2019 (12) TMI 342 - AT - Companies Law

Striking the name of the company from the register of companies - non-compliance with the requirement of sending a notice to the company and all the directors of the company of his intention to remove the name of the company from the register of the companies - Sub-rule (2) of Rule 3 of the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 - HELD THAT - Sub-section (1) of Section 248 of Companies Act, 2013 provides that where the Registrar has reasonable cause to believe that a company is not carrying on any business of operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of dormant company under Section 455 then he shall send a notice to the company and all the directors of the company of his intention to remove the name of the company from the register of companies and requesting them to send their representation alongwith the copies of relevant documents within 30 days from the date of notice. Admittedly ROC has served notice dated 17.3.2017 to company s registered address which returned unserved. In the notice name of company s directors i.e. Appellant No.2 and 3 and their address are mentioned, however, no notice have been sent to them by the ROC. It is true that in the notice dated 17.3.2017 which was sent to company it is mentioned that the notice is also treated as having been served on the directors of the company in terms of the provisions of Section 20 of the Companies Act, 2013 - this is not the compliance of mandatory provisions under sub-section (1) of Section 248 of Companies Act, 2013 and the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016. Due to non-compliance of this provisions the appellants could not send their representations alongwith relevant documents before the ROC. Before passing the order ROC has not recorded his satisfaction as per provisions under sub-section (6) of Section 248 of Companies Act, 2013 - The name of the appellant No.1 company shall be restored to the Register of Companies subject to conditions imposed.

Issues:
1. Appeal against order striking off company's name from the register of companies.
2. Compliance with mandatory provisions of Section 248(1) of Companies Act, 2013.
3. Non-functional status of the company.
4. Ownership of immovable property by the company.
5. Financial status and filing of annual returns.

Issue 1: Appeal against order striking off company's name from the register of companies
The appeal was filed by Calcutta Rubber Factory Pvt Ltd and its directors/shareholders against the order of NCLT, New Delhi, affirming the decision of ROC to strike off the company's name from the register. The NCLT found the company to be non-functional at the time of strike off, based on the Income Tax Department's report. However, the appellants argued that the ROC did not follow the prescribed procedure under Section 248(1) of the Companies Act, 2013, and failed to record satisfaction as per Section 248(6).

Issue 2: Compliance with mandatory provisions of Section 248(1) of Companies Act, 2013
The appellants contended that the ROC did not comply with the mandatory provisions of Section 248(1) as notices were not served to the directors as required. The NCLAT agreed that the ROC's actions did not meet the statutory requirements, leading to the appellants being unable to submit their representations along with relevant documents before the ROC.

Issue 3: Non-functional status of the company
Despite the company being non-functional at the time of strike off, the NCLAT considered the fact that the company owned a leasehold plot allotted by HUDA and had intentions to file returns and financial statements after the period ending in 2012-13. The accumulated losses were also taken into account to determine the company's operational status.

Issue 4: Ownership of immovable property by the company
The company's ownership of a 300 sq meters plot allotted by HUDA was highlighted, along with evidence of property tax payments. The NCLAT considered this ownership as a factor in the decision to restore the company's name to the register.

Issue 5: Financial status and filing of annual returns
The appellants argued that although the company had not filed annual returns and financial reports after March 31, 2013, they were prepared and ready for submission. The NCLAT agreed that the non-filing of returns did not necessarily indicate that the company was not carrying on any business, especially considering the financial difficulties faced by the company.

In conclusion, the NCLAT allowed the appeal, quashed the impugned order, and directed the restoration of the company's name to the register, subject to specified compliances and costs to be paid. The judgment emphasized the importance of compliance with statutory provisions and considered factors such as ownership of property and financial status in reaching the decision.

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