2021 (5) TMI 854 - Tri - Companies Law

Winding up of the company - substratum of the company has been completely lost - Section 271 (e) read with Section 272 (1) (b) of the Companies Act, 2013 - HELD THAT - On perusal of the record, it is found that the company did not have any long term borrowings. Further, the Balance Sheet of the company as on 31.03.2017, it reflects that there are losses and the same trend is continuing and in the year 2017-18 the turnover of the company from business operation as reflected as 'NIL' due to recurring expenses of the company. Thus, as against the total liability as on 31.03.2018 is ₹ 32,40,81,282/-, whereas the total assets of the company is ₹ 1,53,25,517/-, which is not sufficient to completely settle the liabilities of the company, since the operations of the company is completely closed down after April 2011 - On perusal of the record, it is found that since there are no business activities in the company, there is no effective meetings of the Board of Directors and the shareholders of the company are being taken place, as such, there is no effective filing of annual return as well as there is no effective filing of statutory returns before the RoC and no effective return under the Income Tax, Commercial Tax, Service Tax, Central Excise, or any other law are being filed - Looking to the Balance Sheet of the company, it appears that there is no possibility for the company to restart any business activities. The Commercial Tax Department has also cancelled the registration of the company due to piled up tax liabilities and also took notional possession of the fixed assets of the company to recover the outstanding. It clearly reveals that for the object for which the company was started has totally failed and that the substratum of the company has been eroded and there are/were no meeting of the shareholders, members of board, etc. is being held in the recent past and no statutory returns have been filed and there is no possibility of revival of the company, as such, it is a fit case to pass an order on just and equitable ground for winding up of the respondent company. Petition allowed.

Issues Involved:
1. Winding up of the company on just and equitable grounds.
2. Compliance with SEBI regulations and delisting requirements.
3. Financial status and liabilities of the company.
4. Non-compliance with statutory filings and tax obligations.
5. Appointment of Company Liquidator and related directions.

Issue-wise Detailed Analysis:

1. Winding up of the company on just and equitable grounds:
The petition was filed under Section 271(e) read with Section 272(1)(b) of the Companies Act, 2013, seeking the winding up of the company on the grounds that the substratum of the company has been completely lost. The company, incorporated in 1974, had ceased all commercial activities since April 2011 due to actions taken under the SARFAESI Act by Asset Reconstruction Companies, which led to the sealing of production facilities. The company had no turnover from business operations in the financial years 2016-17 and 2017-18 and faced recurring expenses and substantial losses.

2. Compliance with SEBI regulations and delisting requirements:
SEBI submitted that the company, listed on the Bombay Stock Exchange, must comply with the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009, and other relevant regulations before winding up. SEBI highlighted that trading in the company's securities had been suspended due to non-compliance with Regulation 76 of the SEBI (Depositories and Participants) Regulations, 2018. SEBI also noted that the company might be compulsorily delisted, and the directors and promoters could be barred from accessing the securities market for ten years.

3. Financial status and liabilities of the company:
The company had accumulated losses of ?36,14,14,127 as of March 31, 2017, and further losses in the subsequent financial year. The company had current liabilities totaling ?32,40,70,067 as of March 31, 2017, with assets insufficient to settle these liabilities. The company's balance sheet reflected a negative net worth, and there was no reasonable hope for restarting business activities.

4. Non-compliance with statutory filings and tax obligations:
The company failed to file statutory returns under various laws, including Income Tax, Commercial Tax, and Service Tax, due to the cessation of business activities. The Commercial Tax Department had canceled the company's registration and took notional possession of its fixed assets to recover outstanding dues.

5. Appointment of Company Liquidator and related directions:
The Tribunal ordered the winding up of the company under Section 273 read with Section 271(e) of the Companies Act, 2013. Ms. Chhaya Gupta was appointed as the Company Liquidator to conduct the proceedings. The Liquidator was directed to provide an exit option to public shareholders after realizing the company's assets and to comply with SEBI regulations. The Tribunal also directed the Liquidator to file an application for constituting a winding-up committee and stated that no legal proceedings could commence or continue against the company without the Tribunal's leave. The order also served as a notice of discharge to the company's officers, employees, and workmen, who were required to cooperate with the Liquidator.

Conclusion:
The Tribunal allowed the Company Petition, ordering the winding up of the company due to the complete loss of its substratum and the inability to restart business activities. The Tribunal provided detailed directions for the appointment and duties of the Company Liquidator and emphasized compliance with SEBI regulations. The Registry was directed to send a copy of the order to the concerned RoC and the Company Liquidator within seven days.

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