Revival of 'Struck' Companies

Short Summary:

In this Flash editorial, the author begins by referring the provisions of section 248(1) of Companies Act, 2013 relating to Power of Registrar to remove name of company from register of companies and provisions of section 252 relating to REVIVAL OF COMPANIES STRUCK off from the record of the Registrar. The main thrust of the article, however, is upon the 'Provisions of Revival of Companies struck off by the ROC' in correlation with NCLT, Amendment Rules, 2017 dated: 5th July, 2017 read with decided Case Laws.

This is article no. 245 of the series of editorials written by the author on corporate laws {Including Companies Act, 2013, SEBI, RBI Regulations, IBC, LLP Act, 2008 etc.}.

Introduction:

As all ROC's has issued show cause notices to the Companies fallen u/s 248(1) (c).  In notice ROC mentioned that it can strike off the Company if appropriate reply not filed within 30 days and ROC will take appropriate action against the Directors.

After that at the end of the June, 2017 ROC has struck off the 100,000 (One Lakh) Companies from its record. List of Companies struck off from record of ROC available at below given link [1]. Even Our Hon'ble Prime Minister Mr. Narendra Modi  in his speech at ICAI on CA day has confirmed that scrutiny of 300,000 (Three Lakh) Companies are going on, which can be struck off u/s 248(1).

Statutory Provisions Contained Under the Act: Provisions of the Companies Act, 2013 to the extent relevant for our discussion, are stated as under (with necessary comments and modifications, wherever felt necessary).

Appeal to Tribunal

Section: 252 (3) If a company, or any member or creditor or workman thereof feels aggrieved by the company having its name struck off from the register of companies, the Tribunal on an application made by the company, member, creditor or workman before the expiry of twenty years from the publication in the Official Gazette of the notice under sub-section(5) of section 248 may, if satisfied that the company was, at the time of its name being struck off, carrying on business or in operation or otherwise it is just that the name of the company be restored to the register of companies, order the name of the company to be restored to the register of companies, and the Tribunal may, by the order, give such other directions [2]and make such provisions as deemed just for placing the company and all other persons in the same position as nearly as may be as if the name of the company had not been struck off from the register of companies.

Rule: 87A - National Company Law Tribunal (Amendment) Rules, 2017

The Ministry has Issued Rules on 5th July, 2017 in relation to filing of application u/s 252(3) for restoration of name of company in the records of the MCA. Extract of the Rule given at the end of the editorial.

Process of Filing of application with NCLT:

Process of Filing of application for restoration of Company struck off from the record of the ROC has been given in Section 252(3) read with rule 87A of National Company Law Tribunal (Amendment) Rules, 2017.

As per provisions of Section 252(3) of Companies Act, 2013 following persons can file applicationin NCLT for restoration of name of Company in the records of the ROC.

STEPS - REVIVAL OF STRUCK COMPANY

First Step - Preparation of Petition: (Rule 87A(1))

The petition under Section 252(3) for the restoration of name of struck Company shall be filed with the Tribunal (NCLT).  The petition shall be filed in [3]Form No. NCLT-9.

Second Step - Submission of Petition with ROC: (Rule 87A(2))

A copy of the application shall be served on the Registrar of Companies and on such other persons as the Tribunal may direct, not less than 14 days before the date fixed for hearing of the application..

Third Step - List of Documents Attach with application in NCLT-9:-

Annexure B of NCLT Rules, 2016 provide the list of documents required to be filed with NCLT while filing application in different-2 sections. The said Annexure not providing any separate list of documents for filing of application with NCLT u/s 252.Therefore, as per Point NO. 13 of Annexure B “Wherever no document is prescribed to be attached with the application or petition, documents as mentioned below may be attached, as applicable.'

a) Document and/or other evidence in support of the statement made in the application or appeal or petition, as are reasonably open to the petitioner(s);

b) Affidavit verifying the petition;

c) Evidence regarding payment of fee of INR 2,500/- (Rupees Twenty Five Hundred Only)

d) Memorandum of appearance with copy of the Board Resolution or the vakalatnama, as the case may be;

e) Three copies of the petition; and

f) Any other documents in support of the case.

Fourth Step: Hearing by Tribunal:(Rule 87A(3))

Tribunal shall hear the Petitioner and Respondent (ROC). It will also take note of the observations/ objections, if any, received.

After hearing Both the Parties, if it is satisfied, it can order the restoration of name of company in the record of the ROC.

If Tribunal satisfied that:

Fifth Step: directions by Tribunal(Rule 87A(4))

Where the Tribunal makes an order restoring the name of a company in the register of companies, the order shall direct that-

(a) the appellant or applicant shall deliver a certified copy to the Registrar of Companies within thirty days from the date of the order;

(b) on such delivery, the Registrar of Companies do, in his official name and seal, publish the order in the Official Gazette;

(c) the appellant or applicant do pay to the Registrar of Companies his costs of, and occasioned by, the appeal or application, unless the Tribunal directs otherwise; and

(d) the company shall file pending financial statements and annual returns with the Registrar and comply with the requirements of the Companies Act, 2013 and rules made thereunder within such time as may be directed by the Tribunal.

Sixth Step - FILING OF ORDER WITH ROC: The Company shall file the copy of order with Registrar of Companies with in period of 30 days from the date of the order.

Seventh Step - publication of order in gazette: The Registrar of Companies do, in his official name and seal, publish the order in the Official Gazette.

Eighth Step - publication of order in gazette: The company shall file pending financial statements and annual returns with the Registrar and comply with the requirements of the Companies Act, 2013.

CASE LAWS:

Directors of the NCLT can be understood by the below mentioned CASE LAWS:

CASE A: (In the case of R.A.P. Garments Private Limited V/s Registrar of Companies, NCT of Delhi & Haryana Dated 24th April, 2017 C.P. No. 461/2014 - Before NCLT Special Bench, New Delhi)

The petition was filed u/s 560(6) of Companies Act, 1956 before Hon'ble High Court of Delhi. The Hon'ble High Court has transferred the matter to NCLT on 06.01.2017.

• The ROC file a reply to the NCLT that the petitioner company has not filed its statutory documents namely, Annual Return and Balance Sheet for the period 30.09.2001 to 30.09.2014.

• ROC further contention that for notice under 560(5) for strikes off name of company was given and published and only thereafter on 31.05.2017 the name of the Company was struck off.

• The Hon'ble tribunal states that the company is a running company and that it will be seriously prejudiced if not restored in the registrar of Registrar of Companies, the petition is allowed subject to following conditions, namely the petitioner company shall:

a) The Company within 30 days of restoration file its annual return and balance sheet for the period from which there has been default start along with requisite charges/fees as well as additional fee/ late charges.

b) Affidavit of compliance of aforesaid direction be filed by the petitioner with in period of 3 month from the date of restoration.

c) The petitioner company out of its reserves/ cash and bank balance set apart INR 5 Lakh and deposit the same with the respondent (Roc) to defray costs and expenses within period of 2 months from the date of this order.

CASE B: (In the case of M. G. Power System Private Limited V/s Registrar of Companies, NCT of Delhi & Haryana Dated 18th May, 2017 C.P. No. 47/2015 - Before NCLT, New Delhi)

The petition was filed u/s 252(3) of Companies Act, 2013 before Hon'ble High Court of Delhi. The Hon'ble High Court has transferred the matter to NCLT.

• The name of the Company was struck off u/s 560 of the 1956 Act, by a suomoto action of ROC u/s 560(5).

• The ROC file a reply to the NCLT that the petitioner company has not filed its statutory returns and other documents since incorporation. Thus, its giving rise to the reasonable belief that the company was not operational.

• The Company has averred that it was declared defunct by the respondent without being put to any notice.

• The Hon'ble NCLT states that it would be just and proper to order restoration of the name of Company in the registrar of the ROC. The petition is allowed subject to following conditions, namely the petitioner company shall:

a) The Company shall file its annual return and balance sheet for the period from which there has been default start along with requisite charges/fees as well as additional fee/ late charges

b) The restoration is subject to payment of cost of Rs. 25,000/- to be paid to the prime minister Relief fund.

Conclusion:

As Ministry has taken action and struck off 100,000 Companies due to non-filing of statutory form with ROC. By follow the above cited process Company can get its name restore in the records of the ROC. There are many cases decided under Section 560(5) of 1956, Act corresponding section of 252 of the Companies Act, 2013. On the basis of the facts of cases are accepted / rejected by the Court/ Tribunal as per table given below.

EXTRACT
RULE 87A National Company Law Tribunal (Amendment) Rules, 2017

87A. Appeal or application under sub-section (1) and sub-section (3) of section 252. -

(1) An appeal under sub-section (1) or an application under subsection (3) of section 252, may be filed before the Tribunal in  Form No. NCLT 9, with such modifications as may be necessary.

(2) A copy of the appeal or application shall be served on the Registrar and on such other persons as the Tribunal may direct, not less than fourteen days before the date fixed for hearing of the appeal or application, as the case may be.

(3) Upon hearing the appeal or the application or any adjourned hearing thereof, the Tribunal may pass appropriate order, as it deems fit.

(4) Where the Tribunal makes an order restoring the name of a company in the register of companies, the order shall direct that-

(a) the appellant or applicant shall deliver a certified copy to the Registrar of Companies within thirty days from the date of the order;

(b) on such delivery, the Registrar of Companies do, in his official name and seal, publish the order in the Official Gazette;

(c) the appellant or applicant do pay to the Registrar of Companies his costs of, and occasioned by, the appeal or application, unless the Tribunal directs otherwise; and

(d) the company shall file pending financial statements and annual returns with the Registrar and comply with the requirements of the Companies Act, 2013 and rules made thereunder within such time as may be directed by the Tribunal.

(5) An application filed by the Registrar of Companies for restoration of name of a company in the register of companies under second proviso to sub-section (1) of section 252 shall be in Form No. NCLT 9 and upon hearing the application or any adjourned hearing thereof, the Tribunal may pass an appropriate order, as it deems fit

[1] http://www.mca.gov.in/MinistryV2/stk7publicnotices5.html

[2] Directions are mentioned in Rule 87A(4) of National Company Law Tribunal (Amendment) Rules, 2017
http://www.mca.gov.in/Ministry/pdf/NationalCompanyLawTribunalAmdtRules_06072017.pdf

[3] Rule 87A(1)