Mr Vikas Sureshbhai Patel vs The Registrar Of Companies

(Arising out of order dated 29th January, 2020 passed by National Company Law Tribunal, Ahmedabad Bench, Ahmedabad in CA No.310/252(3)/NCLT/AHM/2019)

IN THE MATTER OF:

1. Vikas Sureshbhai Patel Director and Shareholder, Hiraj Hospitality Pvt. Ltd. S/o Sureshbhai Patel R/o Hari Darshan Bunglow, Opp. Vaibhav Tower, V.V. Nagar Road, Anand - 388 001, Gujarat

2. Hiraj Sureshbhai Patel Director and Shareholder, Hiraj Hospitality Pvt. Ltd. S/o Sureshbhai Patel R/o Hari Darshan Bunglow, Opp. Vaibhav Tower, V.V. Nagar Road, Anand - 388 001, Gujarat ...Appellants

Versus

1. The Registrar of Companies, Gujarat Having its Registered Office at: ROC Bhavan, Opp. Rupal Park, Near Ankur Cross Road, Naranpura, Ahmedabad - 380 113 Gujarat ...Respondent

Present:

For Appellants: Mr.Devesh R Desai, PCS. For Respondent: Mr. Vijay Joshi, Advocate for ROC. -2-

JUDGMENT

(21.06.2021)

KANTHI NARAHARI, MEMBER (TECHNICAL)

Preamble:

The Present Appeal arises out of the order dated 29.01.2020 passed by

the National Company Law Tribunal (NCLT) Ahmedabad Bench, Ahmedabad

whereby the NCLT dismissed the Appeal/Application filed by the Appellant

Company.

Appellants Submissions:

2. The Learned Counsel for the Appellant submitted that the Company was

incorporated on 20.06.2011 as a Pvt. Ltd. Company in the State of Gujarat.

The Company filed Annual Accounts and Annual Returns with the ROC,

Gujarat up to Financial Year 2015-2016 in compliance of the Companies Act,

2013 from time to time. However, due to some lack of knowledge of the

Management of the Company and not having any professional guidance the

Company could not file the Annual Accounts and Annual Returns for the

Financial Year ended on 31.03.2017-31.03.2018 and 31.03.2019 in time. It is

submitted that the Company has been active since incorporation and carrying

on its business activities as per the Objects of the Company.

3. While so the ROC, Gujarat issued show cause notice in form STK-1 and

form STK-5 respectively. The Director of the Company approached the ROC

Company Appeal (AT) No. 148 of 2020 -3-

Gujarat for obtaining three months time for compliance of filing of the Annual

Returns for the aforesaid three years. However, no reply has been received from

the ROC. The Company filed Appeal/Application before the Hon'ble NCLT

Ahmedabad Bench, Ahmedabad praying the Hon'ble NCLT to restore the name

of the Company to the Register of Companies maintained by the Registrar of

Companies Gujarat, allow the Petitioner (Appellant Company) to file all

outstanding statutory documents i.e. the financial statements and Annual

Returns for the year 2016-2017, 2017-2018 & 2018-2019 in completion of

Annual filings.

4. The Learned Counsel submitted that the Management of the Company

unaware about statutory filings to be made to ROC and also lack of

professional guidance to the Management. The non- filing of statutory

documents was not deliberate but an inadvertent mistake on the part of the

Management Company.

5. It is submitted that the ROC after issuance of notice in prescribed form

struck off the name of the Company from the Register of Companies, Gujarat.

6. It is submitted that the Company remained continuous functional even

during the period 2017-2019 and the revenue from operations and other

income for the Financial Year ended 31.03.2017-31.03.2018 and 31.03.2019

were Rs. 93,12,565/-, Rs. 1,31,29,404/- and Rs. 1,35,20,818/- respectively.

Company Appeal (AT) No. 148 of 2020 -4-

Apart from the above the company having tangible and intangible assets as

shown in the Annual Returns.

7. The Learned Counsel submitted that there are 22 to 25 employees are

working with the company and the company has been paying regular salaries

to its employees. He submitted that in support of the same he filed photocopy

of the details of the employees and their attendance as Annexure 7 page 170 to

175, of the Appeal Paper Book.

8. The Learned Counsel submitted that the Hon'ble NCLT dismissed the

Application on the ground that the Company did not generate any

income/revenue from its operations since the financial year ending 31.03.2017

to 31.03.2018 and the company did not show TDS deduction as showing in

Annual Accounts and having not provided future plan to revive the company.

9. In view of the aforesaid grounds the Hon'ble NCLT dismissed the

Application seeking restoration of the company. The Learned counsel requested

the Bench to allow the Appeal by setting aside the impugned order of the

Hon'ble NCLT.

Respondents Submissions:

10. The Learned Counsel appearing for the ROC submitted that the

Company i.e. Hiraj Hospitality Pvt. Ltd. failed in filing of its statutory returns

Company Appeal (AT) No. 148 of 2020 -5-

for a continuous period of more than two years, the name of the company has

been considered for striking off by the ROC, Gujarat in a suo-moto action

under the provisions of Section 248(1) (c) of the Companies Act, 2013 and also

in pursuance of a circular issued by the Ministry of Corporate Affairs,

Government of India from time to time. The basis for striking off the name of

the Company is continuous non-filing of statutory returns since 2017 and not

carrying on any business or operations for a period of two immediate preceding

financial years and has not made any Application within such period for

obtaining the status of a dormant Company under Section 455 prior to its

struck off.

11. The Learned Counsel submitted that the Office of the ROC had issued

STK-1 notice on 17.07.2019 to the Company and its Directors informing the

intention of ROC to strike off the name of the Company and requested to

submit the cause contrary to the said action within 30 days. Further, the ROC

published the name of the company on the website as per Rule 7 of the

Companies (Removal of Name) Rules, maintained by the Ministry vide STK-5

notice dated 14.09.2019. The name of the Company was also published in

Official Gazette and also public notice was issued in leading English newspaper

(Indian Express) and widely circulated vernacular language newspaper (Divya

Bhaskar- Gujarati) on 12.09.2019.

Company Appeal (AT) No. 148 of 2020 -6-

12. In absence of statutory filings for more than two years and in absence of

any representation against the proposed strike off, the ROC Gujarat struck off

the name of the company on 13.11.2019 and the dissolution order was passed

on the website of the Ministry vide STK- 7 notice on 13.11.2019.

13. In view of the aforesaid reasons the Learned Counsel submitted that the

Hon'ble NCLT rightly dismissed the Application of the Appellant and no

grounds have been made out by the Appellant for revival of the Company and

prayed this Bench to dismiss the Appeal.

Appraisal:

14. Heard the Learned Counsel for the respective parties. Perused the

pleadings, documents filed by them.

15. The Learned NCLT vide order dated 29.01.2020 rejected the

Application/Appeal of the Company whereupon the company moved before the

Learned NCLT seeking directions to restore the name of the company to the

Register of Companies maintained by the ROC Gujarat and allow the Company

to file all outstanding statutory documents for the financial year 2016-2017,

2017- 2018 and 2018-2019 along with complete Annual filings.

Company Appeal (AT) No. 148 of 2020 -7-

16. The Learned NCLT after having considered the pleadings and documents

of the Appellants and the Respondent, dismissed the Application/Appeal on the

following reasons at paragraph 17,18,19,20,21 & 22.

"17. On perusal of the Balance Sheet for the F.Y.2016-17 and 2017-18, it is found that the Company is running in losses and also failed to produce any document with regard to the future prospect of business or any proposal for future business supported with any project report to show their bonafide.

18. Admittedly, as against Authorized Share Capital of Rs. 2,00,000/- and Issued, Subscribed & Paid Up Capital of Rs. 2,00,000/- , the company is incurring losses for the preceding last few financial years i.e. accumulated loss as on 31.03.2019 is Rs. 1,46,60,340/-.

19. The Appellant has failed to substantiate/justify the cause of the losses and has miserably failed to show their bonafide with regard to their future plan or prospects which may necessitate to revive the company.

20. On further perusal of the Income Tax Return Acknowledgment for the 3 years, which reflects 'NIL' income continuously, however, they are showing TDS deduction but no supporting documents has been filed to substantiate the TDS

Company Appeal (AT) No. 148 of 2020 -8-

deduction when the income is showing as 'NIL'.

Further, why this TDS deduction is made, it is not clarified in the application.

21. Under the given circumstances, as narrated above, we find no bonafide reason, so as to, allow the application by giving an appropriate direction to the ROC for restoring the Company.

22. Accordingly, the instant application is dismissed. No order as to the cost."

(emphasis supplied)

17. I have perused the financial statements filed by the Company for the

years 31.03.2017, 31.03.2018 and 31.03.2019 where from it is evident that the

Company was carrying on its business and the revenue generated from

operations indicates that the company is in operations. Further, from the

record it is evident that the company is having tangible and intangible assets.

Apart from the above the company is having employees working with the

company as per the pleadings and the documents filed by the Appellant. There

is no denial from the ROC that the company is neither in operations nor having

any employees. The only objection of the ROC is that the Company is failed to

file the statutory returns for continuous period of more than two years. It is

not the case of the ROC that the company is a defunct company.

Company Appeal (AT) No. 148 of 2020 -9-

18. From the perusal of the notice in form STK -1 dated 17.07.2019 issued

by ROC Gujarat, Wherein it is stated that the company is not carrying on any

business or operation for a period of two immediately preceding financial years

and has not made any Application within such period for obtaining the status

of dormant company under Section 455. It is stated in the notice that for the

aforesaid reasons it intend to remove the name of the company from the

Register of Companies and requested the Company to send any representation

with the copies of the relevant documents. However, neither the Company nor

the Directors have responded to the said notice even though the notices have

been issued to the company and Vikas Patel and Hiraj Patel, the Shareholder

and Directors of the Company.

19. In response of the notice dated 17.07.2019 the company and the

Appellants have made a representation to the ROC Gujarat dated 04.11.2019

stating that the company is in full operational since the date of incorporation

and duly filed the financial statements and Annual returns up to financial year

2015-2016 in the prescribed form.

20. In the reply the company states that the financial statement for the

Financial Year 2016-2017, 2017-2018 & 2018-2019 and Income Tax

Acknowledgment for Assessment Year 2018-2019 shows that the company is

carrying on its business activities as per the objects enumerated in the

Memorandum of Association and it is fully operational. While so the ROC vide

Company Appeal (AT) No. 148 of 2020 -10-

order dated 13.11.2019 struck off the name of the company from the Register

of Companies.

21. Section 248 of the Companies Act, 2013 deal with power of Registrar to

remove name of Company from Register of Companies. Sub-Section 1 read as

under

"where the Registrar has reasonable cost to believe that (a) a company has failed to commence its business within one year of its incorporation or (c) a company is not carrying on any business or operation for a period of two immediately preceding financial years and has not made any Application within such period for obtaining the status of a dormant company under Section 455."

(emphasis supplied)

22. There is no doubt that the ROC has power to remove the name of

company from the Register of companies for the aforesaid grounds. However,

the statute, provides Appeal to the Tribunal (NCLT) under Section 252 of the

Companies Act, 2013. As per the said provision any person aggrieved by an

order of the Registrar, notifying a company as dissolved under Section 248,

may file an Appeal to the Tribunal within a period of three years from the date

of the order of the Registrar and if the Tribunal is of the opinion that the

Company Appeal (AT) No. 148 of 2020 -11-

removal of the name of the Company from the Register of Companies is not

justified in view of the absence of any of the grounds on which the order was

passed by the Registrar, it may order restoration of the name of the company in

the Register of Companies. Further, Sub-Section 3 of Section 252 states that

"If a company, or any member or creditor or workman 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, member, creditor or workman before the expiry of 20 years from the date of 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 to 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.

(emphasis supplied)

Company Appeal (AT) No. 148 of 2020 -12-

23. From a bare perusal of the provisions of the Companies Act. The

Registrar having the powers to remove the name of company from Register of

Companies as per Section 248(1),(a),(c),(d),(e) & after due compliance of law.

The name of the Company would be struck off and publish in the Official

Gazette showing that the company stand dissolved as per Sub-Section 5 of

Section 248. However, Section 252 provides Appeal to the NCLT and Sub-

Section 3 of Section 252 states that the Company or any Member, Creditor or

Workmen may file an Application to the Tribunal and the Tribunal after

satisfying the grounds as made by the Appellant/Applicant be restored to the

ROC and the Tribunal order the name of the company to be restored and give

such 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.

24. The Learned Counsel for the Respondent taken a stand before the NCLT

that the Tribunal may pass an appropriate order or restore the name of the

Company subject to the conditions, as stated in their reply filed before the

Learned NCLT in its impugned order dated 29.01.2020 reproduced the

condition as stated by the ROC in paragraph 15 where from it is seen that the

ROC put the condition namely viz imposing the cost for their ignorance and

negligence etc. However, the ROC has taken a different stand before this

Tribunal.

Company Appeal (AT) No. 148 of 2020 -13-

Findings:

25. From the Pleadings it is evident that the company is carrying on

business and it is in operational. However, the admitted fact that the company

is not filed the Annual Returns for two preceding years and the same has been

admitted by the Appellant and the Company for their default showing that they

are ignorant of the law.

26. The main ground for the removal of the company from the Register of

Companies is that if the company is not carrying any business or operation for

a period of two immediately preceding years the ROC may issue notice to the

Company calling explanation from the Company and thereafter take action in

accordance with law. Non-filing of Annual Return is a default. The said default

can be cured/rectified by imposing costs as per the provisions of the

Companies Act, 2013. Whilst, the Company is carrying the business and if it is

in operational however, non-filing the Annual Returns and the financial

statement as required under law inadvertently may not be a ground for

removing the name of the company. In the present case, I am of the view that

the company is in operational and as per Section 252 of the Companies Act the

Learned NCLT ought to have restored the name of the Company to the Register

of Companies.

27. In view of the aforesaid reasons the impugned order of the Learned NCLT

dated 29.01.2020 is set aside with the following directions:

Company Appeal (AT) No. 148 of 2020 -14-

Conclusion:

(i) The Show cause notice issued in form STK-1 dated 17.07.2019, in

form STK -5 dated 14.09.2019 and in form STK -7 dated

13.11.2019 any consequential order in respect of striking off the

company are hereby set aside.

(ii) The ROC is hereby directed to restore the name of the Company

i.e. Hiraj Hospitality Pvt. Ltd. on the Register of Companies.

(iii) The Company shall file all its financial statements, Annual

Returns, Balance Sheet which the company was in default, with

the ROC Gujarat.

(iv) The ROC Gujarat is liberty to impose penalty and interest if any

for the default in filing Annual Returns, Balance Sheet, Financial

Accounts etc. in accordance with law.

(v) The Company shall comply all the statutory requirements as per

law.

28. With the aforesaid directions the Appeal is allowed. No order as to costs.

[Kanthi Narahari] Member (Technical)

New Delhi sr

Company Appeal (AT) No. 148 of 2020