* THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY + Company Application No.568 of 2011 % 12-07-2011 # Sono Printers Pvt. Ltd., 702, Raghava Ratna Towers, ….Applicant Vs. $ Registrar of Companies, Hyderabad. …Respondents ! Counsel for the Applicant: Sri V.Ravinder Rao Counsel for the Respondent : Assistant Solicitor General of India < Gist: > Head Note: ? Cases referred: THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Company Application No.568 of 2011 (Dated : 12-07-2011) Between: Sono Printers Pvt. Ltd., 702, Raghava Ratna Towers, ….Applicant A n d Registrar of Companies, Hyderabad. …Respondent THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Company Application No.568 of 2011 ORDER: This application has been taken out by Sono Printers Private Limited under Section 560(6) of the Companies Act, 1956 read with Rule 9 of the Companies (Court) Rues, 1959 to set aside the order of the respondent in striking off the name of the applicant company from the Register and to restore the same to the Register in the same position as if the name of the applicant company has not been struck off. 2. Background facts, in a nutshell, leading to filing of this application, are: - The applicant company was incorporated with the Registrar of Companies on 17.11.1989 with Registration No.01-10600 of 1989-90. The authorised share capital of the applicant company was Rs.5,00,000/- divided into 50,000 equity shares of Rs.10/- each. All the shares were being held by three Directors. One of the objects of the applicant company was to carry on business of printers, lithographers, stereo-typers, electrotypers, photographic printers etc. The applicant company planned and ventured to establish the printing unit with technical knowhow to undertake printing activity on various surfaces/materials more particularly plastic. M/s.Sonoplast Pvt. Ltd was incorporated with the object of manufacturing disposal cups, containers and sachets. The viability of the applicant company depended on the manufacturing activity/production capacity of Sonoplast Private Limited. Soon after establishing the manufacture unit of the applicant company before its commercial production commenced, M/s.Sonoplast Pvt. Ltd faced financial hurdles and its activity could not take off. As a result, the applicant company could not undertake any industrial/business activity and remained in dormant state. While so, the respondent sent a notice dated 09.3.2007 to enquire/ascertain whether the applicant company was in operation or carrying any business. Subsequent thereto, the respondent sent another notice dated 10.9.2007 as required under Section 560(2) of the Companies Act proposing to publish a notice in the official gazette. The applicant company could not sent any reply to the said notice. Therefore, the respondent herein issued a final notice as required under sub-section (5) of Section 560 of the Companies Act striking off the applicant company from the Register and declaring it to have been dissolved. Hence, this application seeking the prayer stated supra. It is trite to refer paragraphs 5 and 6 of the affidavit filed in support of the application, which read as hereunder:- “5. It is respectfully submitted that the Directors of the applicant company had been in pursuit of suitable business activity including the originally proposed printing business to achieve their avowed objective as indicated in the Memorandum of Association. The applicant company is now successful in securing necessary business tie-ups to make the proposed printing unit a viable one. Accordingly the applicant company proceeded further and made substantial investments in the building, plant and machinery. It has obtained necessary permission/building plans from MIDC and completed the construction of the building. Documentary evidence in the form of building permissions and completion certificate are filed herewith as Annexures P-6 to 8. The applicant company has also obtained necessary water connection and consent order from Maharastra Pollution Control Board on 29.12.10 for establishing the unit. Copies of the said permission/consent order are filed herewith as Annexures P.9 &10. 6. I submit that the applicant company has bonafide invested substantial amount in the building, plant and machinery. The efforts it made in identifying suitable consumers/work providers to realize the prospect of making it a profitable business venture fructified. The Board of Directors of Applicant Company passed a resolution dated 11.04.11 to make the present application before this Hon’ble court to revive the applicant company. Restoration of the applicant company to the Register does not cause any prejudice to any person. A copy of the said resolution is filed herewith as Annexure P-11.” 3. Notice to the respondent came to be ordered on 30.4.2011. The respondent filed counter resisting the application. Mr. M.V.Chakranarayan, Registrar of Companies, Andhra Pradesh, Ministry of Corporate Affairs, Government of India has sworn to the affidavit filed on behalf of the respondent. It is stated in the counter affidavit that the applicant company has not responded to the notices and thereupon, the name of the applicant company came to be struck off from the Register of the Registrar of Companies under Section 560(5) of the Companies Act on 29.4.2008. It is also stated in the counter affidavit that investment of the amount in building, plant and machinery is not legally tenable since as on the date of approval by Maharashtra Industrial Development Corporation (MIDC) [i.e., 12.8.2010] the applicant company was struck off from the Register of the respondent under Section 560(5) of the Companies Act. The name of the company in the permission letter issued by MIDC and the name of the applicant company as per the entries in the Register of the Registrar of Companies differs. 4 The applicant company placed on record reply affidavit. It is stated in the reply affidavit that the applicant company spent Rs.9,21,036/- for obtaining necessary permission from the MIDC and for construction of the shed. All such investment would constitute paid up capital contributed by Directors which would be far in excess of statutory requirement of Rs.1,00,000/-. The mandatory requirement pursuant to amendment of Section 3 of the Act could not be complied with in time since the applicant company was in dormant state without undertaking any activity for reasons beyond its realm. In some of the documents addressed by MIDC, the name of the applicant company is wrongly mentioned as “sona printers” instead of “sono Printers Private Ltd.”. and it is purely a typographical mistake by the MIDC. 6. Heard Sri V.Ravinder Rao, learned counsel appearing for the applicant and learned Assistant Solicitor General of India appearing for the respondent. 7. Learned counsel appearing for the applicant submits that the viability of the applicant company depended on the manufacturing activity/production capacity and the business potential of M/s.Sonoplast Pvt. Ltd and as the said Sonoplast Pvt. Ltd faced financial hurdles and could not take off its’ activity, the applicant company could not start it’s activity/business and thereby, it was in a dormant state without undertaking any activity. He would also submit that the applicant company having been successful in securing necessary business tie-ups to make the proposed printing unit viable spent an amount of Rs.9,21,036/ for obtaining necessary permissions from the MIDC and for construction of a shed. Learned counsel refers the particulars of expenditure detailed in annexure to the reply affidavit. The amounts spent by the applicant for construction of shed etc., are as hereunder:- “Expenditure on Plot T,34, MIDC, NANDED Sl.No. Receipt No. Date Amount 1 MIDC, NANDED Receipt No.31979 25/03/2010 Rs.89,409/- 2 MIDC Through Bank of Maharastra 07/06/2010 Rs.61,425/- 3 MIDC Receipt No.34970 16/078/2011 Rs.2,375/- 4 MIDC Receipt No.34905 13/07/2011 Rs.1,575/- 5 MIDC Receipt No.35256 06/08/2000 Rs.525/- 6 MIDC Receipt No.160496 12/08/2010 Rs.990/- 7 MIDC Receipt No.35997 25/11/2010 Rs.2214/- 8 MIDC Receipt No.45226 16/12/2010 Rs.2923/- 9 Construction of shed Rs.7,59,600/- Total : Rs.9,21,036/- Nine lacs twenty one thousand thirty six only Learned Assistant Solicitor General submits that the applicant company came to be dissolved as on 29.4.2008 and any correspondence with the MIDC subsequent to 29.4.2008 does not deserve for consideration and so also the amounts spent by the applicant company, if any. A further contention has been advanced by the learned counsel that the applicant company having been silent for repeated notices issued by the respondent, cannot be permitted to contend that it corresponded with the MIDC for allotment of plot and invested amount of Rs.9,21,036/- for construction of the shed etc. 8. Before dwelling deep into the rival contentions of the parties, I deem it appropriate to refer sub-section (6) of Section 560 of the Companies Act, which reads as hereunder:- “560(6) If a company, or any member or creditor thereof, feels aggrieved by the company having been struck off the register, the 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 Tribunal may, by 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 “ 9. It is well settled that the power of the Court to restore a company to the register is a discretionary power, which it will exercise for a substantial reason and not as a ritual or a ceremony. Ever since its incorporation, i.e., for the last twenty years, the applicant company has never met either in shareholders or in a directors meeting and it has not filed its balance sheets or bank accounts before the Registrar of Companies. All that the Registrar has under Section 560 of the Companies Act 1956 to do is to satisfy himself whether the company is carrying on business or is in operation. Putting the most liberal interpretation and construction on the words "carrying on business" or "in operation" used in that section, I do not think that the applicant company can be said to satisfy any tests of business or operation. It never carried out its business operations since the date of its’ incorporation. The Registrar gave every opportunity by public and private notices to the persons interested to show cause to the contrary or to satisfy that the company was carrying on any business or was in operation. The applicant company has not chosen to respond to the notices sent by the respondent-Registrar of Companies. On facts of this case, the Registrar was quite justified in striking off the applicant company from the Register. 10. Section 560 (5) of the Companies Act, 1956 provides that when the name is struck off from the register, and the notice thereof published in the official Gazette, then the Company stands dissolved on the publication in such official Gazette. The special statutory provisions of Section 560(5) of the Companies Act 1956 appear to indicate that the dissolution of the Company thereunder does not mean a total and complete extinction of the Company for all purposes but that it exists for the special purpose expressly mentioned in proviso (a) of Section 560 (5) of the Act as if the company had not been dissolved. Apart from the court's power to declare the dissolution of a company void under Section 559, the power of the court to restore the company, is really provided in Sub-section (6) of Section 560 of the Companies Act, 1956. The reason for restoration must be sought in the satisfaction of the court that the company, at the time when struck off, was carrying on business or in operation or otherwise that it was just that the company should be restored to the register. The time of the striking off is the crucial point. At that crucial point of time it is plain and obvious on the facts as I have analysed that no business was being carried on by the applicant company. On the interpretation of Sub-section (6) of Section 560 of the Companies Act, 1956, I am of the opinion that this power of the Court to restore the Company is discretionary. The Court's discretion must be well reasoned. One of such reasons for exercising the discretion in favour of restoring a Company must, in my view, be that after restoration the Company will be in a position to carry on the business of the Company. Otherwise, such order for restoration will be a mere ritual and an idle ceremony. 11. The conduct of the applicant company after the order of striking off from the Register of the Registrar of Companies indicates that its objective is to get plot from MIDC and not with a purpose of commencing business. When the applicant company is able to correspond with the Corporation for allotment of land, nothing prevented the applicant company to respond to the notices issued by the Registrar of Companies. The very conduct of the applicant company in being silent and not responding to the notices does not deserve for any discretionary order, as provided under sub-section (6) of Section 560 of the Companies Act. 12. Hence, the Company Application is devoid of merits and accordingly, the same is hereby dismissed. _____________________ B.SESHASAYANA REDDY, J Dt.12-07-2011 Note:- L.R.Copy to be marked (B/o) RAR THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Company Application No.568 of 2011 (Dated : 12-07-2011)