Value Advisory Services Pvt. Ltd. vs Registrar Of Companies & Anr.
2010 Latest Caselaw 2155 Del

                IN THE HIGH COURT OF DELHI AT NEW DELHI

                            COMPANY JURISDICTION

                       COMPANY PETITION NO. 72 of 2009

                                              Date of Decision: 23-04-2010

In the matter of:-

Value Advisory Services Pvt. Ltd.                         .........Petitioner
                       Through :         Mr. Raj K. Sharma, Advocate

                                    Versus

Registrar of Companies & Anr.                             .........Respondents

                             Through :   Mr. V.K.Gupta, Dy. Registrar of
                                         Companies
CORAM :

       HON'BLE MR. JUSTICE SUDERSHAN KUMAR MISRA

1.     Whether Reporters of local papers may be allowed to see the
       judgment? Yes
2.     To be referred to the Reporter or not? Yes
3.     Whether the judgment should be reported in the Digest? Yes


SUDERSHAN KUMAR MISRA, J. (ORAL)

1. This petition seeking restoration of the name of the

company to the Register of Companies maintained by the Registrar of

Companies has been moved under Section 560(6) of the Companies

Act, 1956.

2. A significant aspect that emerges in this case is the fact

that the paid-up share capital of the company, whose restoration is

sought, was only Rs. 400/-. The company had applied for having its

name struck off under the Simplified Exit Scheme, 2003 as it did not

have the requisite share capital in terms of Section 3(3) of the

Companies (Amendment) Act, 2000, which requires a minimum paid

up share capital of Rs. 1 Lac. Consequently, the name of the company

was removed from the Register of Companies, by the respondent.

3. Admittedly, the amendment brought about by the

Companies (Amendment) Act, 2000, which inserted sub-clause (3) in

Section 3, and raised the minimum prescribed share capital for private

companies to Rs. 1 Lac, had given an opportunity to all companies

whose share capital was below that amount, to bring it up to the

required amount within a period of two years. Instead of availing of

this opportunity, the petitioners themselves chose to have the name of

their company struck off from the Register of Companies. Even

otherwise, had they not done so within the time prescribed, the

Registrar of Companies would have been obliged to strike off the name

of the company from the Register. In these circumstances, I do not

see how this Court can issue directions restoring the name of the

company, with a shareholding that is admittedly less than the

minimum prescribed by the statute, to the Register.

4. To my mind, a company which does not conform to the

minimum requirement of paid up share capital cannot be restored to

the Register of Companies even though the applicant seeking

restoration may undertake to increase the share capital to meet the

minimum requirement after restoration. This is because, regardless of

any undertaking being given to do so, the fact remains that this Court

will, in effect, be directing restoration of the name of a company to the

Register of Companies which does not have even the minimum paid up

share capital required under the Companies Act, as on the date of the

order restoring the company.

5. In this context, Section 3(3) of the Companies Act, 1956

states, categorically, that every private company, existing on the

commencement of the Companies (Amendment) Act, 2000 with a paid

up capital of less than one lakh rupees , shall, within a period of two

years from such commencement, enhance its paid-up capital to one

lakh rupees. This is a statutory mandate. An option was available to

the petitioner to avail of the same. Instead of doing so, the petitioner

took the other course, which was to have its name struck off from the

Register of Companies. The petitioner cannot be permitted to come to

the Court after about 9 years to, in effect, be granted the same

indulgence which was contemplated by the aforesaid Section for a

limited period of two years after the amending Act. In the face of an

unambiguous and explicit statutory provision, to my mind, it would not

be proper for this Court to grant the same benefit after the expiry of

the aforesaid period of two years in an indirect fashion. For that

reason also, the relief sought cannot be granted. Not only that, even

Section 3(5) of the Companies Act, 1956, specifically contemplates

that where such a company fails to enhance its paid up share capital in

the manner specified under Section 3(3), that is to say, within two

years of the commencement of the Companies (Amendment) Act,

2000, such a company shall be deemed to be a defunct company

within the meaning of Section 560 and its name shall be struck off

from the Register by the Registrar of Companies. Consequently, once

the company fails to raise the share capital to the prescribed limited

within the time prescribed by the statute, the deeming provision of

Section 3(5) automatically comes into play.

6. If the logic postulated by the petitioner is to be accepted,

then there could be no impediment even in the incorporation of a new

company with less than the minimum required paid up share capital,

provided the promoters of the company undertook to bring in the

minimum required paid up share capital later on, within a specified

period.

7. Counsel for the petitioner has also made an attempt to rely

on Section 560(6) of the Companies Act, 1956, for the proposition

that, under the circumstances, it would be just and proper that the

name of the petitioner be restored to the Register. He states that it

would also be equitable to do so. I do not agree. There can be no

equitable consideration that flies in the face of a statute which creates

an express bar for the incorporation or continuance of a company with

a paid up share capital below the minimum prescribed by that Statute.

Nor would it be, "otherwise just" that the company be restored,

specially in view of the fact that the company itself applied to be

struck off the register instead of increasing its share capital within the

time permitted by the Statute, and since nothing further has been

urged by counsel, such as the discovery of some properties or debtors

or creditors of the company which requires that the company be

restored since they cannot otherwise be dealt with effectively.

Furthermore, it is always open to the contributories to float a new

company, as per law. The maxims Equitas numquam contravenit

leges, i.e. Equity never counteracts the laws and Equitas sequitur

legem, i.e. Equity follows the law, are also relevant in this regard.

8. Under the circumstances, for the Court to now take the

view that it would be just and proper for such a company to be given

an opportunity to raise the share capital to the minimum required after

being restored to the Register of Companies, would, to my mind,

amount to a travesty and cannot be permitted.

9. In view of the above, the petition is dismissed.

SUDERSHAN KUMAR MISRA, J.

April 23, 2010 rd