Corporate Updates 17 May 2014

Case Law: Where company’s name was struck off and petitioner sued company in Trial Court and if company’s name was not restored, there would be no effective remedy available for loss caused to petitioner, can name of company be restored to register ??? 

The Hon’ble High Court of Delhi in the matter of M.A. Panjwani V/s. Registrar of Companies & others, directs restoration of company’s name as no other remedy was available to make good losses of petitioner as it appeared to the Court to be “otherwise just”. The word “just” would mean that it is fair and prudent from a commercial point of view to restore the company and that the Court has to examine the concept of “justness” not exclusively from the perspective of a creditor or a member or a debtor, but from the perspective of the society as a whole. The special facts of the present case attract this principle.

This is a petition filed by the petitioner i.e. under Section 560(6) of the Companies Act, 1956 read with Rules 9 & 92 of the Company Court Rules, 1959.

Facts about the Case

• The petitioner was residing in the United Kingdom. He wanted to settle down in India. With this end in view, he engaged the services of respondent No.3 for searching a suitable house in Delhi. Singhania identified a property known as “Jodhpur Gardens” in village Gadaipur, Tehsil Mehrauli. The petitioner remitted money from England in favour of Respondents 3 in this regard.
• Respondent 3, who, under some pretext or the other kept deferring the issue and giving evasive answers did not handed over the original Deeds of the property to Petitioner.
• The petitioner made inquiries in Delhi through persons who informed him that the property was registered in the name of the company and was in the possession and personal use of Respondent 3 since January, 1980.
• On being so informed, the petitioner filed a suit for declaration, mandatory injunction and damages in the Civil Court. The suit was taken up on 07.05.2012, where the respondent No.2 informed the trial court that the name of the company has been struck off the records by the Registrar of Companies and therefore the suit cannot proceed.
• The present petition was then filed by the petitioner, under sub-section (6) of Section 560 of the Companies Act. The prayer in the petition was for directions to the Registrar of Companies, who is the respondent No.1, for restoring the name of respondent No.2 i.e. M/s. Alfa Impex Pvt. Ltd. (hereinafter referred to as “Company”) to the register of companies maintained by respondent No.1. on the ground that it is “just” to do so having regard to the facts narrated above.
• Counsel appearing for the Registrar of Companies took up a preliminary objection to the effect that a petition for restoration of the name of the company can be filed only by the company, member or creditor in terms of Section 560(6) of the Act and that the petitioner does not fall under any categories.
• As regards the petitioner argued that it was “just” that the company be restored to the register having regard to the events narrated earlier, counsel for the Registrar of Companies submitted that the word “just” appearing in sub-section (6) of Section 560 has to be given a limited or restricted meaning having regard to the context and construed ejusdem generis with the requirement that the company should be carrying on business and should be in operation, and the said word cannot be given any broader meaning.

Judgement

High Court passed decision under sub-section (6) of Section 560 of the Companies Act, 1956 :

• The court said that the power to order restoration of the company’s name to the register of companies on the application made by the company itself or its member or creditor. Such an application can be made at any time before the expiry of 20 years from the publication of the notice for striking off the name published in the official gazette.
• The court enumerated the two circumstances in which the company court can exercise the power. The first is when it is satisfied that the company was, at the time of the striking off of its name from the register, carrying on business or was in operation and second is when it appears to the company court that it is “otherwise just” that the name of the company be restored to the register.
• Court found from the proceeding of the trial that the petitioner was neither a member nor a creditor of the company. Even if the petitioner cannot be considered as a “member” of the company, he was certainly a “creditor” who can file the petition quite apart from the above position, the sub-section recognises that if the Court is of opinion that it is “otherwise just” that the company be restored to the register, restoration can be ordered.
• It was submitted on behalf of the Registrar of Companies that in striking off the name of the company, the procedure prescribed in Section 560 of the Act was followed. That may be so. Sub-section (6) of Section 560 gives power to the company court to order restoration of the name of the company if it finds that such a course was “just”. The fact that the ROC did follow the due procedure prescribed by law while striking off the name cannot, therefore, be an answer to a petition filed on the ground that it would be “just” to restore the name of the company.
• On the facts of this case there is every reason to hold that it would be “just” to restore the name of the company to the register of companies. The Registrar of Companies was directed to do so.
• The company petition is allowed.