2023 (2) TMI 328 - AT - Companies Law

Appellate tribunal overturns NCLT order, restoring company name in Register

The appellate tribunal allowed the appeal under Section 421 of the Companies Act, 2013, challenging the NCLT's order for restoration of the company's name ... Restoration of company name to the register - striking off of company and statutory dissolution procedure - relevance of audited financial statements and existence of assets as evidence of carrying on business - reasonableness of Registrar's belief of non-operation based on non-filing - procedural notice requirements linked to removal from register - conditional restoration subject to compliance and costs - registrar's continuing power to initiate penal or other proceedings for non filingRestoration of company name to the register - relevance of audited financial statements and existence of assets as evidence of carrying on business - reasonableness of Registrar's belief of non-operation based on non-filing - Whether the striking off of the appellant company was sustainable and whether its name should be restored to the Register of Companies. - HELD THAT: - The Tribunal and Registrar acted on the basis that the company was not in operation because financial statements were not filed after 31.03.2015; however, audited balance sheets for the years 2015-16 through 2019-20 showed that the company possessed substantial movable and immovable assets. The presence of such assets and the audited financial statements negatived a conclusion that the company was not carrying on any business or operations. In those circumstances the impugned order of the Tribunal upholding removal from the register was held unsustainable. The Appellate Tribunal accordingly set aside the NCLT order and directed restoration of the company's name, imposing conditional compliances. [Paras 7, 8]Impugned order set aside; the company's name is restored to the Register of Companies subject to payment of costs and fulfilment of filing and fee compliances.Conditional restoration subject to compliance and costs - registrar's continuing power to initiate penal or other proceedings for non filing - procedural notice requirements linked to removal from register - Terms on which restoration is ordered and the Registrar's rights following restoration. - HELD THAT: - Restoration was granted conditionally: the company must pay costs to the Registrar and file all outstanding annual returns and balance sheets, along with payment of applicable fees and late charges. The order preserves the Registrar's statutory rights to initiate any punitive or other actions under the Companies Act, 2013 for prior non filing or late filing against the company and its directors. The appellate direction thus restores the company while leaving regulatory and penal remedies of the Registrar intact. [Paras 8]Restoration subject to payment of costs and filing of outstanding statutory documents; Registrar free to take further action for earlier non-compliance.Final Conclusion: The NCLT order dismissing restoration was set aside; the company's name is restored to the register on payment of costs and completion of statutory filings and fees, without prejudice to the Registrar's right to pursue penal or other proceedings for past non filing. Issues:- Appeal under Section 421 of the Companies Act, 2013 against the order of National Company Law Tribunal (NCLT) for restoration of company name in Register maintained by Registrar of Companies (RoC).- Failure to send notices/Form STK 1 to the Company and directors as per Section 248(1) of the Companies Act, 2013.- Disregard to the assets of the company worth crores of Rupees and implications of company strike-off.- Allegations of non-filing of financial returns due to extraneous circumstances and inadvertence.- Respondent's position based on non-operation of the company and dissolution under Section 248(1).- Appellant's claim of substantial movable and immovable assets indicating business operations.Analysis:1. The appeal was filed under Section 421 of the Companies Act, 2013, challenging the NCLT's order dismissing the appeal for restoration of the company's name in the Register maintained by RoC. The company, GRS Properties Pvt. Ltd., faced strike-off due to non-filing of returns and documents, leading to the current appeal.2. The appellant argued that the NCLT's order disregarded the provisions of the Companies Act, 2013, specifically the failure to send notices/Form STK 1 to the company and its directors as required under Section 248(1). The appellant emphasized the substantial value of the company's assets, primarily the property worth crores of Rupees, and the impact of strike-off on shareholders' valuation security.3. The appellant contended that the company's inability to file financial returns was due to extraneous circumstances and inadvertence. They highlighted efforts to comply, engagement of professionals, and the revelation of strike-off only in March 2021, indicating a lack of willful default.4. The respondent, RoC, justified the strike-off based on the company's non-operation, supported by records of non-filing of financial statements. The respondent followed due process under Section 248(1) by sending notices and ultimately dissolving the company. Lack of evidence of business operations or just and equitable grounds for revival were cited.5. The appellate tribunal, after considering the arguments and financial records of the company, concluded that the company possessed substantial movable and immovable assets, contradicting the notion of non-operation. The tribunal found the NCLT's and RoC's orders unsustainable in law and allowed the appeal for restoration of the company's name in the Register.6. The tribunal set conditions for compliance, including payment of costs to RoC, filing of annual returns and balance sheets, and adherence to statutory requirements post-restoration. RoC retained the authority to take punitive actions for non-compliance with filing obligations.7. The judgment emphasized the importance of maintaining due process and considering the company's assets and operations before resorting to strike-off actions, ensuring fairness and adherence to legal provisions in company law.