2024 (3) TMI 1242 - AT - Companies Law

Seeking restoration of name of the company on ROC - failure to file the Financial Statement and Annual Returns since incorporation - Section 252 of Companies Act, 2013 - HELD THAT - It is not the case of the respondent that appellant company was ever engaged in the transfer of the funds to its own sister concerns or that it is a Shell company or is engaged in siphoning of funds of another company. Rather the appellant claims to have carried commercial transactions with a view to establish a relationship with DPIL in order to commence its operations in consonance with the objectives of the appellant company and had amassed substantial assets but due to the fact DPIL went into insolvency in the year 2017, the company suffered a loss. On going through the auditor reports for the financial years 2016- 17, 2017-18, 2018-19, 2019-20, 2020-21 which show the Non-Current Liabilities to the tune of Rs.7,36,23,359/-; Current Liabilities to the extent of Rs.88.00 Crores; Non-Current Assets to the extent of Rs.06.00 Crores (approximately), the Current Assets of Rs.25.94 Crores, the Fixed Assets of Rs.56.32 Crores; the Loan Advances of Rs.25.93 Crores etc., and further since it is not a case of RoC the appellant is a Shell company and was at any time engaged in siphoning of the funds, hence, if the company s name is restored it shall cause no prejudice to RoC. Admittedly, Nil revenue from operations cannot be a sole cause for striking of the name. The appellant undertakes to be more cautious and vigilant in future in filing compliances under the applicable Laws and would adhere to all stipulated timelines designated without fail and shall pay cost imposed as per law. An affidavit in this regard be filled within a week from today before this Tribunal. It is just and equitable to restore the name of the appellant company to the record of RoC - the impugned order set aside - RoC, New Delhi is directed to restore the name of the company to the Register of Companies subject to the fulfilment of compliances imposed - appeal disposed off.

Summary

Issues:
The issues involved in this case include the restoration of a company's name to the Register of Companies after it was struck off by the Registrar of Companies (RoC) under Section 248(5) of the Companies Act, 2013, and the interpretation of Section 252(3) empowering the Tribunal to order restoration based on the company's business activities or just reasons.

Details of the Judgment:

1. The appeal was filed against an order by the National Company Law Tribunal (NCLT) that did not interfere with the striking off of the company's name by the RoC, as the company failed to demonstrate it was in operation or carrying on business, as required under Section 252 of the Companies Act, 2013.

2. The NCLT observed that the company had not filed balance sheets for the relevant years and lacked sufficient financial documentation to prove ongoing operations, as evidenced by the absence of bank statements and financial records for the period preceding the striking off.

3. The appellant argued that it had filed financial statements and annual returns up to 2015-16, and presented auditor reports for subsequent years showing substantial assets, fixed assets, and bank balances, indicating the company's readiness to resume business activities.

4. The appellant contended that its failure to file financial statements for certain years was due to inadvertent mistakes by a shared Chartered Accountant, leading to the company's name being struck off the register.

5. The appellant acknowledged the oversight in compliance but emphasized its intention to rectify the situation by providing updated financial reports and committing to future statutory obligations, including filing balance sheets and annual returns promptly.

6. Previous judgments by the Tribunal were cited to support the restoration of the company's name based on substantial assets, lack of involvement in unlawful activities, and the need to prevent unjust loss or prejudice to the company and its stakeholders.

7. The pending litigation with the Income Tax Department and the necessity to safeguard the interests of the company and stakeholders were highlighted as additional reasons for restoring the company's name to the register.

8. Considering the appellant's substantial assets, the failed business venture due to the insolvency of another company, and the lack of evidence supporting unlawful activities, the Tribunal found it just and equitable to restore the company's name, subject to specified compliances and costs.

9. The Tribunal emphasized the importance of future compliance, timely filings, and adherence to statutory requirements to prevent recurrence of such issues, directing the company to pay costs and fulfill necessary obligations within specified timelines.

10. The appeal was disposed of, and all pending matters were to be resolved accordingly, with the company's name to be restored to the Register of Companies subject to compliance with the Tribunal's directives.