IBC Proceedings Maintainable Even If Company's Name Struck Off From The Register Of Companies: NCLAT

IBC Proceedings Maintainable Even If Company

The NCLAT has reiterated that an application under Sections 7 and 9 of the Insolvency and Bankruptcy Code, 2016 ('I&B Code') for the initiation of 'Corporate Insolvency Resolution Process' (CIRP) is maintainable even if the name of the Company has been struck-off by the Registrar of Companies.

The Appellate Bench was hearing an appeal filed by Elektrans Shipping Pvt. Ltd., challenging the initiation of CIRP on an application by the operational creditor, Mr. Pierre D'silva. Elektrans submitted that the admission of insolvency proceedings was erroneous as, the Company's name was struck off by the Registrar of Companies from the ROC.

The Bench headed by Justice S J Mukhopadhayay, relied on its previous judgment [Mr. Hemang Phophalia vs. The Greater Bombay Co-operative Bank Limited and Anr.] to decide the maintainability of the proceedings under the I&B Code.

The Registrar of Companies is empowered under Section 248 of the Act to remove the name of the Company from the 'Register of the Companies' (ROC).

On reading of section 248 of the Act, NCLAT observed that before passing an order for removing the name from the ROC, the Registrar must satisfy himself that sufficient provision has been made for realisation of all amount due to the company and for the payment or discharge of its liabilities and obligations, within a reasonable time. Furthermore, it was also clarified that, the liability of the persons associated with management of the company, shall continue and could be enforced as if the company had not been dissolved.

The Appellate Bench opined that as per section 252 of the Act, an application against the Registrar's decision to remove the name, can be made to the NCLT to restore the position of the Company and its management, before its name was removed.

The application under 252(3) of the Act can be filed by the affected Company, or any member or creditor or workman thereof, feeling aggrieved by the removal of the name from the ROC.

If the Tribunal deems it just, it may direct the Company and all other persons to be placed in the same position, as closely as possible, before the name of the Company had been struck off from the ROC.

The Bench also noted that sub-clause 7 of section 248 of the Act clearly provides that, the existing liability of every the ex-management of a Company will continue, even after the removal of the Company's name from the ROC.

In view of the observations, the NCLAT held that, once the NCLT has admitted an application for insolvency proceedings, the position of the 'Corporate Debtor' (Company) and its ex-management, was deemed to have been restored in terms of Section 252 of the Act.

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