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Basanti Cotton Mills (1998) Private Limited & Another v/s Nirendranath Kar & Others

    C.A. No. 95 of 2011 Connected with C.P. No. 432 of 2010
    Decided On, 22 March 2011
    At, High Court of Judicature at Calcutta
    For the Petitioners: Mr. D. Basak, Mr. A. Roy, Advocates. For the Respondents: Mr. Ratnanko Banerjee, Mr. S.S. Banerjee, Mr. A.K. Mitra, Ms. Shyamali Banerjee, Advocates.

Judgment Text

This is an application for vacation of my order made on 6th October, 2010 made in an application under Section 560(6) of the Companies Act, 1956. The company concerned is Basanti Cotton Mills (1998) Private Limited. Before that it was Basanti Cotton Mills Private Limited. The change of name was from or about10th March, 2000. Two directors of the Company applied before the Registrar on 2nd December, 2003 for striking off the name of the Company under Section 560 of the said Act. It did so apparently under a Simplified Exit Scheme of the Government of India. (this scheme has not been placed before me.) The name of this company was struck off the register, by the Registrar of Companies on 27th January, 2006. Now, the mandate of section560 of the Companies Act, 1956 is that if the Registrar is satisfied that a company is not carrying on any business he will send out a notice to the company for an explanation why its name should not be struck off. Then there is a provision for publication of a notice in the Official Gazette. Unless sufficient cause is shown by the company the Registrar can strike off it name. Sub section 6 is very important. It has given a right to a company or any member or creditor to challenge the order striking off the name of the company, before the High Court. Now, that order striking off the name of the company on 27th January, 2006 was challenged in 2010 by the Respondent No.1 representing himself to be the director of the Company, under section 560(6) of the Companies Act for setting aside such action made by the Registrar of Companies.

In that application the Central Government, according to usual procedure, filed an affidavit. It admitted in that affidavit that the required procedure for striking off the name of the company as provided in section 560 had not been followed. On the basis of such admission of irregularity, this court by its order dated 6th October, 2010 set aside such decision, but reserved right to the Registrar to take a fresh action according to law. Now, this application has been preferred by three persons describing themselves to be the holders, jointly, of 650 out of 700 issued and paid up shares of this company. They say that almost the entire shareholding of Basanti Cotton Mills Private Limited was held by the applicants as follows:

Applicant No. 1 - 300 shares

Applicant No. 2 - 300 shares

Applicant No. 3 - 50 shares

They say that the Respondent No.1 at whose instance the order dated 6th October, 2010 was passed had and has no interest in the company. He had some concealed motives in seeking an order for striking off the name of the company. The bone of contention seems to be Swan Mills Limited, renamed as Swan Energy Limited. Now, it is represented that the design in reviving Basanti Cotton Mills Private Limited is to regularize a purported retransfer of liabilities of Swan Mills to this company. Therefore, two points are raised in this application. First of all, the Respondent No. 1 had no locus to file the Section 560(6) application. Therefore, on that ground the order made on 6th October, 2010 should be set aside. It is also submitted that the persons properly in control of the company had applied before the Registrar of companies for striking off its name pursuant to the said scheme of the Central Government. The name was struck off on 27th January, 2006, for very good reasons as the company was not doing any business and its assets and liabilities were nil. Thus, there was no merit in the application, as well. Furthermore, such an application ought not to have been entertained after a period of four years of the decision of the Registrar to strike off the name of the company. On behalf of the Respondent No.1 who had moved this court to obtain the order of 6th October, 2010, it was submitted that he was still the director and the application was competently made. Moreover, when the Central Government had admitted that there was procedural irregularity the court had passed a right order setting aside the striking off of the name of the company. The Registrar was not prevented from taking fresh action in accordance with law. Furthermore, when there is such a serious dispute as to who is in control of the company, the Registrar ought not to have disturbed the register at all.


I am quite satisfied that there is quite a serious dispute as to who are in control and management of the company. There are disputes between rival persons. Now, in this particular case the Registrar?s satisfaction was based on the application made by the company represented by a few persons whose standing is disputed by the other group. There is admission on the part of the Registrar that the proper procedure as provided in section 560 was not followed. Now, suppose an application is apparently made by a company represented by some persons holding themselves to be its directors and claiming that the Company is doing no business and on the other hand another group claims to represent the company in law and asserts that the company is doing business, what is the Registrar to do in such circumstances?

In my opinion, if the issue can be decided without prolixity of evidence, the Registrar is empowered to decide who in law is in control to the company and whether the company is doing any business at all, upon hearing the rival parties and giving them an opportunity of filing written representations. But, in any case, if deciding the above issues calls for substantial, oral and documentary evidence, the Registrar should relegate the parties to a suit in a Court of law. With the above observation, I relegate this matter to the Registrar to consider according to those observations whether the company is doing any business, under section 560(6) of the Companies Act. Now, the question is whether my order made on 6th October, 2010 should be retained or should be set aside. I am of the opinion that while remitting the order back to the Registrar the status quo which is continuing since 2006 in the records of the Registrar, i.e., the company?s name is struck off should be restored. The reason for such restoration is that the balance of convenience is in favour of passing such order as such position has remained unaltered since 2006. However, if th

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e Registrar, relegates the parties to a suit it willrestore the name of the Company in the register, because, in that event, it will follow that whether the Company is doing or not doing business cannot be established. Thus, the order dated 6th October, 2010 is set aside. Therefore, this application is disposed of with the directions as above. The Registrar of companies is directed to make a decision upon a proper approach being made to him by any party, on the basis of this order, within a period of eight weeks from the date of making thereof. Urgent certified photocopy of this judgment and order, if applied for, be supplied to the parties subject to compliance with all requisite formalities.