NCLAT handicapped by lack of clarity

NCLAT handicapped by lack of clarity

What is "Just" under Section 252(3) of the Companies Act, 2013 would be finding of the fact

The National Company Law Appellate Tribunal (NCLAT) on 19 January 2021 dismissed an appeal challenging an Order passed by the National Company Law Tribunal, Division Bench - I Chennai (NCLT).

NCLT had earlier dismissed an appeal under Section 252(3) of the Companies Act, 2013 which was filed for restoration of the name of the Company "Shri Laxmi Spinners Pvt Ltd" which had been struck off by the Respondent (The Registrar of Companies, Tamil Nadu) after following the necessary procedure under Section 248 of the Companies Act.

The Appellate Tribunal stated that the Members of the Bench had not recorded any point or points, legal or factual, for referring the same to the third Member. As such, there was no clarity as to what happens, in case an Order different from both the Members was to be passed.

Section 419 of the Companies Act, 2013 deals with Benches as regards NCLT and Sub-Section (5) was referred. This Sub-Section provides (as regards NCLT) that when the Members differ, they shall state the point or points on which they differ and when the matter is referred to other Member/s, the point or points shall be decided according to the opinion of the majority. The similar provision does not appear to be there with regard to the Appellate Tribunal.

As per the Appellate Tribunal, the difference between the Members did not appear to be on point of law. No point of law or difference on point of law was recorded. The Members had considered the facts involved and different views were on the basis whether it would be "just" to restore the name of the Company.

When Company was struck off, admittedly for the past few years, it was not carrying on any business or operation. Section 248(1)(c) stood attracted. The Appellant did not claim before ROC that there was labour problem or erratic electric supply and thus the production was required to be stopped as is being claimed now. The arguments made for the Appellant claimed that the Returns were not filed due to the litigation. These reasons given to show that there was "just" reason under Section 252(3) were without foundation.

The Appellate Tribunal did not find it proper to take the bare words as recorded in the arguments filed before this Tribunal to claim that there were litigations pending and that the litigations were of such a nature that it would be just to restore the name of the Company.

It was not found that the Appellant had made out a just reason to seek restoration of the name of the Company. It was not sufficient merely to make averments but it was necessary to support the averments with necessary documents, maybe claim with regard to litigation or maybe claim with regard to the property so as to consider if it is "just" to restore the Company's name.

In the present matter, there was no material to support averments that due to power cuts, operations were required to be stopped. No positive material was put on the record of preparations to start production if the name was restored. It was also argued by the Respondent that Balance Sheets and Annual Reports put on record did not show machinery as the assets.

The excuse of Appellant who bought Company in 2006, (when ROC record shows Returns were filed till 2015) that due to inadvertence and lack of professional advice, returns could not be filed, had no substance. The Registrar did not take an undertaking from the Appellant and other Directors under Section 248(6) of the Act cannot be the reason for the Appellant to claim that name should be restored. In the absence of requisite material being placed on record, even on merits of the matter, the Appellate Tribunal was unable to record an opinion that the Appeal deserved to be allowed.

It was directed that the present opinion/decision/Judgement may be placed before the Regular Bench which recorded the divergent views for the Bench to pass Orders with regard to disposal of the Appeal.