2018 (11) TMI 1859 - Tri - Companies Law

Company name restoration granted based on future prospects, with strict compliance terms for revival

The Tribunal allowed the appeal for restoration of the company's name, emphasizing the potential for business revival and revenue generation. The decision ... Seeking restoration of name of respondent company in the Register of Companies - section 252 of Companies Act - HELD THAT:- It is required to be noted that the company is to satisfy this Tribunal about carrying on operations and business for an immediate period of two years prior to the date of striking off which in this case is evidently absent from the figures reflected in the financial statements by the company itself and is duly audited by the statutory auditor of the company. However, the agreement as entered into between the company and the society as named above clearly demonstrate that there is a scope for revival in the operations of the company and which is highlighted by the learned counsel for the petitioner during the course of his submissions constitutes a just ground for restoration of the name of the company. Any business to say the least is attendant with business cycles and a company which is at its lowest ebb at a given point of time can always rise to its potential at a future date based on the upward movement of business cycle of that industry or dependent on the general economic conditions. Thus, mere lack of operations for two years immediately proceeding the striking off of cannot be the only determining factor and this Tribunal is also required to take into consideration the scope of revival of the operations of the company and consequent revenue generation if same is demonstrated by the company before this Tribunal at the time for seeking its restoration. There being no significant objections raised by the respondent ROC in relation to the restoration of the name of the company and as well as by Income Tax, the name of the company shall be revived/ restored to the register of companies as maintained by the registrar of companies - Application allowed. Issues:1. Challenge to striking off the name of the company under Section 248 of the Companies Act, 2013.2. Compliance with statutory requirements by the company.3. Financial position and operations of the company.4. Scope for revival of the company's business.5. Terms and conditions for restoration of the company's name.Issue 1: Challenge to striking off the name of the company under Section 248 of the Companies Act, 2013:The appeal was filed by shareholders aggrieved by the striking off of the company's name. The shareholders invoked Section 252(3) of the Act, claiming the company was a going concern. The respondent ROC stated that due process was followed but had no objection to restoration, subject to compliance with balance sheet and annual return filing requirements.Issue 2: Compliance with statutory requirements by the company:The company had been regular in convening meetings and filing income tax returns. However, the ROC highlighted non-compliance with certain provisions leading to the striking off. The Income Tax department's observation was limited to recent years, indicating no statutory dues assessed.Issue 3: Financial position and operations of the company:Financial statements revealed minimal revenue from operations, with no significant improvements over the years. Additional agreements and financial statements were submitted during the proceedings, showing some revenue generation post-striking off.Issue 4: Scope for revival of the company's business:The agreement between the company and a society demonstrated potential for revenue generation, supporting the argument for restoration. The Tribunal emphasized the need to consider future prospects and revenue generation potential, not solely past activities, for restoration under Section 252(3).Issue 5: Terms and conditions for restoration of the company's name:The Tribunal allowed the appeal, subject to conditions. The company was required to file pending returns, deposit funds for expenses, refrain from alienating assets, and comply with director disqualification provisions. An affidavit of compliance was mandated within two months.In conclusion, the Tribunal allowed the appeal for restoration of the company's name, emphasizing the potential for business revival and revenue generation. The decision was based on considerations of future prospects rather than just past activities, highlighting the importance of demonstrating substantial evidence for revival. The restoration was subject to strict terms and conditions to ensure compliance with statutory requirements and safeguard company assets.