w w w . L a w y e r S e r v i c e s . i n



Basanti Cotton Mills Private Limited & Gopal Navinbhai Dave & Others v/s Nirendranath Kar & Another


Company & Directors' Information:- P A S COTTON MILLS PRIVATE LIMITED [Active] CIN = U17111TN2005PTC058104

Company & Directors' Information:- V R A COTTON MILLS PRIVATE LIMITED [Active] CIN = U15311PB1997PTC020061

Company & Directors' Information:- C A V COTTON MILLS PRIVATE LIMITED [Active] CIN = U17115TZ1987PTC002014

Company & Directors' Information:- V K S M COTTON MILLS LIMITED [Active] CIN = U17111TZ1998PLC008682

Company & Directors' Information:- P K COTTON MILLS PRIVATE LIMITED [Active] CIN = U17111DL2004PTC130281

Company & Directors' Information:- K P G COTTON MILLS PRIVATE LIMITED [Active] CIN = U17115TZ1993PTC004509

Company & Directors' Information:- D B V COTTON MILLS PRIVATE LIMITED [Active] CIN = U17115TZ1982PTC001145

Company & Directors' Information:- S S COTTON MILLS PRIVATE LIMITED [Active] CIN = U17115PB1997PTC019918

Company & Directors' Information:- J R COTTON MILLS PRIVATE LIMITED [Strike Off] CIN = U17111TN1996PTC034302

Company & Directors' Information:- D C H COTTON MILLS PRIVATE LIMITED [Strike Off] CIN = U17111TZ1997PTC008130

Company & Directors' Information:- L D COTTON MILLS PRIVATE LIMITED [Strike Off] CIN = U17291MH2014PTC256832

Company & Directors' Information:- A D COTTON MILLS PVT LTD [Active] CIN = U99999MH1970PTC014837

Company & Directors' Information:- V P K COTTON MILLS PRIVATE LIMITED [Strike Off] CIN = U17111TZ2000PTC009530

Company & Directors' Information:- THE GOPAL MILLS COMPANY LIMITED [Not available for efiling] CIN = U99999MH1931PTC001761

    A.P.O. No. 383 of 2012 & C.P. No. 432 of 2010

    Decided On, 17 October 2012

    At, High Court of Judicature at Calcutta

    By, THE HONOURABLE MR. JUSTICE ASHIM KUMAR BANERJEE & THE HONOURABLE MS. JUSTICE SHUKLA KABIR (SINHA)

    For the Appellants: S.N. Mukherjee, Senior Advocate, Debangshu Basak, Aniruddha Roy, Deepak Jain, Advocates. For the Respondents: R1, Ratnanko Banerjee, Ms. Swapna Chowdhury, Anshuman Gupta, R2, Utpal Moitra, Advocates, Biswanath Chatterjee, Adv, for Intervener.



Judgment Text

Ashim Kumar Banerjee, J

Basanti Cotton Mills (1998) Private Limited was incorporated on August 12, 1998 under the provisions of the Companies Act 1956. The Directors were Gopal Navinbhai Dave, Nikhil Vasantlal Merchant and Paresh Vasantlal Merchant as per the Articles and Memorandum of Association. The last annual return and audited accounts were filed with the Registrar of Companies (hereinafter referred to as ROC), West Bengal for the financial year 2002-2003. On January 27, 2006 ROC struck off the name at the instance of the Directors named above. One Nirendranath Kar claiming to be a Director applied for restoration of the name under Section 560(6) of the Companies Act, 1956. The ROC filed affidavit-in-opposition. They asserted, the company was not functioning. They filed Annual Return up to 2003 that would also depict; the company was not carrying on any business. Hence, the Registrar rightly struck off the name from the register that would not call for any interference. The learned Single Judge allowed the application vide judgment and order dated October 6, 2010. His Lordship observed as follows:-

'It has been admitted in the affidavit in opposition filed by the Central Government, that the procedure under Section 560(6) of the Companies Act, 1956, has not been followed before striking off the name of the company from the register of the Registrar of the Companies.

Three notices are contemplated in such Section and the sub-Sections thereunder before such action can be taken.

In view of the above procedural irregularity, the decision to remove the name of the company from the register is set aside.

However, this will not preclude the Registrar from taking fresh action in accordance with law, as is available to him.'

Being aggrieved, three private individuals namely Gopal Navinbhai Dave, Nikhil Vasantlal Merchant and Paresh Vasantlal Merchant filed an application for recall of the order dated October 6, 2010. The judgment and order of the learned Single Judge appearing at page 200-205 would depict, the name was struck off on January 27, 2006, for good reasons as the company was not doing any business and its assets and liabilities were nil. The learned Judge further observed, prayer for recall made after four years should not be entertained.

Moreover, there was serious dispute as to who was in control of the company. The learned Judge however, asked the Registrar to hear the parties and decide the issue within the stipulated period.

The Division Bench set aside the judgment and order of the learned single Judge dated March 22, 2011 and remanded the matter back to His Lordship by observing, the learned Company Judge was to determine the issue and not the Registrar. Accordingly, learned Judge heard the parties afresh and disposed of the application vide judgment and order dated August 8, 2012. His Lordship allowed the application and restored the name of the company that became the subject matter of the present appeal. The learned Judge held, on a combined reading of Sub-Section 1, 2, 3 and 5 of Section 560 it would infer, the company would only be defunct if it would not reply to the notice or would admit in reply that it was not carrying on business. Otherwise the name could not be struck off under the said provision. Since the Director of the company prayed for recall and the requisites were complied with, the Registrar’s order could not be sustained. His Lordship allowed the application of the appellants by setting aside and/or recalling the order dated October 6, 2010 passed at the instance of the respondent. Hence, this appeal.

At the commencement of the final hearing of the appeal, Mr. Ratnanko Banerjee, learned counsel appearing for the respondent took the plea of the maintainability of the appeal. According to him, Section 560(6) was a superintending and/or appellate power of the learned Company Judge over a quasi-judicial decision of the Registrar. Such decision of the learned Single Judge would not be available to judicial scrutiny in an intra-court appeal that would be barred by law. As and by way of alternative submission, Mr. Banerjee contended, no finality arrived at by the order of the learned Single Judge, at least to the extent that was appealed from. Hence, the appeal would not be maintainable. He relied on the decision in the case of A.P. State Financial Corporation –VS- Mopeds India Ltd. (In Liquidation) reported in 2007 Volume-139 Company Cases Page-514 (Andhra Pradesh) and in the case of Kamal Kumar Dutta & Another –VS- Ruby General Hospital Limited And Others reported in 2006 Volume-VII Supreme Court Cases Page-613.

Replying to the preliminary issue, Mr. S.N. Mukherjee learned senior counsel contended, the decision of the Registrar to strike out a name, was an administrative act. Any person aggrieved by such action was entitled to approach the learned Company Judge under Section 560 that would be amenable to scrutiny before the Division Bench under Section 483 of the of the said Act of 1956. Assuming Section 483 would have no application, a decision of a Single Bench would always be available for an intra-court appeal under Clause 15 of the letters patent or under the Code of Civil Procedure without having a specific statutory bar contained in any law of the land including the Companies Act 1956.

Mr. Mukherjee distinguished the Andhra Pradesh judgment in the case of A.P. State Financial Corporation –VS- Mopeds India Ltd. (In Liquidation) (supra) by referring to Rule 163 and 164 of the Company (Court) Rules 1959 and contended, the adjudication by the Official Liquidator was available for judicial scrutiny of the learned Company Judge through the process of appeal whereas Section 560 should be construed as an original proceeding to be initiated before the learned Company Judge against any decision of the Registrar striking off the name of a company under Section 560. Hence, the said decision would have no application.

Resuming his argument on the next day Mr. Mukherjee contended, Section 560 would pre-suppose an application before the learned Company Judge by a shareholder or a company or a creditor. Hence, it was the duty of the applicant to prove, he would fall under any of the said three categories. The learned Judge did not decide such issue.

Coming to the factual matrix, Mr. Mukherjee contended, the name was struck off on January 27, 2006. The applicant being the respondent no.1 herein for the first time approached the Registrar of Companies filing DIN (Director Identity Number) in 2008. The Registrar disclosed records appearing at pages 39 to 77 (Volume-II) of Paper Book that would show, as per the records of the Registrar the name of the respondent was conspicuously absent at the relevant time. He approached the Registrar for the first time on October 10, 2008 when he filed the DIN that could only be filed by the person himself. Form 32 was however conspicuously absent. On the strength of the DIN filed in 2008 about two years after the Company’s name was struck off, the respondent applied for restoration that the learned Judge allowed vide order dated October 6, 2010. On coming to know the appellant applied for recall. The Division Bench asked the learned Judge to decide on the issue that was remanded back to the Registrar. The learned Judge ultimately decided the issue by judgment and order dated August 8, 2012 appearing at pages 321- 333 of the paper book. Mr. Mukherjee strenuously disputed the transfer deeds appearing at page 251 on wards in the second volume of the paper book. According to him, the Company had no relationship with the respondent no.1 whose claim was based upon forged and fabricated documents. The learned Judge failed to appreciate, without deciding on his locus the application would not be maintainable. He relied on the following decisions to support his above contention.

i) Shah Babulal Khimji –VS- Jayaben D. Kania & Another reported in All India Reporter 1981 Supreme Court Page-1786

ii) Special Deputy Collector (LA) –VS- N. Vasudeva Rao And Others reported in 2007 Volume-14 Supreme Court Cases Page-165

iii) Vijay Kumar Darwa –VS- Official Liquidator, Rohtas Inds. Itd. reported in All India Reorter 2008 Supreme Court Page-1613

Mr. Mukherjee lastly contended, Section 3(1)(3) defined private company having a minimum paid up capital of Rs.1 lac, whereas Section 3(5) would provide, a private company failing to enhance the paid up capital to the minimum one would be deemed to be a defunct company within the meaning of Section 560 and its name shall be struck off from the register by the Registrar.

Mr. Utpal Moitra, learned advocate appearing for the ROC contended, the Registrar did not follow the scheme particularly Clause 9 and 10. He would however dispute the locus of the respondent no.1 as according to him the ROC did not have contemporaneous records to support the status of the respondent no.1.

Per contra, Mr. Banerjee would submit, Section 560 could not be said to be an original proceeding. According to him, even if the interpretation of the provision as contended by Mr. Mukherjee could be held as correct The Company Court could not have more power than the original power that was being enjoyed by the Registrar. According to him, if no finality arrived at by the order passed under Section 560 by the learned Company Judge no appeal could be maintained before the Division Bench that would support the other interpretation as advanced by him. He would put emphasis on the word 'aggrieved' as contained in the said provision that would be synonymous with the word 'appeal'. Mr. Banerjee distinguished the decision in the case of Modi Korea Telecommunication Ltd. –VSAppcon Consultants Pvt. Ltd. reported in 1999 Volume-II Calcutta High Court Notes Page-107 and in the case of Liverpool & London S.P. & I Association Ltd. –VS- M.V. Sea Success I And Another reported in 2004 Volume-IX Supreme Court Cases Page-512 to contend, unless finality arrived at no appeal under Clause 15 of the Letters Patent could be maintained.

On factual matrix he contended, the documents appearing at pages 243 onwards of the second volume of the paper book particularly page 267 where ROC asked the respondents 1 to 5 to file return, would prima facie support his status as Director of the Company. Hence, the learned Judge did not commit any illegality directing restoration of the company’s name that did not finally decide the respective rights of the parties warranting invocation of appellate court’s power under Clause 15 of the Letters Patent. According to Mr. Banerjee, he was a Director since 1998. He filed document to the said extent. The Registrar did not dispute such document.

On the interpretation of Section 3, Mr. Banerjee would contend, there could not be any automatic removal of name from the record of the Registrar. The procedure laid down under Section 560 was required to be followed. Having not done so, the Registrar faulted in striking out the name that was rightly restored by the learned Judge. Mr. Banerjee lastly contended, his writ petition on the subject issue was dismissed, if today the name of the company was allowed to be struck off he would be remediless. Having no apparent error on the face of the order the Court of appeal should not interfere with the order of the learned Single Judge. He also contended, under Clause 2(4)(i) of the exit scheme this scheme would not be available when there was a management dispute.

Section 560 is quoted below :-

'560.Power of Registrar to strike defunct company off register.-

(1) Where the Registrar has reasonable cause to believe that a company is not carrying on business or in operation, he shall send to the company by post a letter inquiring whether the company is carrying on business or in operation.

(2) If the Registrar does not within one month of sending the letter receive any answer thereto, he shall, within fourteen days after the expiry of the month, send to the company by post a registered letter referring to the first letter, and stating that no answer thereto has been received and that, if an answer is not received to the second letter within one month from the date thereof, a notice will be published in the Official Gazette with a view to striking the name of the company off the register.

(3) If the Registrar either receives an answer from the company to the effect that it is not carrying on business or in operation, or does not within one month after sending the second letter receive any answer, he may publish in the Official Gazette, and send to the company by registered post, a notice that, at the expiration of three months from the date of that notice, the name of the company mentioned therein will, unless cause is shown to the contrary, be struck off the register and the company will be dissolved.

(4) If, in any case where a company is being wound up, the Registrar has reasonable cause to believe either that no liquidator is acting, or that the affairs of the company have been completely wound up, and any returns required to be made by the liquidator have not been made for a period of six consecutive months, the Registrar shall publish in the Official Gazette and send to the company or the liquidator, if any, a like notice as is provided in sub-section (3).

(5) At the expiry of the time mentioned in the notice referred to in sub-section (3) or (4), the Registrar may, unless cause to the contrary is previously shown by the company, strike its name off the register, and shall publish notice thereof in the Official Gazette; and on the publication in the Official Gazette of this notice, the company shall stand dissolved:

Provided that-

(a) the liability, if any, of every director, 1[***] manager or other officer who was exercising any power of management, and of every member of the company, shall continue and may be enforced as if the company had not been dissolved; and

(b) nothing in this sub-section shall affect the power of the Court to wind up a company the name of which has been struck off the register.

(6) If a company, or any member or creditor thereof, feels aggrieved by the company having been struck off the register, the 2[Tribunal], on an application made by the company, member or creditor before the expiry of twenty years from the publication in the Official Gazette of the notice aforesaid, may, if satisfied that the company was, at the time of the striking off, carrying on business or in operation or otherwise that it is just that the company be restored to the register, order the name of the company to be restored to the register; and the 2[Tribunal] may, be the order, give such directions and make such provisions as seem just for placing the company and all other persons in the same position as nearly as may be as if the name of the company had not been struck off.'

Under Sub-Section 1 the Registrar was empowered to strike out a defunct company from the register if he had a reasonable cause to believe, the company was not carrying on business or in operation. Under Sub-Section 1 he was to send notice to the company enquiring about its function. Under Sub-Section 2 he was empowered to strike out the name in case no reply was forthcoming within one month from the date of receipt of such notice. However he was to send another notice within fourteen days from expiry of one month period and would wait for another month to get a reply and in case reply was not forthcoming he would be entitled to strike off the name. Under Sub-Section 3 the Registrar in case of any answer having been received to the extent that the company was not in operation and not having any reply to the second letter, would be entitled to strike off the name after three months. Similar provisions were made when the company was being wound up for striking off the name. Under Sub- Section 6 a party aggrieved by any such order of striking off was entitled to approach the learned Company Judge who would be in a position to issue such direction and make such provision as seem just for placing the company and all other persons in the same position as nearly as may be as if the name had not been struck off. Hence, on a combined reading we would find authority of the Registrar to strike out a name after offering opportunity to the persons being in control of the company to justify existence and being satisfied that the company was defunct. Similarly, the aggrieved party was given right to challenge such action before the learned company Judge. The learned company Judge was competent to issue 'such direction' and/or make 'such provision' as seen just and proper. The learned Judge initially restored the name having been satisfied that the pre-requisites were not fulfilled. Another learned single Judge recalled the said order upon hearing rival contentions. His Lordship did so after being satisfied that the order could not be interfered with on the available materials placed before His Lordship and that too after inordinate delay. Hence, the status quo should remain having the name struck off from the register. His Lordship however observed that such order would not preclude any one to approach the Registrar for restoration. The Division Bench set aside the order by pointing out, it was the court to decide the issue and not the Registrar. The learned Judge again upset the order of ROC and restored the company’s name on the roll.

In the case of A.P. State Financial Corporation (Supra), the learned Single Judge considered an order passed by the official liquidator under Rule 163 of the Company Court Rules settling a claim of a creditor in a company in liquidation. The power of the learned company Judge to scrutiny the order of the official liquidator was an appellate power. While doing so, His Lordship observed that such power being an appellate power an intra-court appeal from the said order would not lie before a Division Bench.

In the case of Kamal Kumar Dutta and Another (Supra) the Apex Court held that an appeal from the order of the Company Law Board under Section 10-F would lie before a Single Bench being the learned Company Judge and no intra-court appeal was permissible either under Letters Patent or otherwise as second appeal was not contemplated.

In the case of Modi Korea Telecommunication Ltd. (Supra), the Division Bench of this Court construed Clause 15 of the Letters Patent and observed, where a question of jurisdiction of the court to entertain or proceed with a suit or proceeding is involved and a decision on that question is given such decision is 'judgment' within the meaning of Clause 15 Letters Patent and is appellable.

In the case of Liverpool & London S.P. & I Association Ltd. (Supra) paragraph 124 being relied upon is quoted below :-

'124. Clause 15 of the Letters Patent is not a special statute. Only in a case where there exists an express prohibition in the matter of maintainability of an intra-court appeal, the same may not be held to be maintainable. But in the event there does not exist any such prohibition and if the order will otherwise be a 'judgment' within the meaning of clause 15 of the Letters Patent, an appeal shall be maintainable.'

On this issue Mr. Mukherjee also relied upon Shah Babulal Khimji (Supra) being the parent judgment on the issue. Paragraphs 113, 145 and 152 were relied upon. The Apex Court observed, a judgment that decides all questions or issues in controversy and leaves nothing else to be decided that would be a final judgment available for an intra-court appeal in case the former one was delivered by the Single Bench. However such appeal would not be maintainable in case of being specifically barred under the statute.

Mr. Mukherjee relied on Vijay Kumar Karwa (Supra) wherein the Apex Court observed, 'every order which may reasonably be considered to be a judicial order as distinct from merely administrative order is appealable in terms of Section 483 of the Act'.

In the case of Special Deputy Collector (LA) (Supra), the order was rendered in a contempt proceeding that the Apex Court observed, Letters Patent appeal would not be maintainable.

Any order passed by a learned Single Judge, would always be appealable in absence of a statutory bar, if any, by the laws of the land. Whether an appeal would be maintainable, would however, lie on the nature of the order, that would be appealed from. In case the order does not decide any right of a party, or a controversy, the same would not be available for scrutiny by the Court of Appeal. In case the same would affect any party such decision would definitely be appealable at his instance to the Division Bench under Clause-15 of the Letters Patent. Hence, it is the nature of the order that would be relevant to maintain an appeal, unless it is statutorily barred by law.

On a combined reading of the aforesaid decisions two issues would emerge –

i) Could the application under Section 560 be termed as 'appeal'? If so, would an intra-court appeal to the Division Bench be maintainable?

ii) Would the order of the learned Single Judge impugned herein be termed as 'judgment' within the meaning of Clause 15 of the Letters Patent being available for judicial scrutiny by the Division Bench in an intra-court appeal.

To decide the first issue we would seek help from similar provisions under Section 460 and 10F of the said Act of 1956. The first one would provide for an appeal from the order of the Official Liquidator whereas the later one would extend power to the learned Company Judge to hear appeal from any order passed by the Company Law Board. If we closely examine the said two provisions and the rules framed thereunder we would find the word 'appeal' was very much present that was however absent in Section 560 and the rules prevalent therefor. Mr. Banerjee would however contend, Section 560 would relate to 'grievance' which was synonymous with 'appeal'. Both Mr. Mukherjee as well as Mr. Banerjee were ad idem on one issue. Registrar, if satisfied reasonably that a company was not functioning, would write to the Company asking to showcause why their name would not be struck off. Three eventualities would follow; either the Company would not reply or the Company would say, they are carrying on business or they are not. In the first and third eventuality the Registrar would be competent to strike out the name. However, in case of second eventuality the Registrar would have no power to examine the veracity of such assertion, at least Section 560 does not extend so. Mr. Banerjee would rightly contend, the learned Company Judge could not have any power under this provision wider than the original power the Registrar had. Hence, in case of any grievance the learned Company Judge would only examine whether the Registrar rightly applied his mind within the four corners of the said provisions meaning thereby –

i) Has he given notice as contemplated?

ii) Has he waited for the statutory period to get a reply?

iii) In case he receives a reply would the reply suggest striking off as contemplated in the said provision? or,

iv) Has the Registrar ignored the company’s assertion that they were carrying on business?

The Company Court would also not be in a position to examine as to the veracity of the assertion, if any, made by the Company. In short, the power of the Company Court is to examine the administrative action of the Registrar so envisaged under Section 560. If the Court acts within the four corners of the said provisions and does not step out the Court’s action would not be available for appeal as no finality would arrive. Hence, ordinarily no appeal would lie from an order of the company Court under Section 560 not because what Mr. Banerjee would contend, a second appeal would not be maintainable. It would not be maintainable because such exercise of power in that event would not be a 'judgment' within the meaning of Clause 15.

Would all the orders under Section 560 be not available for appeal? The answer would ordinarily be ‘No’. There could be a peculiar situation like the present one that would make the order appealable. The invocation of the power of the learned Company Judge is stipulated under Sub-Section 6 that would enable a company or any member or a creditor feeling aggrieved by the company’s name being struck off, to approach the learned Judge. Hence, the learned Judge would have to be satisfied that pre-requisites were fulfilled meaning thereby the applicant must be either of a company or a shareholder or creditor, any person not falling under any of the three categories would not be entitled to invoke this provision. Hence, the learned Company Judge, to receive an application under Sub-Section 6, must satisfy himself that the petitioner had locus to approach. In case any error was committed on that score that order would definitely be available for appeal as it would reach finality with regard to the locus of the petitioner. In other words, once the learned Judge would entertain the application on merit the status of the petitioner would get established that would be a finality on that score as no one would hence be entitled to question his status. In the present case, the status of the respondent no.1 was very much in dispute. Learned

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Judge possibly overlooked that aspect. The learned Judge by judgment and order dated March 22, 2011 relegated the issue to the Registrar. The Division Bench set aside by observing, the learned Judge would have to decide the issue. Hence, learned Judge could not ignore such issue. Hence, on that score the appeal would be maintainable as it would be a 'judgment' within the meaning of Clause 15 that would be available for intra-court appeal. We thus hold the present appeal maintainable. In a case of the like nature when there was dispute with regard to the status of the petitioner it would be safe for the Court to rely upon the admitted records being the records maintained by the Registrar. From the records produced by ROC appearing at pages 39 to 77 of the paper book (Volume-II), we would find, as on the date of the striking off not a single document would show the nexus of the respondent no.1 with the company. He came in picture in October 2008 through filing of DIN. Documents filed after 2008 would also show, he was Director since 1998 as claimed by him. Such dispute would have to be resolved in an appropriate forum. Section 560 would not give power to the Court to adjudicate as to such dispute. The court would be relying upon the admitted records that would clearly show, respondent no.1 did not feature in the records. His belated plea would also keep him at bay. His prayer for restoration would wait for a decision in his favour on his status by a competent civil court or any other appropriate forum. The learned Judge should not have restored the name of the company at the instance of someone whose identity is yet to be established. We are not sure, who is correct or who is wrong that is to be established at the appropriate forum. So long he cannot establish his status he would not be entitled to invoke the provision of Section 560. The Registrar would admit, the procedural lapses occurred while striking off the name. It is for the Registrar to correct their mistake. Our judgment would not preclude so. We cannot issue any direction at the instance of someone whose locus is yet to be established. The appeal succeeds and is allowed. The judgment and order of the learned Single Judge impugned herein is set aside. The appeal is disposed of without any order as to costs. This order would not otherwise prejudice the right of the respondent no.1 to establish his locus before the Civil Court and thereafter ventilate his grievance under Section 560 or any other appropriate provision in an appropriate proceeding at the appropriate moment. Our observations made herein would certainly not debar him to do so. Urgent certified copy of this judgment, if applied for, be given to the parties on their usual undertaking. Shukla Kabir (Sinha), J. I agree.
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