The National Company Law Appellate Tribunal has clarified that the mere delay in filing an application for restoration under Section 252 of the Companies Act, 2013, cannot be a ground to deny revival if the company was actively operating at the time of its striking off. The judgment reinforces that substantive evidence of operational status must prevail over procedural technicalities.
Background & Facts
The Dispute
The appellant, Mr. V Sundar, a shareholder of Thirupur Sri Mahaganapathy Apparels Private Limited, sought restoration of the company’s name from the Register of Companies after it was struck off under Section 248 of the Companies Act, 2013. The company had been incorporated under Section 7 of the Act and was engaged in textile manufacturing. Its name was removed following a notice issued by the Registrar of Companies on 14.11.2011, citing non-compliance with statutory obligations and lack of business activity.
Key Facts
- The company obtained a credit facility of Rs. 45 Lakhs from United Bank of India on 16.07.2004, secured by hypothecation.
- On 05.08.2014, the company purchased immovable property using funds from the loan, as evidenced by a registered sale deed.
- The bank issued a notice for default on 08.09.2010, alleging non-repayment of dues.
- The company faced financial distress due to declining business and proposed settlement through asset sale.
- The Registrar of Companies issued a notice under Section 560(1) of the Companies Act, 1956, on 15.09.2011, seeking compliance.
- The company’s name was struck off by order dated 29.03.2012.
- The appellant filed an application under Section 252 for restoration on 10.01.2023.
- The appellant submitted balance sheets for financial years 2010-11 to 2019-20, showing assets and liabilities, but these were rejected by the Tribunal for lack of Chartered Accountant certification.
- The company had not filed annual returns or financial statements for several years, but maintained active bank accounts and property holdings.
Procedural History
- 14.11.2011: Registrar issued notice under Section 560(1) of the Companies Act, 1956.
- 29.03.2012: Company’s name struck off from Register under Section 560(3) of the Companies Act, 1956.
- 10.01.2023: Appellant filed application under Section 252 for restoration.
- Date unknown (prior to 06.04.2026): National Company Law Tribunal dismissed the application, holding that the appellant failed to prove the company was operational at the time of striking off and that the application was delayed.
- 06.04.2026: NCLAT heard the appeal and delivered judgment.
The Parties' Positions
Appellant’s Position: The company was operational at the time of striking off, evidenced by property acquisition in 2014, active bank accounts, and balance sheets showing assets. The absence of CA-certified balance sheets does not negate operational status. Delay should not be fatal where substantive rights are involved.
Respondent’s Position: The company failed to file annual returns or financial statements for years, lacked statutory compliance under Sections 159 and 220 of the Companies Act, 1956, and showed no activity on the MCA portal. The application was filed after a 10-year delay, and no justifiable reason was provided.
Relief Sought
The appellant sought quashing of the Tribunal’s order, restoration of the company’s name to the Register of Companies, and directions to the Registrar to process the application on merit, considering all documents submitted.
The Legal Issue
The central question was whether Section 252 of the Companies Act, 2013, permits denial of restoration solely on grounds of delay and rejection of un-certified balance sheets, when the company demonstrably held assets and was engaged in business at the time of striking off.
Arguments Presented
For the Appellant
The appellant’s counsel relied on NCLAT’s own judgment in CA (AT) (CH) No. 66/2023, which emphasized the tribunal’s duty to support revival of companies where possible. He argued that the balance sheets, though not CA-certified, were internally consistent, reflected asset ownership, and were corroborated by the sale deed and bank records. The delay was attributable to financial distress and settlement negotiations with the bank, not negligence. The Tribunal erred in treating certification as a sine qua non for proving operational status.
For the Respondent
The Registrar contended that the company had not complied with statutory obligations under Sections 159 and 220 of the Companies Act, 1956, and had no filings on the MCA portal for over a decade. The absence of audited financials rendered the balance sheets unreliable. The 10-year delay in filing the application was unexplained and prejudicial to public interest, as the company’s name remained in limbo, affecting third-party creditors and regulatory clarity.
The Court's Analysis
The NCLAT observed that the Tribunal’s reasoning was internally inconsistent. While the Registrar’s own objection cited non-compliance under Section 560(1) of the Companies Act, 1956, the Tribunal relied on Section 252(3) to reject the application on grounds of non-operation - a provision that requires proof of operational status at the time of striking off, not at the time of application.
"The objection filed by the Registrar of Companies justifying the striking off... is in contradiction to the stand taken by the Ld. Tribunal."
The Court noted that the company had acquired immovable property in 2014 - a clear indicium of business activity - and that the balance sheets, though uncertified, were not fabricated. The Tribunal’s refusal to consider them on technical grounds ignored the substance of the evidence. The Court held that the requirement of CA certification under Section 134 of the Companies Act, 2013, applies to filings with the Registrar, not to evidentiary submissions in restoration proceedings.
The Court further emphasized that the purpose of Section 252 is remedial and not punitive. The appellate tribunal must adopt a liberal approach to restoration, particularly where assets exist and creditors may be protected through revival. The delay, while notable, was not absolute or malicious, and was contextualized by the company’s financial hardship and settlement efforts.
The judgment in CA (AT) (CH) No. 66/2023 was cited to affirm that courts and tribunals must strive to preserve corporate entities where there is a reasonable basis for revival, rather than extinguish them on procedural grounds.
The Verdict
The appellant succeeded. The NCLAT set aside the impugned order dated prior to 06.04.2026, quashed the refusal to restore the company, and remanded the matter to the National Company Law Tribunal for fresh consideration. The Tribunal was directed to evaluate the balance sheets, sale deed, bank records, and other documents submitted by the appellant on their merit, without insisting on CA certification, and to pass an order in accordance with law within 8 weeks.
What This Means For Similar Cases
Operational Status Trumps Certification Formalities
- Practitioners may now submit unaudited balance sheets, property records, bank statements, and transaction histories as evidence of operational status under Section 252.
- Rejection of documents solely for lack of CA certification is legally untenable unless the statute explicitly mandates it.
Delay Is Not Fatal if Substantive Activity Exists
- A delay of several years in filing a restoration application does not automatically disentitle the applicant if the company was active at the time of striking off.
- Courts must examine the reason for delay - financial distress, settlement negotiations, or administrative neglect - and weigh it against the public interest in preserving corporate entities.
Restoration Is a Remedial Remedy, Not a Punitive One
- Tribunals must adopt a liberal, purposive interpretation of Section 252, favoring revival where assets, liabilities, and stakeholder interests are identifiable.
- The burden shifts to the Registrar to prove the company was defunct at the time of striking off, not to the applicant to prove continuous compliance.
Corporate Revival Supports Creditors
- Restoration enables creditors to recover dues through asset realization, aligning with the insolvency framework’s objective of maximizing value.
- Practitioners should advise clients to preserve all financial records, even during downturns, as they may become critical in restoration proceedings.
The Limits of Registrar’s Discretion
- The Registrar cannot rely on MCA portal inactivity alone to justify striking off if the company held assets or conducted transactions.
- Judicial review is available where the Registrar’s grounds for striking off contradict the tribunal’s reasoning.
