Company cannot be reinstated solely to litigate: NCLT New Delhi bench
A company which has not been operating for a considerably long period of time will be struck of the rolls from the register of companies by the registrar of companies and such a company ceases to exist. This company cannot be reinstated to its powers priorly awarded solely for the purposes to litigate. This was held by the coram comprising of Hon’ble Member Shri Abni Ranjan Kumar Sinha and Hon’ble member Shri. L.N. Gupta in the case of M/s. Swastik Finbuild India Private Limited and Ors. Vs. The Registrar of Companies on the 22nd of July 2021 before the National Company Law Tribunal, New Delhi Bench, (court – II). The brief facts of the case are, the appellant company was established in the year 1996 and during that year, the Company bought a plot vide Sale Deed dated 03.05.1996 registered with the Revenue District of Gurugram, in order to implement a housing project. It is added that a legal dispute arose on the said plot, as a result of which the Appellant Company could not execute the project for which the plot was purchased. The RoC Delhi and Haryana had struck off the Appellant Company’s name from the Register due to defaults in statutory compliances, namely, failure to file Financial Statements &amp; Annual Returns since in its incorporation. Consequently, the RoC initiated proceedings under Section 248 of the Companies Act 2013 and struck off the name of the Appellant Company from its Register vide STK-7 Notice No. ROC/DELHI/248(5)/STK-7/5071 dated 01.09.2017. The name of the Appellant Company appeared at serial no. 22002 of the list of companies, whose names were stuck off due to default in Statutory compliances. The present Appeal has been preferred by M/s. Swastik Finbuild India Private Limited (hereinafter referred to as the ‘Appellant Company’) under Section 252(1) of the Companies Act, 2013 for seeking restoration of the Appellant Company in the register maintained by the Registrar of Companies, NCT of Delhi and Haryana (RoC). The appellant submitted that in order to defend/allege its claim before the Courts in two other litigations, the Appellant Company has sought restoration of its name in the Register of ROC. Further, the Appellant Company has averred that it is in position to file its Balance Sheets for the Financial Years from 1996 to 2016-17. The ROC submitted that the Appellant Company has not been able to substantiate that it was in operation. Even since launching of MCA-21 portal in 1996, no records of the Annual Return and balance sheet of the Company exist on the portal. The have added that Company has not submitted any document except the balance Sheet for one Financial Year i.e., 2016-17 only in which too, the revenue from its operations is “Zero’. The learned bench heard both the parties and observed that the only ground on which the Appellant Company is seeking its revival is the Litigations that are pending by or against it. It was observed that, the Company has not done any business since its inception i.e., from 1996 to 2017, which is a long period of 21 years. This clearly depicts that the Company never had any intention to do any business. The bench relied on the judgement in Alliance Commodities Private Limited Vs. Office of Registrar of Companies, West Bengal, Company Appeal (AT) No. 20 of 2019 “Section 252 (3) of the Companies Act, 2013 empowers the Tribunal to order restoration of a Company whose name has been struck off from the Register of Companies, if such company, any member or creditor or workman thereof feeling aggrieved by such striking off applies before the Tribunal seeking restoration of the struck off company to the Register of Companies before the expiry of twenty years from the publication in Official Gazette of notice under Section 248(5). The exercise of such power is properly regulated and depends upon satisfaction of the Tribunal that the Company at the time of its name being struck off was carrying on business -10- Company Appeal (AT) No. 20 of 2019 or in operation or otherwise it is ‘just’ that the name of company be restored. We do not find ourselves persuaded to agree with the proposition canvassed by learned counsel for the Appellant that inspite of Appellant’s inability to demonstrate that the Company was at the relevant time carrying on business or in operation, the Tribunal had vast powers to order restoration of Company on the ground “or otherwise”. This term “or otherwise” has been judiciously used by the legislature to arm the Tribunal to order restoration of a struck off company within the permissible time limit to take care of situations where it would be just and fair to restore company in the interest of company and other stakeholders. Such instances can be innumerable. However, this term “or otherwise” cannot be interpreted in a manner that makes room for arbitrary exercise of power by the Tribunal when there is specific finding that the Company has not been in operation or has not been carrying on business in consonance with the objects of the Company”.
THE NATIONAL COMPANY LAW TRIBUNAL NEW DELHI BENCH Appeal No. 530 252(ND) 2020 IN THE MATTER OF: 1. M s. Swastik Finbuild India Private Limited 59 4336 Padam Singh Road Karol Bagh New Delhi 110005 …Appellant No. 1 2. Sh. Sita Ram Singhal A 1 New Sheetla Mata Road Sanjay Gram Gurugram Haryana 122001 3. Smt. Asha Singhal A 1 New Sheetla Mata Road Sanjay Gram Gurugram Haryana 122001 The Registrar of Companies 4th Floor IFCI Tower 61 Nehru Place New Delhi 110019 …Appellant No. 2 …Appellant No. 3 …Respondent Order Delivered on: 22.07.2021 SHRI. ABNI RANJAN KUMAR SINHA HON’BLE MEMBERSHRI. L.N. GUPTA HON’BLE MEMBERPRESENT: For Appellant Mr. Deepak Singhal Advocate For Respondent Mr. Vipul Agarwal For IT Department Appeal No. 530 252(ND) 2020 M s. Swastik Finbuild India Pvt. Ltd. Vs. ROC ORDER PER SHRI L. N. GUPTA MEMBERThe present Appeal has been preferred by M s. Swastik Finbuild India Private Limited and by its Ex Directors Sh. Sita Ram Singhal and Smt. Asha Singhal under Section 252(1) of the Companies Act 2013 for seeking restoration of the Appellant Company in the register maintained by the Registrar of Companies NCT of Delhi and Haryana2020 M s. Swastik Finbuild India Pvt. Ltd. Vs. ROC It is submitted by the Appellant that the RoC Delhi and Haryana had struck off the Appellant Company’s name from the Register due to defaults in statutory compliances namely failure to file Financial Statements & Annual Returns since in its incorporation. Consequently the RoC initiated proceedings under Section 248 of the Companies Act 2013 and struck off the name of the Appellant Company from its Register vide STK 7 Notice No. ROC DELHI 248(5) STK 7 5071 dated 01.09.2017. The name of the Appellant Company appeared at serial no. 22002 of the list of companies whose names were stuck off due to default in Statutory compliances. It is submitted by the Appellant that it was established in the year 1996 and during that year the Company bought a plot vide Sale Deed dated 03.05.1996 registered with the Revenue District of Gurugram in order to implement a housing project. It is added that a legal dispute arose on the said plot as a result of which the Appellant Company could not execute the project for which the plot was It is further submitted by the Appellant that on 07.05.1996 it filed a Civil Suit bearing No. 996 titled as Swastik Finbuild India Pvt. Ltd. Vs Bhawani Parshad & Ors. before the court of Civil Judge Junior Division Gurugram District Court seeking relief of “Suit for Mandatory Injunction and Permanent Injunction.” It is added that the suit was decided in the favour of the Appellant Company on Appeal No. 530 252(ND) 2020 M s. Swastik Finbuild India Pvt. Ltd. Vs. ROC 04.01.2014. However an appeal was filed before the Additional District Judge Gurugram against the said order and the same was also decided in the favour of the Appellant Company on 01.09.2015. It is added by the Appellant that a Second Appeal against the Judgement dated 04.01.2014 and 01.09.2015 has been filed before Hon’ble High Court of Punjab and Haryana vide RSA no. 841 2016 titled as “Bhawani Prasad Dead Through LR’s & Ors. Versus M s Swastik Finbuild India Pvt. Ltd. & Ors. which is still pending and the next date of hearing in the matter is fixed for 29.09.2021. It is further added that the Appellant Company has also filed a Civil Execution Petition bearing no. 6019 titled as Swastik Finbuild India Pvt. Ltd. Vs Bhawani Parshad & Ors. before the court of Civil Judge Junior Division Gurugram District Court for Execution of judgement and Decree dated 04.01.2014 which is also pending before the Civil Court. That in order to defend allege its claim before the Courts the Appellant Company has sought restoration of its name in the Register of ROC. Further the Appellant Company has averred that it is in position to file its Balance Sheets for the Financial Years from 1996 to 2016 17. That the RoC has filed its report on 15.03.2021 and submitted that the Appellant Company has not been able to substantiate that it was in operation. Even since launching of MCA 21 portal in 1996 no records of the Annual Return and balance sheet of the Company exist Appeal No. 530 252(ND) 2020 M s. Swastik Finbuild India Pvt. Ltd. Vs. ROC on the portal. The have added that Company has not submitted any document except the balance Sheet for one Financial Year i.e. 2016 17 only in which too the revenue from its operations is “Zero’. Scanned copy of the relevant extracts of the report of RoC is reproduced below: 10. That the Income Tax Department has also filed its Report and has submitted that there are “NO ITR’s on e filing ITD portal”. Though the IT Department has stated no objection to revival of the Company it has submitted “That while passing any order this Hon’ble Court may consider the Judgement of Hon’ble NCLAT in the case of M s Alliance Commodities Pvt. Ltd. Vs. Office of Registrar of Companies Appeal No. 530 252(ND) 2020 M s. Swastik Finbuild India Pvt. Ltd. Vs. ROC WB CA No. 20 of 2019 which was subsequently upheld by the Hon’ble Supreme Court in the matter of M s Alliance Commodities Pvt. Ltd. Vs. Office of Registrar of Companies WBvide order dated 23.09.2019. 11. That vide order dated 07.07.2021 this Bench had directed the Appellant to file a short written synopsis along with the present status of Execution proceedings and Second Appeal. The same is on record. 12. That the Appellant Company in its written synopsis dated 15.07.2021 has reiterated the same facts and indicated the current status of the cases as per which the Second Appeal is listed before Hon’ble High Court of Punjab and Haryana on 29.09.2021 and Execution Proceedings are listed on 19.07.2021 in the Civil Court. 13. After hearing submissions and perusing documents placed on record by both the parties this Bench is of the view that the only ground on which the Appellant Company is seeking its revival is the Litigations that are pending by or against it. 14. From perusal of the documents placed on record it is observed that the Company was incorporated in the year 1996 and since then it has never filed its Financial Statements and Annual Returns. The Report of RoC also confirms that the only balance sheet filed by the company for the FY 2016 17 also depicts ‘nil’ revenue from its operations. Further the Income Tax Department has stated that Appeal No. 530 252(ND) 2020 M s. Swastik Finbuild India Pvt. Ltd. Vs. ROC though it has no objection towards the revival of the company it has no record of its Income or Income Tax Returns in its data base. 15. Although the Appellant Company has averred in its Appeal that it has a plot of land but no sale deed of the said plot to support its claim has been placed on record by the Appellant which could depict the title of the land in its favour. 16. We notice that the Company has not done any business since its inception i.e. from 1996 to 2017 which is a long period of 21 years. This clearly depicts that the Company never had any intention to do any business. 17. From perusal of the record of Litigation also it is observed that there are other parties too on the side of Appellant Company through which the Litigation may continue and be pursued. That the pending litigation against the Appellant Company cannot be the sole ground to seek its revival since the Litigation can still be carried on by the other contesting parties. That the Appellant Company has not brought anything on record which could substantiate that the Appellant Company was in operation or was doing any significant business at the time when its name was struck off from the register of RoC. Further we are of the view that a company cannot be restored solely to litigate. Appeal No. 530 252(ND) 2020 M s. Swastik Finbuild India Pvt. Ltd. Vs. ROC 19. In the current circumstances it is worthwhile to refer to the paragraph 9 of the Judgement of Hon’ble NCLAT in the matter of Alliance Commodities Private Limited Vs. Office of Registrar of Companies West Bengal Company AppealNo. 219: “9. Section 252 of the Companies Act 2013 empowers the Tribunal to order restoration of a Company whose name has been struck off from the Register of Companies if such company any member or creditor or workman thereof feeling aggrieved by such striking off applies before the Tribunal seeking restoration of the struck off company to the Register of Companies before the expiry of twenty years from the publication in Official Gazette of notice under Section 248(5). The exercise of such power is properly regulated and depends upon satisfaction of the Tribunal that the Company at the time of its name being struck off was carrying on business 10 Company AppealNo. 219 or in operation or otherwise it is ‘just’ that the name of company be restored. We do not find ourselves persuaded to agree with the proposition canvassed by learned counsel for the Appellant that inspite of Appellant’s inability to demonstrate that the Company was at the relevant time carrying on business or in operation the Tribunal had vast powers to order restoration of Company on the ground “or otherwise”. This term “or otherwise” has been judiciously used by the legislature to arm the Tribunal to order restoration of a struck off company within the permissible time limit to take care of situations where it would be just and fair to restore company in the interest of company and other stakeholders. Such However this term “or otherwise” cannot be interpreted in a manner that makes room for arbitrary exercise of power by the Tribunal when there is specific finding that the Company has not been in operation or has not been carrying on business in consonance with the objects of the Company. A Shell Company or a Company having assets but advancing loans to sister concerns or corporate persons for siphoning of the funds evading tax or indulging in unlawful business or not abiding by the statutory compliances cannot be allowed to invoke this expression “or otherwise” which would be a travesty of justice besides defeating the very object of the Company….” instances can be Appeal No. 530 252(ND) 2020 M s. Swastik Finbuild India Pvt. Ltd. Vs. ROC 20. In view of the above this Bench is not inclined to interfere with the striking off action taken by the RoC against the Appellant Company under Section 248(5) of the Companies Act 2013. 21. The Appeal is accordingly Dismissed. S d L. N. GUPTA) MEMBER(ABNI RANJAN KUMAR SINHA) MEMBER 2020 M s. Swastik Finbuild India Pvt. Ltd. Vs. ROC 