Insolvency and BankruptcyNCLATRulingsTribunal & Appellate

NCLAT states that application for CIRP against company whose name is struck off from the Registrar is maintainable.

Mr. Hemang Phophalia vs. The Greater Bombay Co-operative Bank Limited

NCLAT holds that the application under Sections 7 and 9 of the I& B will be maintainable against the Corporate Debtor despite striking off the name of the Corporate Debtor from the Registrar of Companies.

The present Appeal has been preferred by Mr. Hemang Phophalia (the Appellant), Ex-Director and Shareholder of the ‘Corporate Debtor’ against the impugned order of the AA (National Company Law Tribunal), Mumbai Bench by which it admitted the application for initiating ‘Corporate Insolvency Resolution Process’ against Penguine Umbrella Works Private Limited (‘Corporate Debtor’) filed by the Greater Bombay Co-operative Bank (Financial Creditor) under Section 7 of the Insolvency and Bankruptcy Code, 2016 ( ‘I&B Code’) alleging default in repayment of Rs.9,11,08,439.37/- including interest and other charges. Appellant submits that name of the ‘Corporate Debtor’ was struck-off from the Register of the Companies under Section 248 of the Companies Act, 2013 (hereinafter referred to as the ‘Companies Act’), therefore, the application under Section 7 against non-existent Company (‘Corporate Debtor’) is not maintainable.

NCLAT notes that on account of no employee working, or the Shareholder(s) or Director(s) ceased to be Shareholder(s) or Director(s), cannot be a ground to reject application under Sections 7 or 9 of the I&B Code. NCLAT finds that the issue in the present matter is whether an application under Section 7 or 9 for initiating ‘Corporate Insolvency Resolution Process’ is maintainable against a Company/ ‘Corporate Debtor’, if the name of the Company/ ‘Corporate Debtor’ is struck-off from the Register of the Companies. NCLAT refers to the relevant provisions of the Companies Act, 2013 and observes that after removal of the name of the Company from the Register of the Company for the purpose of right of realization of all amount due to the Company and for the purpose of payment or discharge of its liabilities or obligations of Company continues.

NCLAT states that the Tribunal is the Adjudicating Authority in terms of Section 60(1) of the I&B Code and hence, on one side it plays role of ‘Adjudicating Authority’ and on the other ‘Tribunal’ under the Companies Act.  Therefore, if an application is filed by the ‘Creditor’ (‘Financial Creditor’ or (‘Operational Creditor’) or workman (‘Operational Creditor’) before the expiry of twenty years from the publication in the Official Gazette of the Notice under subsection (5) of Section 248, it is open to the Adjudicating Authority to give such directions and make such provisions as deemed just for placing the name of the Company and all other persons in the same position nearly as may be as if the name of the Company had not been struck off from the Register of Companies. NCLAT further states that as per the amended Clause (94-A) of Section 2 of the Companies Act, 2013, it is clear that the Company, whose name has been removed from the Register of the Companies can be liquidated under the I&B Code. 

NCLAT finds that the name of the Company having been struck-off, the Corporate Person cannot file an application under Section 59 for Voluntary Liquidation.  In view of the provisions of Section 250 (3) read with Section 248 (7) and (8), NCLAT holds that the application under Sections 7 and 9 will be maintainable against the ‘Corporate Debtor’, even if the name of a ‘Corporate Debtor’ has been struck-off. NCLAT further holds that the Adjudicating Authority who is also the Tribunal is empowered to restore the name of the Company and all other persons in their respective position for the purpose of initiation of ‘Corporate Insolvency Resolution Process’ under Sections 7 and 9 of the I&B Code based on the application, if filed by the ‘Creditor’ (‘Financial Creditor’ or ‘Operational Creditor’) or workman within twenty years from the date the  name of the Company is struck off under sub-section (5) of Section 248. In the present case, application under Section 7 having admitted, the ‘Corporate Debtor’ and its Directors, Officers, etc. deemed to have been restored in terms of Section 252(3) of the Companies Act. Hence, NCLAT dismisses the appeal.

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