2023 (4) TMI 1029 - AT - Companies Law

Appeal dismissed for company with invalid financial docs. Registrar's procedures followed, no restoration justified.

The tribunal dismissed the appeal, ruling that the company was not operational as claimed and that the financial documents presented were invalid. It was ... Restoration of struck off company under Section 252(3) of the Companies Act, 2013 - striking off from the register for non filing under Section 248 of the Companies Act, 2013 - requirement of plausible material to show the company was carrying on business or in operation - effect of a 50:50 shareholding/directorial deadlock on justness of restoration - dormant company status requires a company's application and cannot be granted suo motu by ROCRestoration of struck off company under Section 252(3) of the Companies Act, 2013 - requirement of plausible material to show the company was carrying on business or in operation - striking off from the register for non filing under Section 248 of the Companies Act, 2013 - effect of a 50:50 shareholding/directorial deadlock on justness of restoration - Whether the NCLT erred in dismissing the petition under Section 252(3) and in refusing to restore the name of M/s Opax Web Pvt Ltd to the register of companies. - HELD THAT: - The Appellate Tribunal examined the material placed before the NCLT and found no error in the conclusion that the appellant had failed to produce plausible material to satisfy that the company was carrying on business or in operation at the time its name was struck off. The Registrar of Companies had followed the statutory procedure under Section 248 and Rules (STK 1, STK 5, STK 7 notices) which was not disputed; consequently the appeal was brought under Section 252(3) (for restoration) and not Section 252(1) (to challenge the striking off procedure). The existence of only two directors/shareholders holding equal shares, and the stand taken by one director that the company was inoperative, meant that restoration would likely generate further dispute and litigation. The balance sheets relied on by the appellant were not board approved, were singly signed, and were contested by the other director as fabricated or irrelevant; documents post dating the striking off were also held not to establish operation at the relevant time. The Tribunal also noted that dormant status cannot be conferred by ROC suo motu but requires an application by the company, and that absence of objections from ROC or Income Tax Department does not relieve the appellant of satisfying Section 252(3). On these bases the NCLT's refusal to restore was held to be justified. [Paras 12, 13, 14]The NCLT did not err in dismissing the petition under Section 252(3); the appellant failed to establish plausible material that the company was carrying on business or that restoration would be just, and the appeal is dismissed.Final Conclusion: The appeal is dismissed; the judgment of the NCLT dated 27.07.2021 refusing restoration of M/s Opax Web Pvt Ltd is upheld. Issues Involved:1. Whether the company was operational or carrying on business at the time of its name being struck off.2. Whether the balance sheets and other financial documents submitted by the appellant were valid and substantiated.3. Whether the procedural requirements under Section 248 of the Companies Act, 2013 were followed by the Registrar of Companies.4. Whether it was 'just' to restore the name of the company considering the disputes between the directors and other relevant factors.Summary:1. Operational Status of the Company:The appellant claimed that the company was operational, citing balance sheets prepared by a Chartered Accountant. However, the NCLT found that the company had not filed financial statements since the financial year ending 31.03.2015. The respondent (another director with 50% shareholding) contended that the company was not in operation prior to the striking off. The tribunal noted the absence of trade receivables, payables, and fixed assets in the balance sheets for the relevant period, concluding that the company was not operational.2. Validity of Financial Documents:The appellant's balance sheets were challenged by the respondent, who argued they were prepared unilaterally and without board approval. The tribunal found that the balance sheets were not signed by both directors, lacked directors' reports, and were not approved in any board meeting. The tribunal deemed these documents as fabricated and not legally valid.3. Procedural Requirements Under Section 248:The appellant did not dispute that the procedural requirements under Section 248 were followed. The Registrar of Companies issued notices in Form STK-1, STK-5, and STK-7, which were not responded to by the company. The tribunal noted that the appellant did not raise any procedural issues and filed the appeal under Section 252(3), not Section 252(1), indicating no procedural lapse by the Registrar.4. Justness of Restoring the Company:The tribunal considered the ongoing disputes between the two directors, which created a deadlock in the company's operations. Given that one director opposed the restoration and the balance sheets were deemed invalid, the tribunal found no justifiable reason to restore the company's name. The tribunal also highlighted that restoring the company would likely lead to further disputes and litigation.Conclusion:The tribunal dismissed the appeal, concluding that the appellant failed to demonstrate that the company was operational or that it was just to restore the company's name. The procedural requirements for striking off the company were followed, and the financial documents presented were not substantiated.