Defunct Company under Companies Act, 2013

Introduction:

A company which is non transporting on any concern or which is non in operation is called a defunct company. [ I ] In a general handbill [ two ] , issued by the Ministry of Corporate Affairs ( MCA ) the defunct companies have been described as that: certain companies have been registered under the Companies Act, but due to assorted grounds some of them are inoperative since incorporation or commenced concern but became inoperative subsequently on and are non registering their due paperss seasonably with the Registrar of Companies. These companies may be defunct and are wishful of acquiring their names strike off from the Register of Companies. [ three ]

Where the company is non transporting any concern or operation or it has discontinued the operations wholly, so it can do any application to the Registrar of Companies for declaring it as defunct company. This is the most easy and shortest method for fade outing of any company. After being declared as defunct, the name of the company is removed from the records of the Registrar of Companies. [ four ] The capacity of the company ceases on going defunct. Where the day of the month on which a suit was filed in the name of the company it had been struck off the Register as being defunct, the proceeding was held to be non valid. [ V ]

Section 560 of the Companies Act, 1956 dealt with the ‘Power of Registrar to strike defunct company off register’ . With alteration of this proviso, it is reincorporated in Section 248 of the new Companies Act, 2013 with the ‘Power of Registrar to take name of company from registry of companies.’

Striking off the name from the Register:

Three evidences are prescribed under Section 248 ( 1 ) of the Companies Act, 2013 for taking the name of the company from the registry of the companies. When any or all of the three mentioned evidences are satisfied, so the name of the Company could be strike off from the registry of the companies.

First when, a company has failed to get down its concern within one twelvemonth of its incorporation. [ six ] Second when, the endorsers to the memoranda have non paid the subscription which they had undertaken to pay within a period of one hundred and 80 yearss from the day of the month of incorporation of a company and a declaration under sub-section ( 1 ) of subdivision 11 to this consequence has non been filed within one hundred and 80 yearss of its incorporation. [ seven ] And thirdly when, a company is non transporting on any concern or operation for a period of two instantly predating fiscal old ages and has non made any application within such period for obtaining the position of a hibernating company under subdivision 455. [ eight ]

Procedural Requirements:

When the registrar has the sensible cause to believe that all or any of the above three mentioned evidences are satisfied by any company so, he shall direct a notice to the company and all the managers of the company, of his purpose to take the name of the company from the registry of companies. The registrar shall besides bespeaking them to direct their representations along with transcripts of the relevant paperss, if any, within a period of 30 yearss from the day of the month of the notice. [ nine ]

The 2nd method of taking the name of the Company from Register is by on its ain gesture by the Company. A Company may by a particular declaration or consent of 75 % members in footings of paid-up portion capital, file an application in the prescribed mode to the Registrar for taking the name of the company from the registry of companies on all or any of the above three evidences specified Section 248 ( 1 ) . The Registrar shall publish a public notice in the prescribed mode on reception of such application. But this proviso does non use to the companies registered under any particular jurisprudence. When the company is regulated by any particular Act so blessing of concerned regulative organic structure constituted or established under that Act shall besides be obtained and enclosed with the application. But this 2nd method of taking the name of the Company is non applicable to Companies which are registered under Section 8 ( Companies with charitable objects ) . [ ten ]

The notice issued by the registrar under the above two mentioned method shall be published in the prescribed format and besides in the Official Gazette for the information of the general populace. [ eleven ]

In the instance ofSitaram Singh Construction P. Ltd v. Union of India[ xii ] , the issue was whether the Registrar can strike off a company without printing a gazetted presentment in this respect? In this instance, the Registrar of Companies had neither published the notice in the Official Gazette nor sent the notice to the company by registered station as required under Section 560 ( 3 ) of the Companies Act, 1956. On the other manus, the company was continuously transporting on concern. It was held that although, there was a serious skip on the portion of the company in non make fulling its one-year returns, the compulsory demand under Section 560 ( 3 ) of the Act was non complied with by the Registrar. Therefore, the notice issued under Section 560 ( 5 ) of the Act was to be quashed and the name of the company was to be restored.

Powers of Registrar:

After the termination of the clip mentioned in the notice the registrar may, unless cause to the reverse is antecedently shown by the company, work stoppage its name off the registry and shall print notice thereof in the Official Gazette, and on the publication of this notice in the Official Gazette, the company shall stand dissolved. [ thirteen ] Before striking off the name of company, the registrar shall fulfill himself that sufficient proviso has been made for the realization of all sum due to the company and for the payment or discharge of its liabilities and duties by the company within a sensible clip. [ fourteen ] If there arises any necessity the registrar can obtain necessary projects from the pull offing manager, manager or other individuals in charge of the direction of the company. [ fifteen ]

Notwithstanding the projects taken by the registrar from the manager, the assets of the company shall be made available for the payment or discharge of all its liabilities and duties even after the day of the month of the order taking the name of the company from the registry of companies. [ sixteen ]

Despite the striking off the name of company, the liability, if any of every manager, director or other officer who was exerting any power of direction, and of every member of the company, shall go on and may be enforced as if the company had non been dissolved.

Restrictions on Company for doing Application to strike off its name:

An application under Section 248 ( 2 ) , by the company on its ain gesture is prohibited in certain fortunes. These conditions are given under Section 249 ( 1 ) of the Companies Act, 2013. If the Company files an application under Section 248 ( 2 ) in misdemeanor of the conditions specified in Section 249 ( 1 ) , it shall be punishable with line which may widen to one hundred thousand rupees. [ xvii ] An application filed under sub-section ( 2 ) of subdivision 248 shall be withdrawn by the company or rejected by the Registrar every bit shortly as conditions under sub-section ( 1 ) of Section 249 are brought to his notice. [ eighteen ] The Conditionss are that:

The company shall non do application if at any clip in the old three months the company [ xix ] –

  • has changed its name or shifted its registered office from one State to another
  • has made a disposal for value of belongings or rights held by it, instantly before cesser of trade or otherwise transporting on of concern, for the intent of disposal for addition in the normal class of trading or otherwise transporting on of concern
  • has engaged in any other activity except the one which is necessary or expedient for the intent of doing an application under that subdivision, or make up one’s minding whether to make so or reasoning the personal businesss of the company, or following with any statutory demand
  • has made an application to the Tribunal for the sanctioning of a via media or agreement and the affair has non been eventually concluded, or
  • is being wound up under Chapter XX, whether voluntarily or by the Tribunal

In instance it is found that an application by a company under sub-section ( 2 ) of subdivision 248 has been made with the object of hedging the liabilities of the company or with the purpose to lead on the creditors or to victimize any other individuals. Then the individuals in charge of the direction of the company shall, notwithstanding that the company has been notified as dissolved, be jointly and independently apt to any individual or individuals who had incurred loss or harm as a consequence of the company being notified as dissolved ; and besides be punishable for fraud in the mode as provided in subdivision 447. [ twenty ]

Where a company stands dissolved under subdivision 248, the company from the day of the month mentioned in the notice under Section 248 ( 5 ) , shall discontinue to run as a company and the Certificate of Incorporation issued to it shall be deemed to hold been cancelled from such day of the month except for the intent of gaining the sum due to the company and for the payment or discharge of the liabilities or duties of the company. [ twenty-one ]

Rectification of mistakes:

If there happens any mistake, so the solution lies with the Appeal to the National Company Law Tribunal. Section 252 of the Companies Act, 2013 provides that- any individual aggrieved by an order of the Registrar, advising a company as dissolved under subdivision 248, may register an entreaty to the Tribunal within a period of three old ages from the day of the month of the order of the Registrar. [ twenty-two ] If the Tribunal is of the sentiment that the remotion of the name of the company from the registry of companies is non justified, so it may order Restoration of the name of the company in the registry of companies. [ twenty-three ] But before go throughing any order under this subdivision, the Tribunal shall give a sensible chance of doing representations and of being heard to the Registrar, the company and all the individuals concerned. [ twenty-four ]

On the other manus, if the Registrar is satisfied, that the name of the company has been struck off from the registry of companies either unwittingly or on the footing of wrong information furnished by the company or its managers, which requires Restoration in the registry of companies. [ twenty-five ] Then the registrar may within a period of three old ages from the day of the month of passing of the order fade outing the company under subdivision 248, file an application before the Tribunal seeking Restoration of name of such company. [ twenty-six ]

After the determination given by the Tribunal, a transcript of the order passed by the Tribunal shall be filed by the company with the Registrar within 30 yearss from the day of the month of the order. On reception of the order the Registrar shall do the name of the company to be restored in the registry of companies and shall publish a fresh certification of incorporation. [ twenty-seven ]

Rights of Affected Parties:

If a company, or any member or creditor or workingman of that company thereof feels aggrieved by the company holding its name struck off from the registry of companies, so that individual may appeal to the Tribunal by an application, before the termination of 20 old ages from the publication in the Official Gazette of the notice under Section 248 ( 5 ) . [ twenty-eight ] In this instance, that individual should set up that the company, at the clip of its name being struck off was transporting on concern or was in operation or otherwise and it is merely that the name of the company be restored to the registry of companies. [ twenty-nine ]

If the Tribunal is satisfied that the company was really transporting on concern or it is otherwise merely to make so, the Tribunal may order the name of the company to be restored to the registry of companies. It may, by the order, give such other waies and do such commissariats as deemed merely for puting the company and all other individuals in the same place every bit about as may be as if the name of the company had non been struck off from the registry of companies. [ thirty ]

In instance ofBhogilal v. Registrar of Joint Stock Companies[ xxxi ] :

The creditor of a defunct company filed a request for Restoration of its name. The suppliant alleged that he had obtained a edict against the company a twenty-four hours before the publication of the presentment. The managers of the company on being asked by the Registrar misinformed him that the company was non in operation. It was besides found that the full portion capital of the company was non called up and that the uncalled capital was sufficient to fulfill the edict. Keeping that it was merely and just to reconstruct the name of the company to the registry, the tribunal observed: “No stairss were taken to dispatch the liability which the company owed to the suppliant. The consequence of the order of remotion would be to do it hard for the suppliant to obtain the fruits of his edict. Had the Registrar known that the company was really supporting a suit, it is highly improbable that he would hold ordered the name of the company to be removed from the register.”

In another instance ofVijayawada Chamber of Commerce and Industry v. Registrar of Non-Trading Companies[ xxxii ] , the company was really working, merely its returns had been delayed. The striking off the companies name was set aside.

An income revenue enhancement officer is a creditor for this intent and can use for Restoration. [ thirty-three ] The company which has been struck off may itself use for Restoration, though the tribunal would non order Restoration unless there is sufficient grounds of likely benefit to creditors or members. [ thirty-four ] Restoration operates retrospectively, [ xxxv ] means that on the Restoration of a company back to the registry after its being struck off the effect is as though it had ne’er been struck off the registry. The company will be deemed to hold had its being althrough. [ thirty-six ]

Therefore the proviso associating to restoration “seems chiefly intended for companies which were active at the minute of their mortal wound” [ xxxvii ] . But find of outstanding assets of the company is, of class, one of the grounds why Restoration is sought. This is why a period of 20 old ages is allowed. The company may hold unknown assets which do non come to light until many old ages after the company has been struck off and so dissolved. [ xxxviii ]

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