Strike-off of defunct companies can render parallel prosecution unsustainable when dissolution is already in progress.

Where a company's name is being struck off under the Companies Act and the statutory exit process is substantially complete, continuation of criminal prosecution for the same default becomes unsustainable. The note explains that once the company has applied for strike-off, the application has been favourably considered, public notice has been issued, and only final Gazette publication remains, the dissolution scheme under section 560, including sub-section (5), points towards cessation of the company's legal existence. In that setting, pursuing prosecution is described as unnecessary and inconsistent with the department's own strike-off course.

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Issues: Whether criminal proceedings against a company and its directors deserved to be quashed when the company had applied for striking off its name under the Companies Act and the department had already moved the matter towards final strike-off under the applicable circular scheme.

Analysis: The petition was founded on the interaction between the scheme for striking off defunct companies and the continuation of prosecution for non-increase of paid-up capital. The company had invoked the statutory exit process, and the reply affidavit ably showed that the application had been favourably considered, newspaper publication had been made, and only the final Gazette publication remained. The statutory scheme under section 560 of the Companies Act, 1956, especially sub-section (5), contemplated that once the prescribed procedure was completed and notice was published, the company would stand dissolved. In that factual setting, continuation of the criminal case was found to be unnecessary and contrary to the course the department itself had adopted under the circular scheme.

Conclusion: The criminal proceedings were not sustainable and were liable to be quashed in favour of the petitioners.

Ratio Decidendi: When the statutory process for striking off a company's name has been substantially completed and the competent authority has moved towards final dissolution under the governing scheme, continuation of prosecution on the same footing becomes unsustainable and may be quashed.

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