2010 (4) TMI 1185 - HC - Companies Law

Court orders restoration of company under Companies Act, ensuring justice for creditor

The court allowed the petition for restoration under Section 560(6) of the Companies Act, 1956, ordering the name of H.N. Explosives Pvt. Ltd. to be ... Restoration of name of companies in the register maintained by ROC - Strike of name of company due to non filing of returns - HELD THAT:- A petition for restoration of the name of a company to the Register of Companies un/s 560(6) of the Companies Act, 1956 can only be made by the company, a member or a creditor. A creditor is entitled to maintain a petition for restoration only if he was a creditor at the time the name of the company was struck off from the Register of Companies. Here, the arbitration award in favour of the petitioner was rendered on 14th March, 2007, i.e. before the date of the Gazette Notification notifying that the name of H.N. Explosives Pvt. Ltd. has been struck off the Register of Companies. It is clear that the amount claimed by the petitioner was against an incorporated company, which was a legal entity recognized under the Companies Act, 1956, and the arbitration award in question was also rendered against such a company. When H.N. Explosives Pvt. Ltd. was struck off from the Register of Companies by the respondent, it ceased to exist. Although, the liability of persons falling within the ambit of the first proviso to Section 560(5), who were directors, managers, officers exercising any power of management and members of the erstwhile company can nevertheless be enforced; however, in this case, the liability in terms of the award is that of the company itself and not of any individual mentioned in Section 560(5). Consequently, under the circumstances, the petitioner, in whose favour the award has been rendered, is left without a remedy to effect recovery against the erstwhile company H.N. Explosives Pvt. Ltd. Seeing that this petition was moved well within the stipulated period of limitation for initiation of proceedings under S.560, Companies Act, 1956, which is twenty years from the date of publication of the notice striking off the name of the company from the Register, this is a fit case for the exercise of the powers of this Court under S.560(6) of the Companies Act, 1956. The name of the company H.N.Explosives Pvt. Ltd., its directors and members stands restored to the Register maintained by the Registrar of Companies, as if the name of the said company had not been struck off, in accordance with S.560(6) of the Companies Act, 1956. Issues:1. Restoration of the name of a company to the Register of Companies under Section 560(6) of the Companies Act, 1956.2. Entitlement of a creditor to maintain a petition for restoration.3. Liability of individuals and companies after the company is struck off the Register.Issue 1: Restoration of Company NameThe petition sought restoration of the name of H.N. Explosives Pvt. Ltd. to the Register of Companies under Section 560(6) of the Companies Act, 1956. The company had been struck off the register by the Registrar of Companies for non-filing of returns, rendering it impossible for the petitioner, Indian Explosives Ltd., to execute an arbitration award against the erstwhile company. The petitioner had acquired the business in explosives of ICI India Ltd., and an arbitration award in their favor was rendered before the company was struck off the register. The court considered the petitioner's inability to recover the awarded sum due to the company's non-existence post-strike off and deemed it a fit case for restoration.Issue 2: Creditor's Right to Petition for RestorationA creditor is entitled to maintain a petition for restoration of a company's name to the Register of Companies if they were a creditor at the time the company was struck off. In this case, the arbitration award in favor of the petitioner was issued before the company's name was struck off, establishing the petitioner's status as a creditor of the erstwhile company. The court emphasized that the liability in terms of the award was that of the company itself and not of any individual, making the petitioner unable to enforce recovery against the defunct company, thus justifying the restoration.Issue 3: Liability of Individuals and CompaniesAfter a company is struck off the Register of Companies, the liability of directors, managers, officers, and members can still be enforced under certain provisions. However, in this case, the liability was against the company itself, and with the company ceasing to exist post-strike off, the petitioner was left without a remedy to recover the awarded sum. The court referred to a prior judgment to support the restoration, highlighting the applicability of restoring a company's name when litigation involving the company was pending at the time of strike off.The judgment allowed the petition for restoration under Section 560(6) of the Companies Act, 1956, ordering the restoration of the name of H.N. Explosives Pvt. Ltd. to the Register of Companies. The court noted the timely filing of the petition within the limitation period, serving notice to the directors of the defunct company, and the absence of their representation. The restoration was deemed necessary to enable the petitioner to enforce the arbitration award against the company, ensuring justice and recovery of the awarded sum.