Basant Kumar Berlia & Anr vs Registrar Of Companies, West Bengal & ...

IN THE MATTER OF: BEFORE NCLT BEFORE NCLAT

1. Basant Kumar Berlia, S/o Shri Ramabtar Berlia, R/o Arun Tea Warehouse, Bankimnagar, P.O. Sevoke Road, P.S. Bhaktinagar, District Jalpaiguri, Siliguri 734001 West Bengal. 2nd Petitioner 1st Appellant

2. Ashok Agarwal, S/o Late Amilal Agarwal, R/o 55, M.R. Road, Khalpara, Siliguri-734005 West Bengal. 3rd Petitioner 2nd Appellant

Vs

1. Registrar of Companies, West Bengal Nizam Palace, 2nd MSO Building, 2nd floor, 234/4, Acharya Jagadish Chandra Bose Road, Kolkata 700017 1st Respondent 1st Respondent

2. M/s Horizon Ispat Company Private Limited, 40/107 Ramkrishna Samity Building, Panitanki More, Sevoke Road, Siliguri West Bengal 734001 1st Petitioner 2nd Respondent

Present: Mr Rajshekhar Rao, Ms Neha Sharma, Advocates and Ms Neha Somani, CS for Appellant. None for Respondent.

Company Appeal (AT) No.171 of 2018 2

JUDGMENT

BALVINDER SINGH, MEMBER (TECHNICAL)

The appellants, original 2nd and 3rd petitioners, have filed this appeal,

under Section 421 of the Companies Act, 2013, being aggrieved by the

impugned order passed in Appeal No.525/KB/2017 filed in National

Company Law Tribunal, Kolkata Bench, Kolkata (NCLT in short) whereby the

Appeal was dismissed on 6th April, 2018.

2. The brief facts of the case are that the 2nd respondent is a Private

Limited company incorporated under the Companies Act, 1956 on 24th April,

2008. 1st and 2nd appellants are two directors in the Company and both of

them are shareholders and each shareholder is having 5000 equity shares.

As per Memorandum of Association, the main object, the company is engaged

in the business of iron and steel including sponge iron, pig iron, hot rolling

and cold rolling steel strips and objects incident or ancillary to the attainment

of the main object is real estate development and construction.

3. 2nd respondent, since its incorporation in 2008, has always been

regular in filing its financial statements and annual returns with the Registrar

of Companies. The last financial year for which the filing was done, was

31.03.2013. Appellants stated that due to some internal problems the

statutory returns of the 2nd respondent after 31.03.2013 could not be filed

before the Registrar of Companies, West Bengal and therefore, 2nd respondent

had not applied under Section 455 of the Companies Act, 2013 to take the

benefit of being a Dormant Company. Appellants state that the company is

still carrying on its business. Appellant did not take steps to file the annual

Company Appeal (AT) No.171 of 2018 3

returns and the financial statements with ROC due to internal problems,

therefore, the name of the company was struck off by the 1st respondent on

June 9, 2017 (Page 87). A notice was issued dated 7.4.2017 (Page 85) giving

30 days' time to the 2nd respondent to file their objections, if any, otherwise

their company's name will be struck off. 2nd respondent did not file their

objections to ROC, therefore, 1st respondent struck off the name of the 2nd

Respondent from the register of companies on 9.6.2017 and issued a Form

No.STK-7, Notice of Striking Off and Dissolution, dated 30.6.2017 (Page 87)

on the subject.

4. On coming to know, the original petitioners, 2nd, 3rd appellants and 2nd

respondent herein, filed the company appeal/petition under Section 252(3) of

Companies Act, 2013 before the NCLT, Kolkata praying that the name of the

2nd respondent be restored to the register of the Registrar of Companies and

direct to modify the master data by modifying the status from "Strike Off" to

"Active".

5. 1st respondent filed their reply and stated that under Section 248 of the

Companies Act, 2013 the Registrar can strike off the name of a company from

his register after complying with certain formalities as provided in the said

Section when he has reasonable cause to believe that the company is not

carrying on business or in operation. 1st respondent further stated that the

competent authority has struck off the name of the 2nd respondent under

Section 248 since he had reasonable cause to believe that the 2nd respondent

was not carrying in business or in operation for the last three years. 1st

respondent stated that the 2nd respondent company filed its Balance Sheets

Company Appeal (AT) No.171 of 2018 4

and Annual Returns upto 2013 and thereafter did not file any Balance Sheet

and Annual Returns under the Companies Act, 2013 before the ROC. 1st

respondent further submitted that the Ministry of Corporate Affairs vide letter

No.F.No.3.53/2017-CL II dated 17.02.2017 has observed that a large number

of companies which have failed to file their Financial Statements or Annual

Returns for the immediately two preceding financial years and have also not

filed application under Section 455(1) of the Companies Act, 2013 for marking

the company as Dormant and directed the ROC to take appropriate action for

removal of names of such companies from ROC under Section 248 of the

Companies Act, 2013. 2nd respondent was struck off after complying with the

provision of Section 248 of the Companies Act, 2013.

6. After hearing both the parties the NCLT passed the impugned order

dated 6th April, 2018. The relevant portion of the impugned order is as under:-

"19.xxxxxx It is significant to note that the provisional allotment

was on 12.03.2012 and the company filed it balance sheets and

annual return upto 2013 and thereafter the company did not file

any balance sheets or annual return. If the petitioner is really

interested to do business upon getting provisional allotment

worth Rs.59 crores, certainly they would have vigilant in

processing the allotment and would have fulfilled the terms of

allotment. From the data available it is understood that they

have committed breach of terms of allotment and committed

default in non-filing of statutory returns which they are duty

bound to submit with the office of the ROC under the Companies

Company Appeal (AT) No.171 of 2018 5

Act, 2013. From the above said discussion we can come to a

legitimate conclusion that the appellant company is a sham

company ever engaged in any business from the time of inception

or it was in operation as alleged. We also found no valid reason

for restoring a company of this nature. The appeal is, therefore,

liable to be dismissed.

20. In the result, this appeal is dismissed. However, there will be

no order as to costs."

7. Being aggrieved by the impugned order dated 6th April, 2018 the

appellants have filed this appeal and sought the following relief:-

a) The impugned order dated 6th April, 2018 passed by the Hon'ble

National Company Law Tribunal, Kolkata Bench, Kolkata be set aside.

b) Stay of operation of the impugned order dated 6th April, 2018 till the

disposal of the instant appeal.

c) The name of the company namely M/s Horizon Ispat Company

Private Limited be restored to the file and/or to the register of the

Registrar of Companies, West Bengal.

d) The respondent be directed to rectify the master data by modifying

the status of the company namely M/s Horizon Ispat Company Private

Limited from "Strike Off" to Active within the specific time as may be

allowed by this Hon'ble Tribunal.

Company Appeal (AT) No.171 of 2018 6

e) An order be passed directing the respondent to place the name of the

company in the same position as if the name of the company namely,

M/s Horizon Ispat Company Pvt Ltd had not been struck off.

f) An order of injunction be passed restraining the respondent whether

by itself or by servants, men or assigns from taking any steps or further

steps in terms of the Gazettee of India notification dated June 30, 2017.

g) Ad-interim orders in terms of prayers above;

h) Cost of and/or incidental to this application be paid by the

respondent;

i) Such further or other order or orders as this Hon'ble Tribunal may

deem fit and proper.

8. The appellants have stated that the NCLT has caused injustice by

passing the impugned order dated 6th April, 2018.

9. Appellants submitted that the NCLT erred in law and in fact by holding

that none of the documents produced before it would show or conclusively

hold that the appellant company is a going concern.

10. Appellants stated that the NCLT failed to consider that the 2nd

respondent is the owner of a valuable piece of land admeasuring 4.65 acres

situated in Jalpaiguri under registered deeds of conveyance.

11. Appellant stated that the financial statement of company commencing

from 2013-14 disclosed that there were several long term borrowing taken in

Company Appeal (AT) No.171 of 2018 7

the name of the company from various creditors whose names are also

reflected in the said financial statement.

12. Appellant stated that the NCLT erred in dismissing the appeal/company

petition thereby destroying the valuable right which had accrued in favour of

the company under the provisional letter of allotment dated March 12, 2012

issued by Luxmi Township Limited.

13. Appellant stated that NCLT erred in holding that 2nd respondent has no

valid reason for not striking off the name of company.

14. Appellants stated that balance sheet for the financial years from 2014

to 2016 could not be filed with the ROC but the said financial statements was

always prepared in time and was part of the company petition and also

submitted before the Income Tax.

15. Appellant stated that the NCLT has wrongly held the company was not

in business of trading, there was no revenue generation for some length of

time and this was because the company was focused on real estate

development projects.

16. Affidavit-in-opposition has been filed on behalf of Registrar of

Companies through Mr. N. Chinnachamy, Dy. Registrar of Companies, West

Bengal. 1st respondent stated that under Section 248 of the Companies Act,

2013 the Registrar can strike off the name of a company from his register after

complying with certain formalities as provided in the said Section when he

has reasonable cause to believe that the company is not carrying on business

or in operation. 1st respondent further stated that the competent authority

Company Appeal (AT) No.171 of 2018 8

has struck off the name of the 2nd respondent under Section 248 since he had

reasonable cause to believe that the 2nd respondent was not carrying in

business or in operation for the last three years. 1st respondent stated that

the 2nd respondent company filed its Balance Sheets and Annual Returns upto

2013 and thereafter did not file any Balance Sheet and Annual Returns under

the Companies Act, 2013 before the ROC. 1st respondent further submitted

that the Ministry of Corporate Affairs vide letter No.F.No.3.53/2017-CL II

dated 17.02.2017 has observed that a large number of companies which have

failed to file their Financial Statements or Annual Returns for the immediately

two preceding financial years and have also not filed application under

Section 455(1) of the Companies Act, 2013 for marking the company as

Dormant and directed the ROC to take appropriate action for removal of

names of such companies from ROC under Section 248 of the Companies Act,

2013. 2nd respondent was struck off after complying with the provision of

Section 248 of the Companies Act, 2013.

17. 1st respondent submitted that as per Section 252 of the Companies Act,

2013 a struck off company can be restored only on the direction of the NCLT

within a period of three years from the date of the order of the ROC. 1st

respondent further submitted that in terms of the said provisions the Hon'ble

NCLT while passing an order of restoration is to be satisfied that the company

is carrying on business or in operation.

18. 1st respondent further submitted that they are not at all concerned

whether the 2nd respondent has filed any income tax return and 1st

Company Appeal (AT) No.171 of 2018 9

respondent is also not aware whether the 2nd respondent is carrying on

business or in operation after the notification dated 30.6.2017.

19. 1st respondent stated that pursuant to Section 164(2)(a) read with

Section 167(1) of the Companies Act, the directors of the company are

disqualified and also directors of the 2nd respondent stand vacated from their

directorship.

20. We have heard the learned counsel for the parties and perused the

record.

21. The main issue raised by the appellants that they are regularly filing

the statutory returns and there were some internal disputes between both the

directors and when the disputes were resolved, it was brought to their notice

about non-filing of statutory returns with the ROC. When they approach the

ROC they came to know the fact of striking off the name of the company and

they filed the appeal/petition before the NCLT. Appellant stated that non filing

of statutory returns and balance sheets is neither deliberate nor intentional

on the part of the company.

22. On the other hand the 1st respondent had stated in its affidavit in

opposition that Section 248 of the Companies Act, 2013 empowers the

Registrar of Companies that he can strike off the name of a Company from

the register after complying with certain formalities as provided by the said

Section when he has reasonable cause to believe that the company is not

carrying on business or in operation. 1st Respondent stated that he has

Company Appeal (AT) No.171 of 2018 10

reasonable cause to believe that the company was not carrying in business or

in operation for the last three years.

23. We have perused the record and noted that the 2nd Respondent has

not filed the statutory returns after the year 2013. 1st Respondent vide its

Form No.STK-5, Public Notice, dated 07.04.2017 (Page 85) gave notice to the

company that it proposes to remove/strike off the names of the company from

the register of companies and dissolve them unless a cause is shown to the

contrary, within thirty days from the date of this notice. Inspite of notice the

company did not respond to the notice of ROC. Then vide Form No.STK-7,

Notice of Strike off and Dissolution, dated 30.6.2017 (Page 87) the 1st

respondent struck off the name of the 2nd respondent company from the

register of companies. We have further perused the Income Tax Return

Acknowledgement filed by the appellants for the Assessment year 2014-15,

2015-16 and 2016-17. We have noted, as per acknowledgement, that the

Income Tax Returns have been filed on 30.3.2016, 31.3.2017 and 16.8.2017

respectively. These Income Tax Return for the year 2014-15 have been signed

by Mr. Ashok Kumar Agarwal, Director and the Income Tax Returns for the

years 2015-16 and 2016-17 have been signed by Mr. Basant Kumar Berlia,

Director. We further noted that the Balance Sheets for years March, 2014,

March 2015 and March, 2016 purport to have been signed by both directors

and the Chartered Accountant on 27.8.2014, 27.9.2015 and 27.8.2016

respectively. These dates i.e. 30.3.2016 and 31.3.2017 for filing Income Tax

Return for the FY 2014-15 and 2015-16 are prior to issuance of notice dated

7.4.2017. Similarly, the dates i.e. 27.8.2014, 27.9.2015 and 27.8.2016 on

Company Appeal (AT) No.171 of 2018 11

which dates the Balance Sheets purport to have been signed by both the

directors and the Chartered Accountant are also prior to issuance of notice

dated 7.4.2017. If these documents were then available there is no reason

why Notice dated 7.4.2017 was not responded to. Again from these

documents filed by the appellants what appears is that there is no substance

in the claim that there were dispute between the directors/shareholders and

this is an afterthought that they could not file the statutory returns due to

internal dispute.

24. Further to prove that the company is in operation, the appellants have

filed bank account statement, copies of income tax return acknowledgement

and a copy of letter of allotment dated 12th March, 2012 allotting land

measuring 22.457 acres for residential cum commercial purpose on the

Southern side of NH-31 at Uttorayon Satellite Township at Siliguri. We have

perused these documents. We have noticed that copies of the Income Tax

Return Acknowledgement have been filed and copies of the income tax returns

have not been filed. Further the provisional allotment is based on a grant of

lease for 99 years upon fulfilling certain clauses contained in the lease deed.

No such lease deed produced for the perusal of this Appellate Tribunal.

25. We have also perused the directors' report at Page 97 for the FY 2013-

14. The said directors' report has been signed by both the directors. It is

clearly mentioned in the directors' report under heading "Business

Operations"- No business operation was carried during the previous year

2013-14. Your directors are hopeful to commence the business operation

very soon. This is precisely the position which is envisaged by law under

Company Appeal (AT) No.171 of 2018 12 Section 455 of the Companies Ac, 2013 for availing the benefit of being a

dormant company. No efforts have been made by 2nd respondent to take the

benefit of this provision. Similarly, for the Directors' report for the years ended

31st March, 2015 and 31st March, 2016 it is mentioned that "No revenue

generating activities took place during the year."

26. We have also perused the copies of income tax return acknowledgement

filed by the appellants for the defaulted years to prove that the company is in

operation. Filing of income tax return will not establish the company is in

operation as this is primary/statutory responsibility to file the income tax

return. Similarly, this is also the primary /statutory responsibility/duty of

the directors to file the statutory returns/financial statements to ROC to

establish that they are operational and compiling all the compliances as per

the Act. The gross income for all these defaulted years upto the financial year

ending on 31.3.2017 is zero. None of these documents satisfy us that the

company is a going concern, or in operation.

27. We have gone through the argument of 1st respondent in which it is

stated that as per Section 252 of Companies Act, 2013 a company can be

restored only on the direction of Hon'ble NCLT within a period of three years

from the date of the order of the Registrar. We also noted that the appellants

had filed Company petition before the NCLT under Section 252(3) of the

Companies Act, 2013. Section 252(3) of the Companies Act, 2013 states as

under:

"If a company, or any member or creditor or workmen 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 Appeal (AT) No.171 of 2018 13

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 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."

Thus the appellants are entitled to file company petition/appeal before

the Tribunal under Section 252(3) of Companies Act, 2013. Therefore, we are

satisfied that the appellants can file petition/appeal under Section 252(3) of

the Act. 1st respondent while submitting his reply seems to have only dealt

with Section 252(1) of the Companies Act, 2013 and have not dealt with

Section 252(3) of the Companies Act, 2013 on the basis of which the

appellants are seeking relief for restoration of the name of company which has

been struck.

28. Further while arriving at the conclusion to struck off the name of the

2nd respondent from the register of companies, the ROC has to act as per

Section 248(6) of the Companies Act, 2013. Section 248(6) of the Companies

Act, 2013 states as under:-

"(6) The Registrar, before passing an order under sub-section (5), 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 reasonable time and, if necessary, obtain

Company Appeal (AT) No.171 of 2018 14

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 of 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."

As per the above Section the Registrar, before passing of order under

Section 248(5), have to satisfy himself that sufficient provision has been made

for the realisation of all amount due to the company and for payment or

discharge of its liabilities and obligations and, if necessary, to obtain

undertaking from the appellant and the assets of the company will be made

available for payment. By not responding to the ROC of its notice, the

appellants shall not be relieved from the responsibility which they were bound

to give in the shape of undertaking under this provision.

29. Appellants have argued that the Hon'ble NCLT has erred in law in

dismissing the appeal filed by them under Section 252(3) of the Companies

Act, 2013. Appellants have argued that they have the fixed assets since 2011

and they have filed the returns upto 31.3.2013. We have noted that the

Balance Sheet as on 31.3.2013 has not been filed with the appeal but the

same has been filed for the years 31.3.2014, 31.3.2015, 31.3.2016. We have

perused the Balance Sheet as on 31st March, 2014 in which the figures of

previous year i.e. 31.3.2013 have also been reflected. In this Balance Sheet

the Fixed Assets (land) of Rs.1,479,660.00 (Page 101) for the year as on

31.3.2014 and 31.3.2013 have been shown. Further the long terms loan and

advances to the tune of Rs.108,311,111.00 (Page101) for the years 2013 and

Company Appeal (AT) No.171 of 2018 15

2014 have been shown. These advances have been paid to M/s Laxmi

township Ltd and Bandana Developers Pvt Ltd (Page 105). We have also

perused the copies of conveyance deeds filed by the appellants at Page No.226

to 300 and found that the conveyance deeds were executed in favour of 2nd

respondent on 4.5.2011, 30.4.2011. Similarly we have also perused the

Balance Sheets for the years 31.3.2014 and 31.3.2015 now filed with the

appeal. We find that the figures for Fixed Assets, Long Term Loans and

Advances and Short Terms Loans and advances have been shown in these

Balance Sheets. Further as per the company has cash and Cash equivalents.

The company has a short term loan of Rs.2,000,000/- as on 31.3.2013 which

has been shown as 'Nil' as on 31.3.2014 (Page 101). Further as per Profit &

Loss for the year ended 31st March, 2013 the loss is Rs.11,194/- and for the

year ended 31st March, 2014 the loss is Rs.16,973/- (Page 101). From the

Balance Sheet we found that they have advanced money to the people and

have also taken short term loans from other persons. In the light of this we

do not agree with the observations of the Learned NCLT that the 2nd

respondent is a sham company.

30. We have noted that when the 1st respondent had issued Public Notice

dated 7.4.2017 (Page 85) intimating the companies, including 2nd respondent,

that their names of the companies would be struck off under Section 248(1)

of Act, 2nd respondent was given 30 days' time from the date of publication of

notice to send their objection to the ROC. 2nd respondent did not respond to

the said notice. Thereafter, 1st respondent vide notice dated 30.6.2017

(Page87) struck off the name of the 2nd respondent from the register of

Company Appeal (AT) No.171 of 2018 16

companies. Now these appellants had filed petition/appeal before the NCLT

stating that the company is going concern and they have valuable assets, long

terms loan and advances and filed petition/appeal under Section 252(3) of

the Act. If the appellants had pleaded it before the ROC, then the ROC before

striking off the name of the company under Section 248(5), would have

considered the pleas now taken under Section 248(6) of the Companies Act,

2013. The appellants have now filed with this appeal the Balance Sheets for

the years 2014, 2015 and 2016 which they could not file with ROC as the

company name was struck off. Seeing the balance sheets and the company's

huge investment which the company is having since 2011 and there are large

amount of the loan and advances, it is possible that creditors could also be

aggrieved persons, feeling aggrieved of company's name being struck off, may

file an application for restoration of company's name, if its name is not

restored. Thus it would be just and equitable to restore the name of the

company to even avoid further legal proceedings.

31. The ROC in its reply also mentioned that pursuant to Section 164(2)(a)

read with Section 167(1) of the Companies Act, the directors of the company

are disqualified and also directors of the 2nd respondent stand vacated from

their directorship. We are noting that the issue is restoration of the company

and not related to disqualification of the directors or otherwise. As this is not

the matter of the appal, therefore, no opinion has been expressed by us over

this matter as it is beyond the ambit of this appeal.

32. From the above discussions and observations we have come to the

conclusion that in the light of huge investment made by the company and

Company Appeal (AT) No.171 of 2018 17

above reasons it would be just that the name of the company is directed to

be restored. The following orders/directions are passed:-

(i) Impugned order is quashed and set aside. The name of Respondent

No.2 company shall be restored to the Register of Companies subject to the

following compliances:

(ii) Appellants shall pay costs of Rs.1 lac to the Register of Companies

within 30 days.

(iii) Within 30 days' of restoration of the company's name in the register

maintained by the Registrar of Companies, the company will file all their

annual returns and balance sheets due for the period ending 31.3.2014 to

date. The company will also pay requisite charges/fee as well as late

fee/charges as applicable.

iv) Inspite of present orders, ROC will be free to take any other steps,

punitive or otherwise under the Companies Act, 2013 for non-filing/late filing

of statutory returns/documents against the company and directors.

34. The appeal is accordingly disposed of. No order as to costs.

(Justice A.I.S. Cheema) (Mr. Balvinder Singh) Member (Judicial) Member (Technical)

New Delhi Dated:24.1.2019

BM

Company Appeal (AT) No.171 of 2018