VALIDITY OF REVIVAL OF A COMPANY

[DR.MARIAPPAN GOVINDARAJAN]

Removal of name of a company

Chapter XVIII of the Companies Act, 2013 (‘Act’ for short) provides the procedure for the removal of names of companies from the Register of Companies maintained by the Registrar of Companies. The company may file an application before the National Company Law Tribunal (‘NCLT’ for short) for striking of its name if all liabilities are paid. If the Registrar, according to Section 248(1) of the Act, has reasonable cause to believe that a company has failed to commence its business within one year of its incorporation or a company is not carrying on any business or operation for a period of 2 immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company under section 455 or the subscribers to the memorandum have not paid the subscription which they had undertaken to pay at the time of incorporation of a company and a declaration to this effect has not been filed within one hundred and eighty days of its incorporation under section 10A(1) or the company is not carrying on any business or operations, as revealed after the physical verification carried out under of section 12(9), he shall send a notice to the company and all the directors of the company, of his intention to remove the name of the company from the register of companies and requesting them to send their representations along with copies of the relevant documents, if any, within a period of 30 days from the date of the notice.

At the expiry of the time mentioned in the notice, the Registrar may, unless cause to the contrary is shown by the company, strike off its name from the register of companies, and shall publish notice thereof in the Official Gazette, and on the publication in the Official Gazette of this notice, the company shall stand dissolved.

Revival of the company

Section 252 of the Act provides that any person aggrieved by an order of the Registrar, notifying a company as dissolved under section 248, may file an appeal to the Tribunal within a period of 3 years from the date of the order of the Registrar and if the Tribunal is of the opinion that the removal of the name of the company from the register of companies is not justified in view of the absence of any of the grounds on which the order was passed by the Registrar, it may order restoration of the name of the company in the register of companies. The Tribunal shall give a reasonable opportunity of making representations and of being heard to the Registrar, the company and all the persons concerned.

If the Registrar is satisfied, that the name of the company has been struck off from the register of companies either inadvertently or on the basis of incorrect information furnished by the company or its directors, which requires restoration in the register of companies, he may within a period of 3 years from the date of passing of the order dissolving the company under section 248, file an application before the Tribunal seeking restoration of name of such company.

A copy of the order passed by the Tribunal shall be filed by the company with the Registrar within thirty days from the date of the order and on receipt of the order, the Registrar shall cause the name of the company to be restored in the register of companies and shall issue a fresh certificate of incorporation.

Case law

In HARSH PAL SINGH AND ANR. VERSUS UNION OF INDIA AND ORS. - 2025 (3) TMI 1356 - DELHI HIGH COURT the petitioner company, Ambe Organic Food Products Private Limited, was incorporated on 15.06.2006 having two directors and two shareholders. The petitioner Harsh Pal Singh and Niranjan Mittal were the shareholders of the company. The company has not started its functions and did not open bank accounts for the company. In the meantime, a dispute was arised between the shareholders. Niranjan Mittal was removed as a Director in the resolution passed by the Company on 15.01. 2015 under Sections 167 of the Companies Act, 1956 (Section 174(2) of the Companies Act, 2013. The petitioner, in the place of Niranjan Mittal, appointed his wife as an alternate Director and shareholder of the company. The petitioners filed a petition under Fast Track Exit scheme for the striking name of their company. On 11.01.2016 the name of the company was struck off.

In this case law, a pecuniary situation arised. The removed company, to the astonishment, suddenly revived.  Consequent to these petitioners were penalized for non-compliances of statutory obligations. Against this the petitioners filed the writ petition before the Delhi High Court.

The petitioners submitted the following before the High Court-

• Once a company has been struck off, its revival can only be done in accordance with the provisions of the Act.
• The Petitioners had applied for striking off or removal of the name of the Company from the Register of Companies, so that there was no question of any inadvertent striking off the Company.
• Once the name of the Company has been removed from the Register of Companies on 11.01.2016 thereafter the change of status of the Company from ‘strike off’ to ‘active’ is arbitrary and contrary to the provisions of law.

The respondent contended that the Petitioner No. 1 is a disqualified Director and thus he was not in a position to apply for striking off the name of the Company on 13.08.2015 when the Fast Track Exit form was signed.  in view of this error that Respondent No. 2 deemed it appropriate to revive the Company which was subsequently revived.

For the contentions of the Department the petitioners filed rejoineder, in which it was contended that the Board Resolution dated 14.03.2015 passed by the Board of Directors of the Company authorising Petitioner No. 1 to take appropriate steps to strike off the name of the Company. The date of disqualification of Petitioner No. 1 is 01.11.2016 (wrongly mentioned as 01.01.2016 in the table). As on the date of filing of the complaint and FTE form, the Petitioner No. 1 was not disqualified.

The High Court accepted the contentions of the petitioner as to the disqualification of the petitioner as Director. The High Court observed that the Petitioner No. 1 was not disqualified as a director, thus, the objection of the Respondents is without any merit.

The High Court analysed the provisions of the proviso to Section 252 of the Act. In the event the name of a company has been struck off from the Register of Companies either inadvertently or on the basis of incorrect information furnished by the company or its directors, and such Company requires restoration in the Company. The Registrar of Companies is to take appropriate steps before the National Company Law Tribunal in this behalf.  The High Court observed that the proviso to Section 252 provides that the name of the company has been struck off from the Register of Companies either inadvertently or on the basis of incorrect information furnished, the Registrar of Companies may within a period of three years from the date of passing of the order dissolving such company under Section 248 of the Act, file an application under Section 252 of the Act seeking restoration of the name of such company before the Tribunal. The Registrar of Companies has not taken any step in this regard but the company has been revived.  Therefore, the action of the Registrar of Companies cannot be sustained.

The High Court allowed the writ petition. The High Court directed to strike off the name of the company and take further actions as required by the law.

Conclusion

From the above case law, it is clear that once the company is strike off the same cannot be revived automatically and the procedure under Section 252 of the Companies Act, 2013 are to be followed.