CANCELLATION OF CERTIFICATE OF SECTION 8 COMPANY UNDER COMPANIES ACT, 2013

A section 8 company is a type of nonprofit organisation registered under the Companies Act, 2013. The main object of this company is for the promotion of commerce, art, science, education, research, charity, social welfare or environmental protection. No dividend shall be issued by Section 8 companies. All the income earned must be reinvested solely for promoting its objectives.

 The company must obtain a specific licence from the Registrar of Companies. The company can surrender the licence voluntarily. The Department can cancel the licence issued to the company on the following grounds-

• The company violates the provisions of Section 8 of the Companies Act, 2013, or the conditions under which the license was granted. 
• The company's affairs are conducted in a fraudulent manner. 
• The company's conduct is prejudicial to public interest or violates its own objectives.

In Ootacamund Club, rep. by its Secretary Mr. Oommen Abraham Versus The Registrar of Companies, The Regional Director (Southern Region), Lt. Col. Sandeep Dewan (Retd.) - 2025 (9) TMI 138 - MADRAS HIGH COURT the petitioner company was registered under the Companies Act, 1882 as a company limited by guarantee. The said company continued to be a company limited by guarantee under subsequent Companies Act, 1922, 1956 and 2013. The third respondent initiated various cases before different Court/Tribunals against the petitioner company on the long pending disputes between the third respondent and the petitioner company.

The third respondent filed a petition before the National Company Law Tribunal (‘NCLT’ for short) against the petitioner company with the prayer for the cancellation of certificate issued to the petitioner under Section 8 of the Companies Act since the petitioner does not meet the mandatory pre-requisites and the petitioner is wilfully masquerading as a company registered under Section 8 of the Companies Act, 2013 by providing false information.

The petitioner company requested the Registrar of Companies to issue a certificate to confirm the fact that they are registered under Section 8 of the Companies Act, 2013. The Registrar of Companies issued the certificate as requested by the petitioner. The said certificate was issued by the Registrar of Companies to the petitioner on 24.01.2025.  The third respondent, on coming to know the issue of certificate to the petitioner by Registrar of Companies, made a complaint to the Regional Director on 19.03.2025 with the prayer to issue suitable directions to the Registrar of Companies to cancel the certificate issued to the petitioner on 24.01.2025. The second respondent, Regional Director allowed the application and issued necessary directions to the Registrar of Companies.

On the basis of the directions of Regional Director, the Registrar of Companies issued a notice to the petitioner on 09.05.2025, calling upon the petitioner to show cause as to why the certificate dated 24.01.2025 should not be withdrawn. The petitioner filed a reply to the said show cause notice on 09.05.2025. The Registrar of Companies, without considering the reply filed by the petitioner, withdrew the certificate issued to the petitioner under Section of the Companies Act, 2013, dated 24.01.2025, on 22.05.2025.

Against the above said order the petitioner filed the present writ petition before the Madras High Court. The petitioner submitted the following before the High Court-

• The petitioner was granted licence under Section 26 of the 1882 Act, which was never revoked.
• By virtue of Section 565 of the Companies Act, 1956, the status of the petitioner would continue u pto the latest enactment of the year 2013 namely as a company registered under Section 8 the Companies Act, 2013.
• The certificate dated 24.1.2025 issued by the first respondent is nothing but a reiteration of the status of the petitioner.
• There is no requirement for the Registrar of Companies to withdraw the said certificate.

The Registrar of Companies and the Regional Director, the first respondent and second respondent respectively submitted the following before High Court-

• The petitioner company was registered as a company limited by guarantee under the Companies Act, 1882 and continues its said status till date.
• The petitioner requested the first respondent to issue a certificate under Section 8 of the Companies Act, 2013 for production before the Income Tax Authorities.
• Therefore, the Registrar of Companies issued the certificate on 24.01.2025.
• The petitioner filed a said certificate before a proceeding before the NCLT in which the first respondent and the second respondent are parties to the case.
• On receipt of the complaint from the third respondent, the first respondent issued a notice to the petitioner.
• On receipt of the reply from the petitioner the first respondent withdrew the certificate dated 24.01.2025 since a case is pending before the NCLT about the status of the petitioner under Section 8 of the Companies Act, 2013.
• When the matter is sub judice the certificate ought not to be issued to the petitioner.
• Therefore, the said certificate was withdrawn.

In view of the above the first and second respondents prayed for the dismissal of the writ petition.

The third respondent submitted the following before the High Court-

• The third respondent filed a petition before NCLT, Chennai against the petitioner about the very status of it.
• The petitioner contended the it is a Section 8 company.
• While the petition is pending before NCLT, the petitioner managed to get a certificate about its status from the Registrar of Companies.
• The said certificate, dated 24.01.2025 was also produced by the petitioner before the NCLT.
• This certificate was obtained by the petitioner without revealing to the first respondent that it is going to be used in the pending proceedings before the NCLT, Chennai where respondents 1 and 2 are parties.
• The third respondent lodged the complaint before the second respondent and in turn, the first respondent acted upon the same and by the impugned proceedings, revoked the certificate dated 24.1.2025 issued in favour of the petitioner.

In view of the above the third respondent prayed for the dismissal of the writ petition.

The High Court considered the submissions of the parties to the present writ petition and also analysed the impugned order. The High Court observed that the Registrar of Companies might not issue the certificate given to the petitioner had the petitioner informed the Registrar of Companies about the original intention of getting the said certificate. The main issue pending before the NCLT, Chennai is as to whether the petitioner is wilfully masquerading it to be a company registered under Section 8 of the Companies Act, 2013 by providing false information and the status has to be cancelled. Therefore, this matter should be agitated before the NCLT. The first respondent and the second respondent are the parties to the case pending before the NCLT. This will tantamount to virtually giving an impression to the NCLT, Chennai as if the first respondent recognized the petitioner as a company registered under Section 8 of the Companies Act, 2013.

The High Court further observed that the certificate given by the first respondent was withdrawn after issuing notice to the petitioner and the reason for withdrawing such certificate given to the petitioner does not suffer from any illegality.

The status of the petitioner is to be decided by the NCLT independently in the pending proceedings. The certificate dated 24.01.2025 given by the Registrar of Companies is immaterial. It is left open to the parties concerned to put forth all the grounds before the NCLT, Chennai and the same shall be considered on their own merits.

The High Court did not find any ground to interfere with the impugned proceedings of the first respondent dated 22.5.2025. The High Court directed NCLT to decide the issue independently without relying on the certificate issued by the Registrar of Companies and its cancellation etc.