Mjm Industries Pvt Ltd vs The Registrar Of Companies

(Arising out of order dated 19.09.2017 passed by the National Company Law Tribunal, Hyderabad Bench, Hyderabad in Company Application No.95/252/HDB/2017).

In the matter of:

Before NCLT Before NCLAT MJM Industries Pvt Ltd, Through its Director, Flat No.T201, 2nd floor, MCH No.1-10-44/B, Technopolis Begumpet, Hyderabad-500016 Petitioner Appellant

Versus

The Registrar of Companies, Andhra Pradesh & Telangana, 2nd floor, Corporate Bhavan, GSI Post, Near Indu Aranya, Thatti Annaram, Bandlaguda, Hyderabad-500068 Respondent Respondent

Present: For appellant: Shri Arshdeep Singh and Mr. Akshat Gupta, Advocates.

For Respondent: Shri Sanjib Kumar Mohanty, Advocate.

JUDGMENT

BALVINDER SINGH, MEMBER (TECHNICAL)

1. The present appeal has been preferred under Section 421 of the

Companies Act, 2013 by the appellant against the impugned order

dated 19.09.2017 passed by the National Company Law Tribunal,

Hyderabad Bench, Hyderabad (hereinafter referred to as the 'Tribunal')

in Company Application bearing CA No.95/252/HDB/2017.

Company Appeal (AT) No.388 of 2017 2

2. The brief facts of the case are that the appellant is a private limited

company registered under the Companies Act, 1956 having its

registered office at Hyderabad. The appellant company is managed by

three directors. The authorised, issued, subscribed and paid-up capital

of the company is Rs.5,00,000/- divided into 50,000 equity shares of

Rs.10/- each. The main objects of the company are given in its

Memorandum of Association which are to carry on the business of

manufacturers, assemblers, dealers, traders, exporters and importers,

clearing and forwarding agents. Agents, wholesalers of all kinds and

varieties of Industries used for production of all kinds and varieties of

Goods and Commodities including iron boxes meant and used for

pressing clothes by use of liquefied petroleum gas as fuel.

3. Appellant submits that the company could not carry on the business

due to some operational issues and did not even file ROC Annual Filings

within stipulated time. Now when the appellant company decided to go

for regularising the company by filing all necessary ROC filings, it was

found that the Registrar of Companies has struck off the name of

appellant company from the Registrar of Companies and the company

filed an application before the National Company Law Tribunal,

Hyderabad Bench, Hyderabad to restore its status and then regularise

the filings of the company accordingly. The Tribunal after hearing the

petitioner rejected the application vide order dated 19.09.2017. The

relevant portion of the impugned order is as under:

"5.In spite of the above facts available on record, the Petitioner Company has casually submitted that the ROC has struck off the name of the company on 28.07.2017

Company Appeal (AT) No.388 of 2017 3

without any prior notice. In spite of publicising the information about the steps taken by the Government through various modes of communications including newspapers, notices from ROC, Gazette notification for striking off the names of Companies for various reasons, the Petitioner Company made such unwanted averments in the Petition which the Bench would like to view very seriously.

6.From the records made available by the Learned Counsel for the Petitioner, no record in support of their prayer is submitted by the Learned Counsel for making an appeal to NCLT, when the company itself is dissolved.

7.In the light of above facts and circumstances of the case, the Bench has no other option but to reject the Appeal dated 14.7.2017 filed through CA 95/252/HDB/2017."

4. Being aggrieved by the said impugned order dated 19.09.2017 the

appellant has preferred this appeal.

5. Learned counsel for the appellant submitted that the name of the

appellant company has been struck off by the Respondent vide Notice

dated 21.07.2017 without following the procedure laid down in Section

248 of the Act read with the Companies Removal of Names Rules. No

notice was issued to the Directors of the appellant company nor any

notice was received by the appellant company before the action of

striking off was concluded. Learned counsel for the appellant

submitted that due to the illegal action of Respondent, the operations

of the appellant company has come to a halt causing severe prejudice

and loss of livelihood for the appellant company as well as its directors

and employees.

6. Learned counsel appearing on behalf of the appellant submitted that

Section 248(1) of the Companies Act, 2013 mandates the ROC to send

a notice to the company and to all the directors of the said company, of

his intention to remove the name of the company from the register of

Company Appeal (AT) No.388 of 2017 4

companies. Learned counsel for the appellant further submitted that as

per Rule 3(2) of Companies (Removal of Names) Rules, 2016 the

Registrar is required to give a notice in writing in Form STK 1 which

shall be sent to all the directors of the company at the addresses

available on record, by registered post with acknowledgement due or by

speed post. Learned counsel further submitted that the notices in Form

STK-1 have only been issued to two directors and not to the third

director namely Shri Venkata Raja Rajeshwara Sharma Sivanoori, who

was appointed as an Additional Director on 1.3.2017 and the

Respondent was intimated about the same vide Form DIR-12 on

14.3.2017. Learned counsel appearing on behalf of the appellant in

support of this has placed reliance on judgements namely Ascot Shoes

Pvt Ltd Vs ROC (2016) SCC Online Del 4180, Pancham Hotels Pvt

Ltd Vs ROC (2015) SCC Online Del 9501, Badal Industries Pvt Ltd

Vs ROC 1010 (117) DRJ 512, Newage Commercial P Ltd Vs ROC

(2010) SCC Online Cal 1908, Tufail Ahmed Khan Constructions

Pvt Ltd Vs UOI & Anr, MANU/BH/0577/2009, M/s Gill Heavens

Farms Pvt LTd Vs ROC, Co.P.No.121/2007, R.A.P. Garments Pvt Ltd

Vs ROC, Co.P.No.461/2014.

7. Learned counsel appearing on behalf of the appellants submitted that

Section 248(1) of the Act read with Rule 3(2) of Companies (Removal of

Names of Companies from the Register of Companies) Rules, 2016

prescribes the specific modes of service/delivery of notice i.e. registered

post with acknowledgement due or speed post but no proof of

service/delivery has been furnished by the Respondent.

Company Appeal (AT) No.388 of 2017 5

8. Learned counsel for the appellant stated that as per Section 27 of the

General Clauses Act, 1897 service is only deemed to be effected upon

showing proof of properly addressing, pre-paying and posting by post

the relevant document which could have been shown by furnishing the

speed post receipts and the same has not been done in the present case.

9. Learned counsel for the appellant submitted that the purported

documents evidencing speed post expenditure is wholly misplaced and

the said documents in no way show that any notice in Form STK-1 was

in fact issued and thereafter served/delivered to the appellant company

or its two directors. Learned counsel further submitted that the speed

post expenditure receipt is dated 11.1.2018 and is in relation to articles

booked for the month of December, 2017 whereas the said notices were

issued in March, 2017.

10. Learned counsel for the appellants submitted that the notice in

Form STK-1 dated 17.3.2017 issued to appellant company is unsigned;

notices issued to the two directors has been digitally signed on a date

different from the date of the notice; no ground/reason has been given

by the respondent for issuing the notices in contravention of the

prescribed format of Form STK-1 in the Rules.

11. Learned counsel for the appellants further submitted that the

respondent have no valid ground for striking off the name of the

company under section 248(1) of the Act. Learned counsel further

submitted that failure to file statutory returns is not a valid ground or

reason contemplated under Section 248(1) of the Act for striking off.

Company Appeal (AT) No.388 of 2017 6

12. Learned counsel for the appellant submitted that the appellant

company has been a running concern since its incorporation and have

invested huge sums of money towards the Research and Development

of the Iron Boxes and had also purchased two parcels of land in 2015.

Both the facts are evident from Independent Auditor's Report for FY

2013-14 and Income Tax Returns alongwith relevant Audited Balance

Sheets showing computation of income and expenditure for the FY

2015-16, 2016-17 and 2017-18. Learned counsel next submitted that

the appellant company is yet to file the abovementioned audited balance

sheets with the Ministry of Corporate Affairs and is willing to do so,

subject to restoration of the appellant to active status and subject to

outcome of the appeal.

13. Reply has been filed on behalf of the Respondent. Learned

counsel for the respondent submitted that the allegations made in the

appeal that the respondent office in a completely illegal, arbitrary and

malafide manner struck off the name of the appellant company by

publishing notice in STK-7 under Section 248(5) of the Act, is denied.

14. Learned counsel for the respondent submitted that the appellant

is a private limited company registered under the Companies Act and

is required to file their Annual Financial Statements under Section 137

of the Act and Annual Returns under Section 92 of the Act every year.

The appellant has not filed the above statutory returns since

incorporation.

15. Learned counsel for the Respondent submitted that Ministry of

Corporate Affairs vide letter F.No.3/53/2017-CL II dated 17.2.2017

Company Appeal (AT) No.388 of 2017 7

advised all Registrar of Companies to identify companies which are not

filing their Statutory returns and initiate action under Section 248(1) of

the Act against companies which are not in operation. Learned counsel

submitted that the respondent identified the companies which have not

filed their statutory returns for the FY 2014-2015 and 2015-2016 and

issued notice under Section 248(1) in STK I to those company and their

directors. Learned counsel further submitted that the notices depicting

the names of those companies have been published in the web portal of

the Ministry of Corporate Affairs namely www.nca.gov.in and in the

official Gazette in STK-5 and a public notice in STK-5A showing the web

link to verify the name of the identified companies have been published

in newspapers of English and Telugu languages. Name of these

companies were also communicated to other regulators authorities like

Income Tax, Central Excise, Service Tax and Reserve Bank of India.

Learned counsel for the respondent submitted that after thorough

verification of the filings done by these companies and after examining

the replies received from the companies and their directors for the

notice in STK-1, STK-5, STK-5A and after analysing the objections

received from other Regulatory Authorities, 20082 companies have

been struck off by the Respondent and STK-7 notices has been issued

on 21.7.2017 and the same has been published in the official Gazette

of India dated 19.8.2017.

16. Learned counsel for the respondent submitted that the

respondent has issued notice in STK-1 by speed post to the Company

and its directors on 17.3.2017 bearing letter

Company Appeal (AT) No.388 of 2017 8

No.ROCH/248(1)/Removal/86579/2017, who were directors of the

Company as per MCA Portal records at the time of identification of the

defaulting companies. Learned counsel further submitted that a notice

has been issued in STK-5 on 5.5.2017 to 24,338 companies seeking

objections within 30 days of its publication on the proposed

removal/strike off names. Learned counsel further submitted that

notice have also been published in STK-5A on the proposed action of

strike off the name of such companies, giving web link namely

http://www.mca.gov.in/Ministry/pdf/rocHyderabad-08052017.pdf in

Andhra Jyothi in Telugu language and New Indian Express newspaper

in English language on 15.5.2017.

17. Learned counsel for the respondent submitted that after following

the due process of law and after verification of replies received from the

Companies and their directors, objection from other regulatory

authorities and general public and after verifying the filing positions of

all the Companies to which the notice have been issued and published,

20082 companies have been struck off and a notice in STK-7 was issued

on 21.7.2017, which has been published in the official Gazette dated

19.8.2017.

18. Learned counsel for the respondent submitted that the Tribunal

has rejected the application of the appellant for want of proof that the

respondent has not followed due process of law and not an application

under section 252(3) of the Act, if the appellant was a working company

and aggrieved by the action of the Respondent in striking the name off

Company Appeal (AT) No.388 of 2017 9

the Register, the appellant ought to have filed an application under

Section 252(3) of the Act, since specific remedy is provided therein.

19. Learned counsel for the respondent stated that the appellant

have nowhere stated the reasons for non-filing of statutory returns with

ROC due to which the name of the company has been struck off.

Learned counsel further stated that non filing of statutory returns

tantamount to denial of right to information to the public authorities

and stake holders at large and is serious in nature.

20. Learned counsel for the respondent stated that it was an appeal

filed under section 252(1) of the Act which was rejected by the Tribunal

and not an application under Section 252(3) of the Act. Learned

counsel further stated that the Tribunal has allowed many applications

filed under Section 252(3) of the Act for revival of the struck off

companies. Learned counsel further submitted that they generated

notice to all such identified companies and its directors as available in

MCA Port and issued more than one lakh notices in STK-1 and spent

an amount of about Rs.33 lakhs for payment towards speed post

expenditure and proof of payment is filed with the reply.

21. Learned counsel for the respondent submitted that they have

issued notices in all three modes in respect of the 20082 companies

including name of the appellant company. Learned counsel further

submitted that Rule 7 quoted in the appeal was amended and it is STK-

5A without the names of the companies but with web link to the

website, which was published in respect of all such companies

including the appellant and the publication STK-5A in newspapers was

Company Appeal (AT) No.388 of 2017 10

in due compliances of law and was in order. Learned counsel for the

respondent next stated that composite Form STK-7 notice in respect of

20082 companies was published in Gazette with the names of 20082

companies. The same was done as per practice and there is nothing in

Section 248 of the Companies Act or Companies (Removal of Names

from the Register of Companies) Rules, 2016 prohibiting such

composite publication and also stated that this practice has been

followed across the country and in respect of all similarly placed

companies.

22. Learned counsel for respondent submitted that all actions such

as issue of notice in STK-1, publication of notice of STK-5 and STK-5A,

issue of letter to regulatory authorities and publication notice in STK-7

was done after the section 248 and rules are made effective. Learned

counsel submitted that it was the duty of the appellant to file statutory

returns with Registrar for verification of the status of the companies by

regulators and by the public.

23. Learned counsel for the respondent stated that had the appellant

filed the financial statements in time the respondent should have

verified the financial position. Learned counsel for the respondent

submitted that the appellant had not moved any application before the

Tribunal to correct the appeal or to file an application under Section

252(3) of the Act.

24. Lastly the Respondent prayed that the appeal filed by the

appellant may be dismissed in view of the reply submitted by the

respondent.

Company Appeal (AT) No.388 of 2017 11

25. Rejoinder has been filed on behalf of the appellant.

26. Learned counsel for the appellant submitted that the

respondents' contention that the appellant company ought to have filed

an application under section 252(3) of the Act instead of Section 252(1)

is completely misplaced and untenable. Learned counsel submitted

that the remedies provided under section 252(1) and 252(3) of the Act

are mutually exclusive remedies and any person, including the

company whose name has been struck off, can approach the Tribunal

seeking restoration of its name.

27. Learned counsel for the appellant stated that the averment of the

Respondent that many applications under Section 252(3) of the Act

have been allowed by the Tribunal and that the aggrieved company

merely has to show that it is a working company and not that the

respondent has not followed the process of law, is a tacit admission on

the part of the respondent that the appellant company is a working

company and that it has no objection if the name of the appellant

company is restored.

28. Learned counsel for the appellant submitted that the appellant is

a working company and that the name of the appellant company ought

to be restored.

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

the entire record.

30. Learned counsel appearing on behalf of the appellant mainly

argued that Section 248(1) of the Companies Act, 2013 mandates the

Registrar of Companies to send a notice to the company as well as all

Company Appeal (AT) No.388 of 2017 12

the directors of the said company about its intention to remove the

name of the company from the register of companies. Learned counsel

for the appellant further argued that as per Rule 3(2) of the Companies

(Removal of Names of Companies from the Register of Companies)

Rules, 2016 the said notice is required to be given in Form STK-1to all

the directors of the company at the addresses available on record, by

registered post with acknowledgement due or by speed post. No notice

has been issued to third director. No proof of service has been shown.

31. Learned counsel appearing on behalf of the respondent argued

that the notice in Form No.STK 1 have been issued to the appellant

company and two of its directors, who were the directors of the company

as per MCA Portal records at the time of identification of defaulting

companies, by speed post and copies of the notices issued to them are

annexed with the reply. The learned counsel for the respondent has

also argued that the ROC has issued more than one lakh notices in

STK-1 and spent an amount of about Rs.33 lakhs for payment towards

speed post expenditure and proof of payment to BNPL Office has

annexed.

32. We have perused the documents duly attested by the Registrar of

Companies annexed with the reply by the respondent and hold that the

notices were issued to the appellant and two of its directors by speed post

and sufficient proof has been submitted. As regards the argument of the

learned counsel for the appellant that no notice was served on 3rd director

who was appointed on 1.3.2017 and duly intimated to ROC on 14.3.2017

is concerned, it is established that the notices has been issued on

Company Appeal (AT) No.388 of 2017 13

17.3.2017 to the appellant company and on 30.3.3017 to two of its

directors. The appellant who has appointed third director on 1.3.2017 and

intimated ROC on 14.3.2017 that even if the company and its two directors

having received the notices did not bother to respond to the notice so as to

save the company rather than taking a plea that the third director who has

been appointed only on 1.3.2017 and notified on 14.3.2017 had not been

given a notice. When company has been served it is Notice to the Directors.

Additionally, 2 of the 3 Directors had been served. It is substantial

compliance and knowledge can be assumed.

33. We further observe that a notice on STK-5 under Section 248(1) of

Companies Act, 2013 has been issued to 24338 companies including the

appellant company intimating them the reasons for striking off/removal of

their name from the register of companies and dissolve them unless a

cause is shown to the contrary, within thirty days from the date of notice.

Appellant company was given thirty days' time to file their objection from

the date of publication of notice. No objection has been filed by the

company.

34. We further observe that a Public Notice in Form No.STK-5A was

published in the English and Telugu newspapers for the information of the

general public and concerned companies including the appellant company

intimating them the reasons for striking off/removal of their name from

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

the contrary, within thirty days from the date of notice. Appellant company

was given thirty days' time to file their objection from the date of

publication of notice. Even if it is assumed for the purpose of logic that

Company Appeal (AT) No.388 of 2017 14

Board of Directors or the company may not have received the notice dated

30.3.2017 and 17.3.2017 and there may be some other mitigating factors,

the company failed to respond even to the notice published in the

newspapers on 15.5.2017 within thirty days. Public Notice would also be

Notice to the Directors. The company having failed to respond to the

opportunity which is in the public domain, therefore, the ROC in absence

of any explanation received from the company or its directors had no

alternative except to take consequent action i.e. to strike off the name of

the company from the register of the companies. We find there was

substantial and actual Notice. There is no reason to interfere.

35. In view of the foregoing discussions the appeal filed by the appellant is

hereby rejected and the impugned order dated 19.9.2017 passed by the

Tribunal is upheld. No order as to costs.

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

New Delhi

Dated:25-4-2018

BM

Company Appeal (AT) No.388 of 2017