NCLT cannot Suo Moto Restore Name of Struck-Off Company under Companies Act: NCLT [Read Order]

The New Delhi bench of the National Company Law Tribunal ( NCLT ) has held that the power of the Tribunal to restore the name of a struck off company under Section 252 of the Companies Act, 2013 is not a suo motu power.

It said that is to be exercised either on the basis of an appeal filed by any aggrieved person under Section 252 (1) or to be exercised on an application filed by the Companies, its members or creditors or workmen aggrieved by the order of striking off under Section 252(3) of the Companies Act, 2013.

Dhirendra Pratap Singh & Anr, the applicant submitted that the applicant was not aware of the said order of dismissal for non-prosecution and came to know about it very recently while checking the status of the case on the web portal of the Tribunal. On becoming aware about the said order, the applicant has instantly moved the present application.

It is submitted that the present matter was transferred from Bench No. 2 after being released as part-heard, and in accordance with the order of the Principal Bench, the matter was listed before the Bench on 17.12.2019. That on 17.12.2019, counsel for the Applicant appeared and apprised the Tribunal of the appointment of Mr. Nitish Kumar Chugh as the valuer by the erstwhile Bench, and also submitted that the valuation of the assets of the Respondent Company was yet to be undertaken.

As none appeared on behalf of the Respondents on 17.12.2019, the Bench directed the counsel for the Petitioner to serve a copy of the order dated 17.12.2019 upon all the Respondents (i.e., Respondent Nos. 1 to 7) through email. Further, Respondent Nos. 1 to 7 were directed to appear either in person or through an authorized representative on the next date of hearing, failing which the matter would proceed ex-parte.

In compliance of order dated 17.12.2019, the counsel for the applicant had sent email on 07.03.2020 to all respondents apprising them about the last date of i.e., 17.12.2019, along with the copy of order dated 17.12.2019 .

The Applicant has submitted that the counsel for the Applicant was unable to appear on 08.12.2020 as the date was inadvertently not updated by the clerk in the daily case diary maintained in the counsel’s office. As a result, the matter remained unattended and was subsequently listed for 01.03.2021. On 01.03.2021, the counsel for the Applicant was again unable to appear, as a total of 14 matters were listed before various courts on the same day. While managing appearances in all the listed matters, the present case regrettably remained unattended, and by the time the counsel attempted to join, the proceedings had already concluded.

It is submitted that due to the sudden surge in COVID-19 cases and multiple fatalities across the country, the functioning of all offices, including that of the Applicant’s counsel, came to a standstill after 20th April 2021. The present matter was thereafter listed for 01.07.2021.

The counsel for the Applicant was unable to keep track of the status of the case, including the next date of hearing, as his office was not functioning properly. In fact, the office remained closed until the first week of July 2021, as several associates had contracted COVID-19, and the closure was necessitated as a precautionary measure. The counsel's office resumed partial operations only in the latter half of July 2021, and it was during this period that the counsel became aware of the dismissal order passed in the present matter.

On perusal of the record, it is noted that the Petitioner remained absent on 08.12.2020, 01.03.2021, and the subsequent hearing. As recorded in the order dated 01.07.2021, none appeared on behalf of either of the parties. Earlier, by order dated 17.12.2019, a valuer was appointed and directions were issued to the Petitioner to serve copies to the Respondents, who were also directed to remain present. However, for over one and a half years, no progress was reported before this Tribunal.

Considering the prolonged inaction and continued absence of the parties, the Tribunal vide order dated 01.07.2021 dismissed the matter for non-prosecution. On perusal of the Master Data of the Corporate Debtor, we observe that the name of the Corporate Debtor has been “Struck off” from the register of Company by the Registrar of Companies.

The term “Striking off‟ means an act by which the name of the company is removed or struck off from the register of companies which is maintained by the Registrar of Companies. The consequences of Striking off the “name of company” is that the business entity has been removed from the official Register of Companies and is no longer legally recognized as a valid business or capable of holding any asset in its name.

The legal recognition of the Company pursuant to strike off is lost, the certificate of incorporation is deemed to be cancelled and the Company stands dissolved under Section 248(5) of the Companies Act, 2013 subject to the discharge of liability towards its outstanding debt by its members, directors, managers in terms of Section 248(7) of the Companies Act, 2013.

The power of the Tribunal to restore the name of a struck off company under Section 252 of the Companies Act, 2013 is not a suo motu power, but is to be exercised either on the basis of an appeal filed by any aggrieved person under Section 252 (1) or to be exercised on an application filed by the Companies, its members or creditors or workmen aggrieved by the order of striking off under Section 252(3) of the Companies Act, 2013.

Moreover, in an Order passed by coordinate bench of the Tribunal i.e. NCLT Bengaluru in the case of Chaitanya Manohar v. All Square Realtors India P. Ltd. reported in (2019) SCC OnLine NCLT 35807 wherein a Petition of oppression and mismanagement was filed against a Company under Sections 397 and 398 of the Companies Act, 1956 and such a Company was struck off by the ROC, the Petition was held to be not maintainable unless the Company was restored back to the Register of the ROC u/s 252 of the Companies Act, 2013.

The Bench of Shri Manni Sankariah Shanmuga Sundaram, Member Judicial and Shri Atul Chaturvedi, Member Technical observed that a Restoration application filed in Section 397-398 of Companies Act, 1956 cannot be maintained against a Company which has been struck-off by the ROC, since there is no legal existence of such a Company.

The Tribunal held that the Petitioner has failed to present any cogent or satisfactory explanation for the delay in prosecuting the matter. The Petitioners have also displayed continued lack of diligence, having failed to cooperate with the appointed valuer or assist in assessing the financial status of Respondent No. 1, which is now non-operational. Their conduct suggests lack of seriousness, and the restoration appears to be an afterthought.

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