No Minimum Shareholding Required To Seek Restoration Of Struck-Off Company: NCLT Indore

The National Company Law Tribunal (NCLT) at Indore has recently held that a shareholder's right to seek restoration of a struck-off company's name is an individual statutory right. It does not depend on the extent of shareholding in the company.

A bench of Judicial Member Brajendra Mani Tripathi and Technical Member Man Mohan Gupta delivered the ruling while allowing a plea by Arun Dagaria. He held 0.1% of the paid-up equity share capital of Space City Homes Private Limited and sought restoration of the company's name to the Register of Companies maintained by the Registrar of Companies (RoC), Gwalior.

“Section 252(3) of the Companies Act, 2013 confers the right on any member or creditor of the company to make an application to the Tribunal for restoration of the name. The right is an individual right and is not conditional upon any minimum threshold of shareholding,” the tribunal observed.

Dagaria approached the tribunal after the company's name was struck off on April 12, 2022 for failure to file statutory returns and compliances. The company, incorporated in July 2008, had last filed its annual return up to September 24, 2018. Its last balance sheet was filed as of March 31, 2018.

Before the tribunal, Dagaria contended that the company remained a going concern. He argued that it continued to carry on business operations.

He relied on financial records showing trade payables, inventories, revenue from operations and employee benefit expenses during financial years 2021-22, 2022-23 and 2023-24. He also pointed to land owned by the company in Indore.

The shareholder argued that striking off the company was unwarranted in the circumstances. He submitted that other statutory measures were available for dealing with non-filing defaults.

The RoC informed the tribunal that the company had not filed annual returns and balance sheets from 2019 onwards. It did not dispute that the application had been filed within the prescribed limitation period. The RoC stated that the petition could be considered on merits, subject to filing of pending statutory documents.

Dagaria undertook to file all overdue returns and statutory documents upon restoration of the company's name. He also agreed to publish the restoration order in newspapers and bear the cost of publication in the Official Gazette.

The Income Tax Department informed the tribunal that tax demands of ₹60.56 lakh for assessment year 2009-10 and ₹300 for assessment year 2019-20 were pending against the company. Dagaria submitted that an appeal against the larger demand was pending before the Income Tax Appellate Tribunal, Indore. He undertook to pay any amount that remained due after disposal of that appeal.

He also undertook to pay the ₹300 demand immediately upon restoration.

While considering the matter, the tribunal noted that the application had been filed within the period prescribed under law. It also held that the applicant's standing to maintain the proceedings could not be denied because of the size of his shareholding.

“The Respondent – ROC has also not disputed the locus of the Appellant. Accordingly, we find that the Appellant has the requisite locus standi to maintain the present petition,” the bench held.

The tribunal further noted that the company had been struck off for non-filing of statutory returns. It also recorded the applicant's undertaking to regularise all pending filings within 60 days of restoration.

“There is no allegation or material on record suggesting that the Company was used for any fraudulent or unlawful purpose,” the tribunal observed.

The bench also found that restoration would be in the interest of revenue. It noted that restoration would enable the company to effectively participate in the pending proceedings before the Income Tax Appellate Tribunal.

Allowing the petition, the tribunal directed the RoC to restore the name of Space City Homes Private Limited. It also directed the RoC to change the company's status on the MCA portal from "Strike Off" to "Active".

The tribunal further directed payment of ₹50,000 to the Consolidated Fund of India. The amount was imposed in view of the company's failure to file annual returns and balance sheets from 2019 onwards.