Shell companies that were struck off seek restoration
In the latter part of last year, the Ministry of Corporate Affairs had struck off around 2.24 lakh companies for remaining inactive for a period of two years or more.
Many companies t hat had been struck off from the register of companies, following their identification as “shell companies”, have now approached the National Company Law Tribunal (NCLT) demanding that their names be incorporated again in the register of companies.
In the latter part of last year, the Ministry of Corporate Affairs (MCA) had struck off around 2.24 lakh companies for remaining inactive for a period of two years or more. These companies were suspected to be shell companies. After this, restrictions were imposed on the operation of their bank accounts and sale of movable and immovable properties until they are restored.
The MCA’s decision was based on data received from 54 banks post demonetisation. These 2.24 lakh companies were struck off as part of a special drive conducted by a special task force constituted by the Prime Minister’s Office under the joint chairmanship of revenue secretary and secretary, corporate affairs. The task force was in-charge of overseeing the drive against such defaulting companies with the help of various enforcement agencies.
These companies were removed from the register of the companies under section 248 of the companies act. Under this section, the Registrar can remove name of company from register of companies if he has reasonable cause to believe that that the company has failed to commence its business within one year of its incorporation or the company is not carrying on any business or operation for a pe- riod of two immediately preceding financial years.
Sources familiar with the development said that many of the companies which were described as “shell” were not engaged in any illegal activity but were deemed as “shell” because of the fact that they were not carrying out any business and had also not taken the status of a “dormant” company under section 455.
Among the handful of the more than 2 lakh companies, which were found to be blatantly violating laws, included one that had Rs 0 in its account before de- monetisation but withdrew more than Rs 2000 crore post demonetisation from the accounts that were linked to its books.
These companies have approached the NCLT under section 252 of the Companies Act.
Under this the aggrieved company can approach the tribunal within three years of an order of the registrar of the company removing the company from the companies register. If the tribunal is satisfied that the company’s name was removed erroneously or due to incorrect and incomplete information or is unjusti- fied it may order the restoration of the company’s name in the register. The MCA, which had received correspondence from different stake holders over the “arbitrary” way in which many companies and their directors were declared “wrong”, was forced to issue an order in the last week of December 2017 titled “Condonation of Delay Scheme, 2018”, under which it gave a three months time period to the defaulting companies to clear their defaults within the time period, which on 28 March was extended till 30 April.