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2019 (9) TMI 893 - AT - Insolvency and BankruptcyInitiation of Corporate Insolvency Resolution process - Restoration of non-existent Company ( Corporate Debtor ) - Power of Tribunal - The Company was struck-off from the Register of the Companies u/s 248 of the Companies Act, 2013 - default in repayment of amount alongwith interest and other charges - Section 7 of the Insolvency and Bankruptcy Code, 2016. Whether an application under Section 7 or 9 for initiating Corporate Insolvency Resolution Process is maintainable against a Company/ Corporate Debtor , if the name of the Company/ Corporate Debtor is struck-off from the Register of the Companies? HELD THAT - As per sub-section (6) of Section 248, before passing an order under sub-section (5) (removing the name from the Register of Companies), the Registrar is to satisfy himself that sufficient provision has been made for realization of all amount due to the company and for the payment or discharge of its liabilities and obligations within a reasonable time and, if necessary, obtain necessary undertakings from the Managing Director, Director or other persons in charge of the management of the Company - As per proviso thereof, notwithstanding the undertakings referred to in sub-section (6), the assets of the Company are to be made available for payment or discharge of its liabilities and obligations even after the date of the order removing the name of the Company from the Register of Companies. From sub-section (7) of Section 248, it is also clear that the liability, if any, of every director, manager or other officer who was exercising any power of management, and of every member of the company dissolved under sub-section (5) of Section 248, shall continue and may be enforced as if the company had not been dissolved - From sub-section (8) of Section 248, it is clear that Section 248 in no manner will affect the power of the Tribunal to wind up a company, the name of which has been struck off from the Register of Companies. Therefore, it is clear that after removal of the name of the Company from the Register of the Company for the purpose of right of realization of all amount due to the Company and for the purpose of payment or discharge of its liabilities or obligations of Company continues. In terms of Part II of I B Code, for the purpose of liquidation, except Voluntary Liquidation of Corporate Persons under Section 59 of the I B Code, procedure of Corporate Insolvency Resolution Process is to be followed, if a proceeding is initiated under Sections 7 or 9 of the I B code. Instead of liquidation, the first step to be taken is to ensure that in a time bound manner the value of assets of Corporate Debtor/ Company is maximized and to promote entrepreneurship, availability of credit by balancing the interest of all the stakeholders; within an active legal framework for timely resolution of insolvency and bankruptcy. Liquidation of assets of the Corporate Debtor / Company is not the object, but object is revival and rehabilitation of the Corporate Debtor / Company by way of Resolution and maximization of the value of assets of the Corporate Debtor and balancing the interest of all the stakeholders. The name of the Corporate Debtor (Company) may be struck-off, but the assets may continue. Whether in the present case, there are assets of the Corporate Debtor or not can be looked into only by the Interim Resolution Professional / Resolution Professional - The name of the Company having been struck-off, the Corporate Person cannot file an application under Section 59 for Voluntary Liquidation. In such a case and in view of the provisions of Section 250 (3) read with Section 248 (7) and (8), we hold that the application under Sections 7 and 9 will be maintainable against the Corporate Debtor , even if the name of a Corporate Debtor has been struck-off.' Liability of the Ex-Directors or Shareholders or Officers - HELD THAT - Section 248 (7) of the Companies Act being clear, we are not expressing specific opinion, till any order is passed by the Adjudicating Authority or demand is made by the Interim Resolution Professional . The Adjudicating Authority who is also the Tribunal is empowered to restore the name of the Company and all other persons in their respective position for the purpose of initiation of Corporate Insolvency Resolution Process under Sections 7 and 9 of the I B Code based on the application, if filed by the Creditor ( Financial Creditor or Operational Creditor ) or workman within twenty years from the date the name of the Company is struck off under sub-section (5) of Section 248 - In the present case, application under Section 7 having admitted, the Corporate Debtor and its Directors, Officers, etc. deemed to have been restored in terms of Section 252(3) of the Companies Act. Appeal dismissed.
Issues Involved:
1. Maintainability of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 against a company whose name was struck off from the Register of Companies. 2. Bar of limitation on the application under Section 7. 3. Impact of non-functionality and lack of assets on the maintainability of the application under Section 7. Issue-wise Detailed Analysis: 1. Maintainability of Application under Section 7 Against a Struck-off Company: The primary issue was whether an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (I&B Code) is maintainable against a company whose name has been struck off from the Register of Companies. The Appellant contended that since the name of the 'Corporate Debtor' was struck off under Section 248 of the Companies Act, 2013, the application was not maintainable. The Tribunal referred to the relevant provisions of the Companies Act, 2013, specifically Chapter XVIII, which deals with the removal of names of companies from the Register of Companies. Section 248 empowers the Registrar to remove the name of a company if it has failed to commence business within one year of its incorporation or is not carrying on any business for two preceding financial years. The Tribunal emphasized that even after the name of a company is struck off, the assets of the company remain available for the payment or discharge of its liabilities and obligations. Section 250 of the Companies Act states that a dissolved company ceases to operate except for the purpose of realizing amounts due and discharging liabilities. Section 252 allows for the restoration of a company's name to the Register of Companies on an application by a creditor, member, or workman within twenty years from the publication of the notice of dissolution. The Tribunal concluded that the Adjudicating Authority, which also functions as a Tribunal under the Companies Act, has the power to restore the name of the company for the purpose of initiating the Corporate Insolvency Resolution Process (CIRP) under Sections 7 and 9 of the I&B Code. Therefore, the application under Section 7 was maintainable even if the company's name had been struck off. 2. Bar of Limitation on the Application under Section 7: The Appellant argued that the application under Section 7 was barred by limitation. However, the Tribunal did not find merit in this argument. The judgment did not elaborate on the specific reasons for rejecting the limitation argument, but it can be inferred that the Tribunal found the application to be within the permissible time frame for initiating CIRP. 3. Impact of Non-functionality and Lack of Assets on Maintainability: The Appellant submitted that the company was non-functional for several years, had no employees, and no assets, and therefore, the Resolution Professional could not make the 'Corporate Debtor' a going concern. The Tribunal rejected this argument, stating that the non-functionality of the company or the absence of employees and assets cannot be grounds to reject an application under Sections 7 or 9 of the I&B Code. The Tribunal highlighted that the objective of the I&B Code is to maximize the value of the assets of the Corporate Debtor and to promote entrepreneurship and availability of credit. The first step is to ensure a time-bound resolution process rather than immediate liquidation. The presence or absence of assets can only be determined by the Interim Resolution Professional or Resolution Professional during the CIRP. Conclusion: The Tribunal held that the application under Section 7 of the I&B Code was maintainable against the 'Corporate Debtor' even if its name was struck off from the Register of Companies. The Adjudicating Authority has the power to restore the name of the company for the purpose of initiating CIRP. The appeal was dismissed with no merit, and the application under Section 7 was upheld.
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