National Company Law Appellate Tribunal
Smile Energy Private Limited vs Registrar Of Companies Orissa on 3 March, 2023
NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH,
NEW DELHI
Company Appeal (AT) No. 75 of 2021
[Arising out of order dated 01.03.2021 passed by the National Company Law
Tribunal (Cuttack Bench, Cuttack) in CP (Appeal) No. 255/CB/2020]
IN THE MATTER OF:
M/s. Smile Energy Private Limited, (Struck
Off),
CIN: U40100OR2007PTC009546
Having register office at:
C/o Trarunshree Cotton Private Limited
Komatalapeta, Rayagada, Odisha, Pin-765001
State of Odihsa
Through its Director,
Rangchand Appikonda, S/o Mr. A.Krupa Rao,
Resident of 301, Mycons Acorpolish, Cyber,
Cyber Hills Society Guttala, Begumpet,
Madhapur, Telangana-500081.
....... Appellant.
Versus
Registrar of Companies, Odisha,
Having his Office at 3rd Floor,
Corporate Bhawan, Plot No. 9(P),
Sector: 1, CDA, Cuttack, Odisha-753014. ....... Respondent.
Present:
For Appellant: Mr. Basa Mithun Shashank and Mr. M.V. Mukunda,
Advocates.
For Respondent:- Mr. Kamal Kant Jha, Sr. Panel Counsel Govt. of India
with Mr. Avinash Singh, Advocate for RoC.
2
JUDGMENT
(03rd 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 01.03.2021 passed by the National Company Law Tribunal (Cuttack Bench, Cuttack) in CP (Appeal) No. 255/CB/2020 whereby and whereunder appeal filed by the Appellant for restoration of the name of the Company in the Register maintained by the Registrar of Companies (RoC), NCT of Delhi and Haryana was dismissed by the Tribunal.
2. The facts giving rise to this Appeal are as follows:
i) The company, M/s. Smile Energy Private Limited, was incorporated under the Companies Act, 1956, on 24.11.2007. The main object of the company are to carrying in the business to generate, receive, produce, improve, by, sell, acquire, use, transit, accumulate, employ, distribute, develop, handle, protect, supply and to act as agent, broker, representative, consultant or otherwise to deal in electronic power in all its branches at such place or places as may be permitted by appropriate authorities by establishment of thermal power plants, hydraulic power plants, atomic power plants, wind power plants solar power plants and other power plants based on any source of energy as may be developed or invented in future, etc. The Appellant herein, was a Director and Shareholder of the Company.
Company Appeal (AT) No. 75 of 2021 3
ii) The Government of Orissa issued an internal letter on 02.02.2009 to one of its departments stating that 3 MW SHEP lower Indra project was allotted to the Appellant. On 16.02.2009, the Company entered into a Memorandum of Understanding with the Government of Odisha on 16.02.2009 to establish a Small Hydro Electric Project (3 MW) on River Indra near Village Dargaon in Nuapada District, State of Odisha. On 30.11.2013, the Company entered into a further MoU dated 30.11.2013 with the Government of Odisha, for establishment of 4 MW (enhanced capacity) project in the same area.
iii) On 01.07.2014, the Office of Chief Engineer cum Chief Electrical Inspector (Generation), Government of Odisha issued Office Memorandum dated 01.07.2014 according Techno Economic Clearance for the proposal of establishing the project. The estimated project cost is Rs. 24.00 Crores. The Company was required to obtain all necessary approvals and clearances within twelve months of the sanction. Further, on 15.05.2017 the Company issued letter to the Executive Engineer, Electricity Department, Nuapada District, Odisha, requesting him to provide the exact coordinates of the substation at Khariar so that the company may conduct a survey and plan the power evacuation from the proposed Small Hydro Electric Project (SHEP) to the sub- station. Thereafter, on 19.06.2017, seeking allotment of land to the extent of 10.3 Acres for various components of the project.
iv) On 08.10.2017, the company issued letter to the Chief General Manager (P) GRIDCO, Janpath, Bhubaneswar seeking to enter into a Power Purchase Company Appeal (AT) No. 75 of 2021 4 Agreement in respect of the Small Hydro Electric Project being constructed by the Company. On 17.10.2017, the company issued letter to the Executive Engineer, WESCO, requesting him to inform the company of the nearest 33/11 KV substation to 4 MW SHEP proposed to be constructed by the company. Thereafter, on 01.11.2017, the company issued letter to the Engineer-in-Charge (EIC), cum PCEI, Unit V, Power House Square, Odisha, requesting allotment of law in order to do the needful in furtherance of the power project.
v) In 2017, the Company, at its Annual General Meeting, approved of its Balance Sheets, as well as the Director's Report for the year 2016-17. The company reported a loss of Rs. 4,96,570/- for the Financial Year ending on 31.03.2017. Thereafter, on 08.01.2018, the company issued letter to the Chief General Manager, GIRDCO, requesting him to expedite the process of issuing a Power Purchase Agreement in order to complete the process by 30.01.2018, so as to meet the deadlines given by the Government of Odisha. The company applied for all the required sanctions, the Government of Odisha was unable to complete the acquisition of the land on which the project was to be completed. However, from time to time, the Company furnished Bank Guarantees required to execute the project.
vi) In 2018, the company, at its Annual General Meeting, approved of its Balance Sheets, as well as the Director's Report for the year 2017-18. The company reported a loss of Rs. 26,699/- for the Financial Year ending on 31.03.2018. Further, the Company, at its Annual General Meeting, approved of Company Appeal (AT) No. 75 of 2021 5 its 2018-19 Balance Sheets, as well as the Director's Report. The company reported a loss of Rs. 8,870/- for the Financial Year ending on 31.03.2019.
vii) The Registrar of Companies issued Gazette Notification dated 24.10.2019 striking off the Company from the Register of Companies as per Section 248(5) of the Companies Act, 2013. The Appellant herein checked the website of the Ministry of Corporate Affairs Portal for filing of certain statutory documents and learnt that the status of the Company was 'Strike Off'. The Company is still a going concern and has been consistently maintaining audited financial statements, meeting all the statutory requirements. The Engineer-in-Chief, Government of Odisha issued letter dated 03.01.2020 to the EIC(P&D), West Resources, Odisha, requesting him to allot 10.3 Acres of land in Badamaheswar Village for the construction of different components of the project. Further, the Government of Odisha by letter dated 28.08.2020, requested the company to extend its Bank Guarantee, as per the terms of the MoU. On 24.09.2020, the company got extended Bank Guarantee for Rs. 4,00,000/- from 30.08.2020 to 30.08.2023 and the Bank Guarantee was to remain in force till 30.08.2023. Therefore, the company has been conducting continuous business with the Government of Odisha.
viii) Thereafter, being aggrieved by the notice of the Respondent No. 1 of "Striking Off", the Appellant approached the Tribunal under Section 252 of the Companies Act, 2013 for revival of the Appellant Company and after hearing Company Appeal (AT) No. 75 of 2021 6 both the parties, the Tribunal passed the order impugned which led to filing of this Appeal.
3. The Ld. Counsel for the Appellants during the course of argument and grounds mentioned in the memo of appeal, submitted that the Company is a going concern, which has been awarded a Memorandum of Understanding (For short "MoU") by the Government of Odisha. As per the terms of the MoU, the company is to set up a 4 MW Small Hydro Electric Project in Nuapada, Odisha. Though the company has received all the required sanctions, the Government of Odisha is yet to allot the land for the project. Therefore, the company is not a shell company, but is a going concern, awaiting the allotment of land from the Government.
4. It is further submitted that Section 248(1) of the Companies Act, 2013, enjoins the Registrar of Companies to serve notices on all of the Directors of the company. This has not been complied with. This Tribunal has repeatedly held that when notices are not served on the Directors of the company which is sought to be struck off, the striking off must be set aside, held in the case of "Calcutta Rubber Factory v. Registrar of Companies, (2019 SCC Online NCLAT 851)". The Company issued letters form 2007 till the date of striking off, in order to be able to conduct the business that the company was incorporated for. The mere lack of income or lack of profits cannot mean that the company is a shell company. The finding of the Tribunal is completely erroneous in this regard, as the company was conducting its business through issuing various letters to the Company Appeal (AT) No. 75 of 2021 7 relevant authorities in order to be able to begin construction and necessary activities on the Hydro Electric Project.
5. It is further submitted that the company and its shareholders are ready and willing to invest Crores of Rupees in the construction of the dam, which is important for the development of Nuapada District, and for the national development. The company will produce renewable electricity connected to the national grid in an environmentally friendly manner. Therefore, it is in the interests of the society that the company is allowed to function and conduct business. Further, the Company and the Appellant herein did not receive any notice under Section 248(1) of the Act. Such a notice is mandatory in order for the company to be struck off from the Register of Companies, therefore, the striking off is bad in law for the failure to follow due process. The company was unable to upload its Annual Reports with the Registrar of Companies due to the suspension of the Appellant's DIN between 2016 and 2019. This was only later investigated by the Appellant, and the Appellant has approached the Hon'ble High Court to defreeze the DIN. Therefore, the inability of updating the Annual Reports does not amount to a reasonable cause to believe that the Company is not carrying out any business.
6. The NCLT failed to peruse and examine the various documents providing that the company had been conducting business. The finding of the NCLT that the company is merely a shell company is ex facie erroneous, as the company has been awaiting allotment of land for the construction of the project awarded Company Appeal (AT) No. 75 of 2021 8 to it by the Government of Odisha. The company repeatedly renewed Bank Guarantees for the project awarded to it, as has a long-term loan of Rs. 29,96,000/-. Therefore, the company's assets and liabilities are also required to be analysed by the NCLT, which had not been done before. Therefore, the order of the NCLT ought to be set aside by this Tribunal.
7. On the other hand, the Ld. Counsel for the Respondent/Registrar of Companies during the course of argument and his Reply Affidavit submitted that the Company, Ms. Smile Energy Pvt. Ltd. was incorporated on 24.09.2007, but due to failure in filing of its statutory returns for a continuous period of more than two years, the name of the company was considered for striking off by the Respondent in a suo motu action under the provisions of Section 248(1) (c) of the Act and also in pursuance of the circulars issued by the ministry of Corporate Affairs, Govt. of India, New Delhi from time to time. The basis of striking off the name of the company was the continuous non-filing of the statutory returns i.e. financial statements and Annual Returns since the financial year ending 31.03.2017 onwards (which are required to be filed under the Act) and it was believed that the company was not carrying on any business or operation for a period of two immediately preceding financial years as the company has not made any application within such period for obtaining the status of a dormant company under Section 455, prior to its struck off.
8. It is further submitted that the Respondent issued Notice STK-1 i.e. a show cause notice under Section 248(1)(c) of the Act, to the Appellant company Company Appeal (AT) No. 75 of 2021 9 enquiring whether the said company was carrying on any business or was in operation, but no reply to the said show cause notice was received by the Respondent's office. Subsequently, the Respondent's office published in the Official Gazette and Newspaper for the information of the general public regarding striking off the name of the company in Form No. STK-5/5A. The said notice is issued as public notice not only to the company and the directors of the company but also to all stakeholders concerned so as to receive their objections, if any, to the said intention of the Registrar to remove the name of the company from the Register. Finally, after the expiry of the time mentioned in the said notice, the name of the company was struck off from the Register maintained by the Respondent and the name of the company was published in Form STK-7 in the Official Gazette dated 22.07.2017 and on the publication of such notice in the official Gazette the company stood dissolved on and from 24.10.2019. Further, the instant appeal is liable to be dismissed with costs because the appellant has not been able to prove that the appellant company was a going concern and was having any business operations at the relevant time.
9. After hearing the parties, going through the pleadings made on behalf of the parties and in view of the fact that the Audited Balance sheets from Financial Year 2017-18 to 2018-19 as also the company repeatedly renewed Bank Guarantees for the project awarded to it by the Government of Odisha, as has a long-term loan of Rs. 29,96,000/- shows that the Appellant Company is having substantial movable as well as immovable assets. Therefore, it cannot be said Company Appeal (AT) No. 75 of 2021 10 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, Odisha is not sustainable in law.
10. In view of the aforenoted, we set aside the impugned order dated 01.03.2021 passed by the National Company Law Tribunal (Cuttack Bench, Cuttack) in CP (Appeal) No. 255/CB/2020. The name of the Company be restored to the Register of Companies subject to the following compliances.
i) Appellant shall pay costs of Rs. 3,00,000/- (Rupees Three Lakhs) to the Registrar of Companies, Odisha 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 Balance Sheets. The 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.
Company Appeal (AT) No. 75 of 2021 11
11. 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 03rd March, 2023 Ram Nath.
Company Appeal (AT) No. 75 of 2021