2023 (5) TMI 201 - AT - Companies Law

Appellate Tribunal Restores Company Name: Criteria Met for Restoration under Companies Act

The Appellate Tribunal overturned the National Company Law Tribunal's decision and ordered the restoration of a company's name in the Register of ... Restoration of name in the Register of Companies - striking off under notice and removal procedure - company 'carrying on business or in operation' at time of striking off - just and equitable ground for restoration - compliance of filing of annual returns and financial statements as condition of restoration - power of Registrar to initiate consequential proceedings for non-filingCompany 'carrying on business or in operation' at time of striking off - striking off under notice and removal procedure - Whether the Appellant company was carrying on business or in operation at the time its name was struck off and whether the Registrar's and NCLT's findings to the contrary were sustainable - HELD THAT: - The Tribunal found that the Company possessed commercial immovable property allotted by NOIDA and produced evidence of regular electricity payments from July 2017 to September 2020. The Registrar's removal action was taken after noting non-filing of financial statements post 31.03.2015 and issuing statutory notices under the removal procedure, but the Registrar expressly stated before this Appellate Tribunal that it would have no objection to restoration on proof that the company was carrying on business or in operation and subject to filing of up-to-date financials. Having regard to the material placed on record (property allotment and electricity bills) and the Registrar's expressed position, the Appellate Tribunal concluded that it could not be said that the company was not carrying on any business or operations, and that the conclusions recorded below were not sustainable. [Paras 9]The finding that the company was not carrying on business or in operation when its name was struck off was set aside; the company's operational status and asset-holding warranted restoration.Restoration of name in the Register of Companies - just and equitable ground for restoration - compliance of filing of annual returns and financial statements as condition of restoration - power of Registrar to initiate consequential proceedings for non-filing - Whether the company's name should be restored and on what terms and conditions such restoration should be ordered - HELD THAT: - The Appellate Tribunal, having set aside the NCLT order and the Registrar's decision, directed restoration of the company's name to the Register of Companies. Restoration was made conditional: payment of costs to the Registrar within the stipulated period; filing of all outstanding annual returns and balance sheets with payment of requisite fees and additional late fees; and preservation of the Registrar's right to take any other punitive or other action for prior non-filing or late filing. The Tribunal thereby exercised its power to restore subject to compliance and left open the Registrar's statutory remedies. [Paras 10]The company's name is ordered restored to the Register of Companies subject to specified compliances, payment of costs, and without prejudice to the Registrar's power to take further action for statutory non-compliance.Final Conclusion: The appeal is allowed in part: the impugned NCLT order and the Registrar's striking-off decision are set aside and the company's name shall be restored to the Register of Companies, subject to payment of costs, filing of all outstanding returns and financial statements with requisite fees and without prejudice to the Registrar's entitlement to take further proceedings for past non-compliance. Issues Involved:The judgment involves the restoration of a company's name in the Register of Companies after it was struck off by the Registrar of Companies due to non-operation for two preceding financial years. The main issue revolves around the interpretation of Section 252 of the Companies Act, 2013 and whether the company met the criteria for restoration.Summary:Issue 1: Interpretation of Section 252 of the Companies Act, 2013The Appellant filed an appeal under Section 421 of the Companies Act, 2013, challenging the order of the National Company Law Tribunal (NCLT) dismissing the appeal for restoration of the company's name in the Register. The Appellant argued that the Tribunal ignored the conditions under Section 252(2) of the Act, which require the company to be carrying on business, in operation, or just to restore its name.Issue 2: Company's Operational Status and Property OwnershipThe Appellant contended that the company, involved in the automobile business, was in operation at the time of being struck off, evidenced by regular payment of electricity bills. The Appellant also highlighted the possession of commercial property and cited previous cases where restoration was allowed based on immovable property ownership.Issue 3: Registrar's Justification for Strike-offThe Respondent Registrar of Companies justified the strike-off by stating that the company had not filed financial statements beyond 2015, leading to the belief that it was not operational. Public notices were issued, and dissolution was completed in accordance with the Act's provisions.Judgment:After reviewing the arguments and evidence presented, the Appellate Tribunal found that the company indeed had commercial property, was operational, and had substantial assets. The Tribunal set aside the NCLT's order and directed the restoration of the company's name in the Register of Companies. The Appellant was instructed to pay costs, file necessary documents, and comply with statutory requirements. The Registrar was allowed to take further actions for non-compliance with filing obligations.This judgment clarifies the application of Section 252 of the Companies Act, 2013 concerning the restoration of a company's name in the Register based on operational status and ownership of immovable property.