Based on the massive drive undertaken by the Ministry of Corporate Affairs (MCA), Government of India, around 2.24 lakh companies have been struck-off by the Registrar of Companies throughout India for remaining inactive for a period of two (2) years or more. Following the action of striking-off of defaulting companies, restrictions have been imposed on the operation of their bank accounts in accordance with the law. Apart from the restrictions on bank accounts, action has also been taken to restrict the sale and transfer of moveable and immoveable properties of struck-off companies until they are restored. The State Governments have been advised to take necessary action in this regard by disallowing registration of such transactions.

The Prime Minister’s Office has constituted a Special Task Force (STF) under the Joint Chairmanship of Revenue Secretary and Secretary Corporate Affairs, to oversee the drive against such defaulting companies with the help of various enforcement agencies. The Special Task Force has so far met five (5) times and action has been initiated against several defaulting companies, which is expected to help in the drive against black money. The Registrar of Companies has been given power under section 248 to remove names of companies from its register after giving reasonable opportunity of being heard.

The Relevant Provisions of Section 248 have been briefly reproduced below

Section 248. (1) Where the Registrar has reasonable cause to believe that—
(a) a company has failed to commence its business within one year of its incorporation [or]
(c) a company is not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company under section 455,
he shall send 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 and requesting them to send their representations along with copies of the relevant documents, if any, within a period of thirty days from the date of the notice.
(4) A notice issued under sub-section (1) shall be published in the prescribed manner and also in the Official Gazette for the information of the general public.
(5) At the expiry of the time mentioned in the notice, the Registrar may, unless cause to the contrary is shown by the company, strike off its name from the register of companies, 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.
(6) The Registrar, before passing an order under sub-section (5), shall satisfy himself that sufficient provision has been made for the realization of all amount due to the company and for the payment or discharge of its liabilities and obligations by the company within a reasonable time and, if necessary, obtain necessary undertakings from the managing director, director or other persons in charge of the management of the company:
Provided that notwithstanding the undertakings referred to in this sub-section, the assets of the company shall be made available for the payment or discharge of all its liabilities and obligations even after the date of the order removing the name of the company from the register of companies.
(7) The liability, if any, of every director, manager, or other officers who was exercising any power of management, and of every member of the company dissolved under sub-section (5), shall continue and may be enforced as if the company had not been dissolved.
As & when the Companies are struck off only because of the fact that the Companies have not filled their Financial Statements or Annual Return for a continuous period of three years appears to be harsh on such Companies & its stakeholders especially in such cases where the companies are carrying on their businesses. The ROcs assumes that such defaulting companies are not carrying on any business only on the pretext of default in filing the financial statements /Annual return. This gives rise to some genuine companies carrying on a business having to default in Annual filings being struck off from the Register of Companies. Now the natural question which arises in such cases is the Restoration of Such Companies. In the Register of Companies, the MCA has given the NCLT window to such companies. To restore back the name of a struck-off Company a company has to follow the provisions of Section 252 read with Rule 87A of NCLT rules 2016. The restoration, as and when it happens, would be reflected in the official records by way of change in the status from ‘struck off’ to ‘active’

The provisions of Section 252 and Rule 87A of NCLT Rules have been briefly reproduced below

Section 252. (1) Any person aggrieved by an order of the Registrar, notifying a company as dissolved under section 248, may file an appeal to the Tribunal within a period of three years from the date of the order of the Registrar and if the Tribunal is of the opinion that the removal of the name of the company from the register of companies is not justified in view of the absence of any of the grounds on which the order was passed by the Registrar, it may order restoration of the name of the company in the register of companies:
Provided that before passing any order under this section, the Tribunal shall give a reasonable opportunity of making representations and of being heard to the Registrar, the company and all the persons concerned:
Provided further that if the Registrar is satisfied, that the name of the company has been struck off from the register of companies either inadvertently or on the basis of incorrect information furnished by the company or its directors, which requires restoration in the register of companies, he may within a period of three years from the date of passing of the order dissolving the company under section 248, file an application before the Tribunal seeking restoration of name of such company.
(2) A copy of the order passed by the Tribunal shall be filed by the company with the Registrar within thirty days from the date of the order and on receipt of the order, the Registrar shall cause the name of the company to be restored in the register of companies and shall issue a fresh certificate of incorporation.
(3 ) If a company, or any member or creditor or workman thereof feels aggrieved by the company having its name struck off from the register of companies, the Tribunal on an application made by the company, member, creditor or workman before the expiry of twenty years from the publication in the Official Gazette of the notice under sub-section (5) of section 248 may, if satisfied that the company was, at the time of its name being struck off, carrying on business or in operation or otherwise it is just that the name of the company be restored to the register of companies, order the name of the company to be restored to the register of companies, and the Tribunal may, by the order, give such other directions and make such provisions as deemed 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 from the register of companies.

Rule.87A. of NCLT Rules –

(1) An appeal under sub-section (1) or an application under subsection (3) of section 252, may be filed before the Tribunal in Form No. NCLT 9, with such modifications as may be necessary.

(2) A copy of the appeal or application, shall be served on the Registrar and on
such other persons as the Tribunal may direct, not less than fourteen days before the date fixed for hearing of the appeal or application, as the case may be.

(3) Upon hearing the appeal or the application or any adjourned hearing thereof, the Tribunal may pass appropriate order, as it deems fit.

(4) Where the Tribunal makes an order restoring the name of a company in the register of companies, the order shall direct that-

(a) the appellant or applicant shall deliver a certified copy to the Registrar of Companies within thirty days from the date of the order;
(b) (b) on such delivery, the Registrar of Companies do, in his official name and seal, publish the order in the Official Gazette;

(c) (c) the appellant or applicant do pay to the Registrar of Companies his costs of, and occasioned by, the appeal or application, unless the Tribunal directs otherwise; and
(d) (d) the company shall file pending financial statements and annual returns with the Registrar and comply with the requirements of the Companies Act, 2013 and rules made thereunder within such time as may be directed by the Tribunal.

REVIVAL OF STRUCK OFF COMPANY BY NCLT –Procedural Aspects

FIRST STEP – Preparation & Filling of Petition: (Rule 87A (1))

The petition under Section 252(3) for the restoration of the name of struck Company shall be filed with the Tribunal (NCLT).  The petition shall be filed in Form No. NCLT-9.
(Form NCLT 9 See Annexure 1)
List of Documents to be attached with application in NCLT-9:-
Annexure B of NCLT Rules, 2016 provides the list of documents required to be filed with NCLT while filing an application under various sections. As per Point No. 13 of Annexure B “Wherever no documents are prescribed to be attached with the application or petition, documents as mentioned below may be attached, as applicable.”
SL. No.
Particulars

I. Notice of Admission

II. Company Petition

III.Copies of Certificate of company incorporation, Memorandum, and Articles of Association, & Master data

III. Copy of Notification dated (STK 5 Notice STK 7 Strike off as the case may be.)

IV. Evidence regarding payment of Fee DD 1000

V. Affidavit Verifying the Petition

VI. Evidence regarding the filing of pending Balance Sheets and Annual Returns along with challans.
Earlier Filed ITR For all the years.

VII. Evidence that Company has been carrying its business
Details of major transactions during previous years

VIII. Undertakings if any

IX. Copy of Vakalatnama / Memorandum of Appearance

While drafting the petition the main focus should be on two things

(a) To repudiate the claim of ROC that the Company Is not carrying on the business or ceased to be in business for the past two years
(b) To show a valid cause why the company has not responded to the notice STK 5 under section 248. At the same time company has to shadow a valid cause as to why It has defaulted in filing the Financial statements & Annual Returns.

SECOND STEP – Submission of Petition with ROC: (Rule 87A(2))

A copy of the application shall be served on the Registrar of Companies and on such other persons as the Tribunal may direct, not less than 14 days before the date fixed for hearing of the application.

THIRD STEP: Hearing by Tribunal: (Rule 87A(3))

NCLT shall hear the Petitioner and Respondent (ROC). It will also take note of the observations/ objections, if any, received. After hearing from both the Parties, if it is satisfied, it can order the restoration of the name of the company in the record of the ROC.

FOURTH STEP: directions by Tribunal (Rule 87A(4))

Where the Tribunal makes an order restoring the name of a company in the register of companies, the order shall direct that-
(a) the appellant or applicant shall deliver a certified copy to the Registrar of Companies within thirty days from the date of the order;
(b) on such delivery, the Registrar of Companies do, in his official name and seal, publish the order in the Official Gazette;
(c) the appellant or applicant do pay to the Registrar of Companies his costs of, and occasioned by, the appeal or application unless the Tribunal directs otherwise; and
(d) the company shall file pending financial statements and annual returns with the Registrar and comply with the requirements of the Companies Act, 2013 and rules made thereunder within such time as may be directed by the Tribunal.

FIFTH STEP– FILING OF ORDER WITH ROC

The Company shall file the copy of the order with the Registrar of Companies within a period of 30 days from the date of the order.

SIXTH STEP– PUBLICATION OF ORDER IN OFFICIAL GAZETTE

The Registrar of Companies does, in his official name and seal, publish the order in the Official Gazette.

SEVENTH STEP– FILING OF PENDING FINANCIAL STATEMENTS & ANNUAL RETURN

The company shall file pending financial statements and annual returns with the Registrar and comply with the requirements of the Companies Act, 2013 in this regard.

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Let’s start with what does strike off literally mean:

In layman’s language, strike off means “sudden attack”. But for us, it means temporary removal of the name of the company from ROC i.e. the company obtains the status of being dormant.

“But here is where the difference between “striking off” and “winding off” lies, while “striking off” means temporary closure allowing a company to restore itself in future, “winding off” means permanent closure of a company.”

        –Divya Gupta (Market Analyst, MUDS Management Pvt Ltd)

Earlier section 560 of Companies Act 1956 used to deal with such issues but from June 2017, Section 248 of Companies Act 2013  deals with striking off defunct companies off the register (an alternative to the winding up of the company). However, the remedy is available in form of section 252 of the Companies Act 2013, which provides such aggrieved companies a chance to restore themselves.

Now, let us try to understand which all companies could be strike off company:

1. The one those have failed to commence its business within a year of its incorporation.
2. Those who have not been carrying any business or operation immediately for a period of two financial years. (Note: The company has not even filed an application for obtaining a status of the dormant company)

Role of ROC:

Registrar of Companies or ROC is the one who has all the authority to strike off not only defunct companies but also even those companies which have failed to do all their statutory filings. The Registrar not only issued served notice mandated by law to all such companies but also subsequently struck off.

Who all can Apply for Revival:

Before jumping to the process of revival, let us look who all can make an appeal in NCLT to restore the company as per provisions of sections 252(3). It could be :

• Company
• Any member/ Creditor
• Workmen

Procedure of Revival of a Struck-Off Company:

• Filing of application: As per NCLT rules under section 252(1) and 252(3), an application shall be filed before the Tribunal along with other necessary information.
• Following attachments would be required along with submission of application:
  • Copy of MOA and AOA of the Company
  • List of Directors of the Company
  • CTC of the order of Registrar for strike off
  • Available signed Balance Sheets of the Company
  • CTC of Board Resolution passed by the company for making a petition to NCLT to make appeal against the order of Registrar
  • Affidavit verifying petition
  • Copy of bank draft evidencing payment of application fee
  • Memorandum of appearance

• Service of Application: A copy of application shall be forwarded to the Registrar by the company.
• Passing of Order:  Once the hearing of the application in which both the parties will present their points, the Tribunal may pass on order, as deems fit.
• Filing with ROC: After satisfaction of the Tribunal, the applicant will have to deliver a certified copy to the  ROC within 30 days of the date of order in INC 28 along with pending financial statements and annual returns.
• Order in Gazette: Once the copy is received, ROC will publish the order in Official Gazette in company’s official name and seal.

As all ROC’s has issued show cause notices to the Companies fallen u/s 248(1) (c).  In notice ROC mentioned that it can strike off Company if appropriate reply not filed within 30 days and ROC will take appropriate action against the Directors.

After that at the end of the June, 2017 ROC has struck off the 100,000 (One Lakh) Companies from its record.

Conclusion:

As ministry has taken action against over 100,000 companies due to non- compliance and non- filing of the statutory form with ROC.  It could be seen as a part of the government’s initiative :

• To clean up Corporate Structure
• To curb Tax Evasion
• To prevent money laundering
• To strengthen the norms of Corporate Governance.

“It could be seen as a farsighted move where the government could distinguish between companies that are black and those that are in grey”.

– Shweta Gupta, Founder, and CEO, MUDS

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