Recently, the National Company Law Appellant Tribunal while dealing with a challenged decision of NCLT held that the payment of electricity bills and the company’s valuable assets is a clear indication that the company is still carrying out its business operation and the Registrar of Companies cannot remove its name from the Registrar of Companies.
Brief Facts:
Choice Automobiles Private Limited was an automobile company established on May 5th, 2000, in Delhi. The Registrar of Companies removed the company's name from the Register of Companies as it had not conducted any business or operation for two consecutive financial years and did not apply for the status of a Dormant Company. As a result, the automobile company filed an Appeal under Section 252 of the Companies Act, 2013 to restore the name of the company, which resulted in the challenged order issued by the Tribunal on October 5th, 2020, further, leading to the appeal to the National Company Law Appellant Tribunal.
Contentions of the Appellant:
The appellant's Counsel argued that the impugned order ignored Section 252(2) of the Companies Act, 2013, which outlines three conditions for restoring a company's name. They pointed out that the Appellant owned commercial property worth Rs. 1,60,00,000/- allotted by NOIDA, proving that it was in operation when struck off by the ROC. Further, the appellant relied on Culcatta Rubber Factory Pvt. Ltd. & Ors. Vs. Registrar of Companies, Delhi & Haryana in Company Appeal (AT) No. 177/2019 reported in 2019 SCC Online NCLAT 851 and Basant Kumar Berlia & Ors. Vs. Registrar of Companies, West Bengal in Appeal (AT) No. 171/2018 where the Tribunal had previously allowed appeals for restoring the name of companies that were struck off by ROC if they owned immovable property on the just and equitable ground. The Appellant claimed that restoration of the company should have been allowed based on the just and equitable ground under Section 252(3) of the Companies Act, 2013, and their ownership of commercial property, as well as being in operation, as shown by the regular payment of electricity bills at the time of being struck off by the NCLT.
Contentions of the Respondent:
The Registrar of Companies (Respondent No. 1) argued that Choice Automobiles Private Limited was formed under the Companies Act, 1956, and its last directors were Sudesh Gupta and Promila Mittal. As the company filed financial statements until March 31, 2015, the Registrar believed that the company was not operating. Notices were sent to the company and its directors under Section 248(1) of the Act. The company was issued notices in May 2018, and public notices were published on the Ministry of Corporate Affairs website and in the official gazette on 18.06.2018, pursuant to Section 248(4) of the Act. The dissolution took effect from 08.08.2018 after the publication of notices and the non-receipt of objections from the company or directors. Further, it was argued that the Appellant's balance sheets from 2015-16 to 2017-18 showed zero revenue generated from operations.
Observations by the Tribunal:
After hearing arguments from both parties, the tribunal noted that the company owned a commercial property in Noida that had been given to them by the New Okhla Industrial Development Authority for auto repairs and had been paying electricity bills from 2017 to 2020. The tribunal referred to the Registrar of Companies’ submission where it was stated that they had no objection to the company's name being restored if they could prove that they were engaged in business and filed their financial statements with appropriate fees. Based on the company's valuable assets, the tribunal concluded that they were indeed carrying out business operations. Consequently, the tribunal held that the decisions made by the National Company Law Tribunal and the Registrar of Companies were not legally sustainable.
The decision of the Court:
The impugned order passed by the National Company Law Tribunal (New Delhi Branch II) was set aside.
Case Title: Sudesh Gupta Vs. Registrar Of Companies, Nct Of Delhi & Haryana & Anr.
Coram: Justice Anant Bijay Singh
Case No.: Company Appeal (AT) No. 218 of 2020
Advocate for the Applicant: Mr. Iswar Mohapatra, Advocate
Advocate for the Respondent None
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