The process of striking off a company from the official register, governed by the Registrar of Companies (RoC) under the provisions of Section 248 of the Companies Act 2013, represents a significant legal action that results in the dissolution of a company, stripping it of its corporate identity and legal standing. This can occur due to non-compliance with statutory obligations or through voluntary application. However, the Companies Act also provides mechanisms for the revival of such struck-off companies, allowing them to restore their legal status and resume operations. The need to revive a company may arise for various reasons such as business continuation, asset preservation, to make future business plans and ultimately to have its legal existence back on its feet. This article delves into the intricacies of the striking-off process, its implications, and the detailed procedures for revival as outlined by the Companies Act 2013, including the roles of the National Company Law Tribunal (NCLT) and various stakeholders in the appeal and restoration process. Through case laws and procedural insights, this article aims to provide a comprehensive understanding of the legal framework surrounding the dissolution and revival of companies in India
When a company is struck off the records of the Registrar, it marks the end of its legal existence, but the reasons behind this drastic step are what truly intrigue. Sometimes, this is a voluntary choice, initiated by the company itself, perhaps as a strategic move to wind down operations in a controlled manner. Other times, it’s the result of persistent non-compliance with statutory obligations, where the company, despite multiple reminders, fails to address its lapses. The implications of this action are profound: the company loses its legal identity, its capacity to conduct business, hold assets, or enter into contracts. This dissolution doesn’t just erase the company from the official records; it nullifies any legal standing it once had, leaving behind a complex web of unanswered questions—what led to this decision or failure, and what happens to the company’s remaining assets, contracts, and obligations? This is where the story of a company’s strike-off becomes not just a legal formality, but a narrative filled with implications and potential consequences that demand further exploration.
However, companies that have been struck off may seek revival under the Companies Act, 2013. The revival process involves re-registering the company to restore its legal status and re-establish its ability to conduct business. This process is governed by specific provisions of the Companies Act, which allow for the application to both the Registrar of Companies and the National Company Law Tribunal (NCLT). Successful revival requires meeting certain conditions and rectifying past compliance issues, enabling the company to resume its operations and regain its legal standing. This process is crucial for companies looking to reinstate their corporate identity and re-engage in business activities.
Section 252 of the Companies Act, 2013, provides a mechanism for appealing against a company’s striking-off order issued by the Registrar of Companies (RoC) under Section 248. If an individual or entity is dissatisfied with the RoC’s decision, they have the right to appeal to the National Company Law Tribunal (NCLT) to seek the restoration of the company’s name on the official register. This appeal must be filed within three years from the date of the striking-off order. Additionally, Section 252 empowers the RoC to appeal to the tribunal if a company’s name was struck off by mistake. This provision broadens the scope of appeals compared to the previous Companies Act of 1956, where Section 560(6) was more restrictive, allowing only the company, its members, or creditors to challenge the order.
The earlier Section 560(6) required the RoC to issue a second notice to the company if there was no response to the first notice within a month, providing an extended opportunity for the company to be heard. This procedural step has been removed in the current Act, reflecting a shift towards a more streamlined process. Under the present law, appeals can further be taken to the National Company Law Appellate Tribunal (NCLAT) if dissatisfied with the NCLT’s decision, and ultimately, appeals can be pursued under Article 32 and 226 of the Indian Constitution if necessary. This progression underscores a more inclusive and accessible appeal process for all stakeholders affected by the RoC’s orders
The term ‘striking-off’ refers to the process by which the Registrar of Companies (RoC) removes a company’s name from register of companies. This action can be initiated either by the RoC, exercising its authority under Section 248(1) of the Companies Act, 2013 (the ‘Act’), or by the company itself through a voluntary application under Section 248(2) of the Act.
The reasonable grounds on which ROC can proceed to strike of the name of a company is as follows: –
A company struck off the register by the Registrar of Companies (RoC) can be reinstated by filing a petition with the National Company Law Tribunal (NCLT) (Form NCLT-9).
Only upon the satisfaction of remarks raised by the applicable authorities, does the NCLT admit the petition, leading to subsequent hearings. The Honourable Court may also request reports from the relevant authorities as necessary. A struck-off company may move the court for passing an order of only after proper reports, due filings, necessary submissions, and the payment of statutory and applicable fees are done and duly complied with.
If a company is struck off by the RoC under Section 248(1) of the Companies Act, 2013, any aggrieved person can appeal to the NCLT for restoration within three years of the striking-off order, provided he establishes that none of the grounds on which the Registrar removed the name were present. The NCLT has the discretion to restore the company’s name if it finds the removal unjustified. Similarly, the RoC can apply to the NCLT within three years if the strike-off was based on incorrect details provided by the company’s board.
Section 252(3) of the Companies Act, 2013 states that any member, creditor, or workman affected by the striking-off may also seek revival by applying to the NCLT within 20 years from the dissolution notice’s publication in the Official Gazette, provided they can demonstrate:
The NCLT is further authorized to order the company’s restoration and issue directions to reinstate its legal status as if it had never been struck off. Diving a little deep, the Companies Act, 2013 has not defined the term ‘aggrieved’ or ‘aggrieved person’. For the purpose of construing the meaning of the term and as expounded by Hon’ble Supreme Court, it is safe to interpret that a person can be said to be aggrieved when a person is denied a legal right by someone who has a legal duty to do something or to abstain from, doing something.
In reviewing revival applications, the NCLT considers:
To apply for revival, one must adhere to Rule 87A of National Company Law Tribunal (Amendment) Rules, 2017. The aggrieved shall submit an application in FORM NCLT 9, along with a fee of Rs. 1,000. The application must include:
A copy of the petition should be sent to the RoC at least 14 days before the NCLT hearing. If the NCLT approves the revival, the company must:
1. In the case of M/S Vats Associates Pvt. Ltd. (Defunct) vs Registrar of Companies, the petitioner sought restoration of the company’s name to the Register of Companies under Section 560(6) of the Companies Act, 1956*, after it was struck off due to non-compliance with statutory requirements, specifically failing to file balance sheets and annual returns from 2000 to 2008. Despite this, the company demonstrated continuous operation and proper maintenance of records, attributing the non-filing to their Company Secretary’s oversight without the management’s knowledge.
The High Court of Delhi, considering the company’s active status and the fact that the petition was filed within the permissible 20-year restoration period, referenced the precedent set in Purushottamdas & Anr (Bulakidas Mohta Co P. Ltd) v Registrar of Companies, where it was held that the object of Section 560(6) is to provide an opportunity to revive a company in the interests of justice. Emphasizing that the ultimate responsibility for compliance lies with the company’s management, not just the Company Secretary, the court ordered the reinstatement of the company’s name, subject to the payment of Rs. 25,000 as costs and completion of all pending statutory formalities. This decision aligns with the principle that restoration is necessary to serve the interests of justice, allowing the company to continue its business operations.
The similar judgments were delivered for restoration of name of company in various cases including but not limited to such as M/S Himalaya Packaging & Printing Pvt. Ltd. vs Registrar of Companies and Alliance Commodities Pvt. Ltd. vs Office of Registrar of Companies. The legal precedent stated above supports the notion that even if a company has faced compliance issues, the overarching goal of the legislation is to facilitate the revival and continuation of business operations, provided there is a compelling justification for doing so.
2. In the case of Khetan Granite P. Ltd. v Registrar of Companies the Registrar of Companies issued a notice under Section 248(1)(c) of the Companies Act, 2013 to the appellant company. The company’s name was subsequently struck off the Register of Companies for failure to file annual returns and financial statements. After due procedure, the Tribunal dismissed the company’s appeal under Section 252 of the Act, affirming the Registrar’s decision on the grounds that the company could not demonstrate it was a going concern or engaged in business activities during the relevant period. Upon further appeal, the NCLAT reversed the Tribunal’s decision, noting that the company had provided audited balance sheets for the financial years in question, filed income tax returns, and presented sale deeds of land purchased during the period. This evidence clearly demonstrated that the company had substantial movable and immovable assets, thereby indicating ongoing business operations. As a result, the orders of the Tribunal and the Registrar were deemed legally unsustainable, and the company’s name was ordered to be restored to the Register of Companies.
3. In the case of Rashmi Rajpal v Klienz Herbal Private Limited the name of a company was struck off from the Register of Companies due to its failure to submit annual returns, as per Section 248(1) of the Companies Act, 2013. In response, a petition was filed under Section 252(3) of the Act, seeking to overturn the Registrar of Companies’ decision and restore the company’s name to the Register. The NCLT, in allowing the application, ruled that the company had filed its petition within the legally prescribed time frame and had provided sufficient grounds to justify the restoration of its name. The application had been submitted by a duly authorized representative of the company, and evidence was presented that the company was still engaged in business activities at the time the action was taken. Furthermore, the company had adequately explained the reasons for its failure to file the required documents with the Registrar. Consequently, the NCLT allowed the application, contingent upon the company submitting all pending returns, annual reports, balance sheets, and other requisite filings, along with the statutory and additional fees. The Tribunal concluded that restoring the company’s name to the Register of Companies would be just and appropriate.
* The relevance can be established from corresponding Section 252 (1) of Companies Act, 2013 having the same meaning/intent as that of Section 560(6) of the Companies Act, 1956. Therefore, it can be concluded that a similar judgment or order would have been applicable if the case had been tested under the prevailing sections of the Companies Act, 2013.
When a company’s name is restored by order, it is as though the name had never been struck off. This means that the company is considered to have been in continuous existence throughout the period it was struck off. If a competent court orders the restoration, the company’s existence is retrospectively recognized as uninterrupted, as if it had never been dissolved.
This retroactive recognition ensures that the rights and obligations of all parties remain unaffected by the period of dissolution. Essentially, all legal and business activities of the company are regarded as having continued seamlessly.
Sections 248 to 252 of the Companies Act, provide a more robust and efficient framework for company dissolution. This method is notably the quickest way to shut down a corporation compared to other procedures under the Act. However, even though a company can be dissolved and its name removed from the Registrar of Companies (ROC) registers, the liabilities of its directors, officers, and members remain intact, enforceable as if the company had never been dissolved.
Additionally, these sections offer restoration provisions, allowing a struck-off company to reinstate its name in the register and resume operations within twenty years of being struck off. Following the enactment of these provisions, the ROC has been proactive in issuing notices to companies eligible for removal under section 248(1) of the Act, with these notices now posted on the Ministry of Corporate Affairs (MCA) portal.
However, the grounds for filing an appeal to the Tribunal (NCLT) are largely consistent under both sub-sections (1) and (3) of Section 252 of the Companies Act, 2013. The rationale for providing two distinct time limits being 3 years and 20 years could benefit from further clarification. While it is reasonable to prescribe a three-year time limit for the Registrar to apply for restoration, there appears to be no justification for offering a three-year time limit for any aggrieved person, and a significantly longer 20-year time limit for a company, its members, creditors, or workmen to apply to the Tribunal. Under Section 560(6) of the Companies Act, 1956, only a single 20-year time limit was provided. However, it may be interpreted that the time period of 3 years is provided for any aggrieved person (statutory bodies, members, creditors, and workmen) in case the grounds of strike off were not present or the due process was not followed. For members, creditors and workmen, an additional timeline has been provided under section 252 (3) of the Act, which stipulates that they can approach the NCLT for revival of struck of companies if it is proved that the company was functional or operational at the time of passing strike off order.
Companies must exercise caution when responding to such notices from the ROC. It is essential to remember that being struck off does not absolve directors and members from any existing liabilities under the law.
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