National Company Law Appellate Tribunal
Dd Finance And Holdings Private Ltd vs Registrar Of Companies on 5 March, 2024
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NATIONAL COMPANY LAW APPELLATE TRIBUNAL
PRINCIPAL BENCH
NEW DELHI
COMPANY APPEAL (AT) NO.112 OF 2022
(Arising out of judgement and order dated 27.05.2022 passed by National
Company Law Tribunal, Court III, New Delhi in Company Appeal
137/252/ND/2021)
In the matter of:
DD Finance and Holdings Private Ltd
1st Floor, Greater Kailash Market Part II,
South Delhi,
Delhi 110048 Appellant
Vs
Registrar of Companies,
NCT of Delhi & Haryana,
4th Floor, IFCI Tower,
61, Nehru Place,
New Delhi-110019 Respondent
For Appellant: Mr. Rajive Maini, Ms Shriya Maini, Advocates.
For Respondent: Mr. B. Rama Ambedkar, Asstt. Director, ROC.
JUDGEMENT
JUSTICE YOGESH KHANNA, MEMBER (JUDICIAL) The present Appeal has been filed by the Appellant against an impugned order dated 27.05.2022 passed by the National Company Law Tribunal, Court III, New Delhi in Company Appeal 137/252/ND/252 titled as DD Finance and Holdings Pvt Ltd Vs. Registrar of Companies NCT of Delhi and Haryana
2. The brief facts are the Appellant Company was incorporated in 1981 and had purchased a property at Mussorie in 1983. The ROC, Delhi & Haryana had initiated proceedings under Section 248(5) of the Companies 2 Act, 2013 and had struck off the name of the company from its register vide Dissolution No.ROC-Del/248(5)/STK-7/2879 dated 30.06.2017. The name of the appellant company was included at Sr. No.4467 of the list of companies whose names were struck off due to default in non-filing of the Financial Statements and Annual Returns.
3. The Learned Tribunal had dismissed the appeal of the Petitioner with following reasoning:
"The Ld. Counsel appearing for the Appellant submits that though there is no Revenue reported from Operations but there is a Sale Deed executed in the name of the Company on 18.11.1983, which is placed at page no. 59 of the Application. On perusal of the document, we notice that it is a photocopy of the Sale Deed. In the course of hearing, the Appellant was given an opportunity to exhibit the latest land revenue/ rent receipts to demonstrate that the appellant is still in possession of the land. The Appellant failed to produce any document to show that the land in question is still in the name of the company and the Land revenue/rent is being paid regularly by the Appellant. Ld. Counsel appearing for the Appellant submitted that the order may be passed on the basis of the material available on the records.
The Ld. Counsel further placed reliance upon the decisions referred to in the Memo of Appeal and submitted that the name of the company can be restored even if there is no revenue from operations.
That on perusal of averments made in the memo of appeal and reply, we observe that the Appellant Company has failed to place or produce any material document to show that the Appellant Company was in operation or carrying out its business or it is otherwise just to restore the Company in the register of RoC, except the sale deed.
So far as the Sale Deed placed by the Appellant on record is concerned, we notice that the said sale deed was executed in the year 1983 and the appellant has failed to produce any document to show that it is still in possession of the said land and they are paying the land revenue/rent. In the absence of any such document, we are unable to accept the contention of the Appellant.
In the circumstances, we would like to refer to the Judgement of Hon'ble NCLAT in the matter of Alliance Commodities Private Limited Vs. Office of Registrar of Companies, West Bengal, Company Appeal (AT) No.20 of 2019:3
"9. Section 252 (3) of the Companies Act, 2013 empowers the Tribunal to order restoration of a Company whose name has been struck off from the Register of Companies, if such company, any member or creditor or workman thereof feeling aggrieved by such striking off applies before the Tribunal seeking restoration of the struck off company to the Register of Companies before expiry of twenty years from the publication in Official Gazette of notice under Section 248(5). The exercise of such power is properly regulated and depends upon satisfaction of the Tribunal that the Company at the time of its name being struck off was carrying on business -10- Company Appeal (AT) No. 20 of2019 or in operation or otherwise it is just' that the name of company be restored. We do not find ourselves persuaded to agree with the proposition canvassed by learned counsel for the Appellant that in spite of Appellant's inability to demonstrate that the Company was at the relevant time carrying on business or in operation, the Tribunal had vast powers to order restoration of Company on the ground "or otherwise".
This term "or otherwise" has been judiciously used by the legislature to arm the Tribunal to order restoration of a struck off company within the permissible time limit to take care of situations where it would be just and fair to restore company in the interest of company and other stakeholders. Such instances can be innumerable. However, this term "or otherwise" cannot be interpreted in a manner that makes room for arbitrary exercise of power by the Tribunal when there is specific finding that the Company has not been in operation or has not been carrying on business in consonance with the objects of the Company. A Shell Company or a Company having assets but advancing loans to sister concerns or corporate persons for siphoning of the funds, evading tax or indulging in unlawful business or not abiding by the statutory compliances cannot be allowed to invoke this expression "or otherwise" which would be a travesty of justice besides defeating the very object of the Company..."
The said order is also confirmed by the Hon'ble Suprem3e Court in the matter of Alliance Commodities Pvt Ltd Vs Office of Registrar of Companies -WB (CA No.7258 of 2019) vide order dated 23.09.20219.
So far as the decisions relief upon by the Appellant, they are not applicable under the facts and circumstances of the case in hand.
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In sequel to the above, we are not inclined to interfere with the striking off action taken by the Roc against the Appellant Company under Section 248(5) of the Companies Act, 2013"
4. Let us examine the factual matrix. The appellant company was incorporated on 27.02.1981 under the Companies Act, 1956 for the purposes of activities related to sale, transfer, purchase, investments, dealing- disposition of shares, stocks, securities, properties etc. The company was initially incorporated with three directors namely one Late Shri Dharamvir, Shri Subhash Gambhir and Shri Surinder Kumar who were involved in day to day operational activities of the company. In the year 1984 vide Special Power of Attorney given to him, Shri Subhash Gambhir purchased a property situated at Bhakti Bhawan Estate on a covered area of 3570 square fee or 322 square metres with appurtenant compound (open) of 2284 square feet or 212 square metre situated in Kulri Mussoorie, Uttarkhand
5. In the years 2001 the said company was transferred by earlier directors in favour of late Mr. Manohar Lal Nagpal and his four sons who were all appointed as Directors on 16.01.2001 with an active din status.
6. However, from 2001 onwards all key managerial decisions were taken by Late Shri Manohar Lal Nagpal and the other four directors i.e. the sons were not involved in the operations of the company. Due to his old age, Sh Manohar Lal suffered from various ailments and was not keeping well, hence could not undertake the compliances viz. filing annual returns and balance sheets; though AGM Meeting was done on 30.09.2011. Hence the company could not file its financial statements for the said financial years with the ROC as the only one director who was looking after the company and was aware 5 about its compliances could not do the needful due to his ill health, despite the financial statements being ready.
7. Even Mr H.L. Kalra, who was the erstwhile Chartered Accountant of the company had also unfortunately passed away and no information details and documents were available with the company. Subsequently, in 2009 the wife of Late Shri Manohar Lal Nagpal suffered from brain haemorrhage and while she was under treatment at Fortis Hospital, Chandigarh, even Mr. Manohar Lal Nagpal had passed away in 2010. At that time the two sons of Mr. Manohar Lal Nagpal had settled down with their respective families at Abhor, Punjab and one of the director was staying in Chandigarh and his fourth son was living at Zirakpur, Punjab. Since all the sons of Mr. Manohar Lal Nagpal were residing at different places, they could not handle the business and could not file the annual returns and/or the financial statements.
8. A public notice dated 27.04.2017 was then published at the website of Ministry of Corporate Affairs and the name of the company was struck off.
9. It was alleged the appellant company is still an sole absolute owner and in possession of the property/land situated at Bhakti Bhawan Estate, Kulri Mussoorie, Uttarakhand and now all the four directors intend to start business again with each other, collaborating with developers to carry out the business objective of the company. The company has an authorised capital of Rs.1,00,000/-; Issued and subscribed capital of Rs.1,00,000/- and paid up capital of rs.1,00,000/- and a valuable asset viz running in crores. The financial reports with balance sheets and profit and loss accounts for the years 2011-12, 2012-13, 2013-14, 2014-15, 2015-16, 2016-17, 2017-18, 2018-19 and 2019-20 are filed with this Appeal.
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10. Though the application was filed under Section 252(3) of the Companies Act, 2013 seeking orders for restoration of the name of the Appellant in the register of the ROC but vide order dated 27.05.2022 the appeal was dismissed by the Ld. NCLT stating interalia that it is "not inclined to interfere with the striking off action taken by the ROC against the Appellant Company under Section 248(5) of the Companies Act, 2013".
11. It was argued the financial statements with balance sheets, profit and loss account or Income Tax Return for the assessment year 2020-21 and the proof of payments viz. water bills, electricity bills, land receipt could not be placed before the NCLT by the erstwhile counsel, though were handed over to him by the applicant. It is argued these documents being material of sterling quality have now been placed before this Hon'ble Tribunal with an application seeking permission to lead additional evidence. The said receipts of water bill, electricity bill and rent receipts are pre-dating the impugned order and are annexed in the Appeal Paper Book at Annexure A-14 and A-15.
12. The company holds property and all the four directors are willing to give an undertaking for three years they will not sell the property, should the name of the company be restored on the rolls of the ROC. The brothers as directors intend to use this asset by developing it and starting a home-stay business for their daily survival and livelihood. They have also received a proposal from Brentwood Hotel, annexed with the Appeal.
13. Section 252(3) of the Companies Act, 2013 deals with the present situation and is as under:-
"If a company, or any member or creditor or workmen thereof feels aggrieved by the company having its name struck off from the register of companies, the Tribunal on an application 7 made by the company, member, creditor or workman before the expiry of twenty years from the 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 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."
14. Now the term otherwise just and equitable under Section 252(3) of the Companies Act, 2013 envisage revival/restoration of the company on the rolls of ROC if it is not a shell company or a company dealing with siphoning funds or advancing loan to sister concern. Rather they have a fixed substantial assets worth crores. The company is still sole absolute owner and in possession of the property situated at Bhakti Bhavan Estate, Kulri, Mussoorie and if the company's name is not restored then, of course, it would result to an irreparable loss and prejudice to the appellant and the fixed assets of company would be a deadlock and would result in wastage of property which is, of course, contrary to the public policy. Admittedly the property is free from all encumbrances.
15. Though the Ld. NCLT has relied upon the ratio of Alliance Commodities Vs Office of ROC, West Bengal being Company Appeal (AT) 20/2019 which is 8 also confirmed by Hon'ble Supreme Court in CA No.7258/2019 but Alliance Commodities (supra) deals with malafide situation of illegal transactions made by shell company (loans advanced to sister concern) and its loan advances were terms as "being violative of Section 186 of the Companies Act, meaning thereby that advancing loans for the purpose of siphoning of the funds and for evasion of tax" which is not the situation here. Rather the financial documents from 2011 onwards including balance sheets, water bills, electricity bills, rent receipt were ready but could not be filed due to the fault of an earlier counsel.
16. Admittedly the impugned order was passed since the appellant had failed to produce documents to show it was still in possession of the asset and it had paid all water bills, electricity bills and rent receipt(s). It is submitted the financial statement could not be filed with the ROC inadvertently since father of the present directors was old and ill and it being a joint family set up with an incomplete professional/legal guidance and even their Chartered Accounts had unfortunately expired.
17. The Master Data details taken from the Ministry of Corporate Affairs website also show the last AGM was convened on 30.09.20211 and the last balance sheet was filed on 31.03.2011 which shows the activities were going in the company in 2011 and admittedly Nil revenue from operations is not a sole criteria for a company's name to be struck off from the rolls of ROC. The company is holding a fixed assets and is not a shell transactionary vehicle. More so admittedly the directors as well as the company were not served with any notice in person, hence could not submit a representation. Thus the act of the Respondent in striking off the appellant from the rolls of ROC had 9 caused a grave prejudice to the appellant herein, more specifically when the public notice issued by ROC was aimed at weeding out shell companies.
18. Here, we would also like to point out the reply filed on behalf of the ROC which read as under:
"Further, the appellant has taken the plea that they have annexed Income Tax Report for AY 2020-21 and Independent auditor reports for the year 2011-12, 2012-13, 2013-14, 2014- 15, 2015-16, 2016-17, 2017-18 and 2019-20. It is observed from the above filings that the revenue from operations are Nil."
19. In M/s Durga Builders (P) Ltd Vs ROC; Company Appeal (AT) No.154 of 2021 this Tribunal held:-
"10. After hearing the parties and going through the pleadings made on behalf of the parties, we observe that the Appellant Company is in litigation therefore, the Company has not filed the financial statements and also without giving opportunity of hearing, the Respondent No. 1/Registrar of Companies struck off the name of the Appellant Company's from the Register maintained by him, but in view of the fact and also the Bank Statements of the Appellant Company from 2015 -2018 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 (Court V, New Delhi) as well as Registrar of Companies, NCT Delhi & Haryana is not sustainable in law."
20. In `Dashmesh Impex Pvt. Ltd. & Ors. Vs ROC: Company Appeal (AT)No.116/2021 this Tribunal held as follows:
"5. After hearing the parties, going through the pleadings made on behalf of the parties and in view of the fact that the financial statements 2016-2017, 2017-2018, 2018-2019, 2019-2020 and Income Tax Return of the Appellant Company 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 10 by the NCLT, New Delhi as well as RoC, NCT Delhi & Haryana is not sustainable in law."
21. In Basant Kumar Berlia & Ors Vs. ROC; Company Appeal (AT) No.171 of 2018 this Tribunal held:-
"30. We have noted that when the 1st respondent had issued Public Notice dated 7.4.2017 (Page 85) intimating the companies, including 2nd respondent, that their names of the companies would be struck off under Section 248(1) of Act, 2nd respondent was given 30 days' time from the date of publication of notice to send their objection to the ROC. 2nd respondent did not respond to the said notice. Thereafter, 1st respondent vide notice dated 30.6.2017 (Page87) struck off the name of the 2nd respondent from the register of companies. Now these appellants had filed petition/appeal before the NCLT stating that the company is going concern and they have valuable assets, long terms loan and advances and filed petition/appeal under Section 252(3) of the Act. If the appellants had pleaded it before the ROC, then the ROC before striking off the name of the company under Section 248(5), would have considered the pleas now taken under Section 248(6) of the Companies Act, 2013. The appellants have now filed with this appeal the Balance Sheets for the years 2014, 2015 and 2016 which they could not file with ROC as the company name was struck off. Seeing the balance sheets and the company's huge investment which the company is having since 2011 and there are large amount of the loan and advances, it is possible that creditors could also be aggrieved persons, feeling aggrieved of company's name being struck off, may file an application for restoration of company's name, if its name is not restored. Thus, it would be just and equitable to restore the name of the company to even avoid further legal proceedings."
22. For foregoing reasons, we are of the view that due to exceptional economic growth curve it shall be viable to run the appellant company as an entreprenurial start up venture since affordable housing options/home-stay business could be bright spot. Admitted the directors of the appellant company are optimistic to carry out the operations given the assets and 11 infrastructure of the appellant company. Hence restart of housing business is very much possible, more so when an expression of interest has been received from Brentwood Hotels. Reference may also be drawn to Santa Claus Toys Pvt Ltd V. Registrar of Companies, Deepsone Non Ferrous Rolling Mills Pvt Ltd V. ROC NCT of Delhi and Haryana and Sohal Agencies Pvt Ltd V. Roc, Delhi and Haryana.
23. We find though the annual accounts of the years stated above though were duly prepared but could not be filed, for the reasons stated above, the non-compliance appear to be inadvertent, non-deliberate and unintentional. Admittedly the appellant is ready to comply with all the statutory provisions once the name of the company is restored by the ROC. Thus we find no reason why its name should not be restored as no prejudice would be caused to the ROC if its name is restored. It is not the case of the ROC that the appellant is a shell company or was at any time engaged in syphoning of funds.
24. The appellant undertakes that it shall be more cautious and vigilant in future in filing compliances under the applicable Laws and would adhere to all stipulated timelines designated without fail and shall pay cost imposed as per law. An affidavit in this regard be filed within a week from today before this Tribunal.
25. For the reasons aforesaid we find it just and equitable to restore the name of the appellant company to the record of ROC and thus we set aside the impugned order dated 27.05.2022 passed by the Ld. NCLT and direct the ROC, New Delhi to restore the name of the company to the Register of Companies subject to the following compliances:
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i) Appellant Company shall pay costs of Rs.2,00,000/- (Rupees Two Lakhs) to the Registrar of Companies, NCT Delhi and Haryana within eight weeks from the passing of this Judgement.
ii) the company shall file all its annual returns and balances sheets within four weeks and shall also pay all requisite charges/fee, as applicable.
26. Inspite of present order, the ROC shall be free to take any other steps, punitive or otherwise, under the Act for non-filing/late filing of statutory returns/documents against the Company and Directors.
29. The instant Appeal is allowed to the above extent.
(Justice Yogesh Khanna) Member (Judicial) (Mr. Ajai Das Mehrotra) Member (Technical) New Delhi Dated: 05-03-2024 BM