2023 (8) TMI 132 - HC - Companies Law

Challenge to NCLT against striking off of companies - grievance of the petitioners is that despite having been struck off, the shell companies have been transacting with shares of the petitioner no. 1, thereby adversely affecting the commercial interests of the petitioner no. 1-Company, which amounts to financial fraud and corporate offence - HELD THAT - A perusal of Section 248 of the 2013 Act indicates that the same merely extends up to the striking off of a company if it is not carrying on any business or operation for a period as stipulated in Section 248(1). Upon taking the steps as contemplated in sub-sections (1) to (4) of Section 248, the Registrar, under sub-section (5) thereof, may strike off the name of the company from the Register of Companies and publish a notice in the Official Gazette, upon which the company stands dissolved - However, there is nothing in the provisions of the 2013 Act which empowers the ROC to enquire into the antecedents and activities of a dissolved company. Section 250 of the 2013 Act provides that where a company stands dissolved under Section 248, it shall, from such date, cease to operate as a company and the Certificate of Incorporation issued to it shall be deemed to have been cancelled from the said date, except for the purpose of realizing the amount due to the company and for the payment or discharge of the liabilities or obligations of the company. The argument of the petitioners, that the petitioners cannot go on filing repeated appeals against the revival orders, is not acceptable, since it is the aggrieved party who has to prefer such an appeal - In the event the petitioners feel that they are aggrieved in any manner with the revival of any of the previously struck off companies which are the shareholders of the petitioner no. 1-company, it is open for the petitioners to prefer a challenge before the NCLAT. However, it is not for the petitioners to route their own grievances through other agencies, including the ROC, by avoiding the responsibility of preferring such challenges in due course of law. If the companies-in-question are revived under Section 252 of the 2013 Act after having been struck off initially, there is no bar on the said companies to carry on functioning. Hence, the cause of action in respect of the revived companies, as argued by the petitioners, lies only in a challenge before the NCLAT - it is well-known that the Ministry has been specifically sensitized to look into economic offences of the nature as complained of by the present petitioners, such as functioning of struck-off shell companies by transacting shares of companies like the petitioner no. 1. Application disposed off.

Summary

Issues involved:
The issues involved in the judgment are the revival of shell companies affecting the commercial interests of a petitioner company, the role of the Registrar of Companies (ROC) in investigating the activities of struck-off companies, the scope of Sections 248, 250, and 252 of the Companies Act, 2013, the duty of the ROC under Rule 25B of the Companies (Incorporation) Rules, 2014, the right of aggrieved parties to challenge revival orders, and the authority of investigating agencies to look into fraudulent transactions involving struck-off companies.

Revival of Shell Companies:
The respondent-companies, initially struck off for being shell companies, were later revived, causing grievances to the petitioners due to transactions affecting the petitioner no. 1-company's commercial interests. The petitioners alleged financial fraud and corporate offense due to the continued transactions by the revived shell companies.

Role of Registrar of Companies (ROC):
The ROC's role, as per the ROC's counsel, is limited to the provisions of Section 248 of the Companies Act, 2013, related to striking off companies not carrying out business operations. The ROC argued that challenging the revival of shell companies lies with the aggrieved parties before the appropriate forum, such as the National Company Law Tribunal (NCLT).

Scope of Companies Act, 2013:
Sections 248, 250, and 252 of the Companies Act, 2013 govern the striking off, dissolution, and revival of companies. The Act empowers the ROC to strike off a company not conducting business operations, leading to dissolution. However, the Act does not authorize the ROC to investigate the activities of dissolved companies.

Duty of ROC under Rules:
Rule 25B of the Companies (Incorporation) Rules, 2014 imposes a duty on the ROC to verify the registered offices of companies. However, this rule does not grant the ROC authority to conduct fact-finding investigations into the functioning of struck-off companies.

Right to Challenge Revival Orders:
Section 252 of the Companies Act, 2013 provides for an appeal to the Tribunal against the removal of a company's name from the register. The aggrieved parties have the right to challenge revival orders before the NCLT, and subsequent appeals can be made to the National Company Law Appellate Tribunal (NCLAT).

Authority of Investigating Agencies:
While the Securities Exchange Board of India (SEBI) is the appropriate authority to investigate fraudulent share transactions, the petitioners did not involve SEBI in the writ petition. The Ministry of Corporate Affairs is responsible for identifying and penalizing shell companies, especially after August 18, 2022, for economic offenses like transacting shares of struck-off companies.

Direction for Further Action:
The judgment grants the petitioners liberty to file fresh complaints detailing fraudulent transactions by the revived shell companies to the Ministry of Corporate Affairs and SEBI. Upon receiving complaints, the authorities are directed to conduct inquiries and investigations, taking corrective steps if fraudulent activities are found. No costs are awarded, and certified copies of the judgment will be issued to the parties upon request.