2022 (8) TMI 424 - Tri - Companies Law

Appeal to Restore Company Name Dismissed for Non-Compliance with Companies Act

The appeal by M/s. Llyod Logic Systems Pvt. Ltd. for restoration of its name in the register of the Registrar of Companies under Section 252 of the ... Restoration of a struck-off company under Section 252(3) of the Companies Act, 2013 - striking off under Section 248(5) of the Companies Act - carrying on business or in operation or otherwise it is just - discretionary restoration limited where company was not in operation / shell company - twenty years limitation for restoration from publication under Section 248(5)Restoration of a struck-off company under Section 252(3) of the Companies Act, 2013 - carrying on business or in operation or otherwise it is just - discretionary restoration limited where company was not in operation / shell company - Whether the name of the appellant company should be restored to the Register of Companies - HELD THAT: - The Tribunal examined whether the appellant had established that the company was carrying on business or was in operation at the time its name was struck off, or that circumstances otherwise justified restoration. The Registrar of Companies had struck off the company's name under Section 248(5) after noting non-filing of statutory documents since the financial year ending 31.03.2007. The appellant failed to produce invoices, purchase orders or contemporaneous evidence of business operations immediately prior to striking off; the balance sheets later filed (for 2018-19, 2019-20 and 2020-21) reflected nil revenue from operations and income only from other sources, and the appellant had not filed income-tax returns. The Tribunal relied on the principle (as expounded by the NCLAT) that the power to restore under Section 252(3) is discretionary but confined by the requirement that restoration be appropriate where the company was carrying on business or was in operation, or where it is otherwise just; that 'or otherwise' cannot be used to permit arbitrary restoration where there is a specific finding that the company was not in operation or was a shell used for impermissible purposes. Applying this reasoning to the facts, and having found insufficient documentary proof that the company was operational when struck off, the Tribunal concluded that restoration was not justified and abstained from interfering with the ROC's action. [Paras 11, 13, 14]Appeal dismissed; restoration refused and the striking off by the RoC is upheld.Final Conclusion: The Tribunal dismissed the appeal and declined to restore the company's name, upholding the RoC's striking off on the ground that the appellant failed to demonstrate that the company was carrying on business or in operation when its name was struck off, and that discretionary restoration was not warranted. Issues:- Restoration of company name in the register of the Registrar of Companies- Compliance with statutory requirements for filing financial statements & Annual Return- Justification for restoration based on business operations and financial records- Interpretation of Section 252(3) of the Companies Act, 2013 regarding restoration of struck-off companiesAnalysis:1. The appeal was filed by M/s. Llyod Logic Systems Pvt. Ltd. for restoration of its name in the register of the Registrar of Companies under Section 252 of the Companies Act, 2013. The company was struck off due to defaults in statutory compliances, specifically failure to file financial statements & Annual Return for several years.2. The company claimed to be engaged in a wide range of business activities as per its Memorandum of Association but failed to provide concrete evidence of business operations immediately before being struck off. The directors had personal differences, leading to negligence in annual filings, and the company's financial records showed minimal revenue from operations, mainly from rental income and job work charges, resulting in losses.3. The RoC's report indicated that the company had not filed documents for years, leading to the belief that it was not in operation. The Income Tax Department did not object to the restoration proposal, but the Tribunal emphasized the importance of demonstrating business operations or justifying restoration on other grounds as per Section 252(3) of the Companies Act, 2013.4. The Tribunal referred to a judgment emphasizing that restoration should be based on the company being in operation or other justifiable reasons, not arbitrary decisions. In this case, due to lack of evidence of significant business operations before striking off and failure to meet statutory requirements, the Tribunal dismissed the appeal, upholding the RoC's decision to strike off the company.5. The Tribunal concluded that the company was not carrying out substantial business activities before being struck off, and there was insufficient evidence to support claims of ongoing operations. Therefore, the appeal for restoration was dismissed, and the company's name remained struck off from the Register of Companies.