Restoration of struck-off company name barred

2 KNOWLEDGE RESOURCE [Vol. 51
Chartered Accountant Practice Journal v January, 2017
Restoration of name of company not allowable when
the name was struck off on the prayer of company itself
Dr. Rajeev Babel*
The Registrar of Companies has been empowered under Section 248 of the Companies
Act, 2013, for the removal of names of companies from the Register of Companies. This
section corresponds to Section 560 of the old Companies Act, 1956 and its sub-section (6)
have a clause for restoration of the name of the company after it has been struck off and a
time limit of 20 years from the date of struck off, has been prescribed. The prayer for the
restoration of name of the company may be made by the aggrieved person (i.e. a company
or any member or creditor thereof), however where the company/ its directors, itself had
made the application for struck off the name, whether the restoration of the name of such
company is allowable. This article narrates the circumstances under which the restoration
of name can be allowed under Section 560(6) of the old CA 1956.
1. Introduction:
1.1. The companies which are not in operation are treated as ‘Defunct companies. A
company during the course of its winding up may not be doing any business but so
long it is not finally dissolved, it will be considered to be in operation1
. A company
which do not exist and is almost dead, the name of such companies may be removed
by the Registrar of the concerned jurisdiction. The circumstances under which the
Registrar may exercise his powers for removal of names of the companies from the
Register of companies are contained in Section 248 of the Companies Act, 2013.
However, this section have not been enforced yet. This section corresponds to Section
560 of the old Companies Act, 1956. While Sub-section (1) to (5) of Section 560 of CA
1956 deals with the matter relating to the removal of name of such company, the sub-
section (6) deals with the restoration of name of company and put in the same position
as if the name of the company had not been struck off.
1.2. Section 560 (6) of CA 1956 provides that if a company, or any member or creditor
thereof, feels aggrieved by the company having been struck off the register, the Tribunal,
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 Tribunal 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.
Article
18
* FCS, MBA, Ph.D, LLB, AIIB, M.COM. Company Secretary in Practice. The author may be
contacted at babelrajeev@gmail.com

2017] 3
1.3 In the case of Meghdoot Services Ltd. v. Registrar of Companies, West Bengal,
arising on account of APOT No. 386 of 20152
, ACO No. 142 of 2015, CA No. 423 of
2015 & CP No. 936 of 2014, decided by the High Court of Calcutta on 11th
May, 2016,
the question for consideration was that where the company’s name was struck off
from Register on the prayer of company itself or of its directors, whether the application
for restoration of name by the company or its director would be allowable. The facts
of the case are as under:
2. Facts of the case:
n This appeal is against an Order dated 21st
July, 2015 passed by the learned
Company Court, recalling an earlier order dated 13th
November 2014, passed
on a petition under Section 560(6) of the Companies Act, 1956, by which the
Company, Meghdoot Services Limited, whose name had been struck off, was
permitted to be revived.
n Meghdoot Services Limited, (Meghdoot) was incorporated on 7th
July, 1984,
under the Companies Act, 1956, to carry on business inter alia of investment. In
2007, the Directors of Meghdoot decided to file an application before the Registrar
of Companies, West Bengal, for striking off the name of Meghdoot from the
Register, as investments made by Meghdoot had ceased to have any value, and
were written off by the directors of Meghdoot. On the basis of the said application,
the name of Meghdoot was struck off from the Register of Companies.
n Later on the value of investments written off by the Directors of Meghdoot rose
and the economic position of the company changed subsequently. However,
by that time the name of Meghdoot had already been struck out.
n Viswanath Agarwal, an erstwhile Director of Meghdoot, who had made the
application for striking off the name of Meghdoot from the Register maintained
by the Registrar of Companies, West Bengal, made an application before the
learned Company Court under Section 560(6) of the Companies Act for orders
directing the Registrar of Companies to restore the name of Meghdoot in the
Register, in the same position as if its name had not been struck off.
n The Company Court vide its order dated 13th
November, 2014 directed the
Registrar of Companies, to restore the name of the company in the Register, in
the list of Active Companies, within a fortnight from date, subject to the
company paying Rs. 90,000/- to the Registrar of Companies, West Bengal.
n From the said Order dated 13th
November 2014, it appears that the attention of
the Company Court was not drawn to the fact that the name of Meghdoot had
been struck off from the Register, on the application of the directors of Meghdoot,
including Viswanath Agarwal, who had filed the application under
Section 560(6) of the Companies Act.
n Pursuant to a Judges Summons taken out on 22nd
June, 2015, Calcutta
Investment Ltd., a shareholder of Meghdoot, holding 24,000 shares in the
company, took out an application for setting aside of the Order dated
13th
November 2014, passed by the Company Court. The Calcutta Investment Ltd.
apprised the Company Court that Viswanath Agarwal along with two other
directors of the company, Abha Devi Agarwal and Ishan Agarwal had affirmed
an affidavit and furnished an indemnity bond along with the application for
19
RESTORATION OF NAME OF COMPANY NOT ALLOWABLE WHEN THE
NAME WAS STRUCK OFF ON THE PRAYER OF COMPANY ITSELF

striking off the name of the company, wherein they had categorically asserted
that the company had no assets and no liabilities and the company had been
inoperative for the last one year and did not intend to do any business or
commercial activity in future.
n By the Order dated 21st
July 2015 under appeal, the Company Court allowed
the application filed by Calcutta Investment Ltd. and recalled the Order dated
13th
November 2014, by which the name of the Company had been restored to
the list of Active Companies. The Company Court made it clear that the
Company’s name remained struck off and the Company had no legal existence
since the day its name had been struck off in 2007.
n The Company Court found, in effect, that Calcutta Investment Ltd. being a
shareholder of Meghdoot who had accepted the name of Meghdoot being
struck off, Calcutta Investment ought to have been given notice of the
application under Section 560(6). No notice was issued to any creditor or
shareholder of Meghdoot.
n The Company Court also held that since it was the Company which had
applied to have its name struck off under the Easy Exit Scheme, the Company
could not have applied under Section 560(6) after lapse of about 7 years.
n Aggrieved from the decision of the Company Court the Petitioner’s appealed
to the High Court of Calcutta and made the following arguments:
3. Issue involved in the case:
n Whether petition for restoration of company’s name to Register of companies
could be filed only if a company, or any member or a creditor of company feels
aggrieved by company having being struck off.
n When company’s name was struck off from Register on prayer of company
itself or its directors (same could not be aggrieved by striking off) whether
application for restoration by company or its director would be allowable.
4. Arguments made by Meghdoot, the Appellant:
n The impugned order affects the right of the company or persons in control of
the company. The impugned order is therefore appealable at the instance of
the company which is in existence by reason of the Order dated 13th
November,
2014, which has been recalled by the order under appeal.
n In the case of Basanti Cotton Mills (1998) (P.) Ltd. v. Nirendranath Kar3
where a
Division Bench held that an order of the Single Bench under Section 560 of the
Companies Act, 1956 would be appealable under Clause 15 of the Letters
Patent, if it was a final order deciding a controversy or deciding any right of a
party. In support of his submission, the Appellant cited Shah Babulal Khjmji v.
Jayaben D. Kania4
n The company had been restored to the list of active Companies by the Order dated
13th November, 2014. Upon restoration pursuant to the Order dated 13th
November, 2014, the amount as mentioned in the said order had been deposited
with the Registrar of Companies. All annual returns and the Balance sheet from
the year 2007 to 2014 had been filed with the Registrar of Companies. The Directors
Ishan Agarwal, Abha Devi Agarwal and Viswanath Agarwal had resigned from
20

2017] 5
Chartered Accountant Practice Journal v January, 2017 21
the company and Arvind Parasramka being the Appellant No. 2, Mrs. Shabana
Khatoon and Mrs. Gita Prasad had become directors of the Company. New
persons had come into the management of the company and shares of the
company had been transacted for valuable consideration. The company was
functional doing business in compliance with all regulatory requirements. Steps
had also been taken for filing Income Tax Returns which were in default and
PAN Card had been obtained from the Income Tax department.
n The company had instituted proceedings before the Company Law Board,
Calcutta and filed complaints before the Income Tax Department, Police
Authorities and Serious Fraud Investigation Office (SFIO) against the misdeeds
of the persons controlling Calcutta Investment, being the Respondent No. 2.
The application of Calcutta Investment for recalling the order dated
13th
November, 2011 was by way of a counter blast.
n The application for restoration had been made by Viswanath Agarwal, an
erstwhile Director of the company on whose application the name of the company
had been struck off from the Register. The company was struck off under the
Simplified Exit Scheme, Clause 9(ii) and 9(iii) whereof requires as follows:—
• The company should give audited accounts for the year in which the
application is made showing no assets and no liabilities.
• The application should be accompanied by an affidavit of at least two
directors sworn before an Executive Magistrate, to the effect that the
company had not carried on any business and had no assets or liabilities.
n After the Company had been struck off, there could be no question of existence
of the company or its directors. The same director who had applied under the
Exit Scheme, applied for restoration of the name of the Company, within the
period provided under Section 560(6) of the Companies Act.
n Section 560(6) of the Companies Act does not however enable an erstwhile
director of the Company to apply under the said section. An application under
Section 560(6) can be made by a Company, its shareholder or creditor.
n The main ground taken in the application for restoration was that in 2007 it
appeared that investments made by the company did not have value and
such investments were written off. It later came to the knowledge of the directors
as well as the shareholders that the value of investment of the company, earlier
written off, had appreciated and could now be in the market at good price,
which would be in the interest of all stake holders.
n In the application under Section 560(6), it was also pleaded that there had not
been any change in management after the date on which the name of the company
was struck off. The assertion is irrelevant since there could be no question of
change in management when there was no existence of the Company.
n The Directors of the company, Mr. Ishan Agarwal, Mrs. Abha Devi Agarwal and
Mr. Viswanath Agarwal had expressed their intention not to continue as directors
of the company and Mrs. Shabana Khatoon, Mrs. Gita Prasad and Mr. Arvind
Parasramka had expressed interest in being appointed directors of the company.
n The Agarwals had ceased to be directors, when the name of the Company was
struck off. There was no question of any intention to continue or not to continue

as Director. There could be no requirement for the directors of the company to
take steps for filing any e -Form with the Registrar of Companies for their
resignation or of cooperating with the company to ensure that the company
became active. Documents like Annual Returns and Balance Sheets of the
year ending 31st
March, 2006 and subsequent years could not be filed with the
Office of the Registrar of Companies as the status of the company had been
struck off. There was no company in existence.
n Notice had not been given to the Registrar of Companies before moving the
application for recalling the Order dated 13th
November, 2014. There was no
requirementoflawtogivenoticetoanyothershareholder.IfnoticetotheRespondent
No.2werenecessary,suchnoticeshouldhavebeeninsisteduponwhenthecompany
was struck off in 2007. The Respondent No. 2 did not have any notice then.
n The Company Court erred in law in holding that notice had to be given to a
shareholder for an application under Section 560(6) of the Companies Act,
1956. Section 560(6) does not require any notice to shareholders.
n The Company Court had gone beyond the scope and ambit of Section 560(6)
of the Companies Act, 1956. The impugned order was therefore without
jurisdiction and perverse.
n The applicant for recalling of the Order dated 13th
November, 2014, Calcutta
Investment is not an aggrieved party and as such, lacked locus standi to file the
application which culminated in the order under appeal. Calcutta Investment
holds 9% shareholding in Meghdoot Services Limited. It cannot therefore be
affected by the order of restoration of the company. The Appellant has attributed
malafide motive to the applicant, Calcutta Investment, contending that it suffered
no legal grievance. In support of his contention that Calcutta Investment was
not an aggrieved party, In re (XIV ChD 458) Thammanna v. K. Veera Reddy5
. The
proposition of law which emerges from the aforesaid judgments is that aggrieved
person must be a man who has suffered legal grievances, a man against whom
a decision has been pronounced which has wrongfully deprived him of
something or wrongfully refused him something or wrongfully affected his
title. Mr. Banerjee argued that Calcutta Investment had not been able to show
that it had suffered any legal grievance or had wrongfully been deprived or
wrongfully been refused or his title affected by the Order dated 13th
November,
2014. Calcutta Investment cannot be termed as an aggrieved party.
n Calcutta Investment had come to Court with unclean hands. The application
for recalling of the Order dated 13th
November, 2014 was a counterblast to the
pending company petition before the Company Law Board and a mischievous
attempt to prevent the Company Law Board from making an enquiry into the
serious management oppression and criminal acts by persons in the
management of Calcutta Investment.
n The orders striking off the company was itself a nullity under the Specified
Exit Scheme since Section 560 of the Companies Act does not allow a company
to take the benefit of the Simplified Exit Scheme to have its own name struck
off from the list of active Companies. All the benefits taken by a company
under the said Simplified Exit Scheme were, therefore, a nullity. The provisions
of the Companies Act, 1956 could not have been bypassed to take the benefit
of the Simplified Exit Scheme to strike itself off. Mr. Banerjee finally argued

2017] 7
Chartered Accountant Practice Journal v January, 2017 23
that the definition of ‘Company’ under Section 560(6) would have to be given
a wider meaning to include directors who were directors at the time of the
company being struck off.
5. Arguments made by the Respondents:
n The Respondent No. 2 submitted that the restoration Order dated
13th
November, 2014 had adversely affected the Respondent No. 2 in the
proceedings under Sections 397 and 398 pending before the Company Law
Board. As such, the Respondent No. 2 had locus standi to apply for recall of the
Order dated 13th
November, 2014.
n It was submitted that under Section 560 it is not necessary for a person
aggrieved to make a recalling application. As such, the judgment cited by the
Appellant was not applicable.
6. Observations made by the High Court:
n The High Court observed that the Company Court rightly held that even
though the word ‘Company’ in Section 560(6) of the Act may be given a wider
meaning, it was not possible to accept that a Company whose name had been
struck off on its own invitation, 6 or 7 years ago, should be permitted to apply
under the said provision for the striking off to be undone. In such a situation,
only a creditor or a shareholder of the Company could have applied, provided
of course the application was made within 20 years from the date on which
the Company’s name had been struck off.
n The Company Court rightly took note of the fact that the petition under
Section 560(6) had not been filed by any shareholder or any creditor of the
Company. had not even been filed by the Company. Accordingly, the Order
dated 13th
November, 2014 was recalled.
n In Dasaprakash (P.) Ltd. v. Registrar of Companies6
, a Single Bench of the Madras
High Court held that a company voluntarily striking off its name from the
Register of Companies under the first track scheme could not avail the benefit
of restoration of its name under Section 560(6) since the provision was intended
for the benefit of a company which felt aggrieved by the removal of its name
from the Register of Companies. We agree with the view taken by the learned
Single Bench of Madras High Court in Dasaprakash (P.) Ltd.’s case (supra).
n The Appellant had argued that the judgment of the Single Bench of the Madras
High Court was contrary to the judgment of other High Courts and in particular
the unreported judgment of the Karnataka High Court dated 8th
February, 2013
in the case of Sri Mukambika Agricultural Estates and Forest Industries Pvt. Ltd.
n The Karnataka High Court did not consider the question of whether a company
voluntarily applying for striking off its name from the Register of Companies under
a fast track scheme could be said to be aggrieved by the removal of its name from the
Register of Companies, to maintain an application under Section 560(6) of the
Companies Act. Furthermore, the Registrar of Companies had, in the case before the
Karnataka High Court given his consent to the restoration of the company.
n A bare reading of Section 560(6) of CA, 1956, the aforesaid provision makes it
amply clear that if a company, or any member or creditor thereof felt aggrieved
by the Company having been struck off the Register, the Court might, on an

application made by the Company, member or creditor, before expiry of 20
years from the date of publication in the official Gazette of the notice of striking
off, the Court might pass orders and/or directions for placing the Company
in the same position as nearly as may be, as if the name of the ‘Company’ had
not been struck off, provided the Court was satisfied that the Company was,
at the time of striking off, carrying on business, or any operation or otherwise
satisfied that it was just that the Company be restored to the Register.
7. Decision of the High Court:
n In view of the assertion made by the erstwhile directors of the Company,
including Viswanath Agarwal, in their affidavits and indemnity bonds in
support of their prayer for striking off the name of the Company from the
Register, the Court could not have been satisfied that the Company was
carrying on business or was in operation.
n The directors including the applicant under Section 560(6) had asserted to
the contrary. The Order dated 13th
November, 2014 does not disclose the reasons
for arriving at the finding that it was just that the Company be restored to the
Register. In any case, an application could have been filed under Section 560(6)
only if a Company, or any member or creditor felt aggrieved by the Company
having been struck off.
n The Company having been struck off on the prayer of the Company itself
and/or its directors, there can be no question of the Company being aggrieved
by the striking off. Viswanath Agarwal who had himself prayed for striking
off also could not be aggrieved by the striking off.
n For the reasons discussed above, the appeal is dismissed and the judgment
and the order under appeal is affirmed.
8. Summing up:
Incidentally the provisions relating to the restoration of the name of the company as
mentioned in Section 506(6) of CA, 1956 do not find place in Section 248 of the new CA,
2013. This new section seeks to provide the circumstances under which the Registrar
shall sent a notice to the company and all the directors of the company of his intention to
remove the name of the company from the register of companies. This new section further
provides that a company may by a special resolution or with the consent of 75% members
in terms of paid-up share capital may also file an application to the Registrar for removing
the name of the company from the register of companies. This new section further seeks
to provide that at the expiry of the time mentioned in the notice, the Registrar may strike
off the name of the company from the register of companies, and on the publication in the
Official Gazette of this notice, the company shall stand dissolved. Section 248 of CA, 2013
has not yet been enforced so the erstwhile provisions will continue.
Endnotes
1 Re. Outlay Assurance Society(1887) 34 Ch.D 479.
2 Arising out of order of Company Court dated 13-11-2014.
3 116 SCL 613 (Cal.)
4 MANU/SC/0036/1981
5 MANU/SC/0294/1980
6 MANU/TN/1940/2012

Restoration of struck-off company name barred

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Restoration of struck-off company name barred

Similar to Restoration of struck-off company name barred (20)

More from CS (Dr)Rajeev Babel

More from CS (Dr)Rajeev Babel (20)

Recently uploaded

Recently uploaded (20)

Restoration of struck-off company name barred