Valuable Contractual Rights Can Justify Restoration Of Struck-Off Company: NCLT Mumbai

The National Company Law Tribunal (NCLT), Mumbai, on 11 September held that the existence of valuable property and subsisting contractual rights can constitute “just” ground for restoring a company struck off from the register under Section 252(3) of the Companies Act, 2013.

A Bench comprising Technical Member Hariharan Neelakanta Iyer and Judicial Member Lakshmi Gurung directed the Registrar of Companies (RoC), Mumbai to restore MDED Estates Private Limited to “Active” status, subject to statutory compliances and payment of Rs. 3 lakh as costs. The Tribunal observed:

“failure to restore a company possessing valuable property could result in irreparable loss and render such property a deadlock, which would be contrary to public policy.”

Diipesh Lakshman Bhagtani, a 50% shareholder/member of MDED Estates, filed the appeal seeking restoration of the company's name after it was struck off by the RoC, Mumbai in 2018 for failure to file statutory annual returns and financial statements since financial year 2015-16.

He had also described himself as a director. However, the RoC disputed his status as a director on account of his deactivated Director Identification Number. The Tribunal held that the appeal was maintainable in his capacity as a shareholder/member under Section 252(3).

The appellant submitted that MDED Estates was incorporated as a special purpose vehicle (SPV) for a redevelopment project and was neither defunct nor a shell company. He relied on a registered Development Agreement dated 2 August 2014 with the landowners, under which the company was appointed as the developer and was entitled to 60% of the constructed area.

The agreement also recorded payment of a refundable security deposit of Rs. 3 crore by the company to the landowners. Disputes subsequently arose over the rights and obligations under the Development Agreement, leading the company to invoke arbitration before the Bombay High Court.

Bhagtani argued that the Development Agreement and pending arbitration demonstrated that the company continued to have valuable legal and business interests requiring protection. He attributed the failure to complete statutory filings to a downturn in the real estate market, contractual disputes and inadvertent lapses.

The RoC, however, contended that the existence of a Development Agreement and pending proceedings did not establish that the company was carrying on business or was in operation when its name was struck off.

The Tribunal relied on the NCLAT's decision in Tahir Vasanali Isani v. Registrar of Companies, Goa, Daman and Diu (Company Appeal (AT) No. 56 of 2025), which held that failure to restore a company possessing valuable property could result in irreparable loss and render such property a deadlock, contrary to public policy.

The Bench found that the registered Development Agreement established the existence of valuable property and subsisting contractual rights in favour of MDED Estates.

Accordingly, the NCLT allowed the appeal and directed the RoC, Mumbai to restore the company's name to the register and its status to “Active”, subject to statutory compliances and payment of Rs. 3 lakh as costs.