Full Text
HIGH COURT OF DELHI
Date of Decision: 29th March, 2023
DEVENDRA PANDEY ..... Petitioner
Through: Mr Prabhat Kumar and Ms. Rupli Singh, Advs. (M: 9354786079)
Through: Ms. Nidhi Raman CGSC with Mr. Zubin Singh & Mr. Mayank, Advs. for R-1. (M: 9891088658)
JUDGMENT
9 WITH + W.P.(C) 996/2023 and CM APPL. 3886/2023 DEVENDRA PANDEY..... Petitioner Through: Mr Prabhat Kumar and Ms. Rupli Singh, Advs.
VERSUS
UNION OF INDIA & ANR...... Respondents Through: Ms. Nidhi Raman CGSC with Mr. Zubin Singh & Mr. Mayank, Advs. for R-1. 10 AND + W.P.(C) 997/2023 and CM APPL. 3888/2023 DEVENDRA PANDEY..... Petitioner Through: Mr Prabhat Kumar and Ms. Rupli Singh, Advs.
VERSUS
UNION OF INDIA & ANR...... Respondents Through: Ms. Nidhi Raman CGSC with Mr. Zubin Singh & Mr. Mayank, Advs. for R-1. Signing Date:31.03.2023 13:11 2023:DHC:2313 W.P.(C) 995/2023 & connected CORAM: JUSTICE PRATHIBA M. SINGH Prathiba M. Singh, J. (Oral)
1. This hearing has been done through hybrid mode.
2. These are three petitions filed by the Petitioner-Mr. Devendra Pandey, who is an ex-director of the three companies in respect of which the said writ petitions have been filed. The Petitions challenge the striking off of the names of the said companies from the Register of Companies by the
3. The following are the three companies, which are the subject matter of these three petitions- Writ Petition Name of Company Date of incorporation Date of notice of striking off in Form STK-7 WP(C) 995/2023 M/s B&M Propmart Private Limited 20th October 2020 5th January 2023 WP(C) 996/2023 M/s Devyansh Hotels & Resorts Private Limited 13th August 2020 13th January 2023 WP(C) 997/2023 M/s B&M Constructions & Developments Private Limited 3rd September 2020 5th January 2023
4. The Petitioner is aggrieved by the orders/ notices of striking off and dissolution issued in Form STK -7, informing the Petitioner through emails, that the names of the companies have been struck off under Section 248 (5) of the Companies Act, 2013. The said orders/ notices are set out below: “ FORM No. STK- 7 NOTICE OF STRIKING OFF AND DISSOLUTION [Pursuant to sub section (5) of Section 248 of the Companies Act,2013 and rule 9 of the Companies (Removal of Names of Companies from the Register of Companies) Rules,2016] GOVERNMENT OF INDIA MINISTRY OF CORPORATE AFFAIRS Office of the Registrar of Companies Dated:05.01.2023 This is with respect to this Office's Notice No. RoCDelhi248(1)7208512022 dated 01.07.2022 and notice in form STK 5 issued on dated 28.09.2022 Notice is hereby published that pursuant to sub-section (5) of Section 248 of the Companies Act, 2013 the name of B&M PROPMART PRIVATE LIMITED has this day of January been struck off the register of companies and the said Company is dissolved.” **************************************************** FORM No. STK- 7 [Pursuant to sub section (5) of Section 248 of the Companies Act,2013 and rule 9 of the Companies (Removal of Names of Office of the Registrar of Companies Dated:05.01.2023 This is with respect to this Office's Notice No. RoCDelhi248(1)7208482022 dated 01.07.2022 and notice in form STK 5 issued on dated 28.09.2022 Notice is hereby published that pursuant to sub-section (5) of Section 248 of the Companies Act, 2013 the name of B&M CONSTRUCTIONS & DEVELOPMENTS PRIVATE LIMITED has this day of January been struck off the register of companies and the said Company is dissolved. FORM No. STK- 7 [Pursuant to sub section (5) of Section 248 of the Companies Act,2013 and rule 9 of the Companies (Removal of Names of Office of the Registrar of Companies Dated:13.01.2023 This is with respect to this Office's Notice No. RoCDelhi248(1)7521632022 dated 07.07.2022 and notice in form STK 5 issued on dated 28.09.2022 Notice is hereby published that pursuant to sub-section (5) of Section 248 of the Companies Act, 2013 the name of DEVYANSH HOTELS AND RESORTS PRIVATE LIMITED has this day of January been struck off the register of companies and the said Company is dissolved.”
5. The bank accounts of the companies were frozen pursuant to the orders from the ROC dated 26th December 2022. The striking off was thereafter communicated to the three companies. Debit freeze was also directed in respect of the bank accounts of the companies. Upon the bank’s communication being received, the Petitioner has filed the present writ petitions.
6. Mr. Prabhat Kumar, ld. Counsel for the Petitioner submits that under the Companies Act and Rules, a notice under Form STK -1 is mandatorily required to be issued by the ROC. In the present case, the said notice is stated to have been issued by the ROC. But the Petitioner claims that the same has never been served. It is further argued that the email addresses of the directors of the companies were available with the ROC. However, despite this, the Forms STK 1 were not served on email. It is only finally Signing Date:31.03.2023 13:11 2023:DHC:2313 W.P.(C) 995/2023 & connected when Form STK- 7 is issued, striking off the names of the companies, that the same was served upon the Petitioner over email. He submits that there has been a violation of the Act and Rules and thus, the striking off deserves to be set aside.
7. Ms. Nidhi Raman, ld. Counsel appearing for the ROC, on the other hand submits that all the necessary provisions of the Companies Act, 2013 (hereinafter ‘Act’ ) and the Companies ( Removal of Name of Companies from the Register of Companies ) Rules, 2016 (hereinafter ‘said Rules’) have been duly complied with by the ROC. She refers to Section 10A of the Act, to submit that before commencement of business, a declaration has to be filed by the directors to the effect that the capital contribution has been made. Further, under Section 10A(3) of the said Act, if the said declaration is not filed and the business is not being carried out by the company, the same is taken as a default and hence, proceedings were commenced under Section 248 of the Act. It is submitted by Ms. Nidhi Raman that a large number of shell and defunct companies were being found by the ROC due to which large scale action was taken against such companies under Section 248 of the said Act.
8. As per the ROC notice was issued under Section 248(1) of the said Act in Form STK-1 to the three companies as well as to their directors, on 1st July 2022 in the case of Ms/ B&M Propmart Private Limited and M/s B&M Constructions and Developments Private Limited and on 7th July 2022 in the case of M/s Devyansh Hotels & Resorts Private Limited. It is stated that these notices were issued in terms of the statute and were dispatched by Speed Post on 1st August 2022 in the case of B&M Propmart Pvt. Ltd. and B&M Constructions and Developments Pvt. Ltd. and on 12th August 2022 in Signing Date:31.03.2023 13:11 2023:DHC:2313 W.P.(C) 995/2023 & connected the case of Devyansh Hotels & Resorts Private Limited. Notices were also issued to the directors i.e. Mr. Devendra Pandey and Ms. Sushma Pandey at different addresses as uploaded on the MCA portal. Subsequently, the notices in Form STK 5 have also been published in terms of the Rules 3 & 7 of the said Rules, on the website of the Ministry, the official gazette as also in two newspapers. Thus, the ROC has followed all the required procedures before striking off the names of the companies.
9. It is stated that the striking off was also carried out on 13th December 2022 and the STK 7 was published in the official gazette on 17th December
2022. Finally, Ms. Raman submits that the order of striking off is an appealable order under Section 252 of the said Act by the National Company Law Tribunal (‘NCLT’) and a large number of companies have already approached the NCLT in these matters seeking setting aside of the striking off. Thus the present writ petition ought not to be entertained.
10. Heard ld. Counsel for the parties.
11. Under Section 10A of the Companies Act 2013, before commencement of business, and after incorporation, a Company has to file a declaration through one of its directors within 180 days that the share capital has been duly contributed as agreed by the subscribers to the memorandum. Section 10A of the Companies Act 2013 reads as under: “10A. Commencement of business etc. (1) A company incorporated after the commencement of the Companies (Amendment) Act, 2019 and having a share capital shall not commence any business or exercise any borrowing powers unless - (a) a declaration is filed by a director within Signing Date:31.03.2023 13:11 2023:DHC:2313 W.P.(C) 995/2023 & connected a period of one hundred and eighty days of the date of incorporation of the company in such form and verified in such manner as may be prescribed, with the Registrar that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of making of such declaration; and (b) the company has filed with the Registrar a verification of its registered office as provided in sub-section (2) of section 12. (2) If any default is made in complying with the requirements of this section, the company shall be liable to a penalty of fifty thousand rupees and every officer who is in default shall be liable to a penalty of one thousand rupees for each day during which such default continues but not exceeding an amount of one lakh rupees. (3) Where no declaration has been filed with the a period of one hundred and eighty days of the date of incorporation of the company and the Registrar has reasonable cause to believe that the company is not carrying on any business or operations, he may, without prejudice to the provisions of sub-section (2), initiate action for the removal of the name of the company from the register of companies under Chapter XVIII ”
12. A perusal of the above section would show that if the declaration is not filed, a penalty is liable to be paid to the tune of Rs.50,000/- by the company. Further, additional penalty of Rs.1,000/- per day till the default continues is payable by every officer in default, not exceeding 1 lakh rupees.
13. Under section 10A(3) of the said Act, the ROC can initiate action for the removal of the name of the company in terms of Chapter XVIII i.e. Signing Date:31.03.2023 13:11 2023:DHC:2313 W.P.(C) 995/2023 & connected under Section 248. Section 248 of the said Act reads as under:
14. As per Section 248, if the declaration is not filed within 180 days, the ROC is to send a notice to the company and all the directors of the company of the intention to remove the name of the company from the register of companies. Further, the directors and the company have an option to send their representations along with the copies of the relevant documents within a period of 30 days from the date of the notice.
15. Rule 3 of the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 provides that the notice is to be in Form STK -1. Rules 3(2) is extracted herein below: “3.(2)For the purpose of sub-rule (1), the STK 1 which shall be sent to all the directors of the company at the addresses available on record, by registered post with acknowledgement due or by speed post. ”
16. In the present case, a perusal of the notices which have been issued and the publications which have been made would show that the notices under STK -1 have been issued by speed post. Though, there can be no doubt that the notice could also have been sent by email, the notice issued Signing Date:31.03.2023 13:11 2023:DHC:2313 W.P.(C) 995/2023 & connected through speed post is in terms of the said Rules i.e. Rule 3(2). Ld. counsel for the Petitioner has attempted to argue that the consignment was never received. Whenever notices are issued under registered post or under speed post, there is a presumption of service. Moreover, the companies and/or its directors were well aware of their obligations for filing the declaration, which they admittedly did not do. The onus cannot be shifted to the ROC in the manner as is sought to be done, that the notice ought to have been sent by email, though, the ROC can usually follow the practice of sending notices by email.
17. The case of the Petitioners is that the companies are running companies and their businesses have been severely hampered and jeopardized due to the striking off of the names of the companies and due to the debit freeze and other freezing orders issued qua the bank accounts.
18. The provision of Appeal against striking off orders i.e., Section 252 of the Act reads as under:
19. As per the above provision, any order of striking off is appealable to the NCLT. In the present case, the present writ petition has been premised on the ground that the notice itself was not issued, therefore, a writ petition would be liable to be entertained. It is stated that the striking off has taken place vide STK -7 issued on 13th December 2022 and published in the official gazette on 17th December 2022. For whatever reasons, the Petitioner has not approached the National Company Law Tribunal (‘NCLT’) and has chosen to come before this Court.
20. A perusal of Section 10A as also Section 252(3) of the said Act would show that the delay ultimately is condonable upon the payment of monetary penalty in terms of Section 10A. Even the standards that have been stipulated for restoration of the company by the NCLT is if the NCLT feels it is just that the name ought to be restored or if the company was carrying on business and was in operation.
21. The ROC has undertaken the exercise of striking off defunct and shell companies, which cannot, in any manner be doubted. Paragraphs 6, 7 & 8 of the reply affidavit are relevant and are quoted below:
22. Thousands of companies, which are shell companies, inactive companies or dormant companies may have been struck off by the ROC. Such companies would have had the remedy of approaching the NCLT. However, in the present case the Petitioner has approached this Court under the writ jurisdiction. Few months have already elapsed since the striking off Signing Date:31.03.2023 13:11 2023:DHC:2313 W.P.(C) 995/2023 & connected has taken place. Such striking off is visiting the Companies with everyday consequences. Thus this Court is of the opinion that relegating the Petitioners at this stage to the NCLT would result in further delays in the Company commencing its business. The striking off is not a permanent consequence and is subject to appeal/judicial review.
23. Considering the fact that the bonafides of the Petitioners are not in doubt as the companies are running companies, and the striking off has already been prejudicial to them, this Court deems it appropriate not to relegate the Petitioners to the alternative remedy under Section 252.
24. Without treating the present case as a precedent the following directions are, accordingly, issuedi. The Petitioner shall deposit a sum of Rs.[1] lakh each for each of the companies as a pro tem deposit of penalty under Section 10A(2). The said deposit shall be made within one week, upon which the names of the companies shall be restored. ii. Along with the deposit, a representation shall be made by each of the companies in terms of Section 248 of the said Act. The said representation shall then be considered by the ROC and any penalties, in accordance with the provisions of the Act and Rules, shall be imposed. iii. Upon the deposit of Rs.[1] lakh by each company, the ROC shall remove the freezing orders and the companies shall be permitted to operate their bank accounts during their daily course of business. Signing Date:31.03.2023 13:11 2023:DHC:2313 W.P.(C) 995/2023 & connected iv. Any orders that may be passed by the ROC in this regard, shall be communicated to the Petitioner, both on email and through speed post. v. Remedies of the Petitioners, if any, in accordance with law, to approach the NCLT are left open.
25. The present order is passed in the unique facts of the present case and shall not be treated as a precedent. The petitions, along with, all pending applications are disposed of in the above terms. Dasti.
PRATHIBA M. SINGH JUDGE MARCH 29, 2023 /dk/rp