2021 (8) TMI 19 - Tri - Companies Law

Company name struck off register for persistent non-compliance

The Tribunal upheld the Registrar's decision to strike off the company's name from the register under Section 248 of the Companies Act, 2013. The Tribunal ... Seeking to restore the name of the Company in the Register maintained by the Respondent/RoC - Section 252 of the Companies Act, 2013 - case of applicant is that due procedure of law as contemplated under Section 248(5) and (6) of the Companies Act, 2013 was not followed by the Respondent will passing an order of strike of - HELD THAT:- As to the facts of the present case, the Applicant has pleaded in the Application and also challenged the procedure followed by the Respondent in striking off the name of the Company. In so far as the compliance to be made under Section 248(6) of the Companies Act, 2013 is concerned, from the Report filed by the Respondent, it is seen from para 17 of the Report that the Registrar has satisfied himself from the scrutiny of the balance sheet of the Company and it was found that the Company does not have any borrowings and third party liabilities. Under such circumstances, it is safe to conclude that the order passed by the Registrar under Section 248(5) of the Companies Act, 2013 does not suffer from any legal infirmities. Further, as to the procedural irregularity as pointed out by the Learned Counsel for the Applicant, it is to be noted here that eventhough in the Application the Applicant has stated that Form No. STK-5 was issued on 10.07.2017 and Form No. STK-7 was issued on 08.11.2017, the Applicant has preferred to remain indolent at that point of time, without sending any reply to the Respondent within a period of 30 days from the date of sending notice to the Company and its director. Further, from the procedure as laid down under Section 248(5) and (6) of the Companies Act, 2013, it is seen that the Respondent has followed the due process of law and has sent notice to the Company as enumerated under the Rules framed thereunder. This Tribunal is not empowered to issue directions to the Respondent in respect of which section (either 248 or 455), the action should be contemplated against a defaulting company. So long as the action initiated by the Respondent is falling within the purview of the Companies Act, 2013, this Tribunal cannot be called into to question its legality. Further, the stance of the Applicant that the Respondent has not preferred to initiate action against the Company under Section 455(4) of the Companies Act, 2013 but rather under Section 248 of the Companies Act, 2013, would not vitiate the proceedings undertaken by the Respondents under Section 248 of the Companies Act, 2013. However on the other hand it is the Company which has miserably failed to place on record any documents to show that the Company is active and carrying on its business activities. It is a fact borne on record that the Company has failed to file its Annual Returns and the Balance Sheet with the Respondent from the year 2006 onwards and also it is seen from the typed set filed along with the Application that they have not filed the Balance Sheet from the year 2006 onwards also before this Tribunal, which would go on to show that eventhough the name of the Company is restored, it would be a futile exercise, since the Company is not ready with its Balance Sheet and Annual Returns to be filed with the Respondent. There are no legal infirmities in the order passed by the Respondent under Section 248 of the Companies Act, 2013 in striking off the name of the Company viz. M/s. Sunflower Finlinks Limited from the Register maintained by them - application dismissed. Issues Involved:1. Legality of the strike-off procedure under Section 248 of the Companies Act, 2013.2. Compliance with procedural requirements under Section 248(5) and (6) of the Companies Act, 2013.3. Applicability of Section 403(1) of the Companies Act, 2013 regarding filing of annual returns.4. The necessity of following Section 455(4) of the Companies Act, 2013.5. The company's failure to maintain statutory compliance and the implications thereof.Issue-wise Detailed Analysis:1. Legality of the strike-off procedure under Section 248 of the Companies Act, 2013:The Applicant challenged the strike-off order on the grounds that the Registrar did not follow the due procedure as required under Section 248(5) and (6). The Tribunal noted that Section 248 allows the Registrar to strike off a company’s name if it fails to commence business within one year of incorporation or is not in operation for two preceding financial years. The Tribunal concluded that the Registrar's action was within the legal framework provided by Section 248.2. Compliance with procedural requirements under Section 248(5) and (6) of the Companies Act, 2013:The Tribunal examined whether the Registrar adhered to procedural requirements before striking off the company’s name. Section 248(5) mandates that the Registrar must issue a notice and publish it in the Official Gazette before striking off a company's name. Section 248(6) requires the Registrar to ensure all liabilities are settled. The Tribunal found that the Registrar had issued the necessary notices and satisfied himself that the company had no borrowings or third-party liabilities, thus complying with the statutory requirements.3. Applicability of Section 403(1) of the Companies Act, 2013 regarding filing of annual returns:The Applicant argued that under the first proviso to Section 403(1), the company was allowed to file annual returns with an additional fee up to 27.07.2017, and thus the strike-off was premature. However, the Tribunal noted that the company had not filed its Balance Sheet and Annual Returns since 2006, and despite ample time, failed to comply with statutory requirements. Therefore, the strike-off was justified.4. The necessity of following Section 455(4) of the Companies Act, 2013:The Applicant contended that the Registrar should have proceeded under Section 455(4) instead of Section 248. The Tribunal clarified that the Registrar has the discretion to initiate action under either section if a company fails to file annual returns for two consecutive years. The Tribunal emphasized that it cannot direct the Registrar on which section to apply, as long as the action falls within the Companies Act, 2013.5. The company's failure to maintain statutory compliance and the implications thereof:The Tribunal highlighted that the company's persistent failure to file its Balance Sheet and Annual Returns since 2006 indicated non-compliance with statutory obligations. The Tribunal noted that even if the company's name were restored, it would be futile as the company was not prepared with the necessary documents. Consequently, the Tribunal found no merit in the Applicant's arguments and upheld the Registrar’s decision to strike off the company’s name.Conclusion:The Tribunal dismissed the application, finding no legal infirmities in the Registrar’s order under Section 248 of the Companies Act, 2013, thereby upholding the strike-off of the company’s name from the register. The Tribunal emphasized that the company’s prolonged non-compliance with statutory requirements justified the Registrar’s action.