2019 (8) TMI 882 - AT - Companies Law

Restoration of name of Company in the Registrar of Companies - Section 252(3) of the Companies Act, 2013 - HELD THAT - The proof in regard to possession of assets by the Company and owing of any liabilities by it as also in regard to factum of any income from legitimate sources assessable to Income Tax being abysmally absent, no fault can be found in regard to striking off the Company by ROC under FTE which has been duly notified in the Gazette of India . Plea in this regard emanating from the Revenue is without substance and cannot be countenanced. Same is true about the plea of Revenue being a Creditor within the meaning of Section 252(3) of the Companies Act, 2013, when admittedly it had not raised any demand or passed any assessment order prior to passing of the order of striking off the Company from the Register of Companies by ROC. Striking off the Company which was a Private Company, from the Register of Companies, indisputably does not absolve its erstwhile Directors who are liable as provided under Section 179 of the Income Tax Act, 1961 to pay the amount of Tax leviable in respect of income of any previous year. Why, in presence of such mechanism within the legal framework available to Revenue, insistence is on restoration of Company without laying any proof of its being possessed of any assets and liabilities and without any evidence of the Company being in operation, is a question that can be best answered, though has not been answered by the Revenue. Appeal dismissed.

Summary

Issues:
1. Appeal against order striking off company's name by National Company Law Tribunal.
2. Compliance with Fast Track Exit Scheme, 2011 guidelines.
3. Revenue's claim as a creditor and demand for restoration of company's name.
4. Undertaking by erstwhile director regarding tax demand.
5. Liability of directors under Section 179 of Income Tax Act, 1961.

Analysis:
1. The appeal was filed by the Revenue against the order of the National Company Law Tribunal striking off the name of a company. The Tribunal dismissed the appeal as there was no tax demand at the time of striking off, and one of the directors had undertaken to settle any future tax demand. The Revenue sought reversal of the order on the grounds that they had disclosed the income escaping assessment and the company had failed to file its return of income. The Revenue claimed that the company made misrepresentations and was trying to evade tax liability.

2. The case involved the application of the Fast Track Exit Scheme, 2011 guidelines for defunct companies. The guidelines required a defunct company with nil assets and liabilities to apply for striking off its name from the register of companies. The procedure included giving notice to stakeholders, including the Income Tax Department, and striking off the name after a specified period. The Tribunal found that the procedure for striking off the company's name had been followed as per the guidelines.

3. The Revenue contended that they should be considered a creditor under the Companies Act, 2013, and sought restoration of the company's name based on a subsequent tax assessment order. However, the Tribunal found that the Revenue had not provided evidence of the company's assets or liabilities, and therefore, the striking off of the company was valid. The Tribunal also noted that the liability of the directors under the Income Tax Act remained, irrespective of the company's status.

4. Regarding the undertaking given by one of the directors regarding the tax demand, the Tribunal stated that it was a separate issue not within the scope of the appeal. The Tribunal suggested that the Revenue could pursue the matter separately if there was a breach of the undertaking.

5. Lastly, the Tribunal emphasized that striking off the company's name did not absolve the directors of their liability under the Income Tax Act. The Tribunal declined to interfere with the order and dismissed the appeal, leaving the Revenue to explore other legal remedies. The judgment highlighted the importance of directors' liability and the need for evidence of assets and liabilities before seeking restoration of a company's name in the register.