REMOVAL OF NAMES FROM THE REGISTER OF COMPANIES

[Mr. M. GOVINDARAJAN]

Chapter XVIII of the Act deals with the removal of names from the Register of Companies.  The Registrar of Companies is required to maintain a Register of Companies when a company is incorporated.  This chapter provides the situation when the name of the companies may be removed and the procedure for such removal.

Powers of Registrar

Section 248 of the Act gives powers to the Registrar of Companies to remove the name of company from the Register of Companies.  Section 248(1) of the Act provides that where the Registrar has reasonable cause to believe that-

• a company failed to commence its business within one year of its incorporation;
• the subscribers to the memorandum have not paid the subscription which they had undertaken to pay within a period of 180 days from the date of incorporation of the company and a declaration under Section 11(1) to this effect has not been filed within 180 days from the date of incorporation; or
• a company is not carrying on any business or operation for a period of two immediately preceding financial year and has not made any application within such period for obtaining status of a dormant company under Section 455

he may initiate the procedure for removal of name of the company from the Register of Companies.

The provisions of this Chapter shall not apply to Section 8 companies.

The name of the company may be removed in two ways.   One is by the initiation of the company and the other is suo motu action of the Registrar of Companies.

Section 248 is akin to the Section 506 of the Companies Act, 1956 which provides that Registrar shall remove the name of the company from the register of companies where the Registrar has reasonable cause to believe that a company is not carrying on business or in operation.  If, in any case where a company is being wound up, the Registrar has reasonable cause to believe either that no liquidator is acting, or that the affairs of the company have been completed wound up, and  any returns required to be made  by the liquidator have not been made for a period of six consecutive months, then the Registrar may remove the name of a company from the register of companies.   Section 248 provides more grounds that Section 506 of the Companies Act to remove the name of a company from the register of companies.

By the company

Section 248(2) of the Act provides that a company may voluntarily offer for the name of its name from the Register of Companies for which the following are required:

• the company should extinguish all its liabilities;
• special resolution should be passed; or
• consent of 75% members in terms of paid up share capital.

The company may file an application in the prescribed manner to the Registrar for removing the name of the company from the Register of Companies on all or any of the grounds specified in Section 248(1) of the Act.

In case the company is regulated under a Special Act, the approval of the Regulatory Body constituted or established under that Act shall be obtained by the Company.   Such approval shall be enclosed with the application.  An application filed by the company may be withdrawn.  The Registrar may reject the application as soon as the conditions under Section 248(1) are brought to the notice.

In the Companies Act, 1956 there was no provision enabling a company to make such application.

Restrictions for the company

Section 249 of the Act provides that an application under Section 248(2) of the Act on behalf of a company shall not be made if, at any time in the previous three months, the company-

• has changed its name or shifted its registered office from one State to another;
• has made  disposal for value of property or rights held by it, for the purpose of disposal for gain in the normal course of trading or otherwise carrying on of business;
• has engaged in any other activity except the one which is necessary or expedient for the purpose of making an application under that section, or deciding whether to do so or concluding the affairs of the company, or complying with any statutory requirement;
• has made an application to the Tribunal for the sanctioning of a compromise or arrangement and the matter has not been finally concluded; or
• is being wound up under Chapter XX, whether voluntarily or by the Tribunal.

Section 249 of the Act is newly introduced in the Act where no such provisions are there in the Companies Act, 1956.

The Registrar, on receipt of such application from the company shall  publish in the prescribed manner and also in the Official Gazette for the information of the General Public.  On publication of the same the company stands dissolved.

Procedure

The following is the procedure to be adopted by the Registrar in respect of removal of name of a company from the Register of Companies:

• Where the Registrar is satisfied that the circumstances prescribed in Section 248(1) has been there, the Registrar shall send a notice to the company and all the directors of the company, indicating his intention to remove the name of the company from the register of companies;
• In the notice the Registrar shall direct the company to send their representations along with copies of relevant documents, if any, within a period of 30 days from the date of the notice;
• After the expiry of the time mentioned in the notice the Registrar may, unless the cause to the contrary is shown by the company, strike off its name from the register of companies;
• The Registrar shall publish notice thereof in the Official Gazette and on the publication in the Official Gazette of this notice, the company shall stands dissolved.
• Before passing an order as mentioned above, the Registrar shall satisfy himself that sufficient provision has been made for the realization of all amount due to the company and for the payment or discharge of its liabilities and obligations by the company within a reasonable time;
• If necessary, the Registrar shall obtain necessary undertakings from the Managing Director, director or other person who is in charge of the management of the company to this effect;
• Despite of the undertakings given by the person who is in charge of the management of the company the assets of the company shall be made available for the payment or discharge of all its liabilities and obligations even after the date of the order removing the name of the company from the register of companies;
• The liability, if any, of every director, manager or other officer who was exercising any power of management and of every member of the company dissolved shall continue and may be enforced as if the company has not been dissolved.

The above said mandatory procedure is to be followed by the Registrar while removing the name of the company from the register of companies.  In ‘Animesh Poly Industries P. Limited V. Registrar of Companies’ – 2010 (3) TMI 673 - HIGH COURT OF MADHYA PRADESH it was held that where no notice was sent by Registrar of Companies before striking off the company’s name and also other mandatory requirements were not observed, the name of the company was ordered to be restored.

In ‘Sitaram Singh Construction Co. Limited V. Union of India’ – 2009 (12) TMI 509 - HIGH COURT OF PATNA  the name of the company was struck off on failure to file annual returns.  The notice was not published in the Official Gazette, nor it was sent by registered post.   The High Court held that since the mandatory requirements having not been observed the Court ordered restoration of the company’s name in the register.

In ‘Pithampur Petro Pharma P. Limited V. Registrar of Companies’ – 2009 (10) TMI 524 - HIGH COURT OF MADHYA PRADESH the company was incorporated with the object of manufacturing certain products.   It came to know that its name had been struck off the register.   The company showed that it was in operation at the material time and continued to be so and that the striking off was done without any notice to it.   Nobody was likely to be prejudiced by its restoration.  The Court ordered restoration as if its name had never been struck off the register.

Power of Tribunal

Section 248 (8) provides that ion

no provisions of this Section shall affect the power of the Tribunal to wind up a company the name of which has been struck off from the Register of Companies.

Effect of dissolution

Section 250 provides that where a company stands dissolved under Section 248 (5) it shall on and from the date mentioned in the notice cease to operate as a company.   The certificate of incorporation issued to the company shall be deemed to have been cancelled from such date except for the purpose of realizing the amount due to the company and for the payment or discharge of the liabilities or obligations of the company.

Section 250 is newly introduced in the Act.   Such provision is not available in the Companies Act, 1956.

Appeal to Tribunal

Any person aggrieved by an order of the Registrar, notifying a company as dissolved under Section 248,  may file an appeal to the Tribunal, under Section 252.  The time limit for filing such appeal is within three years from the date of the order of the Registrar.  The Tribunal may confirm the order of the Registrar.  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.  Before passing such order the a reasonable opportunity of making representations and of being heard shall be given to the Registrar, the company and all the persons concerned

Restoration of name

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 three years from the date of passing of the order dissolving the company under Section 248, file an application before the Tribunal seeking restoration of such company.

There was  no provision like this in the Companies Act, 1956 permitting Registrar to file application before the Tribunal for restoration of the name of the company.

A copy of the order passed by the Tribunal shall be filed by the company with the Registrar within 30 days from the date of the of the order of the Tribunal.   On such 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.

Section 252 (3) provides that if-

• A company; or
• Any member; or
• Creditor; or
• Workman

feels aggrieved by the company having its name struck off from the register of companies, the same may file an application before the Tribunal.  The time limit for filing such application is twenty years from the date of publication in the Official Gazette of the notice under Section 248 (5) of the Act.  The Tribunal may, if it is satisfied that the company was, at the time of its name being struck off, carrying on business or in operation or otherwise, it is just that the name of the company be restored to the Register of Companies, order the name of the company to be restored to the register of companies, and the Tribunal may, by the order, give such other directions and make such provisions as deemed just for placing the company and all other persons in the same position as nearly as may be as if the name of company had not been struck off from the register of companies.

In the old Act there was no provision for the workman to file application before the Tribunal.

Creditor

In re ‘Harvest Lane Motor Bodies Limited’ – 1968 (5) TMI 35 - IN THE CHANCERY DIVISION it was held that in using the word ‘creditor’ simpliciter (in Section 506 of the Companies Act, 1956) the Legislature cannot have been intending thereby to differentiate between those creditors whose debts are fixed and ascertained and those whose debts are contingent and prospective, providing redress for the grievances of the former but ignoring the grievances of the latter.   The word ‘creditor’ is wide enough to include a person whose debt is contingent or prospective.

Effect of restoration

The effect of an order of restoration is that the company is to be deemed to have continued in existence “as if its name had not been struck off”.  The object is to put both the company and their parties in the same position as they would have occupied if the dissolution of the company had not been intervened.   Not only is the corporate existence of the company restored, but also it takes effect retrospectively, so that at the date of restoration the company is to be regarded as never having been dissolved.

In ‘Vijayawada Chamber of Commerce and Industry V. Registrar of Non Trading  Companies’ – 2003 (10) TMI 401 - HIGH COURT OF ANDHRA PRADESH the company proved that it was carrying new business and was in operation on the date on which its name was struck off the register.   It has filed its annual returns and statements belatedly.  The Court ordered restoration of the name of the company.

In re ‘Zalak Cold Storage Private Limited’ – 2008 (2) TMI 632 - HIGH COURT OF GUJARAT permission was granted for restoring the name of the company in the Register of Companies on the application of another company which wanted to supply natural gas to the company.  A piece of land was purchased for setting up a cold storage plant to generate business.   The Registrar of Companies presented no objection and required only that all the requirements of the Act should be complied with.  The company was directed to be restored and to comply with the Rules and statutory provisions.

In ‘Sohal Agencies P. Limited V. Registrar of Companies’ – 2009 (12) TMI 502 - HIGH COURT OF DELHI the name of the company was struck off because of the failure to file statutory returns for 8 years the default was attributed to the company’s Chartered Accountant.  The company was a running concern.  The petition was filed within the period of limitation.   The Court held that the company ought to have exercised greater degree of care in ensuring the statutory compliance.   Restoration was subject to the payment of costs.

In ‘Auto Kashyap India P. Limited V. Registrar of Companies’ – 2010 (4) TMI 600 - HIGH COURT OF DELHI the defence put forth by the company was that the Chartered Accountants did not file annual returns for a period of 10 years.   The Court did not accept the contentions of the company because ultimately it is the responsibility of the management.   The company was permitted to seek restoration subject to completion of formalities and payment of costs, payment of late fee and other charges leviable for late filing.

In ‘Radima Exports P. Limited V. Registrar of Companies’ – 2008 (5) TMI 403 - HIGH COURT OF DELHI the name of the company was struck off on an application under Section 560.   Thereafter the management of the company changed.  The new management brought forth a proposal for revival of the company.   Their application for restoration of the company was accepted.   There was no objection from the Registrar in this regard.

In ‘VI Brij Fiscal Services P. Limited V. Registrar of Companies’ – 2010 (2) TMI 583 - HIGH COURT OF MADHYA PRADESH the name of the company was struck off on an application under the ‘Simplified Exist Scheme’.   The shareholders subsequently sought to revive the company because of favorable market conditions.   The court directed restoration of the company’s name.

Punishments

Section 249 (2) provides that if a company files an application under Section 248(2) in violation of Section 248(1), the company shall be punishable with fine which may extend to ₹ 1,00,000/-

Section 251 provides that where it is found that an application by a company under Section 248(2) has been made with the object of evading the liabilities of the company or with intention to deceive the creditors or to defraud any other persons, the persons in charge of the management of the company shall, notwithstanding that the company has been notified as dissolved-

• be jointly and severally liable to any person or persons who had incurred loss or damage as a result of the company being notified as dissolved; and
• be punishable for fraud in the manner as provided in Section 447.

In addition, the Registrar may also recommend prosecution of the persons responsible for filing of an application under Section 248(2).

Section 251 is new provision.  Such provision was not in the Companies Act, 1956.