CASE BRIEF: Mr Pankaj Kumar Mishra v. Registrar of Companies, Mumbai & Others.

CASE NAME	Mr Pankaj Kumar Mishra v. Registrar of Companies, Mumbai & Others.
CITATION	Company Appeal (AT) No.121 of 2020
COURT	National Company Law Appellate Tribunal
BENCH	Justice Jarat Kumar Jain (Judicial), Mr.Balvinder (Technical Assistance)
APPELLANT	Mr Pankaj Kumar Mishra
RESPONDENT	Registrar of Companies of Mumbai and Principal Commissioner of Income Tax
DECIDED ON	September 30, 2020

INTRODUCTION 

The case of Mr Pankaj Kumar Mishra v. Registrar of Companies, Mumbai & Ors. It serves as an important precedent clarifying questions related to the governance of defunct companies in the corporate sector and the rights of individuals who are in connection with companies that are no longer functioning. It involves a company named Viking Ship Managers Pvt. Ltd., whose name was struck off from the list of register of companies by the Registrar of Companies, Mumbai (ROC of Mumbai) because of its failure to meet statutory requirements and its inactivity for a long period of time. After this action by the Registrar of Companies, the Principal Commissioner of Income Tax-15, Mumbai, challenged the ROC order before the National Company Law Tribunal (NCLT). He filed an appeal stating that despite the non-functioning status of the company, it was involved in financial transactions in AY 2011-2012 for which the Company did not file an IT return. As the name of the company was struck off from the register of companies by the ROC of Mumbai, it was difficult to access the defunct company. This led to a huge loss of revenue for the government of India (GOI).  The National Company Law Tribunal (NCLT), in answer to the appeal filed by the Principal Commissioner of Income Tax, passed impugned order to direct the ROC to restore the name of the company, however, no notice was served to the Company.  Mr Mishra alleged that no proper notice was given by the authorities about the proceedings and that he was not involved in functioning of the Company for the years. He appealed to the National Company Law Appellate Tribunal (NCLAT) to look for recourse and highlight the procedural failures to follow the due process. The NCLAT held that the order which was passed by the NCLT was not valid according to the law and, thus, was not sustainable. This was because it was carried on without giving proper notice to the company, and thus the respondent did not have any opportunity to present their side of the case and as they were not heard before the tribunal. This case answers critical questions related to the governance of entities in the corporate sector and provides clear instructions related to the procedural guidelines to be followed when a company is no longer in existence. It also deals with queries related to the responsibilities of the directors of a company in case a company goes defunct. The judgment passed by the NCLAT on 30 September 2024 reinforces the idea that fair representation and the procedural processes should be duly followed in legal proceedings related to defunct companies.

FACTS

This case revolved around the validity of restoring the name of a defunct Company named Viking Ship Managers Pvt. Ltd. The name of this company was struck off from the Register of Companies by the Registrar of Companies, Mumbai. The legal standing behind this act came from Section 248 of the Companies Act, 2013 because it failed to fulfil the requirements mandatory to maintain its operational activity for a long period of time. This action was executed because of the non-filing of returns by the Company. Viking Ship Managers Pvt.Ltd was still being examined in connection to income tax under the Income Tax Act, 1961 and this proves that some financial obligations related to the Company were still pending.  The Tax Department was concerned about the notice to strike off this company’s name from the register of companies and issue a notice under Section 148 in relation to the assessment of the year 2011-2012. The Principal Commissioner of Income Tax filed an appeal to restore the name of the company before the National Company Law Tribunal because it was importance to recover the tax due on this Company. The NCLT, in response to this appeal, allowed it and gave orders to restore the name of the Company. However, no information was provided to Mr Mishra and he was not given any chance to present his case. Mr Pankaj Kumar Mishra then filed an appeal stating that no proper notice was provided to him in relation to the proceedings conducted by NCLT and the company was not involved in any financial activities long before its name was struck off from the register of Companies. He stated that the order of restoration of the Company’s name would bring unnecessary financial obligations on him and that all the liabilities related to taxes was already settled.

ISSUE RAISED

1. Fair Procedural Process- The primary issue that was raised was the lack of due process during the proceedings before the National Company Law Tribunal (NCLT) in relation to the defunct company named Viking Ship Managers PVT Ltd. The company’s name was restored without providing proper notice to Mr Pankaj Kumar Mishra and he was not given any opportunity to represent himself and present his side of the case.

1. Action taken by the Registrar of Companies- Another issue that was raised was the authority exercised by the Registrar of Companies in his act of striking off the name of Viking Ship Managers PVT. Ltd. under section 248 of the Companies Act, 2013. This act of his raises concerns about the balance between regulatory orders and the shares of directors and shareholders.

1. Governance in Corporate setup- Issue of treatment of defunct companies and responsibility of their directors when it ceases its operations was also discussed upon in this case. Treatment of defunct companies relating to their financial obligations and tax liabilities was also cleared.

APPELANT'S ARGUMENTS (Mr. Pankaj Kumar Mishra)

• The plaintiff argued that the National Company Law Tribunal (NCLT) did not provide him opportunity to present his case before restoration of his company’s name. He stated that Section 252(1) of the Companies Act, 2013 which provides for giving fair chance for the parties to represent themselves before any decision is made, was violated as he was not provided any notice regarding the proceedings. 
• The plaintiff contended that the Company was not functioning and had not conducted any financial activities after 2018. It had also not employed any staff and were not in operation and restoring its name would bring penalties and unnecessary burdens of him.
• The plaintiff maintained that restoring the name of the company will cause him financial liabilities and complications. He was not involved in any financial transactions and had step down from his role as a director of the company and thus should not face any unnecessary liability.

RESPONDENT'S ARGUMENTS (Registrar of Companies and Principal Commissioner of Income Tax)

• The Respondents argued that the name of the company had to be restored because its striking off made it difficult to find information about its tax liabilities. They stated that this lead to huge revenue loss for the government
• The Respondents asserted that under Section 252 of the Companies Act, they had the legal backing to restore the name of the company because of its economic activities, and its operational status did not matter.
• The Respondents also revealed that there was no objection to restoration of the name and it suggested a co-operative position.

JUDGEMENT

The National Company Law Appellate Tribunal (NCLAT) gave its judgment in the case of Mr. Pankaj Kumar Mishra v. Registrar on September 30, 2020. The striking off of the name of Viking Ship Managers Pvt.Ltd. by the Registrar of Companies due to its non-functioning status and non-compliance with necessary procedures was the reason for arising of this case. The main issue presented by the Appellant, Mr Pankaj Kumar Mishra was that the principles of justice were violated as he was not given proper notice to notify him about the proceedings being carried on by the Principal Commissioner of Income Tax and the NCLT. The NCLAT gave the judgment that the order passed by the NCLT was not legally valid and did not follow the principles of Natural Justice as it did not give Mr. Pankaj Kumar Mishra an equal opportunity to present his case before the tribunal, which led to a violation of his rights. The Tribunal also made it clear that directors and shareholders of a defunct company may face unnecessary financial liabilities if it is restored without providing them with proper notice. The decision given by the National Company Law Tribunal was set aside by the NCLAT as it was not sustainable in law. The case was transferred back to the Tribunal, and it was directed that the order must be given according to section 252 of the Company Act, 2013, and the previous order must be absolutely void.

CONCLUSION

This case backs the concept that it is important to follow the necessary procedures in order to give all the parties involved a fair chance to present their case. This ensures that the principles of natural justice are duly followed in the corporate sector, where the proceedings impact their rights and duties.  The importance of transparency and fairness during legal processes was underscored in the order passed by the NCLAT to invalidate the order given by the NCLT for the restoration of the defunct company Named Viking Ship Managers Pvt.Ltd.  An important precedent requiring authorities to follow the procedural and regulatory process when making decisions that will affect the directors and stakeholders of a company was established. This ruling reinforced the idea that individuals must not face arbitrary actions when they did not get a fair chance to present their side of the case and thus, contributing to a more fair and impartial judgement.