Tribunal Upholds Registrar's Decision to Strike Company Name

The tribunal upheld the Registrar of Companies' decision to strike off the company's name, finding that the necessary steps under Section 248 of the Companies Act, 2013 were followed. It concluded that the appellant was given a fair opportunity to be heard and that the company was not engaged in any business operations based on the evidence presented. The tribunal also rejected the appellant's argument regarding the default in filing statutory returns and upheld the NCLT's interpretation of nil tax returns as indicative of non-business activities. The appeal was dismissed with no costs awarded.

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Issues Involved:

1. Compliance with Section 248 of the Companies Act, 2013.
2. Opportunity of being heard and principles of natural justice.
3. Allegations of non-business operations.
4. Default in filing statutory returns.
5. NCLT's interpretation of nil tax returns and business operations.

Issue-wise Detailed Analysis:

1. Compliance with Section 248 of the Companies Act, 2013:

The appellant argued that the Registrar of Companies (ROC) did not follow the necessary steps outlined in Section 248 of the Companies Act, 2013, before striking off the company's name. The appellant claimed that the ROC's action was premature and did not meet the conditions specified under Section 248.

Upon reviewing the records, it was found that the ROC issued a Notice dated 20.3.2017 to the appellant, directing them to submit their defense along with relevant documents within thirty days. Additionally, as per Section 248(1) and 248(4) and under the second proviso to Rule 7(1) of the Companies Act, 2013, an STK-5 notice was issued for the removal of the company's name from the register, and the notice was published in both vernacular and English languages. Therefore, it was concluded that the proper procedure was followed, and the principles of natural justice were complied with.

2. Opportunity of being heard and principles of natural justice:

The appellant contended that they were not afforded a reasonable opportunity to be heard before the ROC took action, which they claimed was a violation of the principles of natural justice.

The tribunal noted that the appellant was given a notice and directed to submit their defense within thirty days. The notice was published in both vernacular and English languages, ensuring that the appellant had the opportunity to respond. Consequently, it was determined that the appellant was provided with an opportunity to be heard, and the principles of natural justice were adhered to.

3. Allegations of non-business operations:

The appellant claimed that the NCLT's observation that the company was not engaged in any business was contrary to the facts, as evidenced by their financial statements and income tax returns.

The tribunal examined the records and found that the appellant had not filed balance sheets and annual returns for the financial years from 2011 onwards. Without any material evidence being provided by the appellant, the ROC could not ascertain whether the company was conducting any business. Therefore, the tribunal upheld the NCLT's observation that the company was not engaged in any business.

4. Default in filing statutory returns:

The appellant argued that the default in filing returns was due to a lack of legal awareness among the directors and was not done with any mala fide intent.

The tribunal observed that the company had been incorporated in 1991 and had been filing balance sheets and annual returns until 2010. The non-filing of returns from 2011 onwards could not be attributed to a lack of legal awareness, as the directors were well aware of their statutory obligations. The tribunal noted that the directors had been filing returns up to 2010 and were familiar with the legal requirements. Therefore, the appellant's argument was not accepted.

5. NCLT's interpretation of nil tax returns and business operations:

The appellant contended that the NCLT erred in treating the payment of nil tax and incurring of losses as evidence of not carrying on any business.

The tribunal reviewed the income tax returns filed by the appellant and noted that the returns for the assessment years 2014-15, 2015-16, 2016-17, and 2017-18 were filed in February/March 2018. The tribunal found no material or substance in those returns to contradict the NCLT's conclusion. Therefore, the tribunal upheld the NCLT's interpretation that nil tax returns indicated a lack of business operations.

Conclusion:

The tribunal found no merit in the appeal and dismissed it. The appeal was dismissed with no order as to costs.

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