accordingly. The Tribunal found that sufficient notice was served on the appellant, and since no response was received, the ROC's action was deemed legal.

2. Compliance with Section 248(1) of the Companies Act, 2013:
The appellant contended that the ROC did not follow the due process under Section 248(1), which requires notice and sufficient time to comply with statutory requirements. The ROC countered by detailing the issuance of multiple notices (STK-1, STK-5, STK-5A) and publication in newspapers and the official Gazette. The Tribunal observed that the ROC had indeed complied with the statutory requirements, giving the appellant ample opportunity to respond, which they failed to do.

3. Whether the appellant company was operational or not:
The NCLT initially concluded that the appellant company had no revenue from operations since its incorporation and thus was not operational. The appellant argued that it had been actively pursuing the establishment of a manufacturing facility, including obtaining permits and land allotment from KIADB. The Tribunal noted that although the company had been allotted land and made substantial payments, these transactions were not reflected in the balance sheets. Despite this, the Tribunal acknowledged the continuous efforts and investments made by the appellant to set up the industry.

4. Impact on shareholders and the company if the name is not restored:
The appellant claimed that the shareholders would suffer irreparable loss and hardship if the company's name was not restored. The Tribunal recognized the potential negative impact on the shareholders and the company's ongoing efforts to establish its business. Consequently, the Tribunal decided that it would be just to restore the company's name to protect the interests of the shareholders and the investments made.

5. Appellant's efforts to set up a business and investments made:
The appellant provided evidence of continuous efforts to set up a manufacturing facility, including substantial payments for land allotment and ongoing correspondence with local authorities. The Tribunal observed that the appellant had indeed made significant investments and was actively pursuing the establishment of the business. Despite the lack of reflection in the balance sheets, the Tribunal found the appellant's efforts sufficient to warrant the restoration of the company's name.

Conclusion:
The Tribunal quashed the impugned order and directed the restoration of the appellant company's name to the Register of Companies, subject to compliance with specific conditions, including payment of costs and filing of all pending statutory documents. The Tribunal emphasized that the ROC could still take punitive actions for non-compliance with statutory requirements. The appeal was disposed of with no order as to costs.