2024 (3) TMI 292 - AT - Companies Law

Company Name Restored After Being Struck Off for Non-Filing Under Section 248(5) Due to Inadvertent Non-Compliance

NCLAT Principal Bench allowed company's appeal for restoration of struck name from ROC register. Company was struck off for non-filing of financial ... Restoration of struck off company - power under Section 252(3) of the Companies Act, 2013 - or otherwise just and equitable - discretionary relief against striking off - shell company and siphoning of funds - non-filing of financial statements - conditional restoration subject to compliance and costsRestoration of struck off company - or otherwise just and equitable - shell company and siphoning of funds - non-filing of financial statements - Whether the appellant's name should be restored to the register despite non-filing of statutory returns and absence before NCLT of contemporaneous possession receipts - HELD THAT: - The Tribunal concluded that restoration under Section 252(3) is available where it is just and equitable to do so and the company is not a shell or engaged in siphoning of funds. Although the NCLT had declined restoration for lack of contemporaneous possession evidence and because the appellant had not produced certain receipts before that forum, the Appellate Tribunal found the non-compliance to be inadvertent, non-deliberate and caused by incapacity and counsel failure. The company holds substantial immovable assets, is not shown to have been used for siphoning or other malafide transactions, and there is no claim that it is a shell. In these circumstances, and having regard to authorities recognising restoration where companies possess substantive assets and operations, it was just and equitable to restore the company's name subject to conditions. [Paras 14, 15, 16, 23]Set aside the NCLT order and restore the company's name to the register on the grounds that the company is not a shell, the non filing was inadvertent, and restoration is just and equitable.Discretionary relief against striking off - power under Section 252(3) of the Companies Act, 2013 - Whether the Tribunal may exercise its discretion under Section 252(3) to order restoration despite the NCLT's reliance on Alliance Commodities (malafide/siphoning precedent) - HELD THAT: - The Appellate Tribunal recognised the scope of Section 252(3) to permit restoration where it is just and equitable but declined to adopt the broad application of Alliance Commodities where that case involved clear malafide conduct (loans to sister concerns and alleged evasion). The Tribunal distinguished Alliance on facts: there is no finding here of advancing loans to siphon funds or evasion of tax. Given the appellant's asset base and absence of malafide activity, the discretionary power was properly exercised in favour of restoration. [Paras 15, 23]The Tribunal exercised its discretion under Section 252(3) to restore the company after distinguishing precedents concerned with malafide conduct.Conditional restoration subject to compliance and costs - non-filing of financial statements - What conditions should attend restoration and whether the ROC retains rights to take further action for past non-compliance - HELD THAT: - The Tribunal directed restoration subject to specified conditions: payment of costs to the ROC and filing of all outstanding annual returns and balance sheets with payment of applicable fees within stipulated timeframes. The order expressly preserved the ROC's statutory right to take any other punitive or remedial steps for previous non filing or late filing against the company and its directors. [Paras 25, 26]Restoration ordered subject to payment of costs and compliance filings; ROC remains free to initiate further action for prior defaults.Admission of additional evidence - discretionary relief against striking off - Whether documents and receipts not placed before the NCLT but now produced to the Appellate Tribunal can be considered in support of restoration - HELD THAT: - The Tribunal accepted that certain material documents (financial statements, utility and rent receipts, Income Tax Return) were available but not placed before the NCLT due to prior counsel's failure and the ill health of key persons. Those documents were placed before this Tribunal and formed part of the reasoning that non compliance was inadvertent and the company retains substantive assets and capacity to resume operations. The Tribunal treated those materials as corroborative of the appellant's case for restoration. [Paras 11, 23]Additional pre-existing documents presented before the Tribunal were considered and weighed in favour of restoration.Final Conclusion: The appeal is allowed: the NCLT order is set aside and the Registrar is directed to restore the company's name to the register as just and equitable, subject to payment of costs and filing of all outstanding statutory returns and fees; the ROC remains free to pursue any further action for past non compliance. Issues Involved:1. Legitimacy of striking off the Appellant Company by the ROC under Section 248(5) of the Companies Act, 2013.2. Justification for restoration of the Appellant Company's name under Section 252(3) of the Companies Act, 2013.Summary:Issue 1: Legitimacy of striking off the Appellant Company by the ROC under Section 248(5) of the Companies Act, 2013.The Appellant Company, incorporated in 1981, was struck off by the ROC, Delhi & Haryana, under Section 248(5) of the Companies Act, 2013, due to non-filing of Financial Statements and Annual Returns. The Tribunal dismissed the appeal, noting the absence of any material document demonstrating that the appellant was still in possession of its property or conducting business. The Tribunal relied on the decision in *Alliance Commodities Private Limited Vs. Office of Registrar of Companies, West Bengal*, which emphasized that restoration of a company's name should not be arbitrary and must be justified by the company's operational status or other equitable grounds.Issue 2: Justification for restoration of the Appellant Company's name under Section 252(3) of the Companies Act, 2013.The Appellant argued that the company holds substantial assets and the non-compliance was due to the ill health and subsequent death of the key managing director and the lack of legal guidance. The Appellant presented additional evidence, including financial statements, water bills, and electricity bills, to substantiate their claim of ongoing possession and intent to resume operations. The Tribunal acknowledged that the company is not a shell company and holds valuable assets, making it just and equitable to restore its name. The Tribunal referenced multiple cases, including *Durga Builders (P) Ltd Vs ROC* and *Dashmesh Impex Pvt. Ltd. & Ors. Vs ROC*, where companies with substantial assets were restored despite non-filing of returns due to exceptional circumstances.Conclusion:The Tribunal found that the non-compliance was inadvertent and unintentional, and the Appellant is ready to comply with statutory provisions. The Tribunal directed the ROC to restore the Appellant Company's name, subject to payment of costs and filing of all pending returns. The ROC retains the right to take punitive actions for non-filing/late filing of statutory returns/documents. The appeal was allowed to the extent of restoring the company's name.