Strike Off of Companies in India: A Complete Guide to Sections 248–252 of the Companies Act, 2013

This is where Sections 248 to 252 of the Companies Act, 2013, come into play. These provisions address the removal of a company's name from the register of companies maintained by the Registrar of Companies (RoC), either voluntarily by the company itself or initiated by the RoC. This process is commonly referred to as a strike-off. Let’s take a deep dive into what the law says, how it works, and why it matters, especially in the Indian business ecosystem.

Section 248: Power of Registrar to Remove Name of Company

This section empowers the Registrar of Companies (RoC) to remove a company's name from the register on its initiative if certain conditions are met. This is the regulatory response to dormant or non-functioning entities. The Registrar may initiate the strike off of a company when the company has failed to commence its business within one year of its incorporation; or when the company is not carrying on any business or operation for a period of two immediately preceding financial years, and has not applied for the status of a dormant company under Section 455.

Additionally, the company can apply for removal itself if it has no liabilities, has not been operational for at least two consecutive financial years, and has passed a special resolution or obtained the consent of at least 75% of its shareholders. But this is not a casual process. The RoC is required to serve a notice, typically in Form STK-1, on the company and all its directors, providing them with an opportunity to respond. If no satisfactory reply is received within thirty days, the RoC may proceed to strike the name from the register.

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Section 249: Restrictions on Making Application for Strike-off

To prevent misuse of the strike-off route, Section 249 lays down specific prohibitions. A company cannot apply for removal of its name if, in the last three months, it has changed its name or shifted its registered office from one state to another, it has made a disposal of property or rights for value, it has engaged in any activity other than that necessary for making the application under this chapter or when an application is pending before the Tribunal for compromise, arrangement, or winding up. If a company violates this provision and still files for strike-off, the application is treated as void ab initio.

Section 250: Effect of Company Notified as Dissolved

Once the company's name is struck off and the RoC notifies it in the Official Gazette, the company is considered dissolved from that date.

However, there’s a catch to this: the company’s liabilities and obligations do not disappear. The directors, officers, and members of the company remain liable for any acts committed before dissolution. If the company held any assets, they can be claimed back only through restoration proceedings.

Section 251: Fraudulent Application for Removal

This provision of law serves as a safeguard against the misuse of the strike-off process. If it is later discovered that a company filed for removal fraudulently or with the intent to evade liabilities, the RoC can take action against those involved. These actions can include imposing penalties, restoring the company’s name or initiating criminal proceedings. The law essentially ensures that companies don’t use strike-off as an escape route from litigation or financial liabilities.

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Section 252: Appeal for Revival of Company

All hope is not lost once a company is struck off. Section 252 allows for revival through the National Company Law Tribunal (NCLT). This application for revival can be initiated by the company itself, a creditor, a shareholder, or any person aggrieved by the removal of the company’s name from the register. Such an application can be made within three years of the publication of the strike-off notice in the Official Gazette. If the Tribunal is satisfied that the name was removed unintentionally or unjustifiably, it may order restoration. This is particularly crucial in cases where companies had pending assets, ongoing litigation, or disputes that were overlooked during the strike-off process.

Why It Matters

In the Indian context, the Registrar of Companies has become increasingly active in utilising Section 248 powers, particularly since 2016, when the Ministry of Corporate Affairs (MCA) launched a major clean-up operation. Thousands of shell companies were struck off as part of a larger campaign to boost transparency and curb black money. The strike-off process is also a convenient option for small companies and start-ups that want to exit the business world without undergoing a formal winding-up process, which is often longer and more cumbersome.

However, for every company that’s struck off, there are multiple stakeholders, including employees, creditors, and investors, who may still be impacted. Hence, the restoration mechanisms under Section 252 play a crucial role in striking a balance between regulatory efficiency and fairness.

Conclusion

The removal of a company’s name from the register may seem like a simple paperwork exercise, but it has far-reaching consequences. It affects liabilities, legal standing, access to justice, and even property rights. The law, as outlined in Sections 248 to 252, ensures that the process is transparent, balanced, and not prone to abuse.

Whether you are a company director considering striking off your entity, a creditor who suspects something is amiss, or a legal professional navigating revival applications, understanding these provisions is crucial. In a country like India, where lakhs of companies are incorporated every year, these rules ensure that only genuine, compliant, and operational entities remain in the game.

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