2019 (7) TMI 1467 - AT - Companies Law

Restoration of name of Appellant in the Registrar of Companies - striking off the name on the ground that the Appellant Company was not in operation and was not doing any business on the date of striking off of the name of the company - whether the Appellant Company could justifiably be restored? HELD THAT - On the crucial issue of the Appellant Company being in operation and doing business in consonance with its object be it noticed that the financial statements covering fiscal period beginning 2013 through 2017 amply demonstrate that the Appellant Company was not in operation and did not conduct any business of the nature bearing nexus with its intended object. The Tribunal has tabulated the factual position emanating from such financial statements reflecting the assets, liability and turn-over of the Company as NIL . Thus, the finding that the Appellant Company was not doing the intended business cannot be termed erroneous notwithstanding the fact that the Appellant Company is shown to have been engaged in granting short term loans and advances to its sister concern which was not the intended object of the Company. Indulging in business activity not falling within the ambit of object of the Company or not being incidental or ancillary thereto cannot be termed a legitimate business for demonstrating that the Company was in operation. The finding recorded by the Tribunal and the conclusions deducible from the material on record do not warrant interference as no contrary view is possible - A Shell Company or a Company having assets but advancing loans to sister concerns or corporate persons for siphoning of the funds, evading tax or indulging in unlawful business or not abiding by the statutory compliances cannot be allowed to invoke this expression or otherwise which would be a travesty of justice besides defeating the very object of the Company. Such course would neither be just nor warranted. The Appellant has failed to make out a just ground warranting interference with the impugned order which is neither shown to be legally infirm nor are the findings recorded therein shown to be erroneous, much less perverse - appeal dismissed - decided against appellant.

Issues Involved:
1. Legality of striking off the Appellant Company’s name by the Registrar of Companies (ROC).
2. Compliance with statutory requirements by the Appellant Company.
3. The Appellant Company’s business operations and activities.
4. Maintainability of the appeal by a disqualified Director.
5. Application of Section 252(3) of the Companies Act, 2013 for restoration of the Company.

Detailed Analysis:

1. Legality of Striking Off the Appellant Company’s Name by the Registrar of Companies (ROC):
The Appellant Company, Alliance Commodities Private Limited, was struck off by the ROC, West Bengal, due to non-compliance with statutory requirements. The Tribunal upheld this action, noting that the Appellant had not filed its statutory returns and balance sheets since 2014. The ROC issued notices under Section 248(1) of the Companies Act, 2013, and the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016, which were published in the official gazette and newspapers. The Tribunal found no irregularity or illegality in the ROC's actions, concluding that the Appellant Company was not in operation and was not conducting any business on the date of striking off.

2. Compliance with Statutory Requirements by the Appellant Company:
The Appellant Company failed to file its Annual Returns and Financial Statements for more than two consecutive years, which led to its name being struck off. The Appellant contended that the non-compliance was unintentional and due to unawareness of the notice issued by the ROC. However, the Tribunal noted that the Appellant did not apply for the status of a ‘Dormant Company’ and found that statutory notices were duly issued, and the process for striking off was followed as per the Act.

3. The Appellant Company’s Business Operations and Activities:
The Tribunal analyzed the financial statements from 2013 to 2017 and found that the Appellant Company was not conducting its intended business of trading in commodities but was instead engaged in advancing inter-corporate loans, primarily to its sister concern. The Tribunal noted that there was no business activity, no employees were paid, and the income tax returns reflected zero gross income. The Tribunal concluded that the Company was not a going concern and was engaged in activities that could be viewed as illegal transactions by a Shell Company.

4. Maintainability of the Appeal by a Disqualified Director:
The ROC contended that the appeal was non-maintainable as it was preferred by a Director disqualified under Section 164(2)(a) of the Act. However, the Tribunal overruled this objection, stating that the Director’s status as a member of the Company was not disputed and that the issue of disqualification was anterior to the main issue of the Company’s restoration. The Tribunal found the objection regarding maintainability legally infirm and unwarranted.

5. Application of Section 252(3) of the Companies Act, 2013 for Restoration of the Company:
Section 252(3) empowers the Tribunal to restore a company if it is just to do so. The Appellant argued that the Company had financial assets and had filed income tax returns, and thus should be restored. However, the Tribunal found that the Company was not carrying on business or in operation at the time of striking off. The Tribunal emphasized that the term “or otherwise” in Section 252(3) should not be interpreted to allow arbitrary restoration of a company not complying with statutory requirements or engaging in unlawful business activities. The Tribunal held that the Appellant failed to demonstrate a just ground for restoration.

Conclusion:
The appeal was dismissed, with the Tribunal concluding that the Appellant Company did not make out a just ground for interference with the impugned order. The order was neither legally infirm nor were the findings erroneous or perverse.

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