2024 (7) TMI 1735 - AT - Companies Law

Struck-off company's restoration based on ongoing business activity, tax filings, and assets/liabilities; name restored u/s252(3)

In an appeal under s.252(3) of the Companies Act, 2013 seeking restoration of a struck-off company's name, the NCLAT held that restoration is warranted ... Seeking restoration of a company's name under Section 252(3) of the Companies Act, 2013 in the register of companies - HELD THAT:- In the present case the company had filed Audited Accounts till March 2020 copies of which annexed in the Appeal Paper Book. The said company has also filed Income Tax Returns up to Assessment Year 2020-21 as per the report of the concerned Income Tax Officer. The company has substantial assets and liabilities, it owns property and plant and machinery. Since the company has substantial assets and liabilities, it cannot be said that the company does not carry on any business or operations. No prejudice shall be caused to any one if the company is restored. It is considered just and equitable to restore the name of the company to the records of RoC - appeal allowed. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether restoration of a company's name under Section 252(3) of the Companies Act, 2013 was warranted where the company had been struck off under Section 248(5) for non-filing, but the record before the Appellate Tribunal showed continuing indicia of business/operation and/or facts making restoration 'just and equitable'. (ii) Whether the dismissal of restoration by the Tribunal below was sustainable despite subsequent material placed on record showing filing of income tax returns up to a later period and audited accounts reflecting substantial assets and liabilities, and whether restoration could be ordered with conditions to safeguard statutory compliance. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Threshold for restoration under Section 252(3) after strike-off under Section 248(5) Legal framework (as discussed by the Court): The Court proceeded on the statutory standard in Section 252(3), namely that restoration may be ordered if the company was 'carrying on business or in operation' or 'otherwise it is just' to restore its name, even though strike-off had been effected under Section 248(5) for non-filing. Interpretation and reasoning: The Court assessed whether the company could be treated as non-operational merely because earlier material before the Tribunal below indicated 'nil' revenue from operations and absence of bank statements/income tax returns. On appraisal of the appellate record, the Court found contrary and stronger indicators: audited accounts were available up to March 2020 and reflected ownership of property and presence of plant and machinery as well as loans/advances recoverable; and the tax department's report confirmed income tax return filing up to Assessment Year 2020-21 (except one year) with a minor outstanding demand. The Court treated the existence of substantial assets and liabilities and continuing fiscal filings as sufficient to negate the inference that the company did not carry on business/operations, and also as supporting that restoration was 'just and equitable'. The Court further reasoned that no prejudice would be caused by restoration in these circumstances. Conclusion: The statutory test under Section 252(3) was satisfied; given substantial assets and liabilities and continuing returns/audited accounts, the company could not be characterised as not carrying on any business or operations, and restoration was held to be just and equitable. Issue (ii): Sustainability of refusal of restoration and appropriateness of conditional restoration Legal framework (as applied): Having found restoration warranted under Section 252(3), the Court considered the need to balance restoration with compliance enforcement, including the regulator's ability to proceed for statutory defaults. Interpretation and reasoning: The Court held the refusal of restoration was unsustainable in law in light of the appellate material demonstrating assets, liabilities, and continuing tax filings and audited accounts. However, restoration was not unconditional: the Court imposed a cost payable to the Registrar and required filing of all annual returns and balance sheets with applicable fees/late fees. Importantly, the Court preserved the Registrar's liberty to take punitive or other steps under the Act for non-filing/late filing against the company and its directors, indicating restoration does not immunise prior defaults. Conclusion: The impugned dismissal order was set aside and restoration was ordered, subject to (a) payment of specified costs within a fixed time, (b) completion of pending statutory filings with applicable charges, and (c) continued freedom of the Registrar to initiate action for past non-compliances.