Calcutta High Court (Appellete Side)
Rishima Sa Investments Llc vs Registrar Of Companies on 1 March, 2017
W.P. No. 20044 (W) of 2016
IN THE HIGH COURT AT CALCUTTA
Constitutional Writ Jurisdiction
Appellate Side
Rishima SA Investments LLC
Vs.
Registrar of Companies, West Bengal & Ors.
For the Petitioner : Mr. Ranjan Bachwat, Sr. Advocate
Mr. Debnath Ghosh, Advocate
Mr. Sanjoy Ginodia, Advocate
Mr. Sushant Dutt Majumder, Advocate
Ms. Vidhi Agarwal, Advocate
For the Respondent : Mr. Ratnanko Banerjee, Sr. Advocate
Nos. 2 & 3 Mr. D.N. Sharma, Advocate
Mr. Saptarshi Banerjee, Advocate
Mr. Shounak Mitra, Advocate
Mr. Zulfiquar Ali, Advocate
For Registrar of Companies : Mr. Tarunjyoti Tewari, Advocate
Hearing concluded on : February 21, 2017
Judgment on : March 1, 2017
DEBANGSU BASAK, J.:-
The petitioner assails a decision of the Registrar of Companies, West Bengal striking off the name of Rama Inn (International) Private Limited (hereinafter referred to as the "Company") from the Register maintained in respect of companies.
Learned Senior Advocate for the petitioner submits that, the petitioner is neither a member nor a creditor or the company itself to apply under Section 560(6) of the Companies Act, 1956 for recall of the order of the Registrar. He submits that, the impugned decision of the Registrar of Companies is dated September 10, 2015 when the provisions of the Companies Act, 2013 had not been notified. He further submits that, on the date of filing of the writ petition being September 8, 2016, the same position with regard to the notification of the provisions of the Companies Act, 2013 had continued. He relies upon 175 Company Cases page 462 (Basanti Cotton Mills (1998) Private Limited and Gopal Navinbhai Dave & Ors. v. Nirendranath Kar & Anr.) in support of the contention that, the petitioner could not have approached the Company Court. He submits that, the provisions of Section 248 of the Companies Act, 2013 have been notified subsequent to the filing of the writ petition. Therefore, the petitioner did not approach the National Company Law Tribunal under the Act of 2013.
Referring to the impugned decision of the Registrar of Companies, he submits that, no reasons have been ascribed by the Registrar why the name of the company was struck off. He submits that, the petitioner, the company and another legal entity had entered into an agreement with regard to a hotel business. Such agreement contains an arbitration clause. Disputes and differences had arisen between the parties to such agreement. The petitioner had referred such disputes to arbitration in terms of the arbitration clause. Such arbitration proceedings are pending. The company was a party respondent in such arbitration proceedings. In order to non-suit the petitioner in the arbitration proceedings, the respondent nos. 2 and 3 who were the persons in control and management of such company have made an application under Section 560 of the Act of 1956 before the Registrar of Companies, West Bengal. He submits that, the respondent nos. 2 and 3 as the two Directors of such company had filed two several affidavits before the Registrar of Companies claiming that, the company is inoperative from the date of its incorporation. He refers to the balance- sheet of the company as at March 31, 2012 and submits that, the company had long term liabilities, it had inventories in excess of Rs. 50 Lakhs and that it had held shares in Shristi Hotel Private Limited for the value of Rs.13,84,61,540/-. The company had invested in the joint venture company. The joint venture company is Shristi Hotel Private Limited. He submits that, the company was posting net loss. In view of such evidence available, it cannot be said that the company was inoperative from the date of its incorporation for the company to be struck off under the provisions of Section 560 of the Companies Act, 1956. The decision of the Registrar of Companies in this regard is, therefore, perverse.
Learned Senior Advocate appearing for the respondent nos. 2 and 3 submits that, the petitioner has no locus standi to file the writ petition. He submits that, the petitioner is neither the company itself nor is a member or creditor of the company. The petitioner, therefore, cannot be allowed to achieve something indirectly which is not permitted to it directly. The petitioner is not entitled to apply under Section 560(6) of the Act of 1956. The petitioner is, therefore, not entitled to challenge a decision of the Registrar of companies taken under Section 560 of the Act of 1956. He refers to an unreported judgment of a Division Bench of this Court rendered in A.P.O.T. No. 386 of 2015 (Meghdoot Services Limited & Anr. v. Registrar of Companies, West Bengal & Ors.) in support of his contentions.
Referring to the decision of the Registrar of Companies impugned in the present proceedings, learned Senior Advocate for the respondent nos. 2 and 3 submits that, the Registrar of Companies had taken such decision after publication of notice. The decision cannot be said to be vitiated by any infirmity. The shares referred to in the balance-sheet of the company as at March 31, 2012 were subsequently sold in 2015. Therefore, on the date when the Registrar had struck off the name of the company, the company was not doing any business. He submits that, the petitioner is not prejudiced by the decision of the Registrar in the sense that the petitioner has already initiated foreign arbitration with regard to the joint venture agreement. The shares were sold by the company to another legal entity in the joint venture agreement and that the disputes arising out of such joint venture agreement are subject matter of the foreign arbitration. The petitioner can seek adequate relief with regard to the shares held by the company in the joint venture company. Learned Senior Advocate for the respondent nos. 2 and 3 seeks directions for filing affidavits.
The pleadings and the contentions of the rival parties give rise to the following issues:-
1. Is a person, not being a member or a creditor or the company itself, entitled to challenge the striking off of the name of the company under Section 560 of the Companies Act, 1956?
2. Does the petitioner have the locus standi to file and maintain the present writ petition?
3. If the answers to the first two issues are in the affirmative, is the impugned order of the Registrar vitiated as being perverse and without reason?
4. To what reliefs, if any, are the parties entitled to?
The first two issues being interconnected, are taken up together for consideration.
The petitioner seeks relief with regard to an action taken by the Registrar of Companies under the provisions of Section 560 of the Companies Act, 1956. The Registrar of Companies by the impugned writing dated September 10, 2015 had issued a notice to the effect that, the name of Rama Inn (International) Private Limited (Company) has been struck off from the Register of Companies and that, such company is dissolved. The Registrar of Companies has exercised powers under Section 560 of the Act of 1956 in doing so.
At the time of filing of the writ petition, the provisions of the Companies Act, 2013 relating to striking off of a company had not been notified. The maintainability of the writ petition has to be considered on the basis of the law prevailing on the date of filing of the writ petition. Moreover, the action of the Registrar of Companies under Section 560 of the Act of 1956 is under challenge in this writ petition.
Existence of statutory alternative remedy is not a complete bar to the maintainability of a writ petition. Notwithstanding the existence of a statutory alternative remedy, a writ petition is held to be maintainable when a fundamental right is violated or where the authority has acted without jurisdiction or the decision complained of is perverse.
In the present case, the issue of maintainability of the writ petition is on the basis that, Section 560(6) of the Act of 1956 recognizes the categories of persons who are entitled to apply thereunder to question a decision of the Registrar of Companies rendered under Section 560 and since the petitioner is not such a recognized person, the petitioner cannot be allowed to maintain a writ petition to assail an order of the Registrar of Companies under Section 560 which cannot do under Section 560(6) of the Act of 1956.
Basanti Cotton Mills (1998) Private Limited (supra) and Meghdoot Services Limited & Anr. (supra) are of the view that, the company directed to be struck off or a member or a creditor of such company, if aggrieved by the striking off of the name of the company can approach the Company Court for redressal. These two authorities were concerned with the right to approach the Company Court under Section 560(6) of the Act of 1956. Considering Section 560(6) of the Act of 1956 which stipulates the categories of persons who are capable of approaching the Company Court for the purpose of redressal of grievances under Section 560 of the Act of 1956, their Lordships have held that, no other person is entitled to approach the Company Court.
Sections 560(5) and 560(6) of the Companies Act, 1956 are as follows:-
"560(5) At the expiry of the time mentioned in the notice referred to in sub- section (3) or (4), the Registrar may, unless cause to the contrary is previously shown by the company, strike its name off the register, and shall publish notice thereof in the Official Gazette; and on the publication in the Official Gazette of this notice, the company shall stand dissolved:
Provided that-
(a) the liability, if any, of every director, manager or other officer who was exercising any power of management, and of every member of the company, shall continue and may be enforced as if the company had not been dissolved; and
(b) nothing in this sub- section shall affect the power of the Court to wind up a company the name of which has been struck off the register.
560(6) If a company, or any member or creditor thereof, feels aggrieved by the company having been struck off the register, the Court, on an application made by the company, member or creditor before the expiry of twenty years from the publication in the Official Gazette of the notice aforesaid, may, if satisfied that the company was, at the time of the striking off, carrying on business or in operation or otherwise that it is just that the company be restored to the register, order the name of the company to be restored to the register; and the Court may, by the order, give such directions and make such provisions as seem 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."
The Court referred to Section 560(6) of the Act of 1956 is defined in Section 2(11) of the Act of 1956. Read with Section 10 of the Act of 1956, in the facts of the present case, would mean the Hon'ble High Court at Calcutta. Sections 2(11) and 10 of the Act of 1956 are as follows:-
"2(11). "the Court" means,-
(a) with respect of any matter relating to a company (other than any offence against this Act), the Court having jurisdiction under this Act with respect to that matter relating to that company, as provided in section 10;
(b) with respect to any offence against this Act, the Court of a Magistrate of the First Class or, as the case may be, a Presidency Magistrate, having jurisdiction to try such offence."
"10. Jurisdiction of Courts.
(1) The Court having jurisdiction under this Act shall be-
(a) the High Court having jurisdiction in relation to the place at which the registered office of the company concerned is situate, except to the extent to which jurisdiction has been conferred on any District Court or District Courts subordinate to that High Court in pursuance of subsection (2); and
(b) where jurisdiction has been so conferred, the District Court in regard to matters falling within the scope of the jurisdiction conferred, in respect of companies having their registered offices in the district.
(2) The Central Government may, by notification in the Official Gazette and subject to such restrictions, limitations and conditions as it thinks fit, empower any District Court to exercise all or any of the jurisdiction conferred by this Act upon the Court, not being the jurisdiction conferred-
(a) in respect of companies generally, by sections 237, 391, 394, 395 and 397 to 407, both inclusive;
(b) in respect of companies with a paid- up share capital of not less than one lakh of rupees, by Part VII (sections 425 to 560) and the other provisions of this Act relating to the winding up of companies.
(3) For the purposes of jurisdiction to wind up companies, the expression" registered office" means the place which has longest been the registered office of the company during the six months immediately preceding the presentation of the petition for winding up."
The petitioner is not the company nor its member or creditor. It is not the person named in Section 560(6) of the Act of 1956. It does not have the statutory right to apply under Section 560(6) of the Act of 1956. In absence of such statutory right can the petitioner be said to be remediless? There is a remedy for every violation of a right. The petitioner claims violation of its rights by the impugned decision of the Registrar of Companies. It cannot be said that, the petitioners does not have any forum before which it can ventilate its grievances or seek redressal with regard to the impugned decision of the Registrar of companies.
Section 560(6) of the Act of 1956 cannot be read to say that, persons not specified therein are remediless in respect of a decision of the Registrar of Companies regarding the striking off of the name of a company. Section 560(6) permits the categories of persons noted therein to approach the Company Court. Persons who are not noted in such sub-section are entitled to approach a Writ Court or for that matter a Civil Court for the purpose of redressal of their grievances. Approaches to these forai are not barred under Section 560 of the Companies Act, 1956 or any other provision therein. The constitutional right to approach a Court under Article 226 of the Constitution of India cannot be taken away by statute. The impugned decision of the Registrar of Companies is justiciable under Article 226 of the Constitution of India. Unless expressly excluded by the statute, the right to approach a Civil Court for redressal of civil disputes cannot be curtailed. Ouster of jurisdiction of a Civil Court should not be readily inferred. Section 560 of the Act of 1956 does not contain any provision excluding the jurisdiction of a Civil Court. It does not say that the persons not named therein cannot approach a Civil Court for redressal. It has been recognised in various judicial pronouncements that, where persons, who do not have the requisite qualification as prescribed under the Companies Act, 1956 to approach the Company Court or the forum designated thereby, can approach the regular Civil Court or any other appropriate forum for redressal. The Companies Act, 1956 has not excluded the jurisdiction of the Civil Courts in respect of matters governed by it where the disputes are civil in nature. The regular Civil Courts, however, does not have the same powers as are vested in "the Court" defined under Section 2(11) read with Section 10 of the Act of 1956. That does not mean that a regular Civil Court has no jurisdiction to adjudicate upon the civil disputes in respect of an infringement of the provisions of the Act of 1956 or an action taken purportedly under the Act of 1956. Readily the provisions of Sections 397, 398 and 399 of the Act of 1956 come to mind with regard to the right to approach the Company Court and after amendment of the Companies Act, 1956, the Company Law Board. Section 399 of the Act of 1956 provides the right to apply under Sections 397 and 398 of the Act of 1956. It stipulates the eligibility criteria to approach the forum designated by Sections 397 and 398 of the Act of 1956. Persons not having the requisite qualification under Section 399 are not entitled to the approach the designated forum under Sections 397 and 398 for redressal of the grievances relating to oppression and mismanagement in relation to the affairs of the company. Absence of eligibility criteria laid down under Section 399 does not mean that, persons who do not have such eligibility cannot have their grievances with regard to the affairs of a company redressed at all. A regular Civil Court has been recognized to have jurisdiction to entertain a suit with regard to the affairs of a company at the instance of a person who does not have the requisite share holding to file a petition under Sections 397 and 398 of the Act of 1956. Similarly, a person who is not named under Section 560 of the Act of 1956 cannot be held to be remediless in respect of an action taken by the Registrar of Companies purporting to exercise powers under Section 560 of the Act of 1956. Such a person can approach a regular Civil Court or apply under Article 226 of the Constitution of India for redressal of his grievances in respect of a decision of the Registrar of Companies striking off the name of a company under Section 560 of the Act of 1956.
The petitioner claims to have entered into a tripartite agreement in which the company is involved. The petitioner claims a jural relationship with the company. The rights of the petitioner stand affected by the decision of the Registrar of Companies in striking off the name of the company from the Register. In the facts of the present case, the petitioner cannot be said to be a busy body so far as the affairs of the company is concerned.
The first two issues are answered in the affirmative in view of the discussion above.
The third issue is taken up for consideration.
The respondent nos. 2 and 3 had activated the Registrar of Companies by way of an application under Section 560 of the Companies Act, 1956. Apparently, the respondent nos. 2 and 3 were acting under an Exit Scheme under Section 560 of the Act of 1956. The application contains various documents including affidavits affirmed by the respondent nos. 2 and 3 and the balance-sheets of the company sought to be struck off. In the affidavits filed before the Registrar of Companies, the respondent nos. 2 and 3 have claimed that, the company was inoperative from the date of its incorporation. The company was incorporated on December 19, 1996. The company has a paid up capital of Rs.50,00,000/-. The company had purchased shares in the joint venture company some time subsequent to July 2008. The value of the shares is noted in the balance-sheet as at March 31, 2012 to be Rs.13,84,61,540/-. The company had to arrange for funds to buy such shares. It had entered into a tripartite agreement in respect of a hotel business. The company had sold such shares as submitted on behalf of the respondent nos. 2 and 3 in 2015. The balance-sheet of the company placed before the Registrar of Companies discloses that, the company had held such shares. The balance-sheet of the company shows that it had long term liabilities. It was posting loss. The net earnings per share were in the negative. The balance-sheet for the year ended on March 31, 2012 of the company discloses that the company had non-current investment of Rs.13,84,61,540/- and that it had an inventory that is stock-in-trade of Rs.50,51,500/-. The company had a closing work-in-progress of Rs.50,51,500/-. It was incurring certain expenses. The accounting policies and the notes on account appended to the balance-sheet of the company shows that the company had stock-in-trade. The balance-sheet as at March 31, 2014 of the company discloses the same situation. These are businesses undertaken by the company subsequent to its incorporation. These activities of the company are not claimed to be ultra vires the objects clause of the memorandum of association of the company. From the balance-sheets disclosed before the Registrar of Companies, it is not possible to come to a finding that, the company became inoperative or that the company was inoperative from the date of its incorporation.
Section 560 of the Act of 1956 allows the Registrar to strike a defunct company from the Register. Sub-section (1) of Section 560 allows the Registrar when it has reasonable cause to believe that, the company is not carrying on business or its operation, to issue a notice calling upon the company to explain whether the company is carrying on business. Exit schemes formulated for the purpose of striking off a defunct company, allows a company to apply voluntarily to the Registrar of Companies for striking off its name from the Register without waiting for the Registrar to issue a notice under Section 560(1) of such Act. In the present case, the respondent nos. 2 and 3 apparently had applied under such exit policy. Even under the exit policy, the respondent nos. 2 and 3 has to demonstrate and the Registrar has to come to a finding that, the company had not carried on business or its operation for the name of the company to be struck off under Section 560 of the Act of 1956. The balance-sheet as at March 31, 2012 to March 31, 2014 relied upon by the respondent nos. 2 and 3 in support of its claim that, the company was not carrying on business and was inoperative since incorporation, does not permit a reasonable person to arrive at a finding that, the company was inoperative during that material period of time. The claim of the respondent nos. 2 and 3 before the Registrar of Companies is that, the company was inoperative from its incorporation. Such claim is belied by the evidence on record before the Registrar of Companies. The Registrar of Companies is obliged to have a reasonable cause to believe that, the company is not carrying on business or its operation for it to act under Section 560 of the Act of 1956. The materials provided to him do not allow the Registrar to arrive at such finding. A company having a paid up capital of Rs.50,00,000/-, inventories of Rs.50,51,500/-, holding shares worth Rs.13,84,61,540/- and entering into tripartite agreement to carry on hotel business cannot be said to be without business or being inoperative since incorporation. The decision of the Registrar of Companies impugned herein dated September 10, 2015 is, therefore, perverse. It gives no reason for arriving at the conclusion stated therein. Reasons are the life blood of any decision. A decision without reasons is a nullity. The same is quashed.
The third issue is answered accordingly.
The fourth issue is taken up for consideration.
The Registrar of Companies, West Bengal shall forthwith restore the name of Rama Inn (International) Private Limited in the Register of Companies and shall take all consequential follow up steps to give effect to such restoration.
The prayer for directions for filing affidavits is not accepted in the facts of the present case. The order impugned is that of the Registrar of Companies who had passed the impugned order on the basis of the records made available to him. The Court is called upon to adjudge the validity of the impugned order of the Registrar of Companies, West Bengal on the basis of the materials made available to him for the purpose of such consideration. It is not the case of the respondent nos. 2 and 3 that, apart from the documents disclosed in the writ petition, the Registrar of companies had other materials to consider for the purpose of striking off the name of the company from the Register. In such circumstances, no affidavit is called for from any of the respondents.
The fourth issue is answered accordingly.
W.P. No. 20044 (W) of 2016 is disposed of accordingly. No order as to costs.
[DEBANGSU BASAK, J.]