IN THE HIGH COURT OF JUDICATURE AT PATNA Company Petition No.7 of 2010 ====================================================== M/S Raj Chiktsa Pvt. Ltd. Boring Patliputra Road, P.S. S.K.Puri, Patna through its Ex-Director-Member, Narendra Ahuja .... .... Petitioner/s Versus The Registrar of Companies, Bihar and Jharkhand, 4th Floor, „A‟ Wing, Maurya Lok Complex, Dakbunglow Road, Patna-800 001 .... .... Respondent/s ====================================================== Appearance : For the Petitioner/s : Mr. Ranjit Sahay & Mr. Brajesh Sahay For the Registrar of Company : Mr. Rashid Izahar For the Intervenor : Mr. Satyabir Bharti & Mr. Alok Chandra ====================================================== CORAM: HONOURABLE MR. JUSTICE RAMESH KUMAR DATTA ORAL ORDER 29 19-10-2012 Heard learned counsel for the petitioner and learned counsels for the Registrar of Companies and the Intervenor. The application has been filed under Section 560(6) of the Companies Act, 1956 for restoration of the petitioner-Company to the register of companies by setting aside the Gazette Notification published in the Gazette of India dated 2nd – 8th June, 2007. The petitioner-Company was incorporated under the Companies Act, 1956 on 22.4.1988 and an amount of Rs. 80 lacs was sanctioned by the Bihar State Credit and Investment Corporation (BICICO) in the year 1990 to the Company for starting a Hospital in the name of the Company. The said venture Patna High Court COM PET No.7 of 2010 (29) dt.19-10-2012 2 / 17 2 incurred huge loss and had to be closed in the year 1995. As on 31.3.1995 the liability of the Company towards BICICO was Rs. 59,38,571/-. BICICO, acting under Section 29 of the SFC Act, 1951, took over the assets/ possession of the said Hospital on 16.2.2002. The assets were advertised for sale but it is stated that the said sale has not been finalized and a writ application with respect to the same has been admitted for hearing by this Court on 13.9.2010 and is pending for hearing. It may be pointed out that the land on which the Hospital‟s building was constructed, does not belong to the Company but was given on lease for 25 years ending in the year 2015 by the owners of the land who were also the major shareholders and their family members are the Directors of the Company. In the said lease deed it was stated that lessees have first right of extension of lease but if the lease was ultimately not extended the building would pass on to the lessor. In the year 2009 OTS Scheme was announced by BICICO and pursuant to the same the Company is stated to have applied under the OTS Scheme and paid an amount of Rs. 87,67,055/- to BICICO as per the terms of the OTS Scheme, 2009. Thereafter No Dues certificate has been issued by BICICO on 31.3.2010. It is stated in the application that the amount has been arranged by the petitioner-Company for making payment of the same under the OTS Scheme, 2009. After getting the said No Dues certificate the Company learnt about the pendency of a writ petition being CWJC No. 6170/2006 by a proposed buyer and prayed to be impleaded as respondent in the case on 9.4.2010. In the said writ petition the intervenor Dr. Sandhya Ahuja, wife of late Dr. Ramesh Ahuja, who was one of the three members of the Patna High Court COM PET No.7 of 2010 (29) dt.19-10-2012 3 / 17 3 petitioner Company at the time of signing of the Memorandum of Association and also the full brother of other two members, namely, Surendra Ahuja and Narendra Ahuja, brought certain facts on the record from which the petitioner learnt that it had been struck off from the register of companies by the Registrar of Companies in May, 2007. It is the further stand of the Company that notices as contemplated under Section 560(1), (2) and (3) of the Companies Act, 1956 were never received by the petitioner-Company at any point of time and had that been done, they would have taken immediate remedial measures under the Act. Thereafter two of three surviving members of the Company convened an informal meeting on 22nd August, 2010 and again on 14th September, 2010 and expressed desire to get the name restored in the register of the Companies and accordingly the present petition has been filed. In the counter affidavit and supplementary counter affidavits filed on behalf of the Registrar of Companies, it is stated that the Company had not submitted the statutory returns after 1990 in the office of Registrar of Companies; hence, the Registrar of Companies sent the statutory notices under Section 560 of the Act firstly on 29.11.2006 under Section 560(1) of the Act and thereafter second notice was issued on 21.2.2007 by registered post. Finally, the notice under Section 560(3) of the Act was issued on 29.3.2007 and upon failure of the petitioner- Company to respond to any of the notices, by the Gazette notification dated 2-8.6.2007 the name of the Company was struck off from the register of Companies. It is thus, the stand in the counter affidavit that the Company had not been carrying on Patna High Court COM PET No.7 of 2010 (29) dt.19-10-2012 4 / 17 4 business since 1995 and not submitted the statutory returns from 1990 and has rightly been struck off from the register of Companies. The intervenor-respondent, Dr. Sandhya Ahuja has stated that she is a member and shareholder of the petitioner- Company and co-owner of the piece of land leased out for a period of 25 years. It is stated in the application that the Company petition filed under Section 560(6) of the Companies Act through Narendra Ahuja who has sworn affidavit on behalf of the Company is not maintainable as it is not supported by the resolution of the Company. It is further stated that her husband was the original promoter and Director of the Company who was ultimately ousted from the management of the Company and went back to United Kingdom where he was a practicing Doctor. Subsequently, due to humiliation by the other two members- directors of the Company, he suffered a massive heart attack and died on 27.2.1995. It is submitted that after the other two promoters, namely, Narendra Ahuja and Surendra Ahuja, took over the management of the Company under their absolute control they indulged in all sorts of illegal activities including the widely reported “Kidney Scam‟ which led to the ultimate closure of the Hospital in the year 1996. It is further stated that the Directors of the Company, Narendra Ahuja and Surendra Ahuja, apart from being involved in the nefarious activities of illegal kidney transplantation leading to lodging of criminal case in which they are absconding, are also involved in a case of forgery and cheating giving rise to Gardanibagh (Shastri Nagar ) P.S. Case No. 403/2002 instituted under Sections 419, 420, 467 and 468 of the Indian Penal Code in which also they are absconding Patna High Court COM PET No.7 of 2010 (29) dt.19-10-2012 5 / 17 5 and their properties have been attached. It is further stated that the Company is a chronic defaulter in complying with various provisions of the Companies Act, 1956 and not even a single provision has been complied by them since last 17-18 years which has been enumerated as follows:- (i) The Company has not maintained the books of accounts and the balance sheet as required under Section 209 of the Companies Act. (ii) The Company has not held its annual general meeting for the last more than 17-18 years as required under Section 166 of the Companies Act. (iii) The Company has failed to file its Annual Return as required under Section 160 of the Companies Act. (iv) The Company has not appointed its statutory Auditor as required under Section 224 of the Companies Act. (v) The Company has failed to hold its regular meetings. (vi) The Company is not in business or in operation since last more than 14 years and it is a dead Company without transacting any business and is unable to do so in the given facts and circumstances of the case. It would be manifest from the report prepared by Shri Subodh Prasad, Company Secretary on 10.7.2007 which has been annexed. In the further affidavits filed by the intervenor- respondent, an agreement of sale dated 1.11.2008 has been brought on the record showing that the assets and liabilities of the Company and the land have already been sold by the co-owners of the land and the shareholders of the Company, namely, (1) Patna High Court COM PET No.7 of 2010 (29) dt.19-10-2012 6 / 17 6 Late Mrs. Rajkumari Ahuja, wife of Late Ram Prasad Ahuja, (2) Surendra Ahuja (HUF) son of Late Ram Prasad Ahuja, (3) Mrs. Madhu Ahuja, wife of Mr. Surendra Ahuja, (4) Mr. Narendra Ahuja (HUF) son of Late Ram Prasad Ahuja and (5) Mrs. Anita Ahuja wife of Mr. Narendra Ahuja by an agreement dated 1st November, 2008 much before the instant Company petition came to be filed by Narendra Ahuja on behalf of the Company. It is stated that the entire assets and liabilities of the Company including land over which the building of the Company is constructed has already been sold in favour of one Mr. Mohan alias Mr. Sanjay Kumar and the sellers have also received consideration money against the sale of the assets and liabilities of the Company as well as the land. It is further alleged that the same has been done ignoring the interest of the intervenor- respondent though her share in the company is 16.41% and she is also co-owner of 1/3rd area of the land. It is further stated that left with no option the intervenor-respondent, Sandhya Ahuja has also sold her 1/3rd share of the land to Mr. Mohan @ Sanjay Kumar by another agreement of sale dated 14.2.2012. It is asserted that in view of the aforesaid facts, the Company is non-operational and not complying with the provisions of the Companies Act as also the entire assets and liabilities of the Company as well as land have already been sold and thus Company petition does not survive and is fit to be rejected. Learned counsel for the petitioner submits that the name of the Company has been struck off from the register of Companies without complying with the mandatory provisions of Section 560 of the Companies Act. It is contended that the notice Patna High Court COM PET No.7 of 2010 (29) dt.19-10-2012 7 / 17 7 under sub-section (1) is not proper in the sense that it does not indicate that it is a notice under Sub-section (1) rather is a direction to show cause as to why action should not be taken under the said sub-section. With respect to notice under sub- section (3) of Section 560 it is stated that no time is mentioned in the notice. It is thus submitted by learned counsel that the mandatory provisions of sending the notices before striking off the name of the Company, having not been complied with, the Gazette Notification dated 2-8.6.2007 is fit to be quashed and the name of the petitioner-Company restored to the register of Companies. It is further submitted by learned counsel that the notices have not been sent at the registered office of the Company which is located in Ashiana Towers, Exhibition Road Patna whereas the notices have been sent at Boring Patliputra Road where the Hospital of the Company is located and which is not its registered office. It is also the stand of learned counsel that the Company having paid a huge amount of Rs. 87,67,055/- to BICICO under the OTS Scheme in July, 2009 would suffer greatly if the name of the Company is not restored to the register of companies. Learned counsel for the Registrar of Companies, on the other hand, submits that the decision to strike off the name of the Company from the Register of companies is fully justified considering the fact that no statutory returns have been filed by the Company since 1990 and further admittedly the Company has not been carrying on its business since 1995. Learned counsel for the intervenor also opposes the Patna High Court COM PET No.7 of 2010 (29) dt.19-10-2012 8 / 17 8 prayer for restoration of the name of the Company in the register of Companies stating that apart from being gross defaulter by not only filing statutory returns but violating each and every provision of the Companies Act within two years of the incorporation, there can be no justification for restoring the Company‟s name in the register of Companies as it is required under Section 560 of the Companies Act that the Company must be carrying on its business on the date its name is removed from the register of Companies. It is urged that admittedly the Company has not been functional for the last 17 years. Learned counsel also submits that the Company petition itself has been filed by gross suppression of material facts including the sale of the assets and liabilities of the Company as also the land over which the building of the Company stands. For the said reason, it is urged by learned counsel for the intervenor-respondent that it is not a case where the equitable principle of it being just and proper to restore the name of the Company in the register of companies can be invoked by the petitioner-Company. It is also pointed out by learned counsel for the intervenor that under the terms and conditions of the lease deed on the termination of the lease in 2015 the building constructed over the leased out land will pass on to the lessors and thus there would be no place for the Company to carry on any business. It is also the stand of the intervenor that instead of acting in the interest of the Company the other promoters/Directors have acted contrary to it by suo motu selling not only the land over which the building of the Company stands but also the assets and liabilities of the Company. It is contended Patna High Court COM PET No.7 of 2010 (29) dt.19-10-2012 9 / 17 9 with reference to the terms and conditions of the agreement for sale that it was the purchaser under the agreement for sale who had to clear the dues of BICICO under the OTS Scheme and as a matter of fact, it is the purchaser who has cleared all the dues; all of which facts have been suppressed and false statement has been made that the Company has taken loan to clear the said dues. It is also the contention of learned counsel for the intervenor that the Company petition itself is not maintainable on behalf of the Company as it is not supported by any common resolution of the Board of Directors. Learned counsel also submits that provisions of Section 560 are not mandatory and what is required is a substantial compliance of the same and it is for the petitioner to show as to what prejudice was caused to it if there has been some technical non-compliance of the provisions. In support of the same, learned counsel relies upon a decision of the Supreme Court in the case of Dove Investments (P) OLD. And others Vs. Gujarat Industrial Investment Corpn. And another, etc: (2006) 2 SCC 619, in paras 15,16,17 and 18 of which it has been held as follows:- “15. In Mohan Singh V. International Airport Authority of India: (1997) 9 SCC 132 this Court observed: (SCC p.144, para-17) “The distinction of mandatory compliance or directory effect of the language depends upon the language couched in the statute under consideration and its object, purpose and effect. The distinction reflected in the use of the word „shall‟ or „may‟ depends on conferment of Patna High Court COM PET No.7 of 2010 (29) dt.19-10-2012 10 / 17 10 power. In the present context, „may‟ does not always mean may. May is a must for enabling compliance with provision but there are cases in which, for various reasons, as soon as a person who is within the statute is entrusted with the power, it becomes duty to exercise. Where the language of statute creates a duty, the special remedy is prescribed for non- performance of the duty. In Craies on Statute Law (7th Edn.), it is stated that the court will, as a general rule, presume that the appropriate remedy by common law or mandamus for action was intended to apply. General rule of law is that where a general obligation is created by statute and statutory remedy is provided for violation, statutory remedy is mandatory. The scope and language of the statute and consideration of policy at times may, however, create exception showing that the legislature did not intend a remedy (generality) to be exclusive. Words are the skin of the language. The language is the medium of expressing the intention and the object that particular provision or the Act seeks to achieve. Therefore, it is necessary to ascertain the intention. The word „shall‟ is not always decisive. Regard must be had to the context, subject-matter and object of the statutory provision in question in determining whether Patna High Court COM PET No.7 of 2010 (29) dt.19-10-2012 11 / 17 11 the same is mandatory or directory. No universal principle of law could be laid in that behalf as to whether a particular provision or enactment shall be considered mandatory or directory. It is the duty of the court to try to get at the real intention of the legislature by carefully analyzing the whole scope of the statute or section or a phrase under consideration.” 16. Recently, a three-Judge Bench in Kailash V. Nanhku: (2005) 4 SCC 480 while interpreting Order 8 Rule 1 of the Code of Civil Procedure was of the opinion: (SCC p.496, para-33) “33. As stated earlier, Order 8 Rule 1 is a provision contained in CPC and hence belongs to the domain of procedural law. Another feature noticeable in the language of Order 8 Rule 1 is that although it appoints a time within which the written statement has to be presented and also restricts the power of the court by employing language couched in a negative way that the extension of time appointed for filing the written statement was not to be later than 90 days from the date of service of summons yet it does not in itself provide for penal consequences to follow if the time schedule, as laid down, is not observed. From these two features certain consequences follow.” 17. However, even if a statute is directory in nature Patna High Court COM PET No.7 of 2010 (29) dt.19-10-2012 12 / 17 12 the same should be substantially complied with. What would satisfy the requirements of substantial compliance, however, would depend upon the fact of each case. 18. The appellants do not state as to how they would be prejudiced by the act of Respondent 1 in not filing the application for registration of transfer of shares within the aforementioned period. The appellants have, indisputably, filed suits. In para 10 of the plaint filed by Appellant 1, in OS No. 3742 of 2003, it was categorically stated: “……. Even though the plaintiff cannot have an objection on the transfer, the plaintiff is concerned about the value at which the second defendant is attempting to transfer the equity shares in its favour….” Learned counsel also relies in this regard upon a decision of the Calcutta High Court in the case of U.N.Mandal‟s Estate Private Ltd.: AIR 1959 Calcutta 493, in paras 30,31,35 and 36 of which it has been held as follows:- “30. Ever since 1929 and for these last 30 years the Company has never met either in a shareholder‟s or in a directors meeting, has not filed for more than 10 years any summaries or lists of shareholders, has shown no balance sheet or bank accounts; it has treated Company‟s properties as though they were properties belonging to the individual members of the family; sales, transfers and various dealings with Patna High Court COM PET No.7 of 2010 (29) dt.19-10-2012 13 / 17 13 these properties have taken place for all over these 30 years as though the individual members were owners thereof. If such a Company is not defunct. I do not know which is. 31. All that the Registrar has under S. 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 this Company can be said to satisfy any tests of business or operation. It may have done so at the very inception, but it long ceased to do so. The Registrar gave every opportunity by public and private notices to persons interested to show cause to the contrary or to satisfy him that in fact the Company was carrying on any business or was in operation. No such cause was ever shown. I feel that on the facts of this case the Registrar was quite justified in striking off this Company from the register. 35. Apart from the court‟s power to declare the dissolution of a Company void under S. 559, the power of the court to restore the Company, is really provided in sub-sec. (6) of S. 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 Patna High Court COM PET No.7 of 2010 (29) dt.19-10-2012 14 / 17 14 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 analyses, that no business was being carried on by this Company. 36. Lastly, on the interpretation of sub-sec. (6) of S. 560 of the Companies Act, 1956, I am of the opinion that this power of the Court to restore the Company is discretionary. This is not a mandatory provision. No doubt, 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. In this case on the facts, I have not the slightest doubt and hesitation in my mind that even if I had restored the Company, it would be impossible for this Company to carry on any business having regard to the attitude and the disputes between the members of the family. I am, therefore, of the opinion that even if I were otherwise satisfied that the Company could be restored to the register, I would not do so for the practical reason that it would be idle to make such an order in the context of the present facts of this case. “ Lastly, learned counsel refers to the annexure Patna High Court COM PET No.7 of 2010 (29) dt.19-10-2012 15 / 17 15 enclosing minutes of the first meeting of the Company which shows that it has been held on 28.4.1988 at 5.00 P.M. at the registered office of the Company at Boring Patliputra Road and it is thus submitted that wrong statement has been made that notices have not been sent to the registered office of the Company. I have considered the rival submissions of the parties. From a perusal of Section 560(6) of the Companies Act, it is evident that the Court must be satisfied that the Company at the time of striking