15 Chandrasekar Muruga vs. Registrar of Companies (TN) Company Appeal (AT) No. 76 of 2019 (NCLAT) [2019] 151 CLA 366 Date of order: 29th May, 2019
Where name of the Company is struck off due to non-filing of financial documents but it is found that significant accounting transactions were undertaken during the relevant period and the Company being in operation was carrying on business, the name of the Company is to be restored in the Register
FACTS
The shareholders and directors of M/s MPC India Private Limited (‘M/s MPC’) had filed an instant appeal against the order dated 20th February, 2019 by which the National Company Law Tribunal at Chennai (‘NCLT’) declined to restore the name of M/s MPC in the Register of Companies as maintained by the Office of the Registrar of Companies (‘ROC’) on the ground of failure to file its financial statements and annual returns with the ROC from the financial years 2009-10 to 2017-18.
The NCLT observed that since M/s MPC had not filed financial statements and annual returns for the F.Ys. 2009-10 to 2017-18, there was no adequate reason to restore the company’s name. Therefore, there was no scope to grant an order for restoration of the name in the Register of Companies.
However, the NCLT noted the submission made by M/s MPC that the balance sheet was prepared and Annual General Meetings were held on time and duly signed by the respective directors but for reasons unknown the officials concerned failed to upload the same. NCLT also admitted that the Income-tax Returns and bank statements submitted by M/s MPC show that there have been significant accounting transactions during the aforesaid period.
The order was challenged primarily on the ground that the ROC had improperly exercised jurisdiction u/s 248 of the Companies Act, 2013 and the NCLT failed to notice that the parameters as set out in section 252(3) of the Companies Act, 2013 had been satisfied by M/s MPC.
HELD
The NCLAT observed that M/s MPC was struck off by the ROC on the ground of non-filing of financial statements and annual returns for the financial years 2009-10 to 2017-18, though it was not disputed that it had filed Income-tax Returns and bank statements for the A.Ys. 2008-09 to 2017-18, which demonstrated significant accounting transactions during the aforesaid period.
NCLAT further observed that it was futile to address the issue of non-adherence to the procedural requirements on the part of the ROC in striking off the name of the company within the ambit of section 248 of the Companies Act, 2013 and the fact was observed in the order that the NCLT had overlooked the factum of the significant accounting transactions admittedly undertaken by M/s MPC during the relevant period justifying no conclusion other than that M/s MPC was in operation and carrying on business.
Accordingly, the NCLAT held that the findings recorded by the NCLT being erroneous cannot be supported and the same were liable to be reversed and a just ground existed for restoration of the name of the company. The appeal was accordingly allowed, the order set aside and the ROC directed to restore the name of M/s MPC subject to statutory compliances being filed together with the prescribed fees and penalties leviable thereon as mandated by law.
16 M/s Vintage Hotels Private Limited & Ors. vs. Mr. Ahamed Nizar Moideen Kunhi Kunhimahin Company Appeal (AT) No. 408 of 2018 (NCLAT) Source: NCLAT Official Website Date of order: 12th November, 2020
The discretionary power of directors to refuse ‘Transfer of Shares’ is not to be resorted to in a deliberate or arbitrary fashion but in good faith – The directors are to give due weightage to shareholder’s right to transfer his share
FACTS
Mr. K was an existing shareholder and also one of the Directors of M/s Vintage Hotels Private Limited (‘VHPL Company’). It was learnt from the contents of the affidavit of Mr. TH dated 10th April, 2015 that he was holding 20,000 equity shares of Rs. 100 each of the company and that he had transferred the aforesaid shares to Mr. K and further that the share certificates were lost and were not in his possession. The deponent (Mr. TH) had averred that he had made a request to VHPL Company to issue duplicate share certificates in lieu of the original share certificates in the name of Mr. K.
The VHPL Company, through its communication dated 30th October, 2015, had rejected the request for transfer of shares in the name of Mr. K. The company submitted that in the share transfer form SH-4 furnished by Mr. K the distinctive numbers of the shares were not mentioned, the corresponding share certificate numbers were not mentioned, the witness’s signature and name was not found and the transferee’s details were not mentioned. Further, the allotment letter or the ‘Original Share Certificate’ was not enclosed with the share transfer form.
Mr. K also contended that the board of directors had not issued the duplicate share certificates even though a request was made by him.
The NCLT Bengaluru bench via an order dated 16th October, 2018 after considering the facts and circumstances of the case and also taking into consideration the existing law, came to the conclusion that the action of VHPL Company in refusing to transfer the shares in favour of Mr. K was an arbitrary and unjustifiable one and consequently issued a direction to VHPL Company to rectify the register of shareholders by incorporating the name of Mr. K in place of Mr. T.H in respect of the 20,000 equity shares under transfer.
The VHPL Company was aggrieved by the order passed by the NCLT which directed it to register the transfer of shares in favour of Mr. K.
HELD
The NCLAT observed that the discretionary power to refuse ‘Transfer of Shares’ was not to be resorted to in a deliberate, arbitrary, fraudulent, ingenious or capricious fashion. As a matter of fact, the directors were to exercise their discretion in good faith and to act in the interest of the company. The directors were to give due weightage to the shareholder’s right to transfer his shares. When the original share certificates are lost, it is not prudent for VHPL Company to insist upon the production of the original share certificates in question to give effect to the transfer of shares. Thus, NCLAT upheld the order passed by the NCLT, Bengaluru bench and dismissed the appeal.
17 Ghanashyam Mishra & Sons (P) Ltd. vs. Edelweiss Asset Reconstruction Co. Ltd. Supreme Court of India [2021] 126 Taxmann.com 132 (SC)
CASE NOTE
Amendment to section 31 by IBC (Amendment) Act, 2019 is declaratory and clarificatory in nature Central Government, any State Government or any local authority to whom an operational debt is owed would come within ambit of ‘operational creditor’ as defined under sub-section (20) of section 5
FACTS
Insolvency proceedings were initiated by State Bank of India u/s 7 of the Insolvency and Bankruptcy Code (IBC) before the National Company Law Tribunal, Kolkata bench.
In response to the invitation made by the resolution professional for a resolution plan, three resolution plans were received, one each from Edelweiss Asset Reconstruction Company Limited (EARC), Orissa Mining Private Limited (OMPL) and Ghanashyam Mishra & Sons Private Limited (GMSPL).
The GMSL resolution plan was duly approved with the voting share right of more than 89.23%.
QUESTIONS OF LAW INVOLVED
Whether after approval of the resolution plan by the Adjudicating Authority a creditor including the Central Government, State Government or any local authority is entitled to initiate any proceedings for recovery of any of the dues from the corporate debtor which are not part of the resolution plan approved by the Adjudicating Authority.
Whether any creditor, including the Central Government, State Government or any local authority is bound by the resolution plan once it is approved by the Adjudicating Authority u/s 31(1) of the Code.
Whether the amendment to section 31 is clarificatory / declaratory or substantive in nature.
HELD BY THE SUPREME COURT
The Government is covered under the definition of creditor under the IBC. The Court, through a harmonious construction of the definition of operational creditor, operational debt and creditor, observed that even a claim in respect of the dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority would come within the ambit of operational debt.
The operational debt owed to the Central Government, any State Government or any local authority would come within the ambit of operational creditor. Similarly, a person to whom a debt is owed would be covered by the definition of creditor.
The Supreme Court further observed that the claims as mentioned in the resolution plan shall stand frozen and will be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders, once a resolution plan is duly approved by the NCLT u/s 31(1) of the IBC.
Consequently, all the dues, including the statutory dues owed to the Central Government, State Government or any local authority if not part of the resolution plan, shall stand extinguished and proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval u/s 31 cannot be continued.
The Court further observed that the section 31 amendment of the IBC is clarificatory in nature and therefore will come into effect from the date on which the IB Code came into effect.
