2021 (1) TMI 515 - Tri - Companies Law

Seeking restoration of name of the Company in the Register of Companies - section 252 of the Companies Act, 2013 - HELD THAT - It is not in dispute that the Registrar of Companies is conferred with power U/s. 248(3) to strike off the Company, if the Company has failed to commence its business within one year of its incorporation or a Company is not carrying on any business or operation for a period of two immediately preceding financial years and has not made any Application within such period for obtaining the status of a dormant Company U/s. 455. However, Section 248(6) states that the Registrar of Companies, before finally striking off Company, has to satisfy himself that sufficient provision has been made for the realization of all amounts due to the Company and for the payment or discharge of its liabilities and obligations by the Company within a reasonable time, and, if necessary, obtain necessary undertakings from the Managing Director, Director or other persons in charge of the management of the Company. Though, the impugned order striking off the Company was in accordance with law, the Tribunal has to take into consideration the bona fide contentions of Petitioner seeking to restore the name of Company, by taking a lenient view of the issue in the interest of justice and ease of doing business, instead of rigidly interpreting the law on the issue. It is also not in dispute that the instant Company Petition is filed in accordance with law; there are no investigations pending against the Company; the Respondent has not opposed the Petition and has left the issue to the Tribunal to consider the case subject to certain terms and conditions - The Members of the Company have undertaken that post restoration of the Company in the Register of the Registrar of Companies, Bangalore, the Company will complete the Annual filings due for the past years and carry on the business in its ordinary course. Therefore, the interest of justice would be met if the name of Company is restored as prayed for, subject to conditions mentioned below. The Registrar of Companies, Karnataka, the Respondent herein, is directed to restore the name of the Company in the Register maintained by the Registrar of Companies, Karnataka as if its name had not been struck off from the rolls of the Register, with restoration of all consequential action taken by Registrar of Companies, which includes restoration of DINs of its Directors - Application allowed.

Summary

Issues:
1. Restoration of company name in the Register of Companies and quashing of striking off order.
2. Compliance with statutory requirements under the Companies Act, 2013.
3. Consideration of company's financial status and impact on stakeholders.
4. Tribunal's discretion in restoring company name and ease of doing business.

Issue 1: Restoration of company name in the Register of Companies and quashing of striking off order

The case involved a petition filed under Section 252 of the Companies Act, 2013, seeking to quash an order striking off the company's name from the Register of Companies and to restore it. The company, engaged in chit fund business, had failed to file financial statements for certain years, leading to the striking off order by the Registrar of Companies, Karnataka. The petitioner argued that the non-filing was due to negligence and not intentional. The Registrar did not oppose the restoration, subject to certain conditions. The Tribunal, after considering the facts and legal provisions, decided to restore the company's name, emphasizing the interest of justice and ease of doing business. Various directions were issued for compliance, including filing statutory documents and payment of costs.

Issue 2: Compliance with statutory requirements under the Companies Act, 2013

The Tribunal analyzed the provisions of the Companies Act, 2013, particularly Section 248, which empowers the Registrar to strike off a company for non-compliance. It noted the requirement for the Registrar to ensure the realization of amounts due and discharge of liabilities before striking off a company. Despite the legality of the striking off order, the Tribunal considered the petitioner's contentions sympathetically, emphasizing the need to balance legal compliance with the practicalities of business operations. The restoration order was made with conditions to ensure future compliance with statutory filings.

Issue 3: Consideration of company's financial status and impact on stakeholders

The case highlighted the company's financial standing, active business operations, and the potential impact on chit subscribers if the company's name remained struck off. The Tribunal acknowledged the revenue generated by the company and the assurance from its members to fulfill pending obligations post-restoration. It recognized the potential hardship and financial loss to stakeholders if the company's name was not restored, leading to the decision in favor of restoration, subject to specified conditions.

Issue 4: Tribunal's discretion in restoring company name and ease of doing business

The Tribunal exercised its discretionary powers under Section 252(3) of the Companies Act, 2013, to restore the company's name, considering the interests of justice and ease of doing business. It emphasized the need to interpret the law leniently in certain cases while ensuring compliance with legal requirements. The order to restore the company's name was accompanied by directions for timely compliance with statutory filings, payment of costs, and resumption of business operations post-restoration. The Tribunal's decision aimed to balance legal obligations with practical considerations for the benefit of the company and its stakeholders.