Procedure to Appeal to NCLT Under Section 252 of Companies Act 2013

This article provides an explanation of appeal under Section 252 of the Companies Act in the event that the company name is struck off from the Register of Companies. After a decision to remove the company name has been made in Section 248, Section 252 can be used as a remedy to appeal the said decision in the case it is deemed as unjust and unfair.

Fri Jul 01 2022 | Business Law | Comments (0)

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The entire process of appeal under Section 252 of Companies Act 2013 to the NCLT for Revival of the name of the Company comes into play, after the process under Section 248 of the Companies Act 2013, which empowers a Registrar to strike off the name of a company from the Register of Companies has taken place. In the Act, Section 248 has listed the criteria followed by the Registrar in striking off the name under the 2013 Act and the State of Affairs in which the name of the Company can be struck are listed in the Section below:

Power of Registrar to remove name of company from register of companies

Where the Registrar has reasonable cause to believe that

  1. a company has failed to commence its business within one year of its incorporation;
  2. the subscribers to the memorandum have not paid the subscription which they had undertaken to pay within a period of one hundred and eighty days from the  date of incorporation of a company and a declaration under sub-section (1) of section 11 to this effect has not been filed within one hundred and eighty days of its incorporation;

    or

  3. 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. Without prejudice to the provisions of sub-section (1), a company may, after extinguishing all its liabilities, by a special resolution or consent of seventy-five per cent. members in terms of paid-up share capital, file an application in the prescribed manner to the Registrar for removing the name of the company from the register of companies on all or any of the grounds specified in sub-section (1) and the Registrar shall, on receipt of such application, cause a public notice to be issued in the prescribed manner
  5. Provided that in the case of a company regulated under a special Act, approval of the regulatory body constituted or established under that Act shall also be obtained and enclosed with the application.
  6. Nothing in sub-section (2) shall apply to a company registered under section 8.
  7. A notice issued under sub-section (1) or sub-section (2) shall be published in the prescribed manner and also in the Official Gazette for the information of the general public.
  8. 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.
  9. The Registrar, before passing an order under sub-section (5), shall satisfy himself that sufficient provision has been made for the realisation 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
  10. 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.
  11. The liability, if any, of every director, manager or other officer 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.
  12. Nothing in this section shall affect the power of the Tribunal to wind up a company the name of which has been struck off from the register of companies.

However, if the companies fall under the criteria listed in Rule 3 of the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016, the ROC possibly will not remove the name of a company from the register of companies in terms of sub-section (1) of section 248 of the Act, The types of companies listed in Rule 3 are as  below:

Removal of name of company from the Register on suo-moto  basis. 

The Registrar of Companies may remove the name of a company from the register of companies in terms of sub-section (1) of section 248 of the Act:

Provided that following categories of companies shall not be removed from the register of companies under this rule and rule 4, namely:-

  1. listed companies;
  2. companies that have been delisted due to non-compliance of listing regulations or listing agreement or any other statutory laws;
  3. vanishing companies;
  4. companies where inspection or investigation is ordered and being carried out or actions on such order are yet to be taken up or were completed but prosecutions arising out of such inspection or investigation are pending in the Court;
  5. companies where notices under section 234 of the Companies Act, 1956 (1 of 1956) or section 206 or section 207 of the Act have been issued by the Registrar or Inspector and reply thereto is pending or report under section 208 has not yet been submitted or follow up of instructions on report under section 208 is pending or where any prosecution arising out of such inquiry or scrutiny, if any, is pending with the Court;
  6. companies against which any prosecution for an offence is pending in any court; (vii) companies whose application for compounding is pending before the competent authority for compounding the offences committed by the company or any of its officers in default;
  7. companies, which have accepted public deposits which are either outstanding or the company is in default in repayment of the same;
  8. companies having charges which are pending for satisfaction; and
  9. companies registered under section 25 of the Companies Act, 1956 or section 8 of the Act.

In addition to the above under section 249 of the 2013 Act, Companies not eligible to make an application for strike off under section 248(2) of the Act if, are as under:

Restrictions on making application under section 248 in certain situations

An application under sub-section (2) of section 248 on behalf of a company shall not be made if, at any time in the previous three months, the company:

  1. has changed its name or shifted its registered office from one State to another;
  2. has made a disposal for value of property or rights held by it, immediately before cesser of trade or otherwise carrying on of business, for the purpose of disposal for gain in the normal course of trading or otherwise carrying on of business;
  3. has engaged in any other activity except the one which is necessary or expedient for the purpose of making an application under that section, or deciding whether to do so or concluding the affairs of the company, or complying with any statutory requirement;
  4. has made an application to the Tribunal for the sanctioning of a compromise or arrangement and the matter has not been finally concluded; or
  5. is being wound up under Chapter XX, whether voluntarily or by the Tribunal.
  6. If a company files an application under sub-section (2) of section 248 in violation of
  7. sub-section (1), it shall be punishable with fine which may extend to one lakh rupees.
  8. An application filed under sub-section (2) of section 248 shall be withdrawn by the company or rejected by the Registrar as soon as conditions under sub-section (1) are brought to his notice.

Remedy for Strike off  is as under:

The following remedies are available to a company under Section 252 Sub-section (1) and (2), when the name is struck off from the Register under Section 248 of the Companies Act 2013.

  1. An application can be filed before the Tribunal for restoring the name of the company within a span of three years from the date of passing of the order dissolving the company under Section 248, provided the Registrar is mollified with the fact that the striking of the name of the company from the register of companies has happened inadvertently or due to incorrect information that has been provided by the company or directors.
  2. The said petition or appeal or application before NCLT must be made in English language. A copy of English Translation should accompany it, if made or represented in any other language. The said application should be made on a legal-size paper, and printed in double spacing on one side of standard petition paper. The provision of law under which the Court is moved should be stated immediately in the cause title.
  3. All newly joined parties are numbered in the order in which they are brought in.
  4. The proceedings are filed under Rule 23 of the NCLT Rules, 2016 and a copy is to be sent to the ROC. Each and every document has to be self-certified with the name and signature of the representative at the bottom of the Petition or Application.
  5. An application under Section 252 would be filed with a statutory fee of INR.1000.
  6. Finally, a photocopy of the order passed by the Tribunal will be filed by the company to the Registrar in a span of thirty days from the date of order. On receipt of the order, the Registrar restores the name of the company in the register of companies.
  7. Thereafter, a new incorporation certificate gets issued.

If a member or creditor or worker is distressed by the company name being struck off from the register of companies, they can apply to the Tribunal before the expiry of twenty years from the publication in the Official Gazette of notice made under Sub-section (5) of Section 248. The name of the company would eventually be restored in the register of companies. If a struck off has happened due to defaulting in the filing of annual return and financial statements, the penalty will be imposed in the form of late fee.

Conclusion

By this provision in Law, a company that gets struck off may get a chance to refurbish their name in the register. This helps them to get active with the permission of the Tribunal even within 20 years of being struck off by the ROC.

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