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Proceedings/ appeal can continue against struck off companies. However, revenue un-necessarily filed appeal before the Supreme Court, against judgment AND ORDER of High Court of Rajasthan

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Proceedings/ appeal can continue against struck off companies. However, revenue un-necessarily filed appeal before the Supreme Court, against judgment AND ORDER of High Court of Rajasthan
By: CA DEV KUMAR KOTHARI
April 8, 2019
  All Articals by: CA DEV KUMAR KOTHARI       View Profile
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Relevant judgments- links and references:

COMMISSIONER OF INCOME TAX, JAIPUR VERSUS M/S GOPAL SHRI SCRIPS PVT LTD 2019 (3) TMI 743 - SUPREME COURT

Commissioner of Income Tax, Jaipur Versus M/s. Gopal Shri Scrips Pvt. Ltd. - 2019 (3) TMI 703 - SUPREME COURT

Commissioner of Income Tax, Jaipur, Versus M/s. Gopal Shri Scrips Pvt. Ltd. - 2016 (8) TMI 1422 - RAJASTHAN HIGH COURT

Struck off companies:

People conversant with corporate law are well aware that even after strike off of names of companies from register of companies, rights and obligations of companies remain. Proceedings can be initiated and continued against such companies. This is clearly provided in the Companies Act 1956 / 1983. Therefore on this issue much discussion is not made.

Judgment of Rajasthan High Court:

In judgment Dated: - 09 August 2016 the Rajasthan High Court had duly considered the fact that the respondent assesse company had been struck off the Register of Companies as per the provisions of the Companies Act, 1956.

Relevant paragraph from judgment are reproduced below with highlights added:

                 “ Sh. Anuroop Singhi Adv., appearing for appellant has placed for our perusal a communication issued from the office of Registrar of Companies, dt.7-4-2011 indicating that pursuant to sub-section(5) of Sec.560 of the Companies Act,1956 the name of Gopal Shri Scrips Pvt. Ltd, has been struck off from the Register and the said company is dissolved.

In the light of the communication placed for our perusal dt. 7-4-2011, no purpose is going to be served in examining the substantial question of law which has been raised for consideration in the instant appeal and on account of these change in circumstances, the present appeal has become infructuous and accordingly stands dismissed. However, the appellant is still at liberty to file application if any occasion arises in future.

Observations of author:

The High Court has taken note of fact that the name of company had been struck off. This is as per communication dt. 07.4.2011. The date of such strike off is not clear however, it can either be 07.04.2011 or an earlier date. That is more than five years ago when the appeal was being heard on 09082016.

This also means that no one had taken any step for revival of company and cancellation of order of striking of the name of company.

The honorable High Court considered that:

a. No purpose is going to be served in examining the substantial question of law, which has been raised.

As per author such consideration was in view of changed circumstances that is long ago name was struck off and no one has applied for restoration of name( otherwise ROC would have given such details in communication)

b. on account of these change in circumstances, the honorable High Court considered that  the  appeal has become infructuous.

As per author, the honorable High Court has considered the appeal as infructuous in the sense that disputed tax is not likely to be recovered, even if the order of Tribunal is reversed and issue is decided in favor of revenue.

Though the appeal was dismissed However, the High Court passed order with rider that “the appellant is still at liberty to file application if any occasion arises in future.

Per author,

 the revenue was protected by this part of order of the High Court. Because, as per reported judgment, the honorable High Court had clearly mentioned that appellant is at liberty to file application if any occasion arise in future.

Such occasions can be of many type for example:

a. Company is revived and there is scope of recovery of disputed tax

b. Company is found to have valuable and realizable property of any kind from which disputed tax can be realized.

c. There can be any action against other persons to whom company had transferred properties illegally and that is reverted back to company.

 In view of this position, it was not proper for the revenue to file appeal against judgment / order of High Court, because the interest of revenue was fully considered and protected, as discussed above.

Author feels that the honorable High Court had passed order considering purpose of appeal that is recovery of tax, if the appeal is allowed in favor of revenue. When there was no chance of recovery of tax, even an order in favor of revenue would not have served purpose.

Question of law:

In reported judgments question of law is not given. Order of Tribunal is also not found. Therefore, merit of case could not be considered.

Order of the Supreme Court:

The honorable Supreme Court has set aside order of High Court and  restored appeal  back to the High Court for deciding the appeal and answering substantial question of law.

Author feels that observation of the Supreme Court that  “Since the High Court did not decide the appeal keeping in view the aforementioned two relevant provisions, the impugned order is not legally sustainable and has to be set aside.”

Is not considered in view of the observation of the High Court as discussed above. It cannot be that the High Court had not considered the relevant provisions. This is clear from the observations and order of the High Court, as discussed earlier by author.

It seems that the high Court has on consideration of these provisions only had given liberty to the revenue to make application, if occasion arise.

Un-necessary appeal and litigation:

In view of the order of High Court as discussed above, It was not necessary for revenue to prefer appeal, filing of appeal had un-necessarily cause  spending of public money and brain drain.

COMMISSIONER OF INCOME TAX, JAIPUR VERSUS M/S GOPAL SHRI SCRIPS PVT LTD 2019 (3) TMI 743 - SUPREME COURT

Commissioner of Income Tax, Jaipur Versus M/s. Gopal Shri Scrips Pvt. Ltd. - 2019 (3) TMI 703 - SUPREME COURT

Commissioner of Income Tax, Jaipur, Versus M/s. Gopal Shri Scrips Pvt. Ltd. - 2016 (8) TMI 1422 - RAJASTHAN HIGH COURT

 

By: CA DEV KUMAR KOTHARI - April 8, 2019

 

 

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