TaxTMI 
TaxTMI 
2024 (2) TMI 977
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....ing/setting aside the Impugned Decision and Order dated 07.08.2020 passed by the Respondent No. 2;" 2. Since Rule 37 of the Companies (Incorporation) Third Amendment Rules, 2016, notified by the Respondent No. 1 on 27.07.2016 is under challenge in the present Writ Petition, the matter was placed before the Division Bench of this Court. On 23.01.2023 Learned Counsel appearing for the Petitioner stated before the Division Bench of this Court that he is not pressing for the relief prayed for in the prayer Clause (a) of the Writ Petition. In view of the submission made by the learned Counsel for the Petitioner the matter was listed before a Single Judge. 3. This Court will, therefore, deal only with the Order dated 07.08.2020, which is under challenge in the present Writ Petition, by which the Registrar of Companies rejecting the conversion of the Petitioner's company from an "Unlimited Liability Company" to a "Limited Liability Company". 4. Facts of the case reveal that the Petitioner is a company incorporated under the Companies Act, 1956 and is engaged in the business of wholesale cash and carry trading of footwear, apparels and sports equipment under the "Reebok" brand....
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....es Act, 2013 for striking off its name, or (c) the company is in default of any of its Annual Returns of financial statements under the provisions of the Companies Act, 1956 or the Companies Act, 2013, or (d) a petition for winding up is pending against the company, or (e) the company has not received amount due on calls in arrears, from its directors, for a period of not less than six months from the due date; or (f) an inquiry, inspection or investigation is pending against the company." 7. It is stated that the application of the Petitioner was rejected vide communication dated 05.10.2016 without any reasons and justification. It is stated that the Petitioner wrote letters seeking reasons for the rejection and since no reason was forthcoming, the Petitioner approached this Court by filing W.P.(C) 952/2017 challenging the communication dated 05.10.2016. It is stated that this Court vide Order dated 03.03.2020 directed the Respondent No. 2 to decide the application of the Petitioner afresh, in accordance with law, after giving adequate opportunity of being heard to the Petitioner. It is stated that pursuant to the Order passed by this Court, ....
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....abilities over the assets amounting to Rs. 2117.52 Crores, Rs. 2175.32 Crores & Rs. 2122.14 Crores as on 31.03.2014, 31.03.2015 & 31.03.2019 respectively due to cash losses incurred by the company during the past financial years and the net worth of the company is negative and if company goes into winding up or is unable to pay its debts/liabilities then only the 3 shareholders of company have to bring money to pay the debts of the company and the company will not be able to pay its creditors in full. 10. Since the validity of Rule 37 of the 2016 Rules is not under challenge anymore, the only question which remains for consideration is as to whether the Order rejecting the application of the Petitioner can be sustained or not. 11. It is contended by the learned Senior Counsel appearing for the Petitioner that Section 18(3) of the Companies Act provides for conversion of companies which are already registered and it provides that the registration of a company under this section shall not affect any debts, liabilities, obligations or contracts incurred or entered into, by or on behalf of the company before conversion and such debts, liabilities, obligations and contracts may be....
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....me No. of shares held % of shareholding Reebok International Ltd. LLC. 233008420 99.03 Reebok (Mauritius) Company Limited 2130377 0.91 adidas Technical Services Private Ltd. 2 0.00 Focus Energy Ltd. 156750 0.07 February 21, 2022 Shareholder name No. of shares held % of shareholding Reebok International Ltd. LLC. 233008420 99.03 Reebok (Mauritius) Company Limited 2130377 0.91 adidas Technical Services Private Ltd. 2 0.00 adidas America, Inc. 156750 0.07 February 24-2022 Shareholder name No. of shares held % of shareholding adidas Holding LLC 233008420 99.03 adidas (Mauritius) Limited (formerly known as Reebok (Mauritius) Company Limited) 2130377 0.91 adidas Technical Services Private Ltd. 2 0.00 adidas America, Inc. 156750 0.07 As of the date of this affidavit, the Petitioner Company's shareholding structure is as below: Shareholder name No. of shares held % of shareholding adidas Holdings LLC. 233008420 99.03 adidas (Mauritius) Limited (formerly known as Reebok (Mauritius) Company Limited 2130377 ....
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....which would apply prospectively. 18. Per contra, learned Counsel for Respondents relies on the Judgment of the Apex Court in Zile Singh v. State of Haryana, (2004) 8 SCC 1, wherein the Apex Court has held as under: "14. The presumption against retrospective operation is not applicable to declaratory statutes.... In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is "to explain" an earlier Act, it would be without object unless construed retrospectively. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended.... An amending Act may be purely declaratory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect (ibid., pp. 468-69). 15. Though retrospectivity is not to be presumed and rather there is presumption against retrospectivity, according to Craies (Statute Law, 7th Edn.), it is op....
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....he Petitioner that the Registrar only had to satisfy himself as to whether the provision of Chapter II which will be applicable to the registration of companies has been complied with or not as they existed on the day when the application was made. He states that if the ingredients had been complied with on the day of the application, the Registrar ought to have issued a certificate of registration in the same manner as it was under the earlier regime. Under Section 18(2) of the Companies Act, the Registrar of Companies could not have exercised his discretion to not permit the conversion of an unlimited company to a limited company in case the company's net worth was negative or where the company was in default of its annual returns or financial statements under the provisions of the Companies Act or if an inquiry, inspection or investigation was pending against the company. 20. Resultantly, even if the net-worth of the company was negative or even if there was an inquiry, inspection or investigation pending against the company, the Registrar of Companies had no other alternative but to accept the application. 21. This Court is of the opinion that the lacuna in the Companies ....
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....w Dictionary, 7th Edn., 1999) '"Retroactivity" is a term often used by lawyers but rarely defined. On analysis it soon becomes apparent, moreover, that it is used to cover at least two distinct concepts. The first, which may be called "true retroactivity", consists in the application of a new rule of law to an act or transaction which was completed before the rule was promulgated. The second concept, which will be referred to as "quasi-retroactivity", occurs when a new rule of law is applied to an act or transaction in the process of completion.... The foundation of these concepts is the distinction between completed and pending transactions....' T.C. Hartley, Foundations of European Community Law, p. 129 (1981). *** Retrospective.-Looking back; contemplating what is past. Having operation from a past time. 'Retrospective' is somewhat ambiguous and that good deal of confusion has been caused by the fact that it is used in more senses than one. In general, however, the courts regard as retrospective any statute which operates on cases or facts coming into existence before its commencement in the sense that it affects, even if for the futu....
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....tatute is passed for the purpose of protecting the public against some evil or abuse, it may be allowed to operate retrospectively, although by such operation it will deprive some person or persons of a vested right." Thus public interest at large is one of the relevant considerations in determining the constitutional validity of a retrospective legislation. 25. The above position was elaborately noted in Virender Singh Hooda v. State of Haryana [(2004) 12 SCC 588] . 26. Curative statutes are by their very nature intended to operate upon and affect past transactions. Curative and validating statutes operate on conditions already existing and are therefore wholly retrospective and can have no prospective operation." (emphasis supplied) 23. Similarly, the Apex Court in State of Kerala v. B. Six Holiday Resorts (P) Ltd., (2010) 5 SCC 186, while adjudicating on the issue of retrospectivity of rules in public interest held as under: "17. This question is directly covered by the decision of this Court in Kuldeep Singh v. Govt. of NCT of Delhi [(2006) 5 SCC 702] relating to the grant of licences for sale of Indian-made foreign liquor. This Court h....
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....f a lease and none can claim a vested right to have an application for the grant or renewal of a lease dealt with in a particular way, by applying particular provisions. In the absence of any vested rights in anyone, an application for a lease has necessarily to be dealt with according to the rules in force on the date of the disposal of the application despite the fact that there is a long delay since the making of the application." 20. We may next refer to the decision in Union of India v. Indian Charge Chrome [(1999) 7 SCC 314] wherein this Court held: (SCC p. 327, para 17) "17. ... Mere making of an application for registration does not confer any vested right on the applicant. The application has to be decided in accordance with the law applicable on the date on which the authority granting the registration is called upon to apply its mind to the prayer for registration." 21. The applicant contended that it had a vested right because of the several time-bound orders of the High Court and those orders were deliberately flouted by the Excise Authorities. An identical contention was rejected by this Court while considering the issue with reference to sa....
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....r of processing of application for sanction by the Corporation cannot be blamed for delay but during pendency of its application for sanction, if the State Government, in exercise of its rule-making power, amended the Building Rules and imposed restrictions on the heights of buildings on G.T. Road and other wards, such 'settled expectation' has been rendered impossible of fulfilment due to change in law. The claim based on the alleged 'vested right' or 'settled expectation' cannot be set up against statutory provisions which were brought into force by the State Government by amending the Building Rules...." (emphasis in original) 22. Where the rules require grant of a licence subject to the fulfilment of certain eligibility criteria either to safeguard public interest or to maintain efficiency in administration, it follows that the application for licence would require consideration and examination as to whether the eligibility conditions have been fulfilled or whether grant of further licences is in public interest. Where the applicant for licence does not have a vested interest for grant of licence and where grant of licence depends on various factors or eligibility crit....