2026 (2) TMI 442 - HC - Companies Law

Company name similarity and fraudulent incorporation: registration cancelled and funds ordered remitted to liquidation account.

A company was found to be fraudulently incorporated using a name strikingly similar to an existing corporate debtor, breaching the prohibition on ... Names which resemble too nearly - fraudulent incorporation - name similarity test - Section 4(2)(a) prohibition on similar names - cancellation of registration - remittance of funds to liquidation account - Corporate Insolvency Resolution Process (CIRP) - SPICe+ automated name-checking - writ remedy for wrongful incorporation - No Objection Certificate (NOC) misuse - HELD THAT:- We find substance in the contention of the petitioner that on a proper application of Rule 8 of the aforesaid Rules, respondent No. 3 could not have been registered as a company bearing the name ‘Sangeeta Aviation Service Private Limited’ as it was clearly and strikingly similar to the name of the petitioner corporate debtor i.e. ‘Sangeeta Aviation Services Private Limited’. The only difference being deletion of alphabet ‘s’ from the word ‘services’ clearly demonstrated that the respondent No. 1 could not have registered and incorporated respondent No. 3 with the name ‘Sangeeta Aviation Service Private Limited’. Apart from this, we find that the registered address of both the companies was shown as ‘Akshay Mittal Estate, Andheri (East), Mumbai’. We also find that common domain name viz. supremeaviation.com was used in the registered e-mail ID of respondent No. 3, when the said domain name was already being used by the suspended director of the petitioner corporate debtor. Even the company letterhead was replicated by the respondent No. 3 when compared with the letterhead of the petitioner corporate debtor. It is simply stated that the said system approved the name ‘Sangeeta Aviation Service Private Limited’, and therefore, registration and incorporation of respondent No. 3 was undertaken. We find that the stand taken in the reply affidavit of respondent No. 1 makes matters worse for the said respondent. An impression is sought to be given that due to lack of human interface and in the light of the functioning of the ‘SPICe+ system', such registration of the respondent No. 3 was undertaken. This is another reason why we are of the opinion that the respondent No. 1 is seeking to justify the fraudulent manner in which the respondent No. 3 was registered and incorporated as ‘Sangeeta Aviation Service Private Limited’. If the aforesaid ‘SPICe+ system' is so inadequate and incompetent, there is no reason why the officers of respondent No. 1 - Registrar of Companies should have used such a system in the first place and in any case, we find that a detailed enquiry into the matter is justified. We have come to the considered conclusion that in this case, respondent No. 3 company was fraudulently incorporated in the name of ‘Sangeeta Aviation Service Private Limited’ although its name was strikingly and too nearly similar to the name of the already registered company ‘M/s. Sangeeta Aviation Services Private Limited’, which is the corporate debtor petitioner. It is of no consequence that when the fraud was discovered, the name of respondent No. 3 was subsequently changed to ‘M/s. S4 Aviation Service Limited’. We also find that the petitioner has suffered considerable financial loss due to significant amounts being diverted because of the fraud committed by respondent No. 3, for which separate proceedings have already been initiated. The record also shows that the respondent No.4 Bank had taken steps to debit-freeze the account of respondent No. 3. Considering the conclusions that we have reached hereinabove, we find that an appropriate direction ought to be issued to respondent No.4 to remit the balance amount lying in the account of the fraudulently registered and incorporated respondent No. 3 to the liquidation account of the petitioner corporate debtor (under liquidation). Accordingly, we grant reliefs to the petitioner in terms of prayer clauses (A), (B) and (D). - Consequently, the registration and incorporation of respondent No. 3 stands cancelled. As regards prayer clauses (C), (E) and (F) pertaining to directions for instituting inquiry and investigation against the officers of the respondent No. 1 and considering directions for imposing penalty on respondent No. 1 and also directing the said respondent to pay compensation / damages to the petitioner, the respondent No. 1 is granted time of four weeks to file an additional affidavit. Rejoinder, if any, shall be filed within two weeks thereafter. Issues: Whether the company respondent No.3 was fraudulently incorporated under a name too nearly resembling the petitioner company and whether its registration should be cancelled and the balance funds in respondent No.3's bank account remitted to the petitioner's liquidation account.Analysis: The Court examined the application of Section 4(2)(a) of the Companies Act, 2013 read with Rule 8 of the Companies (Incorporation) Rules, 2014 concerning names which resemble too nearly the name of an existing company. The Court compared the names and noted that the only material difference was deletion of the terminal 's' in 'services', rendering the names strikingly similar when disregarding matters set out in Rule 8(2). The Court considered documentary evidence including identical registered addresses, use of a common domain in e-mail IDs, replication of company letterhead, vendor submissions bearing the suspended director's signature, and bank transaction records showing payments receivable by the petitioner being diverted into respondent No.3's account. The Court also evaluated respondent No.1's reliance on its automated SPICe+ system and an erroneously quoted version of Rule 8 in its affidavit, finding the quoted Rule to be incorrect and the registrar's explanation inadequate. On this factual and legal matrix, the Court found that respondent No.3 was registered in a manner inconsistent with Section 4(2)(a) and Rule 8 and that the fraudulent registration facilitated diversion of funds from the petitioner.Conclusion: The Court concludes that respondent No.3 was fraudulently incorporated with a name too nearly resembling the petitioner's name; respondent No.3's registration is cancelled and respondent No.4 (bank) is directed to remit the balance standing in respondent No.3's account to the petitioner's liquidation account.Ratio Decidendi: A company shall not be registered with a name that resembles too nearly an existing company's name; where Section 4(2)(a) of the Companies Act, 2013 read with Rule 8 of the Companies (Incorporation) Rules, 2014 shows striking similarity in names and documentary evidence establishes misuse of the similar name to divert the existing company's receivables, registration is impermissible and cancellation with remedial remittance to the aggrieved company's liquidation account is appropriate.