2019 (6) TMI 136 - AT - Companies Law

Restoration of name of appellant company in the the Register of Companies - the name was struck off for failure on the part of Appellant to file its annual returns and balance sheets since incorporation - HELD THAT - A suit has been filed against the Appellant Company by S. G. Nichelos and others which is pending adjudication before Ld. Subordinate Judge of the Nilgiris. Proceedings in the suit have been kept on hold by Hon ble High Court at Madras which is hearing an appeal against dismissal of interim injunction application preferred by the opposite party. It is nobody s case that the Appellant Company is a Shell Company. It is also not denied that the Company is locked in a litigation not commenced by it and further proceedings in the suit have been stayed by the Hon ble High Court of Madras. There is nothing in the Report of ROC to even suggest that the Appellant Company was not in existence. The documents relied upon by the Appellant, some of which were not before the Tribunal, unmistakably demonstrate that the Appellant Company is a living entity and its operations have come to a grinding halt, one of the reasons being the pending litigation and the order of stay passed by the Hon ble High Court of Madras - Pending litigation in itself has been judicially recognized as a just ground for restoration of a Company struck off the Register of Companies. Appellant has been able to demonstrate that the Appellant Company has been carrying on business of sale and purchase of property though the instances given are few and far between and such transactions cannot be said to be substantial and of respectable magnitude. However, that does not detract from the fact that the Appellant was carrying on business which was seriously affected because of pending legal process. In the given circumstances, it would be just to restore the struck off Appellant Company at the instance of Company itself or its Shareholder or Director. The Tribunal appears to have been oblivious of the proposition that it had power to order restoration of the Appellant Company in the Register of Companies on a just ground notwithstanding the fact that it failed to transact business for the assigned reasons. The matter was to be approached from a broader perspective keeping in view the interests of various stakeholders and larger social interest which can be better subserved by restoring a Company struck off for mere statutory non-compliances, which is not a Shell Company as is the admitted position in the instant case. Appellant Company is restored to its original status - appeal allowed.

Summary

Issues Involved:
- Restoration of a struck-off company in the Register of Companies under Section 252(3) of the Companies Act, 2013.
- Interpretation of the grounds for restoration as per the provisions of Section 252(3) of the Companies Act, 2013.
- Consideration of pending litigation as a just ground for restoration.
- Failure to file annual returns and balance sheets as a reason for striking off the company.
- Adherence to statutory compliances and the impact on restoration decisions.

Analysis:

1. The case involved the appeal of a company, 'Adroit Trade (P) Ltd.,' which was struck off from the Register of Companies by the Registrar of Companies due to its failure to file annual returns and balance sheets since its incorporation in 1983. The company sought restoration under Section 252(3) of the Companies Act, 2013, which was dismissed by the National Company Law Tribunal, Chennai.

2. The Appellant challenged the dismissal, arguing that the Tribunal failed to differentiate between the situations where restoration can be ordered under Section 252(3) - when the company was carrying on business or when restoration appears just. The Appellant contended that even if the company was not operational, restoration could be justified if it was deemed 'otherwise just.' The Appellant highlighted that pending litigation hindered its operations, preventing the utilization of its land for development.

3. The Respondent, Registrar of Companies, Chennai, reported that the company had not filed annual returns and balance sheets since its inception. The Respondent also stated that notice of striking off was published in local newspapers as required by law.

4. The Tribunal found that the company had not complied with statutory requirements since its incorporation, attributing the failure to various reasons, including adverse market conditions and pending litigation. The Tribunal acknowledged the pending litigation and the impact it had on the company's operations, noting that the company was not a shell company and had tangible assets.

5. The Tribunal recognized that pending litigation could be a just ground for restoration, citing legal precedents to support this view. It emphasized that the company, despite facing challenges, was not dormant and had conducted business activities, albeit on a limited scale. The Tribunal concluded that restoration was warranted to protect the interests of stakeholders and uphold the company's existence.

6. Consequently, the Tribunal allowed the appeal, setting aside the impugned order and restoring the company to its original status. The company was directed to fulfill all statutory compliances within a specified timeframe to regularize its position in accordance with the law.