NCLT Delhi: Application U/s 7 IBC Cannot Be Initiated Against A Struck-off Company; NCLT cant Suo Motu Restore The Name

The National Company Law Tribunal (“NCLT”), Delhi Bench, comprising of Manni Sankariah Shanmuga Sundaram (Judicial Member) and Dr Binod Kumar Sinha (Technical Member) has held that any application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) cannot be initiated against a company struck off by Registrar of Company (“RoC”) and the power to restore the name of such a company under section 252 of Companies Act, 2013 (“Companies Act”) is not a Suo motu power of NCLT. Background Facts In the year 2010, the Greater Noida Industrial Development Authority (“GNIDA”) floated a Scheme for the Allotment of large group Housing/Builders Residential Plots to M/s. Earth Infrastructure Limited (“EIL/Lead Member”) and its other two subsidiaries. Accordingly, a Special Purpose Vehicle in the name of M/s. Earth Towne Infrastructure Private Limited (“Corporate Debtor/Respondent”) was incorporated by the members and the GNIDA, in terms of Clause C-8(e) of the brochure, that had been approved in the name of the Corporate Debtor on 20.08.2010. A Development Agreement was entered into by the Corporate Debtor and EIL wherein the EIL was to develop the project land. The Corporate Debtor would remain the lease right holder of the project land and EIL would have the permission to enter into the project land for carrying out the construction activities as a Licensee. Mr Satyabrata Mitra and 145 other home buyers (“Applicants”) entered into Agreements with the Corporate Debtor for the purpose of Allotment of Apartments in the Project and paid an amount of Rs. 28.64 Crores in favour of the Corporate Debtor and EIL. The date of completion of the Project was mentioned as 31.12.2021, however, the applicants have not received the possession. The Applicants therefore filed an application under Section 7 for the initiation of a Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor. NCLT Verdict NCLT observed that as per the Master Data of the Corporate Debtor as available on the Website of the Ministry of Corporate Affairs, the name of the Corporate Debtor has been “Struck off‟ from the register of the Company by the RoC. NCLT further observed that the consequences of Striking off the name of the company is that the business entity has been removed from the official Register of Companies and is no longer legally recognized as a valid business or capable of holding any asset in its name. The legal recognition of the Company pursuant to strike off is lost, the certificate of incorporation is deemed to be cancelled and the Company stands dissolved under Section 248(5) of the Companies Act and the discharge of liability towards its outstanding debt by its members, directors, managers in terms of Section 248(7) of the Companies Act. NCLT further held that due to the action of striking off, taken against the Corporate Debtor the Roc, having jurisdiction under the provisions of the Companies Act, the legal existence of the Corporate Debtor itself has ceased and the certificate of incorporation has also been cancelled. Further, according to the provisions of Section 248(8) of the Companies Act, 2013, the Tribunal may order winding up of a Company, the name of which has been struck off, but no power can be exercised by the Tribunal for Insolvency Resolution under the Insolvency and Bankruptcy Code, 2016, unless the name of the Company is restored to the Register of Company in terms of procedure laid down under Section 252 of the Companies Act, 2013. The power of the Tribunal to restore the name of a struck off company under Section 252 of the Companies Act, 2013 is not a suo motu power, but is to be exercised either on the basis of an appeal filed by any aggrieved person under Section 252 (1) or to be exercised on an application filed by the Companies, its members or creditors or workmen aggrieved by the order of striking off under Section 252(3) of the Companies Act, 2013. NCLT thus concluded by directing the Applicants to take appropriate steps for the restoration of the name of the Corporate Debtor in the Register of Companies, in order to file an application under Section 7 of IBC. Case Title: Mr. Satyabrata Mitra & Ors. Vs Earth Towne Infrastructure Pvt Ltd Case No: IB/196/ND/2023 Click Here To Read/Download Order

NCLT Delhi: Application U/s 7 IBC Cannot Be Initiated Against A Struck-off Company; NCLT cant Suo Motu Restore The Name

Pragya Kriti

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