2023 (6) TMI 1468 - AT - Companies Law

Maintainability of appeal under Section 560(6) of the Companies Act 1956 - Power of Registrat to stike off Respondent No.3 Company s name from the Register of Companies - HELD THAT - Notably if the name of the Company has been struck off following the procedure prescribed in sub-section (1) to (5) of Section 560 of the Companies Act 1956 when the Company had itself voluntarily applied for striking off its name by filing an application under the Easy Exit Scheme 2010 no appeal shall lie under Section 560(6) of the Companies Act 1956. The Appellant is not a member of the R-3 company. Further we have not been shown any evidence by the Appellant that he made any sincere and diligent effort to get a succession certificate in his favour with regard to the shares held by his deceased parents and therefore he is not entitled to the privileges and other facilities that are available to the member of a company under Companies Act. In this connection it is noted that an appeal under the Companies Act 2013 would be available to a person who is either a Member of the Company or a Creditor or a Director and quite clearly the Appellant is none of these. On this basis the Appellant is not entitled to maintain an appeal before the NCLT. Conclusion - The rights and privileges under company law are reserved for registered members or creditors. Voluntary applications for striking off under schemes like the Easy Exit Scheme 2010 are binding and not subject to challenge under Section 560(6) by non-members. There is no error in the Impugned Order and therefore it does not require any interference - Appeal dismissed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

• Whether the Appellant is entitled to maintain an appeal under Section 560(6) of the Companies Act, 1956 regarding the striking off of Respondent No.3 Company's name from the Register of Companies.
• Whether the Appellant has any legal standing as a member or creditor of Respondent No.3 Company.
• Whether the striking off of the company's name under the Easy Exit Scheme, 2010 was conducted appropriately and if the Appellant has grounds to challenge it.
• Whether the Appellant has a rightful claim to shares of the company allegedly inherited from his deceased parents.

ISSUE-WISE DETAILED ANALYSIS

1. Entitlement to Maintain an Appeal under Section 560(6)

Relevant Legal Framework and Precedents: Section 560 of the Companies Act, 1956 outlines the procedure for striking off a company's name from the register. Sub-section (6) allows a company, member, or creditor to apply for restoration if aggrieved by the striking off.

Court's Interpretation and Reasoning: The Tribunal emphasized that the provisions under sub-sections (1) to (5) of Section 560 are interconnected. The action taken by the Registrar of Companies (RoC) was based on the company's voluntary application under the Easy Exit Scheme, 2010, not on the RoC's own motion.

Application of Law to Facts: The Tribunal noted that the Appellant was neither a member nor a creditor of the company, as his name was not entered in the company's register of members.

Treatment of Competing Arguments: The Appellant argued for his right to appeal based on an alleged inheritance of shares. The Respondent countered by citing legal definitions and precedents that restrict such rights to registered members or creditors.

Conclusions: The Tribunal concluded that the Appellant lacked standing to maintain an appeal under Section 560(6) as he was not a registered member or creditor.

2. Legal Standing as a Member or Creditor

Relevant Legal Framework and Precedents: Section 41 of the Companies Act, 1956 defines a "member" as someone whose name is entered in the company's register of members.

Court's Interpretation and Reasoning: The Tribunal reiterated that membership rights and privileges are reserved for those whose names appear in the company's register.

Key Evidence and Findings: The Appellant's name did not appear in the company's register. The shares allegedly inherited were not transferred to his name.

Application of Law to Facts: The lack of evidence showing the Appellant's name in the register meant he could not claim membership rights.

Treatment of Competing Arguments: The Respondent emphasized the necessity of having one's name in the register to claim membership rights, supported by case law.

Conclusions: The Tribunal held that the Appellant was not a member or creditor and thus had no legal standing in the matter.

3. Appropriateness of Striking Off under the Easy Exit Scheme, 2010

Relevant Legal Framework and Precedents: The Easy Exit Scheme, 2010 allowed companies to voluntarily apply for striking off their names. Section 560 outlines the procedure and conditions for such actions.

Court's Interpretation and Reasoning: The Tribunal found that the striking off was conducted following the company's voluntary application, adhering to the procedural requirements.

Key Evidence and Findings: The Tribunal noted that the company had not filed financial statements since 2005, supporting the application for striking off.

Application of Law to Facts: The voluntary nature of the application under the Easy Exit Scheme meant that the Appellant could not challenge the procedure under Section 560(6).

Treatment of Competing Arguments: The Appellant's allegations of procedural impropriety were dismissed due to the voluntary application by the company.

Conclusions: The Tribunal concluded that the striking off was appropriate and could not be challenged by the Appellant.

4. Claim to Inherited Shares

Relevant Legal Framework and Precedents: The transmission of shares by inheritance is governed by company law provisions and requires registration in the beneficiary's name.

Court's Interpretation and Reasoning: The Tribunal noted the absence of efforts by the Appellant to register the inherited shares in his name.

Key Evidence and Findings: There was no evidence of the Appellant seeking a succession certificate or initiating the transfer of shares.

Application of Law to Facts: Without registration, the Appellant could not claim rights to the shares.

Treatment of Competing Arguments: The Respondent highlighted the necessity of formal registration for claiming share-related rights.

Conclusions: The Tribunal found no basis for the Appellant's claim to the shares.

SIGNIFICANT HOLDINGS

Core Principles Established: The Tribunal reinforced the principle that rights and privileges under company law are reserved for registered members or creditors. Voluntary applications for striking off under schemes like the Easy Exit Scheme, 2010 are binding and not subject to challenge under Section 560(6) by non-members.

Final Determinations on Each Issue: The Tribunal dismissed the appeal, concluding that the Appellant lacked standing as a member or creditor and that the striking off was procedurally sound and voluntary.