2024 (10) TMI 402 - HC - Companies Law

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

M/s. A.B. Creations & Anr. Versus M/s. Bhan Textiles Pvt. Ltd.

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 ... Dismissal of application under Order VII Rule 11 of CPC - name of the respondent/plaintiff company had been struck off from the Register of Companies in terms of Section 248(5) of the Companies Act, 2013 - HELD THAT:- As per Section 248 (1) to (5) of the Act, a mechanism has been provided whereby the Registrar of Companies on finding the grounds which are enumerated under Section 248 (1), can issue notice to the company and its directors and after adopting the appropriate procedure, it may proceed to strike off the name of the company from the register under sub-section (5) thereof. On a careful reading of the words in Section 250 of the Act by invoking the golden rule of construction that the words in the statute should be interpreted in their ordinary, normal and grammatical meaning, is that even if the name of a company is struck off from the register, it remains operational in so far as it can pursue legal remedies for realisation of the ‘dues’ of the said company against its debtors, which have either crystalised or remain uncrystallised, arising from any liability or obligation of its debtors to the company, but even the creditors can pursue legal remedies against the said company for the payment and discharge of its liabilities or obligations arising from any contract or statutory implications. This Court finds that the mere striking-off of the name of the respondent-company from the register by the Registrar of Companies does not automatically invalidate or renders flawed the civil suit filed by the respondent/plaintiff. In the instant matter, apparently the cause of action existed on the day the suit was instituted. Accordingly, the respondent/plaintiff company can pursue its remedies in law even after its name being struck off from the register by the Registrar of Companies. The present civil revision petition is dismissed. 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.