N K Jain Real Buildwell vs Registrar Of Companies Chattisgarh

[Arising out of order dated 23.10.2019 passed by the National Company Law Tribunal (Cuttack Bench, Cuttack) in Company Petition (Appeal) No. 82 /CTB /2019]

IN THE MATTER OF: N K Jain Realbuild Pvt. Ltd., Through its Authorised Representative and Director Mr. Nand Kishore Jain, Having its registered Office at bank of India Road, Vikas, Kondagaon, Bastar, Chhattisgarh 494226. ....... Appellant. Versus Registrar of Companies, Chhattisgarh, 1st Floor, Ashok Pingley Bhawan, Municipal Corporation, Nehru Chowk, Bilaspur Chhattisgarh-495001. ...... Respondent. Present: For Appellant: Mr. Deboporiyo Malik and Ms. Sanidhya Gupta, Advocates. For Respondent:- Mr. Himanshu Pathak and Mr. Krishna Kumar, Advocates. JUDGMENT

(23rd March, 2023)

Justice Anant Bijay Singh;

The present Appeal under Section 421 of the Companies Act, 2013, has

been filed by the Appellant being aggrieved and dissatisfied by the order dated 2

23.10.2019 passed by the National Company Law Tribunal (Cuttack Bench,

Cuttack) in Company Petition (Appeal) No. 82 /CTB /2019 whereby and

whereunder Company Petition (Appeal) filed by the Appellant against the struck

off the name of the company vide order dated 29.08.2018 passed by the Registrar

of Companies, Chhattisgarh, was dismissed by the Tribunal.

2. The facts giving rise to this Appeal are as follows:

i) N. K. Jain Realbuild Private Limited ("Appellant Company/Company") was

incorporated under the Companies Act, 1956 on 22.05.2012 as a Private

Company, Limited by Shares with the Registrar of Companies, Chhattisgarh

registered with the CIN: U45400CT2012PTC000356. The authorized share

capital of the Company is Rs. 10,00,000/- divided into 1,00,000 number of

equity shares of Rs. 10/- and the Issued, Subscribed and Paid-Up Capital of the

Company is Rs. 5,00,000/- divided into 50,000/- number of equity shares of Rs.

10/- each.

ii) Mr. Nand Kishor Jain and Mr. Dinesh Kumar Jain were appointed as the

directors of the company since incorporation and they have held office as such

ever since incorporation. They are also Promotors of the company, who were the

initial subscribers of the company and together hold 100% shares of the

company currently. The company has been active and has been doing regular

business since its incorporation. The company has been regularly filing its

Income Tax Returns. The Company ahs a bonafide intention of running its

business and in furtherance of the same also purchased the following parcels of

land:

Company Appeal (AT) No. 147 of 2021 3

• Land admeasuring 0.324 Hectares situated at Village Kondagaon, Kh. No.

185/1, PH No. 12, Dist. Kondagaon (C.G.) purchased by the Company at

a consideration of Rs. 4,65,000/-.

• Land admeasuring 1.355 Hectares situated at Village Kondagaon, Kh. No.

1114/2 and 1114/5, Dist. Kondagaon (C.G.) purchased by the Company

at a consideration of Rs. 63,00,000/-.

iii) During this time the Company has got its accounts audited in terms of

provisions of Section 224(1) and 139 of Companies Act, 1956 and Companies

Act, 2013 respectively for Financial Year 2012-2013, 2013-14, 2014-15, 2015-

16, 2016-17 and 2017-18. The Company regularly held its Annual General

Meetings and had also been maintaining all the requisite documents, as per the

provisions of the Companies Act, 2013.

iv) On, 29.08.2018, the Appellant company was shocked and surprised that

the Respondent in term of Section 248(5) of the Act, had published the name of

the Appellant company on the Official Gazette thereby, declaring that the

company had been struck off as purportedly the company had not been carrying

on any business or operation for a period of two financial years and had not

made any application for obtaining the status of a dormant company under

Section 455 of the Act. The company has it base of operations in a remote

location in Bastar Dist. Chhattisgarh. The day-to-day life in the said region is

frequently disrupted due to Naxalite activities and ensuing violence. Due to the

remote location and the disruptions in day to day functioning due to Naxalite

activities, the Promoters of the said company were unable to get proper advice

Company Appeal (AT) No. 147 of 2021 4

concerning the mandatory compliances under Companies Act. Thus, the

Promoters of the company were under the incorrect impression that they were

only required to conduct regular audits, filing of income tax return and conduct

timely AGM's as per the Companies Act. Further, the fact that various notices

intimating the company of the said strike off could not be delivered due to

Naxalite activities in the said region, is testament to the difficulties faced by the

Company and its promoters.

v) Thereafter, the Appellant learnt that on 11.01.2018 the Respondent had

purportedly issued a show cause notice to the Appellant company and all its

directors which was never received by the Appellant company or its directors.

Consequently, proceedings under Section 248 of the Companies Act, 2013 were

initiated and on account of failure of the company to file its Annual Returns or

Balance Sheets, the company name was struck off.

vi) On 28.06.2019, the Appellant company filed an Appeal under Section 252

of the Companies Act, 2013 seeking restoration of their name in the Register of

Companies maintained by the Respondent inter alia on the ground hereunder:

• that they are an active business that has not been able to raise adequate

turnover on account of the recent downturn in the real estate market;

• that the company has inventories amounting to Rs. 67,65,000/-

comprising of land and Construction materials of Rs. 5,25,747/- as per

the audited Balance sheet for the financial year 2017-18;

• the company has long term borrowings to the tune of Rs. 71,19,454/- as

on 31st March, 2018;

Company Appeal (AT) No. 147 of 2021 5

• the company had not deposited substantial cash during the

demonetization period and therefore it is a genuine company carrying on

legitimate business.

After hearing the parties, the Tribunal passed the order impugned dated

23.10.2019 which led to filing of this Appeal.

3. The Ld. Counsel for the Appellant during the course of argument and

grounds taken in his memo of Appeal submitted that the NCLT failed to

appreciate that the company continues to own valuable assets being Land

admeasuring Land admeasuring 0.324 Hectares situated at Village Kondagaon,

Kh. No. 185/1, PH No. 12, Dist. Kondagaon (C.G.) and Land admeasuring 1.355

Hectares situated at Village Kondagaon, Kh. No. 1114/2 and 1114/5, Dist.

Kondagaon (C.G.) purchased by the Company and presently valued over Rs.

80,00,000/- which it or its management or shareholders are prevented from

dealing with, by way of the strike off order. It is settled law that when a company

has valuable assets, revival of such a company for disposal of its assets is in the

interest of justice. The company needs to discharge its long-term borrowings to

the tune of Rs. 71,19,454/- as on 31st March, 2018, which it is prevented from

doing by virtue of the strike off order.

4. It is further submitted that the NCLT also failed to appreciate that the

company had (a) got its accounts books audited in terms of the Act, (b) filed its

Income Tax Returns and (c) maintained all proper documentation in terms of the

Act, and as such the promoters and directors had every intention of running the

company as a going concern. Further, the Strike Off order was passed by the

Company Appeal (AT) No. 147 of 2021 6

Respondent in violation of the principles of natural justice as it has proceeded

without adequate notice being issued to the Appellant Company and also without

any investigation of inquiry into the affairs of the Company and solely on the

basis of documents already available with the Respondent. Further, the NCLT

also failed to appreciate that the Respondent was not opposed to the Company

being revived in the interest of justice.

5. It is further submitted that the Respondent has arrived at a wrongful

conclusion that the company is not carrying on any business because in the

absence of financial statements. The carrying on business and filing annual

financial statements are two separate and independent matters and there is no

causal relationship between the two. Thus, non-filing of annual financial

statements is not conclusive of no business operations. Further, non-filing of

annual financial statements was not intentional, it was inadvertent. The

Company was very much in business, a fact which is substantiated by the

presence of stock as reflected in the balance sheets of the Company. Since the

Company was operational, it had not intentions of obtaining "dormant status"

and therefore had not applied for obtaining the same. The Company has been

carrying on Bank account transactions, which further substantiate the fact that

the company was actively carrying on business.

6. The NCLT failed to appreciate that the Appellant company has not earned

any revenues in the income statement or registered any turnover since

incorporation, because of the peculiarity of the business of real estate and

construction. It is submitted that the purchase of construction material as

Company Appeal (AT) No. 147 of 2021 7

reflected in Company's inventories in its balance sheet substantiates the fact

that the Company had intentions of carrying on business and was taking all the

necessary steps towards the same. The Company has bought certain properties

with a view to develop them and sell them in future. However, it is common

knowledge that neither can properties be developed in the short-term, nor can

they be sold in a short span of time. This is the reason the Company has not

generated any revenue since incorporation.

7. The Appellant Company in the event of revival of the Company and

restoration of the name of the Company in the Register maintained by the

Respondent, shall file all outstanding statutory documents i.e. the financial

statements and annual returns for the financial years 2012-13 to 2017-18 along

with the filing fee and the additional fee, as applicable on the date of actual filing.

8. The settled law that restoration is the rule and not the exception as was

held by the Hon'ble High Court of Delhi in the case of "ZTE Corporation v.

Siddhant Garg and Others". In this case, the Court has held hereunder:

"........ Normally the rule is to allow the restoration. Exercising

discretion against restoration would thus be an exception and

not the rule. The Court would also be varying of refusing

restoration so as to possibly safeguard the interest of one

particular class of affected persons. This is a discretionary

power and is evident from the use of the work "may" used in

Section 560(6) (corresponding section 252 of Companies Act,

2013). A statutory period of 20 years limitation has also been

Company Appeal (AT) No. 147 of 2021 8

provided in the section for a party to seek restoration. If such a

party succeeds, the Company would be deemed to have been

continued in its existence."

Based on above submissions, the impugned order is fit to be set aside and

the instant Appeal be allowed.

9. On the other hand, the Respondent / Registrar of Companies during the

course of argument and in his reply stated that as per record of the office of the

Respondent, the Appellant company had not filed Annual Return and Balance

Sheet for the last 8 years i.e. year ending 31.03.2013 to 31.03.2020. It is stated

that due to reasons that the Appellant company was not carrying on nay

business or operation for a period of two financial year and had also not applied

for the obtaining the dormant status under Section 455 of the Act, therefore,

after giving proper notice etc. the answering Respondent in accordance with

Section 248(5) of the Act, passed an order dated 29.08.2018 thereby strike off

the name of the Appellant company from the register of the Company and

published in the Official Gazette in form STK-7 on 29.08.2018 and the same had

been placed on the official website of the Ministry of Corporate Affair on

29.08.2018.

In view of the above, the Appellant not having any valid submissions,

therefore, the Appeal may be dismissed as the Respondent has duly complied

the law and the Tribunal has passed the appropriate order in public interest.

10. After hearing the parties and going through the pleadings made on behalf

of the parties, we take note of the fact that para 9 of the impugned order, the

Company Appeal (AT) No. 147 of 2021 9

NCLT has recorded that in this case, Registrar of Companies, Chhattisgarh also

did not have objection for restoration of the Company's name in the Register.

However, in view of the fact that the Audited Annual Accounts of the Company

for the Financial Years 2012-2013, 2013-14, 2014-15, 2015-16, 2016-17 &

2017-18 and Income Tax Return of the Company for the Financial Years 2012-

2013, 2013-14, 2014-15, 2015-16, 2016-17, 2017-18 & 2018-19 shows that the

Appellant Company is having substantial movable as well as immovable assets.

Therefore, it cannot be said that the Appellant Company is not carrying on any

business or operations. Hence, we are of the view that the order passed by the

National Company Law Tribunal (Cuttack Bench, Cuttack) as well as Registrar

of Companies, Chhattisgarh, is not sustainable in law.

11. In view of the aforenoted, we set aside the impugned order dated

23.10.2019 passed by the National Company Law Tribunal (Cuttack Bench,

Cuttack) in Company Petition (Appeal) No. 82 /CTB /2019. The name of the

Appellant Company be restored to the Register of Companies subject to the

following compliances:

i) Appellant Company shall pay costs of Rs. 5,00,000/- (Rupees

Five Lakh) to the Registrar of Companies, Chhattisgarh,

within eight (8) weeks from the passing of this judgment.

ii) After restoration of the Company's name in the Register

maintained by the Registrar of Companies, the Company shall

file all their Annual Returns and Balances Sheets. The

Company Appeal (AT) No. 147 of 2021 10

Company shall also pay requisite charges/fee as well as late

fee/charges as applicable.

iii) Inspite of present orders, Registrar of Companies 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.

The instant Appeal is allowed to the above extent.

12. Registry to upload the Judgment on the website of this Appellate Tribunal

and send the copy of this Judgment to the National Company Law Tribunal

(Cuttack Bench, Cuttack), forthwith.

[Justice Anant Bijay Singh] Member (Judicial)

[Mr. Kanthi Narahari] Member (Technical)

New Delhi 23rd March, 2023 R. Nath.

Company Appeal (AT) No. 147 of 2021