Company whose name has been removed from the Register of the Companies can be liquidated under the I&B Code: NCLAT
Initiation of Corporate Insolvency Resolution Process was maintainable against a company whose name had been struck off from the Register of the Companies under Section 248 of the Companies Act, 2013. The judgment passed by the NCLAT New Delhi (principle bench), in its decision in   Mr. Hemang Phophalia vs The Greater Bombay Co-operative Bank Limited (Company Appeal (AT) (Insolvency) No. 765 of 2019)   by Hon’ble Shri  Justice A.I.S. Cheema and Justice S. J. Mukhopadhaya The facts of the case was such that – The Respondent (Greater Bombay Co-employable Bank Limited) had documented an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 for starting CIRP against Penguine Umbrella Works Private Limited (‘Corporate Debtor’), claiming a default in reimbursement including revenue and different charges. Ld .counsel showing up for the Appellant presented that name of the ‘Corporate Debtor’ was struck-off from the Register of the Companies under Section 248 of the Companies Act, 2013, in this way, the application under Section 7 against non-existent Company (‘Corporate Debtor’) isn’t viable. Further, Appellant submitted that in view of the initiation of ‘corporate insolvency resolution process, now, the ‘resolution professional’ will ask the appellant, ex-director, and others to hand over the records and assets of the ‘corporate debtor’, which are not available. however, in absence of any such order passed by the ‘resolution professional’ or the adjudicating authority (NCLT), we are not inclined to decide such an issue. Section 252(3), it will be clear that the Tribunal, by the request, before the expiry of a long time from the distribution in the Official Gazette of the Notice under sub-Section (5) of Section 248, on an application made by a leaser or laborer, may pass request and give such different headings and make such arrangements as considered only for putting the name of the Company and any remaining people similarly situated as almost as might be as though the name of the Company had not been struck off from the Register of Companies. Thusly, if an application is recorded by the creditor before the expiry of a long time from the distribution in the Official Gazette of the Notice under subsection (5) of Section 248, it is available to the Adjudicating Authority to give such headings and make such arrangements as considered only for putting the name of the Company and any remaining people similarly situated almost as might be as though the name of the Company had not been struck off from the Register of Companies. The name of the ‘Corporate Debtor’ (Company) may be struck off, but the assets may continue. Whether in the present case, there are assets of the ‘Corporate Debtor’ or not can be looked into only by the ‘Resolution Professional’
NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI Company Appeal(Insolvency) No. 7619 Arising out of Order dated 12th June 2019 passed by the Adjudicating Authority National Company Law Tribunal) Mumbai Bench in CP 1661MB 2017) Appellant IN THE MATTER OF: Mr. Hemang Phophalia Having Address at P.O. Box Number 7109 C o Wadala Post Office Wadala West Mumbai 400031. The Greater Bombay Co operative Bank Limited GBCB House 89 Bhuleshwar Road FanasWadi Kalbadevi Mumbai 400 002. Private Limited Through Mr. Vijay Pitamber Lulla Interim Resolution Professional) IBBI IPA 001 IP P00323 2017 18 10593] B 12 13 Chinnar 1st Floor R.A. Kidwai Road Mumbai 400031. 2. M s. Penguin Umbrella Works For Appellant: Respondents Mr. Arun Kathpalia Senior Advocate with Mr. P.V. Dinesh Mr. R.S. Lakshman Mr. Ashwini Kumar Mr. Sindhu Advocates. For Respondents: Mr. Shridhar Y. Chitale Advocate. Mr. Sumit Shukla Advocate for Respondent JUDGMENT SUDHANSU JYOTI MUKHOPADHAYA J. First Respondent The Greater Bombay Co operative Bank Limited hereinafter referred to as the ‘Financial Creditor’) filed an application under Section 7 of the Insolvency and Bankruptcy Code 2016for initiating ‘Corporate Insolvency Resolution Process’ Company Appeal(Insolvency) No. 7619 against Penguine Umbrella Works Private Limited alleging default in repayment of Rs.9 11 08 439.37 including interest and other charges. The Adjudicating Authority Mumbai Bench by impugned order dated 12th June 2019 having admitted the application the present Appeal has been preferred by Mr. Hemang Phophalia Ex Director and Shareholder of the ‘Corporate Debtor’. Learned Counsel appearing on behalf of the Appellant submitted that name of the ‘Corporate Debtor’ was struck off from the Register of the Companies under Section 248 of the Companies Act 2013 therefore the application under Section 7 against non existent Companyis not maintainable. It was further submitted that the application under Section 7 preferred by 1st Respondent Bank ‘Financial Creditor’ was barred by limitation. Learned Counsel appearing on behalf of the Appellant submitted that in view of the initiation of ‘Corporate Insolvency Resolution Process’ now the ‘Resolution Professional’ will ask the Appellant Ex Director and others to handover the records and assets of the ‘Corporate Debtor’ which are not available. However in absence of any such order passed by the ‘Resolution Professional’ or the Adjudicating Authority Mumbai Bench we are not inclined to decide such issue. Learned Counsel for the Appellant also submitted that Company is non functional since number of years and there is no employee working in company and even assets are not there. Therefore according to him the ‘Resolution Professional’ cannot make the ‘Corporate Debtor’ a going concern. Therefore the application under Section 7 is not maintainable. However on the ground that there is no employee working or the Shareholder(s) or Director(s) ceased to be Shareholder(s) or Director(s) cannot be a ground to reject application under Sections 7 or 9 of the I&B Company Appeal(Insolvency) No. 7619 6. The question arises for consideration is whether an application under Section 7 or 9 for initiating ‘Corporate Insolvency Resolution Process’ is maintainable against a Company ‘Corporate Debtor’ if the name of the Company ‘Corporate Debtor’ is struck off from the Register of the Companies. For deciding the issue it is necessary to refer the relevant provisions of the Companies Act 2013 as also the reasons and manner in which the name of a Company is struck off. Chapter XVIII of the Companies Act deals with “Removal of Names of Companies from the Register of Companies”. The Registrar of Companies is empowered under Section 248 of Companies Act to remove the name of the Company from the Register of the Companies which reads as follows: “CHAPTER XVIII REMOVAL OF NAMES OF COMPANIES FROM THE REGISTER OF COMPANIES 248. Power of Registrar to remove name of company from register of companies. Where the Registrar has reasonable cause to believe that— a) a company has failed to commence its business within one year of its incorporation c) a company is not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company under section 455 he shall send a notice to the company and all the directors of the company of his intention to remove the name of the company from the register of companies and requesting them to send their representations along with Company Appeal(Insolvency) No. 7619 copies of the relevant documents if any within a period of thirty days from the date of the notice. 2) Without prejudice to the provisions of sub section a company may after extinguishing all its liabilities by a special resolution or consent of seventy five per cent. members in terms of paid up share capital file an application in the prescribed manner to the Registrar for removing the name of the company from the register of companies on all or any of the grounds specified in sub section and the Registrar shall on receipt of such application cause a public notice to be issued in the prescribed manner: Provided that in the case of a company regulated under a special Act approval of regulatory body constituted or established under that Act shall also be obtained and enclosed with the application. 3) Nothing in sub section shall apply to a company registered under section 8. 4) A notice issued under sub section or sub sectionshall be published in the prescribed manner and also in the Official Gazette for the information of the general public. 5) At the expiry of the time mentioned in the notice the Registrar may unless cause to the contrary is shown by the company strike off its name from the register of companies and shall publish notice thereof in the Official Gazette and on the publication in the Official Gazette of this notice the company shall stand dissolved. 6) The Registrar before passing an order under sub section shall satisfy himself that sufficient provision has been made for the realisation of all amount due to the company and for the payment or discharge of its liabilities and obligations by the company within a Company Appeal(Insolvency) No. 7619 reasonable time and if necessary obtain necessary undertakings from the managing director director or other persons in charge of the management of the company: Provided that notwithstanding the undertakings referred to in this sub section the assets of the company shall be made available for the payment or discharge of all its liabilities and obligations even after the date of the order removing the name of the company from the register of companies. 7) The liability if any of every director manager or other officer who was exercising any power of management and of every member of the company dissolved under sub sectionshall continue and may be enforced as if the company had not been dissolved. 8) Nothing in this section shall affect the power of the Tribunal to wind up a company the name of which has been struck off from the register of companies” As per sub sectionof Section 248 before passing an order under sub section (removing the name from the Register of Companies) the Registrar is to satisfy himself that sufficient provision has been made for realization of all amount due to the company and for the payment or discharge of its liabilities and obligations within a reasonable time and if necessary obtain necessary undertakings from the Managing Director Director or other persons in charge of the management of the Company. 10. As per proviso thereof notwithstanding the undertakings referred to in sub section the assets of the Company are to be made available for payment or discharge of its liabilities and obligations even after the date of the order removing the name of the Company from the Register of Companies. Company Appeal(Insolvency) No. 7619 11. From sub sectionof Section 248 it is also clear that the liability if any of every director manager or other officer who was exercising any power of management and of every member of the company dissolved under sub section of Section 248 shall continue and may be enforced as if the company had not been dissolved. 12. From sub sectionof Section 248 it is clear that Section 248 in no manner will affect the power of the Tribunal to wind up a company the name of which has been struck off from the Register of Companies. 13. Section 250 of the Companies Act 2013 relates to effect of Company notified as dissolved and reads as follows: “250. Effect of company notified as dissolved.— Where a company stands dissolved under section 248 it shall on and from the date mentioned in the notice under sub section of that section cease to operate as a company and the Certificate of Incorporation issued to it shall be deemed to have been cancelled from such date except for the purpose of realizing the amount due to the company and for the payment or discharge of the liabilities or obligations of the company.” 14. Therefore it is clear that after removal of the name of the Company from the Register of the Company for the purpose of right of realization of all amount due to the Company and for the purpose of payment or discharge of its liabilities or obligations of Company continues. 15. Section 252 relates to ‘Appeal to Tribunal’ against order of Registrar notifying a Company as dissolved under Section 248. As per Section 252if 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 Company Appeal(Insolvency) No. 7619 Gazette of the notice under sub sectionof 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 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. Section 252reads as follows: “252. Appeal to Tribunal.— 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 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 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 Company Appeal(Insolvency) No. 7619 name of the company had not been struck off from the register of companies.” 16. From sub sectionof Section 252 it will be evident that the Tribunal by the order before expiry of twenty years from the publication in the Official Gazette of the Notice under sub Sectionof Section 248 on an application made by a creditor or workman may pass order and give such other directions and make such provisions as deemed just for placing the name of 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 17. The Tribunal is the Adjudicating Authority in terms of Section 60(1) of the I&B Code. Hence on one side it plays role of ‘Adjudicating Authority’ and on the other ‘Tribunal’ under the Companies Act. Therefore if an application is filed by the ‘Creditor’ or workman before the expiry of twenty years from the publication in the Official Gazette of the Notice under sub section of Section 248 it is open to the Adjudicating Authority to give such directions and make such provisions as deemed just for placing the name of the Company and all other persons in the same position nearly as may be as if the name of the Company had not been struck off from the Register of Companies. 18. As per amended Clauseof Section 2 of the Companies Act 2013 “winding up” means ‘winding up under this Act or liquidation under the Insolvency and Bankruptcy Code 2016 as applicable’. Therefore it is clear that the Company whose name has been removed from the Register of the Companies can be liquidated under the I&B Code. In terms of Part II of I&B Code for the purpose of liquidation except ‘Voluntary Liquidation of Corporate Persons’ under Section 59 of the I&B Code procedure of ‘Corporate Insolvency Resolution Process’ is to be followed if a proceeding is initiated under Sections 7 or 9 of the I&B code. Company Appeal(Insolvency) No. 7619 Instead of liquidation the first step to be taken is to ensure that in a time bound manner the value of assets of Corporate Debtor Company is maximized and to promote entrepreneurship availability of credit by balancing the interest of all the stakeholders within an active legal framework for timely resolution of insolvency and bankruptcy. Liquidation of assets of the ‘Corporate Debtor’ Company is not the object but object is revival and rehabilitation of the ‘Corporate Debtor’ Company by way of ‘Resolution’ and maximization of the value of assets of the ‘Corporate Debtor’ and balancing the interest of all the stakeholders. 20. The name of the ‘Corporate Debtor’may be struck off but the assets may continue. Whether in the present case there are assets of the ‘Corporate Debtor’ or not can be looked into only by the ‘Interim Resolution Professional’ ‘Resolution Professional’. 21. The name of the Company having been struck off the Corporate Person cannot file an application under Section 59 for Voluntary Liquidation. In such a case and in view of the provisions of Section 250 read with Section 248andwe hold that the application under Sections 7 and 9 will be maintainable against the ‘Corporate Debtor’ even if the name of a ‘Corporate Debtor’ has been struck off. 22. So far as liability of the Ex Directors or Shareholders or Officers are concerned Section 248 of the Companies Act being clear we are not expressing specific opinion till any order is passed by the Adjudicating Authority or demand is made by the ‘Interim Resolution Professional’. In view of the aforesaid provision we hold that the Adjudicating Authority who is also the Tribunal is empowered to restore the name of the Company and all other persons in their respective position for the purpose of initiation of ‘Corporate Insolvency Resolution Process’ under Sections 7 and 9 of the I&B Code based on the application if filed by the ‘Creditor’ ‘Financial Creditor’ or ‘Operational Creditor’) or workman within twenty years from the date the name of the Company is struck off under sub section Company Appeal(Insolvency) No. 7619 of Section 248. In the present case application under Section 7 having admitted the ‘Corporate Debtor’ and its Directors Officers etc. deemed to have been restored in terms of Section 252(3) of the Companies Act. 24. We find no merit in this Appeal it is accordingly dismissed. No cost. Justice S. J. Mukhopadhaya] Justice A.I.S. Cheema) MemberMemberNEW DELHI 5th September 2019 Company Appeal(Insolvency) No. 7619 