Manacles Transformers Private Limited ... vs Registrar Of Companies

IN THE MATTER OF: Manacles Transformers Pvt. Ltd. & Anr. ...Appellant Versus Registrar of Companies, Delhi ...Respondents

Present: For Appellant : Mr. Malak Bhatt and Ms. Samridhi, Advocates. For Respondents : None.

ORDER

(Hybrid Mode)

15.03.2024 : This appeal is filed against an impugned order dated 22.08.2022 passed by Ld. NCLT, New Delhi in Appeal No. 03/252/ND/2022 under Section 252 of Companies Act, 2013. It is submitted by an impugned order the learned National Company Law Tribunal did not interfere with the striking of action taken by RoC against the appellant company under Section 248(5) of Companies Act, as it was of the view the appellant could not demonstrate it was in operation or carrying on its business or it was otherwise just to restore the name of the company.

2. The Ld. NCLT gave the following reasoning in its order :-

7. After hearing submissions of both the parties and perusing the documents including the ROC's report placed on record, this Bench observes that the Appellant Company has produced Balance Sheet for the Financial Year 2015-16 only, which too depicts 'NIL' revenue from its operations.

Further, the Company has not filed or produced Balance Sheet for the Financial Year 2016-17 and 2017-18 i.e; 2 years prior to the period when its name was struck from the register of RoC on 29.10.2019, Similarly, the Bank statement filed by the Appellants only pertains to the period from 01.09.2015 to 30.03.2016. There is no bank statement available on record for the relevant preceding 2 years, which could demonstrate that the Company was in operation, when its name was struck off from the register of RoC.

8. In the circumstances of the present case, it is worthwhile to refer to the Judgement of Hon'ble NCLAT in the matter of Alliance Commodities Private Limited Vs. Office of Registrar of Companies, West Bengal, Company Appeal (AT) No. 20 of 2019:

"9. 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 in spite 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. 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.....

3. It is the submission of the learned counsel for the appellant though the Ld. NCLT had held the appellant company did not file the Financial Statement and Annual Returns since its incorporation but it is factually incorrect. In fact the company had filed its financial statements and annual returns till 2015- 16 though that it was incorporated on 20.07.2012. It is argued the company had got prepared independent Auditors Report of the financial years 2016-17, Comp. App. (AT) No. 175 of 2022 2 of 6 2017-18, 2018-19, 2019-20 and 2020-21 which are annexed with this appeal which shows the fixed assets of the company to be Rs.56.32 crores; and non- current assets to the tune of Rs.6,23,42,211/-, besides the bank balance of Rs.66,309/- till the financial year 2020-21.

4. It is the submission of the learned counsel for the petitioner the appellant possesses substantial movable as well as immovable assets and hence it cannot be said the appellant company was not carrying out any business or operations. Reference is made to GRS Properties Private Limited Vs. Office of Registrar of Companies decided by this appellate Tribunal on dated 08.02.2023. The appellant had filed along with this appeal the financial statement reflecting the company had fixed and non-current assets, including the amount lying with the bank account and the appellant company admitted that it was their bonafide mistake in not filing the financial statements and in fact the company was to start fresh business in the year 2017 on a land belonging to one M/s Diamond Power Infrastructure Limited but since such company viz DPIL had gone into liquidation, the Chartered Accountant who was common for both the appellant company and DPIL, also inadvertently did not file financial statements for appellant company for the years 2016-17 and 2017-18, which led to striking of name of the appellant company from the register of the companies.

5. The appellant had admitted its bonafide mistake as he was under a bonafide impression that the statutory compliances got met by its Chartered Accountant. Nevertheless, the appellant company had now furnished independent auditor reports for the financial year 2016-17 to 2020-21 before this Tribunal and undertake to comply with other statutory compliances including filing of Balance Sheets. It is also the case of appellant that STK-1 notice notifying about the striking of the company's name was never served upon the appellant and it was on being notified about the striking of, it took immediate steps in filing of appeal before the Ld. NCLT seeking restoration.

Comp. App. (AT) No. 175 of 2022 3 of 6

6. In HIFFCO Farming Limited Vs. RoC (2022) 141 Taxman.com 293 (NCLAT-New Delhi), this Tribunal had restored the Company therein on the ground the appellant's financial statements reflected the company had current liabilities, tangible assets, cash & cash equivalent and the company therein had admitted its bonafide mistake for not filing its financial statements and it was found just and proper to restore the appellant's company name and the failure/ negligence/ omission on the part of the appellant's company therein for not filing the statutory annual returns and financial statements in time could be saddled with a levy of cost, to prevent aberration of Justice and to promote substantial cause of Justice.

7. Further admittedly the Income Tax Department had initiated proceedings against the appellant which are currently pending and it is necessary to safeguard the interest of the appellant and its stake holders. In Ramesh Kumar Chidlangya & Anr. Vs. Roc & Anr. 2020 SCC online NCLAT 895, it was held the "pendency of litigation warranted restoration of name of the company to Registrar of Companies, so as to safeguard the interest of the company and its stakeholders".

8. Though the Ld. NCLT had relied upon the Judgment of this Tribunal in the matter Alliance Commodities Private Limited vs. Office of Registrar of Companies West Bengal, Company Appeal (AT) No. 20 of 2019 (supra) to dismiss the appeal of the appellant but in the present case the appellant has substantial assets and was in the process of starting its business with M/s Diamond Power Infrastructure Limited (DPIL) however, DPIL was admitted in insolvency in the year 2017 and the appellant could not initiate its business activities. Now the appellant endeavours to look for a place to start a factory as alleged in its appeal in paras- 8 and 9 of the paper book.

9. We have also perused the reply of the respondent, it is not the case of the respondent that appellant company was ever engaged in the transfer of the funds to its own sister concerns or that it is a Shell company or is engaged in siphoning of funds of another company. Rather the appellant claims to have carried commercial transactions with a view to establish a relationship with Comp. App. (AT) No. 175 of 2022 4 of 6 DPIL in order to commence its operations in consonance with the objectives of the appellant company and had amassed substantial assets but due to the fact DPIL went into insolvency in the year 2017, the company suffered a loss.

10. It is not the case of the respondent that the appellant was merely engaged in transfer of funds to its own sister concerns or the transactions were being carried out by the appellant in violation of any provision of law. In DD Finance and Holdings Private Limited Vs. RoC in Company Appeal (AT) No. 112 of 2022 decided on 05.03.2024 by this Tribunal it was held:-

"14. Now the term otherwise just and equitable under Section 252(3) of the Companies Act, 2013 envisage revival/restoration of the company on the rolls of ROC if it is not a shell company or a company dealing with siphoning funds or advancing loan to sister concern. Rather they have a fixed substantial asset worth crores. The company is still sole absolute owner and in possession of the property situated at Bhakti Bhavan Estate, Kulri, Mussoorie and if the company's name is not restored then, of course, it would result to an irreparable loss and prejudice to the appellant and the fixed assets of company would be a deadlock and would result in wastage of property which is, of course, contrary to the public policy. Admittedly the property is free from all encumbrances.

25. For the reasons aforesaid we find it just and equitable to restore the name of the appellant company to the record of ROC and thus we set aside the impugned order dated 27.05.2022 passed by the Ld. NCLT and direct the ROC, New Delhi to restore the name of the company to the Register of Companies subject to the following compliances:

11. We have gone through the auditor reports for the financial years 2016-

17, 2017-18, 2018-19, 2019-20, 2020-21 which show the Non-Current Liabilities to the tune of Rs.7,36,23,359/-; Current Liabilities to the extent of Rs.88.00 Crores; Non-Current Assets to the extent of Rs.06.00 Crores (approximately), the Current Assets of Rs.25.94 Crores, the Fixed Assets of Rs.56.32 Crores; the Loan & Advances of Rs.25.93 Crores etc., and further since it is not a case of RoC the appellant is a Shell company and was at any time engaged in siphoning of the funds, hence, in view of the law discussed Comp. App. (AT) No. 175 of 2022 5 of 6 above, if the company's name is restored it shall cause no prejudice to RoC. Admittedly, Nil revenue from operations cannot be a sole cause for striking of the name.

12. The appellant undertakes to be more cautious and vigilant in future in filing compliances under the applicable Laws and would adhere to all stipulated timelines designated without fail and shall pay cost imposed as per law. An affidavit in this regard be filled within a week from today before this Tribunal.

13. In view of the above, we find it just and equitable to restore the name of the appellant company to the record of RoC and thus we set aside the impugned order dated 22.08.2022 passed by the Ld. NCLT and direct the RoC, New Delhi to restore the name of the company to the Register of Companies subject to the following compliances:-

i) Appellant Company shall pay cost of Rs.2,00,000/- (Rupees Two Lakhs) to the Registrar of Companies, NCT Delhi and Haryana within eight weeks from the passing of this Judgement.

ii) the company shall file all its annual returns and balances sheets within four weeks and shall also pay all requisite charges/fee, as applicable.

14. The appeal is disposed of accordingly. All pending IAs, if any, shall disposed of.

[Justice Yogesh Khanna] Member (Judicial)

[Ajai Das Mehrotra] Member (Technical) harleen/md

Comp. App. (AT) No. 175 of 2022 6 of 6