2023 (5) TMI 986 - AT - Companies Law

NCLT Upholds Strike-off Order for Non-operational Company

The National Company Law Tribunal (NCLT) upheld the Registrar of Companies' (ROC) strike-off order of M/s Millennium Realtech Pvt Ltd under Section 248 of ... Power to strike off name and dissolve company under Section 248 of the Companies Act, 2013 - restoration of name to the register under Section 252 of the Companies Act, 2013 - effect of dissolution and realisation of claims under Section 250 of the Companies Act, 2013 - non-filing of financial statements for two preceding years as basis for striking off - burden on appellant to satisfy the tribunal with cogent evidence of continued operationPower to strike off name and dissolve company under Section 248 of the Companies Act, 2013 - restoration of name to the register under Section 252 of the Companies Act, 2013 - non-filing of financial statements for two preceding years as basis for striking off - burden on appellant to satisfy the tribunal with cogent evidence of continued operation - effect of dissolution and realisation of claims under Section 250 of the Companies Act, 2013 - Whether the NCLT erred in rejecting the appeal under Section 252 and in refusing to restore the company's name which had been struck off by the ROC under Section 248. - HELD THAT: - The Appellate Tribunal affirmed the NCLT's rejection of the restoration appeal. The ROC followed the prescribed procedure (notice in Form STK-1, public notice in STK-5 and STK-7) on the basis that the company had not filed financial statements/annual returns since 31.03.2016 and was non-operational. The appellant had admitted before the NCLT that inter-se litigation and a managerial deadlock prevented holding board meetings and approval of financial statements, and failed to produce cogent evidence of ongoing business, revenue, or GST compliance. The arbitral proceedings relied upon did not establish operational activity and, in any event, Section 250 preserves the dissolved company's capacity to realise claims and does not mandate restoration where statutory grounds for striking off are established. Granting restoration in such circumstances would undermine the statutory scheme under Section 248. On these findings the NCLT did not err in refusing restoration. [Paras 13, 16, 17, 18, 19]Appeal dismissed; NCLT correctly refused restoration of the company's name and upheld the ROC's striking off.Final Conclusion: The Tribunal dismissed the appeal and upheld the striking off by the ROC: the appellant failed to discharge the burden of proving that the company was operational and the statutory procedure for striking off was properly followed; restoration was therefore not warranted. Issues Involved:1. Validity of the strike-off order by the Registrar of Companies (ROC) under Section 248 of the Companies Act, 2013.2. Maintainability of the appeal under Section 252 of the Companies Act, 2013.3. Whether the company was operational and doing business in the preceding two years.4. Relevance of internal disputes and deadlock in the management of the company.5. Applicability of precedents cited by the appellant.Summary:Issue 1: Validity of the Strike-off Order by ROCThe ROC struck off the name of M/s Millennium Realtech Pvt Ltd (the Company) under Section 248 of the Companies Act, 2013, due to non-filing of financial statements and annual returns for the preceding two years and the company being non-operational. The ROC issued notices in Form STK-1 and STK-5, and finally struck off the name on 29.10.2019, as per Section 248 and Rule 9 of the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016.Issue 2: Maintainability of the Appeal under Section 252The company filed an appeal under Section 252 of the Companies Act, 2013, for annulling the strike-off order and restoring the company's name. The NCLT dismissed the appeal on 04.03.2022, as the company was non-operational and did not generate any revenue in the preceding two years. The present appeal was filed by one of the directors against this order.Issue 3: Operational Status of the CompanyThe appellant argued that the company was operational despite not filing financial statements or generating revenue. However, the NCLT found no cogent evidence to support this claim. The ROC's reply indicated that the company was not operational, as evidenced by blank columns for revenue from operations and GST details.Issue 4: Internal Disputes and Management DeadlockThe appellant admitted to inter-se litigation and deadlock among the directors, preventing board meetings and approval of financial statements since 31.03.2017. This admission led to the inference that the company was unlikely to be operational or doing business.Issue 5: Applicability of PrecedentsThe appellant cited cases like Alliance Commodities Pvt Ltd and Indian Explosives Ltd. However, the NCLT found these cases inapplicable as the facts differed significantly. The NCLT also noted that Section 250 of the Companies Act allows a struck-off company to realize claims and discharge liabilities, which mitigates the appellant's concerns.Conclusion:The NCLT did not err in rejecting the appeal for restoring the company's name, as the company was non-operational, and there was no plausible explanation to counter the ROC's decision. The appeal was dismissed.