2024 (10) TMI 402 - HC - Companies Law

Company can pursue legal remedies despite name struck off from Register under Section 248(5) Companies Act

Delhi HC dismissed application under Order VII Rule 11 CPC challenging suit filed by company whose name was struck off from Register of Companies under ... Effect of striking off company on pending civil proceedings - Continuance of suit for realisation of amount due - Section 250 - company deemed to continue for realisation of dues - Proviso to Section 248(6) and Section 248(7) - liabilities enforceable despite striking off - Interpretation of 'due' in Section 250 - Order VII Rule 11 CPC - rejection of plaintEffect of striking off company on pending civil proceedings - Order VII Rule 11 CPC - rejection of plaint - Whether striking off the name of the plaintiff company from the Register of Companies invalidates the pending civil suit and warrants rejection of the plaint under Order VII Rule 11 CPC. - HELD THAT: - The Court examined the statutory scheme under Section 248 read with Section 250 of the Companies Act, 2013 and concluded that striking off a company's name and consequent dissolution does not automatically render a pending civil suit incompetent or non-maintainable. The provisions (including the proviso to Section 248(6) and Section 248(7)) specifically preserve the company's existence to the extent necessary for realisation of amounts due and for payment or discharge of liabilities. Applying the ordinary grammatical meaning of the words used in Section 250, the Court held that the company remains capable of pursuing legal remedies to realise its dues and that a plaint filed before the striking-off is not vitiated merely because the company's name was later struck off. On that basis the learned Trial Court's dismissal of the Order VII Rule 11 application was upheld. [Paras 8, 9, 10, 13]The striking off did not invalidate the suit; the Order VII Rule 11 application was properly dismissed and the suit remains maintainable.Interpretation of 'due' in Section 250 - Continuance of suit for realisation of amount due - The meaning and scope of the expression 'amount due' in Section 250 and whether it is limited to crystallised or admitted debts. - HELD THAT: - The Court considered precedent and the statutory text and rejected the submission that 'due' must be limited to an 'admitted' or 'crystallised' debt. While recognising authorities which distinguish between damages and debt, the Court emphasised the plain and ordinary meaning of 'due' in Section 250, observing that the provision unconditionally preserves the company's capacity to realise amounts due and to have liabilities discharged even after striking off. Thus 'amount due' encompasses quantified amounts legally recoverable as well as claims for realisation that may require adjudication; it is not confined only to already crystallised or admitted debts. [Paras 10, 11, 12]The term 'amount due' in Section 250 is not confined to crystallised or admitted debts; the struck-off company continues to be entitled to realize its dues and pursue remedies.Final Conclusion: The civil revision petition is dismissed. The High Court held that striking off the plaintiff company's name does not automatically invalidate a suit filed prior thereto; the company remains competent to prosecute claims for realisation of amounts due and for discharge of liabilities under Section 250 and the proviso to Section 248(6)/Section 248(7). The Court expressed no opinion on the merits of the underlying suit. Issues Involved:1. Whether the striking off of the respondent/plaintiff company's name from the Register of Companies invalidates the pending civil suit.2. Interpretation of Sections 248 and 250 of the Companies Act, 2013 concerning the continuation of legal proceedings by a struck-off company.3. The distinction between 'due' and 'claimed' amounts under Section 250 of the Companies Act, 2013.4. The impact of delay and limitation on the maintainability of the petition.Issue-wise Analysis:1. Validity of the Civil Suit Post-Striking Off:The primary issue was whether the civil suit initiated by the respondent/plaintiff company could continue after its name was struck off from the Register of Companies. The petitioners/defendants argued that the company, being a non-existent legal entity post-striking off, could not pursue the suit. However, the court noted that the provisions under Sections 248(6) and 250 of the Companies Act, 2013, allow for the continuation of legal proceedings for the realization of dues and discharge of liabilities. The court emphasized that the striking off does not automatically invalidate the suit, especially since the cause of action existed at the time of filing the suit.2. Interpretation of Sections 248 and 250:The court examined Sections 248 and 250 of the Companies Act, 2013, which provide mechanisms for striking off a company's name and outline the effects of such dissolution. Section 248(6) ensures that a company's assets remain available for liabilities even after being struck off. Section 250 allows the company to continue existing for the purpose of realizing dues and settling liabilities. The court held that these provisions create exceptions, enabling the company to pursue legal remedies despite its dissolution status.3. Distinction Between 'Due' and 'Claimed':The petitioners/defendants contended that the term 'due' in Section 250 should be restricted to 'admitted debt' or 'crystallized amounts.' The court rejected this interpretation, stating that 'due' should be understood in its ordinary sense, encompassing both crystallized and uncrystallized claims. The court referred to precedents, including Tower Vision India Pvt. Ltd. v. Procall Private Limited, to clarify that 'due' does not solely apply to acknowledged or adjudicated amounts.4. Delay and Limitation:The respondent/plaintiff raised a preliminary objection regarding the maintainability of the petition due to a delay of over 167 days in filing, arguing it was barred by limitation. Although the court acknowledged the delay, it proceeded to address the substantive issues on merits, ultimately dismissing the petition. The court noted that the application under Order VII Rule 11 CPC was intended to derail the trial process rather than address genuine concerns.Conclusion:The court concluded that the striking off of the company's name does not invalidate the civil suit filed prior to such action. The provisions of the Companies Act, 2013, particularly Sections 248 and 250, safeguard the continuation of legal proceedings for dues and liabilities. The petition was dismissed, allowing the respondent/plaintiff to pursue remedies in law, with the court emphasizing that the suit's validity remained intact despite the company's dissolution status. All pending applications were disposed of, and the court refrained from expressing any opinion on the merits of the ongoing trial.