Court’s Decision:
The Delhi High Court dismissed the civil revision petition filed by the petitioners/defendants, affirming that the striking off of the respondent company’s name from the Register of Companies does not automatically render the civil suit filed by the respondent/plaintiff invalid. The court held that the respondent company can still pursue its legal remedies despite being struck off the register, as per Section 250 read with Section 248(6) of the Companies Act, 2013.
Facts:
- The respondent/plaintiff filed a civil suit in 2016 for the recovery of ₹6,73,740/- against the petitioners/defendants under Order XXXVII of the Code of Civil Procedure, 1908 (CPC), which was later converted into an ordinary civil suit.
- The petitioners/defendants moved an application under Order VII Rule 11 of CPC, seeking dismissal of the suit on the ground that the respondent’s name was struck off from the Register of Companies by the Registrar of Companies, Delhi, vide notification dated 08.08.2018, under Section 248(5) of the Companies Act, 2013.
- The trial court dismissed the application, holding that the suit’s continuation is saved by the provisions of Section 250 and the proviso to Section 248(6) of the Companies Act, 2013.
Issues:
Whether the civil suit instituted by a company, whose name has been struck off from the Register of Companies under Section 248(5) of the Companies Act, 2013, is maintainable in light of the provisions under Sections 248 and 250 of the Act.
Petitioner’s Arguments:
- The petitioners contended that once the name of the respondent/plaintiff has been struck off, it ceases to exist as a legal entity and cannot pursue the pending legal proceedings.
- They argued that the term ‘due’ in Section 250 of the Companies Act should be interpreted to mean a crystallized amount that is legally recoverable and not merely an amount claimed.
- The petitioners relied on Tower Vision India Pvt. Ltd. v. Procall Private Limited, where the court held that damages become a debt due only upon adjudication and cannot be considered ‘due’ unless legally established.
Respondent’s Arguments:
- The respondent argued that the civil suit was filed in 2016, much before the striking off of the company’s name in 2018, and the continuance of the suit is protected under the proviso to Section 248(6) and Section 250 of the Companies Act.
- The respondent emphasized that the statutory provisions save the right of the company to continue with legal proceedings to recover amounts due even after the company is struck off the register.
Analysis of the Law:
- The court examined Section 248(6) of the Companies Act, which provides that, despite the striking off, the company’s assets shall be made available for the payment or discharge of its liabilities even after the date of the order removing the company’s name.
- Section 250 of the Act further provides that the company shall remain operational for the realization of dues and the payment or discharge of liabilities.
- The court clarified that the word ‘due’ in Section 250 cannot be restricted to admitted debts or crystallized amounts. Instead, it covers any claims arising from a debtor’s obligation, irrespective of whether the amount has been legally established or is in dispute.
Precedent Analysis:
- The court referred to Tower Vision India Pvt. Ltd. v. Procall Private Limited to distinguish between ‘due’ and damages, reaffirming that ‘due’ does not require crystallization for the purpose of Section 250.
- The decision in Indian Explosives Ltd. v. Registrar of Companies was considered, where it was held that even a creditor holding an arbitral award must move for restoration of the company’s name to enforce the award.
Court’s Reasoning:
- The court applied the golden rule of statutory interpretation, concluding that the plain language of Section 250 allows a dissolved company to continue legal actions for recovering amounts due to it.
- It noted that the legislative intent behind the proviso to Section 248(6) and Section 250 is to protect the rights of companies to realize their dues even after their names have been struck off.
Conclusion:
The Delhi High Court upheld the trial court’s order and dismissed the petition, affirming that the respondent/plaintiff is legally entitled to pursue its pending civil suit despite being struck off the Register of Companies. The striking off does not invalidate or render the civil proceedings flawed, as the company remains alive for the limited purposes outlined under Section 250 of the Companies Act.
Implications:
This decision clarifies that even when a company is struck off from the Register of Companies, its legal rights to recover dues and the rights of creditors to pursue liabilities against it remain intact. The court’s interpretation ensures that legal remedies are not frustrated merely due to the administrative act of striking off a company’s name.
