IN RE MORNING STAR (P. ) LTD. , TRIVANDRUM v. . — 1969 DIGILAW 165 (KER)

Judgment :- 1. This is a petition by the Income-tax Officer, Company Circle, Trivandrum under S.439 of the Companies Act, 1956 (hereinafter referred to as the 1956 Act) read with S.433 and 560 (5) (b) and 560 (6) thereof, to wind up an incorporated company by name Morning. Star (Private) Ltd. The company was assessed to income-tax by the petitioner for the assessment years 1957-58 to 1963-64 both inclusive. It did not pay the tax due under these assessments; and penalties were imposed for default by the petitioner. A sum of Rs. 59,460-42 is now due from the company under the aforesaid assessments by way of arrear of tax, interest thereon and penalties imposed for non-payment of tax. The petitioner issued several notices calling upon the company to pay the above amount; but he did not succeed in recovering anything. This petition has, therefore been filed to wind up the company. 2. It appears that the company was not carrying on business for sometime; and the Registrar of Companies took action under S.560 of the 1956 Act. The name of the company was struck off the register, and the Registrar of Companies published a notice thereof in the Gazette of India dated 28 81965. This application is resisted by one of the shareholders, who was a director of the Company. According to him, the company was carrying on the business of passenger transport; and due to the nationalisation of that business, the company lost all its business. Hence it was struck off the register, and dissolved under S.560 (5) of the 1956 Act. He contends that this petition is not maintainable as the company has ceased to exist consequent on the dissolution. 3. The question for decision is whether a company which has been struck off the register and dissolved under S.560 (5) of the 1956 Act can be wound up. The learned counsel for the petitioner contends that clause (b) of the proviso to S.560(5) applies to the case; and the company is liable to be wound up, even though it has been struck off the register and dissolved. The learned counsel for the petitioner contends that clause (b) of the proviso to S.560(5) applies to the case; and the company is liable to be wound up, even though it has been struck off the register and dissolved. Sub-section (6) of S.560 empowers a court to order the name of the company, which has been struck off the register, to be restored to the register on the application of the company or any member or the creditor thereof if the court is satisfied that the company was, at the time of striking off carrying on business or in operation or otherwise that it is just that the company be restored to register. It is not disputed that, if the company is thus restored to register, it can then be wound up. But the contention is that the company was not carrying on business or in operation at the time of striking off, and that there are no grounds justifying the restoration of the company to the Register. Sub-sections (5) and (6) of S.560 read as follows: "560. (5) At the expiry of the time mentioned in the notice referred to in subsection (3) or (4), the Registrar may, unless cause to the contrary is previously shown by the Company, strike its name off the register, and shall publish notice thereof in the official Gazette; and on the publication in the official Gazette of this notice, the company shall stand dissolved: Provided that (a) the liability, if any, of every director, the managing agent, secretaries and treasurers, manager or other officer who was exercising any power of management, and of every member of the company, shall continue and may be enforced as if the company had not been dissolved; and (b) nothing in this sub-section shall affect the power of the Court to wind up a company the name of which has been struck off the register. (6) If a company, or any member or creditor thereof, feels aggrieved by the company having been struck off the register, the Court, on an application made by the Company, member or creditor before the expiry of twenty years from the publication in the official Gazette of the notice aforesaid, may, if satisfied that the company was, at the time of the striking off. carrying on business or in operation or otherwise that it is just that the company be restored to the register, order the name of the company to be restored to the register and the Court may, by the order, give such directions and make such provisions as seem just for placing the company and all other persons in the same position as nearly as may be as if the name of the company had not been struck off." Sub-section (5) corresponds to S.247 (5) of the Indian Companies Act, 1913 (hereinafter referred to as the 1913 Act), the only difference being that clause (b) of the proviso to sub-section (5) of S.560 did not exist in the 1913 Act. S.247 (5) of the 1913 Act read as follows: "At the expiration of the time mentioned in the notice the Registrar may unless cause to the contrary is previously shown by the company, strike its name off the register, and shall publish notice thereof in the local official Gazette, and, on the publication in the local official Gazette of this notice, the company shall be dissolved: Provided that the liability (if any) of every director and member of the company shall continue and may be enforced as if the company had not been dissolved." S. 353 (5) of the English Companies Act of 1948 is the same as S.560 (5) or the 1956 Act. 4. The question whether a company which had been struck off the register and dissolved under S.247 (5) of the 1913 Act can be wound up arose incidentally for consideration before a Division Bench of the Judicial Commissioner's Court of Nagpur in Shekh Kandu v. Berar Ginning Co. AIR. 1928 Nagpur 194. The application for winding up in that case was made by a shareholder; and it was dismissed by the District Judge on the ground that, after the company was struck off the register, a shareholder automatically ceased to be a member of the company, and he was not therefore entitled to apply under S.247 (5) of the 1913 Act. The application for winding up in that case was made by a shareholder; and it was dismissed by the District Judge on the ground that, after the company was struck off the register, a shareholder automatically ceased to be a member of the company, and he was not therefore entitled to apply under S.247 (5) of the 1913 Act. In dealing with the above ground, which the court rejected, it stated as follows: "The proviso to S.247 (5), Companies Act shows clearly that a company can be wound up after it has been dissolved." This question arose for decision before a Division Bench of the Madras High Court consisting of P. V. Rajamannar, C. J. and Venkitarama Iyer, J. in Sri. Nataraja Textile Mills Ltd. v. 5. V. Angidi Chettiar ILR. 1955 Madras 635. It was contended in that case that the absence of a provision similar to proviso (b) of S.353 (5) of the English Companies Act of 1948 in S.247 (5) of the 1913 Act, made all the difference between the English law and the Indian law on the subject, and that under the Indian Law, there was no scope to wind up a company which has been dissolved, consequent on its name being struck off the register. The contention was rejected; and in doing so, the Court referred to the above Nagpur decision. Venkitarama Iyer, J. who delivered the judgment of the Court, stated as follows: "S. 353 (5) (b) only makes explicit what is really implied in S.353 (5) (a). If the directors and members of the company continue to be liable, as if the company had not been dissolved, it must follow that the Court must have jurisdiction to order winding-up. if that is necessary for enforcing those obligations. As argued by Mr. Veeraswami. the effect of a striking off of a company under S.247 is not the same as dissolution thereof on the completion of the administration of the concern under S.194. if that is necessary for enforcing those obligations. As argued by Mr. Veeraswami. the effect of a striking off of a company under S.247 is not the same as dissolution thereof on the completion of the administration of the concern under S.194. When a company is struck off under S.247 (5), there may be assets to be realised and debts to be discharged and for that purpose there might be need for administration; and the effect of the provision in S.247 (5) that for certain purpose the company shall continue as if it had been dissolved, is to invest the Court with jurisdiction under S.162 to order its winding-up The only decision which has been cited before us bearing on this question is Shekh Kandu v. Berar Ginning Co. f AIR. 1928 Nag. 194). There it was held that a company could be wound up even after it had been struck off under S.247 (5). We are accordingly of opinion that even apart from an order restoring the company to the register under S.247 (6), the Court has jurisdiction under S.162 to order winding up of the concern.” I respectfully agree with the view expressed in the above decision and the reasons stated therein. In the above case there was no dispute that, if there was in the Indian statute a provision similar to proviso (b) of S.353 (5) of the English Act, the court would be entitled to wind up a company dissolved on account of its name being struck off the register. As already stated, such a provision has now been incorporated in S.560(5) of the 1956 Act; and it must therefore follow that even the argument advanced before the Madras High Court is not available in this case. 5. The learned counsel for the contesting director, however, submits that clause (b) of the proviso to S.560 (5) of the 1956 Act refers only to a company, whose name has been struck off the register and not to a company whose name was struck off and dissolved by publishing a notice thereof in the Official Gazette. 5. The learned counsel for the contesting director, however, submits that clause (b) of the proviso to S.560 (5) of the 1956 Act refers only to a company, whose name has been struck off the register and not to a company whose name was struck off and dissolved by publishing a notice thereof in the Official Gazette. His contention is that striking off the register and dissolution consequent on the publication of the notice are different things happening at different stages, and that, while clause (b) permits a winding up of a company which has been struck off the register, there is no scope for winding up a company dissolved consequent on the stricking off, as the company ceases to exist on the dissolution. This contention has also been well-met in the Madras decision. The dissolution of the company under sub-section (5) is the consequence of the publication of the notice that it has been struck off the register. Yet there may be assets and liabilities of the company to be administered. What clause (b) of the proviso provides is that nothing in this sub-section, namely the fact that the company has been struck off the register and that it has been dissolved consequent on the publication of the notice thereof, shall affect the power of the court "to wind up a company, the name of which has been struck off the register". A company dissolved under sub-section (5) is certainly "a company, the name of which has been struck off the Register". To say that clause (b) of the proviso would not apply to such a company, in respect of which notice of striking off has been published would be adding such a restriction to the power of the Court, which has been expressly saved by the above clause of the proviso for obvious reasons. The argument of the learned counsel for the contesting director, if accepted, would defeat the remedy available to an aggrieved person to invoke the jurisdiction of the court to wind up a company whose name has been struck off the register. No period is prescribed for publication of the notice of striking off. The argument of the learned counsel for the contesting director, if accepted, would defeat the remedy available to an aggrieved person to invoke the jurisdiction of the court to wind up a company whose name has been struck off the register. No period is prescribed for publication of the notice of striking off. Normally, the Registrar should do it as soon as the name is struck off; and this would mean that the power of the court to wind up such a company, which is expressly saved by clause (b) of the proviso, can scarcely be invoked by an aggrieved or interested person. Such a construction of the clause is contrary to the obvious legislative intent of the said provision, which, as stated by the Madras High Court, only makes explicit what is really implied by clause (a) of the proviso. Sub-section (6) of S.560 of the 1956 Act empowers the court to restore to register a company whose name has been struck off the register on an application made by any of the persons mentioned therein within 20 years of the date of publication of the notice of striking off; and the court can do it, if it is just to do so. This sub-section does not refer to the dissolution of the company consequent on the publication of the notice; and it cannot be contended that an application under this sub-section is not maintainable, as the company is not existent consequent on the dissolution. If that were so, such a contention is not available for the same reason against the exercise of the power of the court, expressly saved by clause (b) of the proviso to sub-section (5) for the winding up of a company whose name has been struck off the register. On reading sub-sections (5) and (6) of S.560, it appears to me clear that the court's power to wind up a company whose name has been struck off the register is not affected by the publication of the notice of striking off by the Registrar. 6. In the result I order that Morning Star Private Ltd., (the company concerned in this case) be wound up. Parties will bear their own costs.