Company Appeal(AT) for Restoration of Company Name Section 421 of Companies Act, 2013
In Krishana Kumar Aggarwal v. Registrar of Companies, the Company fought to restore its name to the Register of Companies and ultimately succeeded.
Initially, National Company Law Tribunal (NCLT) ruled against the Company but we at Dugain Legal, Advocates and Solicitors, through its founder,Ms. Reema Jain,were able to overturn the decision at the National Company Law Appellate Tribunal (NCLAT).
The tabular representation breakdowns the reasons for rejection for Restoration of Company by NCLT under Section 252 and Reversal under Section 421 of the Companies Act, 2013:
Factor | NCLT Reasoning | NCLAT Reasoning |
Revenue | Nil Revenue (2016-17 to 2018-19) which indicated no business operation. | Statutory filings for Financial Year 2016-17 were reproduced, and contentions were made that next filing was not due at time of strike off. |
Evidence of Ongoing Business | No proof provided by erstwhile Counsel | Company has assets (property) and liabilities (unpaid creditors) |
Precedents Considered | Not mentioned by erstwhile Counsel. | Cited successful restoration cases. |
The NCLT dismissed the Company’s appeal based on several factors. The company's financial statements for FY 2016-17 to 2018-19 reflected nil revenue, leading the tribunal to believe it was not an active unit. Secondly, the erstwhile Counsel for the Company who appeared before NCLT, did not submit any evidence to show that it was a "going concern" when its name was struck off. Finally, the non-filing of Income Tax Return submissions for a decade strengthened the view taken by NCLT against restoration.
The NCLAT's Reversal: A Second Chance with Assets and Liabilities
The NCLAT, however, viewed the issues on contentions put forth by Ms. Jain. They acknowledged the fact that the Company had complied with statutory filings for FY 2016-17 and the next filing was not due when it was struck off. More importantly, the NCLAT accepted the fact that the Company had assets (property) and liabilities (unpaid creditors) as a sign of potential ongoing business or the possibility of resuming operations. Additionally, Ms. Jain successfully argued the case by citing previous NCLAT rulings like “GRS Properties and Calcutta Rubber Factory”, whereby restoration was granted to companies having assets.
The following are key considerations for the restoration of name of the Company according to Section 421 of the Companies Act, 2013 by an Appeal to NCLAT:
This case offers valuable insights for companies facing the possibility of having their names struck off the register:
1. Maintain Statutory Filings: Filing of financial statements and annual returns regularly, is important to avoid striking off.
2. Assets and Liabilities Matter: Even with low or no revenue, having assets and owing creditors shows the possibility of business activity and the NCLAT may take this into consideration.
3. Precedents can be Powerful: Researching and citing pertinent past rulings can make your case for restoration stronger.
Recommendations
Companies with impending strike-off action for non-compliance with statutory filing are encouraged to seek advice with legal counsel at the earliest opportunity. Our experienced team can assist in appeal procedures under Section 421 of the Companies Act and help in compiling evidences to help present a stronger case for restoration.
Conclusion
We emphasizes that good corporate governance entails observing the requirements of the statute in terms of filing on time. Filing on time serves the purpose of continuity in business and avoidance of penalties and/or strike-off action. We are here to partner with you in navigating through these complexities and ensure that your company maintains its legal and compliant status.