Value Advisory Services (P.) Ltd. vs Registrar of Companies and Another

Sudershan Kumar Mishra, J.—This petition seeking restoration of the name of the company to the register of companies maintained by the Registrar of Companies (''RoC'') has been moved u/s 560(6) of the Companies Act, 1956 (''the Act'').

A significant aspect that emerges in this case is the fact that the paid-up share capital of the company, whose restoration is sought, was only Rs. 400. The company had applied for having its name struck off under the Simplified Exit Scheme, 2003, as it did not have the requisite share capital in terms of section 3(3) of the inserted by of the Companies (Amendment) Act, 2000, which requires a minimum paid-up share capital of Rs. 1 lakh. Consequently, the name of the company was removed from the register of companies, by the respondent.

Admittedly, the amendment brought about by the Companies (Amendment) Act, 2000, which inserted sub-section (3) in section 3, and raised the minimum prescribed share capital for private companies to Rs. 1 lakh, had given an opportunity to all companies whose share capital was below that amount, to bring it up to the required amount within a period of two years. Instead of availing of this opportunity, the petitioners themselves chose to have the name of their company stuck off from the registrar of companies. Even otherwise, had they not done so within the time prescribed, the RoC would have been obliged to strike off the name of the company from the register. In these circumstances, I do not see how this court can issue directions restoring the name of the company, with a shareholding that is admittedly less than the minimum prescribed by the statute, to the register.

To my mind, a company which does not conform to the minimum requirement of paid-up share capital cannot be restored to the register of companies even though the applicant seeking restoration may undertake to increase the share capital to meet the minimum requirement after restoration. This is because, regardless of any undertaking being given to do so, the fact remains that this court will, in effect, be directing restoration of the name of a company to the RoC which does not have even the minimum paid-up share capital required under the Act, as on the date of the order restoring the company.

In this context, section 3(3) of the Act, states, categorically, that every private company, existing on the commencement of the Companies (Amendment) Act, 2000, with a paid-up capital of less than one lakh rupees, shall within a period of two years from such commencement enhance its paid-up capital to one lakh rupees. This is a statutory mandate. An option was available to the petitioner to avail of the same. Instead of doing so, the petitioner took the other course, which was to have its name struck off from the register of companies. The petitioner cannot be permitted to come to the court after about 9 years to, in effect, be granted the same indulgence which was contemplated by the aforesaid section for a limited period of two years after the amending Act. In the face of an unambiguous and explicit statutory provision, to my mind, it would not be proper for this court to grant the same benefit after the expiry of the aforesaid period of two years in an indirect fashion. For that reason also, the relief sought cannot be granted. Not only that, even section 3(5) of the Act, specifically contemplates that where such a company fails to enhance its paid-up share capital in the manner specified u/s 3(3), that is to say, within two years of the commencement of the Companies (Amendment) Act, 2000, such a company shall be deemed to be a defunct company within the meaning of section 560 and its name shall be struck off from the register of companies. Consequently, once the company fails to raise the share capital to the prescribed limit within the time prescribed by the statute, the deeming provision of section 3(5) automatically comes into play.

If the logic postulated by the petitioner is to be accepted, then there could be no impediment even in the incorporation of a new company with less than the minimum required paid-up share capital, provided the promoters of the company undertook to bring in the minimum required paid-up share capital later on, within specified period.

Counsel for the petitioner had also made an attempt to rely on section 560(6) of the Act, for the proposition that, under the circumstances, it would be just and proper that the name of the petitioner be restored to the register. He states that it would also be equitable to do so. I do not agree. There can be no equitable consideration that flies in the face of a statute which creates an express bar for the incorporation or continuance of a company with a paid-up share capital below the minimum prescribed by that statute. Nor would it be, "otherwise just" that the company be restored, specially in view of the fact that the company itself applied to be struck off the register instead of increasing its share capital within the time permitted by the statute, and since nothing further has been urged by counsel, such as the discovery of some properties or debtors or creditors of the company which requires that the company be restored since they cannot otherwise be dealt with effectively. Furthermore, it is always open to the contributories to float a new company, as per law. The maxims equitas numquam contravenit leges, i.e., equity never counteracts the laws and equitas sequitur legem, i.e., follows the law, are also relevant in this regard.

Under the circumstances, for the court to now take the view that it would be just and proper for such a company to be given an opportunity to raise the share capital to the minimum required after being restored to the register of companies, would, to my mind, amount to a travesty and cannot be permitted.

In view of the above, the petition is dismissed.