Restoring Struck-Off Company For Pending Tax Proceedings Won't Remove Directors' Disqualification: NCLT Ahmedabad

The National Company Law Tribunal (NCLT) at Ahmedabad has clarified that restoring a struck-off company does not automatically lift the bar on its directors from serving on the boards of other companies.

A coram of Judicial Member Shammi Khan and Technical Member Sanjeev Sharma said, “It is clarified that restoration of the Company shall not automatically remove disqualification of directors under Section 164(2) of the Companies Act, 2013 and such consequences shall be governed independently in accordance with law.”

The tribunal also made it clear that pending legal proceedings are enough to justify restoring a company. “The pendency of such statutory proceedings constitutes sufficient cause for restoration of the company,” the bench observed.

The case arose from an appeal filed by the Income Tax Department seeking restoration of Jinesh Ginning and Pressing Private Limited. The company had been struck off by the Registrar of Companies in July 2017 for failing to file statutory returns for more than two years. Incorporated in 2005, it was engaged in cotton processing.

The department pointed out that reassessment proceedings for the financial year 2015 to 2016 were still pending, making restoration necessary.

The department relied on instructions issued by the central tax authority requiring officials to seek restoration of struck-off companies where tax proceedings are underway or contemplated, or where dues remain unpaid.

It told the tribunal that a reassessment notice had been issued on April 4, 2024 and that restoration was needed to protect revenue and allow the proceedings to reach their logical conclusion. The Registrar of Companies, on the other hand, said the company had not filed returns since March 2011 and that due process was followed before striking it off.

Dealing with these submissions, the tribunal said the right to seek restoration is not limited to companies and extends to authorities pursuing legal claims. It said striking off cannot defeat ongoing proceedings or recovery of lawful dues.

The bench added, “Restoration under Section 252(3) is not confined to cases where business operations are to be revived but extends to cases where restoration is necessary to enable adjudication of legal liabilities and statutory claims.”

It also noted that refusing restoration would prejudice the tax department and lead to loss to the public exchequer.

Allowing the appeal, the tribunal directed that the company's name be restored to the register, with its status changed from struck off to active. It also directed the company to file all pending financial statements and annual returns within 45 days along with the prescribed fees and penalties.