Meghdoot Services Limited vs Registrar of Companies

Indira Banerjee, J.—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.

Meghdoot Services Limited, hereinafter referred to as 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.

According to the appellants, 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.

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.

By an Order dated 13th November, 2014, the learned Company Court 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.

From the said Order dated 13th November 2014, it appears that the attention of the learned 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.

It is the case of Calcutta Investment Ltd. in its affidavit in support of the Judges Summons, affirmed by Rajesh Khandelwal, 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 striking off the name of the company, wherein they had categorically asserted that the company had no assets and no liabilities. Further, in the affidavit and in the indemnity bond, it had also been clearly mentioned that the company had been inoperative for the last one year and did not intend to do any business or commercial activity in future.

By the Order dated 21st July 2015 under appeal, the learned 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 learned 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.

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 learned Company Court.

In allowing the application of Calcutta Investment Ltd. and recalling the Order dated 13th November 2014, the learned Company Court accepted the grounds of objection to the application under Section 560(6) filed by Viswanath Agarwal, and in particular, the ground that the applicant, Viswanath Agarwal was neither a shareholder nor a creditor of the Company.

The learned 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.

The learned 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.

In our view, the learned 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.

The learned 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.

Mr. Ratnanko Banerjee, Senior Advocate, appearing on behalf of the appellant argued that 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.

Mr. Banerjee referred to Basanti Cotton Mills (1998) P. Ltd. and Ors. v. Nirendranath Kar and Anr. reported in [2012] 175 Comp Cas 462 (Cal) 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, Mr. Banerjee cited Shah Babulal Khimji v. Jayaben D. Kania and Anr. reported in (1981) 4 SCC 8.

Mr. Banerjee argued that 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 the company and Arvind Parasramka being the appellant No. 2, Mrs. Shabana Khatoon and Mrs. Gita Prasad had become directors of the Company.

Mr. Banerjee submitted that 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.

Mr. Banerjee rightly argued that the impugned order whereby the Order dated 13th November, 2014 restoring the Company to the list of Active Companies has been recalled, is appealable under Clause 15 of the Letters Patent, since it finally affects rights that might have accrued to the appellant by reason of the Order dated 13th November, 2014. Whether there is merit in the appeal or not is a different issue.

Mr. Banerjee submitted that 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.

Mr. Banerjee argued that 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.

Mr. Banerjee argued that the company was struck off under the Simplified Exit Scheme, Clause 9(ii) and 9(iii) whereof requires as follows :-

(i) The company should give audited accounts for the year in which the application is made showing no assets and no liabilities.

(ii) 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.

Mr. Banerjee argued that, 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.

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.

Mr. Banerjee submitted that 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.

Mr. Banerjee argued that, 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.

It was also pleaded that 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.

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.

Mr. Banerjee argued that 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 requirement of law to give notice to any other shareholder. If notice to the respondent No. 2 were necessary, such notice should have been insisted upon when the company was struck off in 2007. The respondent No. 2 did not have any notice then.

Mr. Banerjee argued that the learned 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.

Mr. Banerjee argued that the learned 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.

In Dasaprakash P. Ltd. v. Registrar of Companies reported in [2012] 175 Comp Cas 248 (Mad), 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. v. Registrar of Companies (supra).

Mr. Banerjee 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.

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.

Mr. Banerjee argued that 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. Mr. Banerjee argued that Calcutta Investment holds 9% shareholding in Meghdoot Services Limited. It cannot therefore be affected by the order of restoration of the company. Mr. Banerjee 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, Mr. Banerjee cited Sidebotham, In re (XIV ChD 458). Mr. Banerjee also cited Thammanna v. K. Veera Reddy & Ors. reported in (1980) 4 SCC 62. 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.

Mr. Banerjee argued that Calcutta Investment had come to Court with unclean hands. Mr. Banerjee submitted that 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.

Mr. Banerjee also argued that 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. Mr. Banerjee argued that 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 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.

Mr. S.N. Mukherjee, appearing on behalf of the respondent No. 2 submitted and rightly 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. Mr. Mukherjee submitted that under Section 560 it is not necessary for a person aggrieved to make a recalling application. As such, the judgment cited by Mr. Banerjee was not applicable.

Section 560(6) of the Companies Act provides as follows :

"(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."

A bare reading of 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.

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. 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. 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.

For the reasons discussed above, the appeal is dismissed and the judgment and the order under appeal is affirmed.

Urgent Photostat certified copy, if applied for, be delivered to the learned counsel for the parties, upon compliance of all usual formalities.

Indira Banerjee, J. - I Agree.

Sahidullah Munshi, J.