M/s. Simplex TMC Private Limited vs M/s. Simplex Naigai Castings Pvt. Ltd.
CA No.62 of 2023 in CP No.115/BB/2022
Facts:
1. Respondent Nos.2, 3 and 4 herein have filed the main Company Petition bearing C.P. No.115/BB/2022 titled ‘Tokyo Foundry Company Ltd. & Ors. v. Simplex Naigai Castings Pvt. Ltd. & Ors.’ u/s 241 and 242 of the Companies Act, 2013 inter alia alleging oppression and mismanagement by the Applicants and others in Respondent No. 1 Company, pending before this Tribunal.
2. Respondent No. 1 Company (‘R-1 Company’) ceased business operations amid disputes between Applicant Group and Non-Applicants, resulting in a deadlock over its functioning and management. Non-Applicants’ Petition alleging oppression and mismanagement by Applicants is baseless due to the Company’s closure and absence of business activities for years.
3. Application is filed by the Respondent seeking order to dismiss the captioned petition for being devoid of merits and non-maintainable.
Issue: Whether the application can be allowed ?
Argument:
Applicant:
1. Counsel submitted that R-1 Company, having been struck off by the ROC, no longer exists, and thus, no relief u/s 241 and 242 of the Companies Act, 2013 can be granted, as the Tribunal’s orders cannot be implemented against a non-existent entity. It was submitted that no notice was issued for IA No. 72/2021 in CP No. 20/BB/2019. They were deprived of the opportunity to respond, and the IA’s contents are wholly denied and furthermore mentioning of the said IA in the present Petition holds no significance. The Petitioners persistently imposed their unilateral decisions on the Applicants herein, disregarding the mutual understanding for joint decision-making as equal shareholders in the JV Company.
2. Counsel submitted that Petitioners sought financial records since 2017, with representatives inspecting accounts during visits to India. Contrary to their claim, Petitioners had ample access to financial information through Mr. Salim Khan’s correspondence and meetings. While any shareholder can file Petition for Company revival, it is stated that no derivative action can be brought for a Company which is non-existent as in the present case.
Respondent:
1. Counsel submitted that Respondent Nos. 2 to 5 managed R-1 Company in violation of Companies Act, 2013 and its Articles of Association and Memorandum of Association. Instances of oppression and mismanagement by them are outlined in the Company Petition and Rejoinder. They are responsible for day-to-day finance, accounting, tax matters, etc., as per the JV Agreement.
2. It was submitted that Mr. Salim Khan, representing the Simplex group, handled R-1 Company’s financial matters without the Petitioners’ knowledge. The Petitioners discovered this when Mizuho Bank contacted them about monthly ECB reports, stating they had been receiving reports from Mr. Salim Khan until February, 2022. Mr. Salim Khan allegedly claimed the Company was in the process of liquidation, a claim which the Petitioners deny.
3. It was submitted that section 252 of the Companies Act, 2013 permits a member aggrieved by a company’s name being struck off to apply to the Tribunal for restoration. The Tribunal may restore the name if satisfied that the company was in operation at the time or if restoration is just. Rule 87A of the NCLT Rules mandates filing pending financial statements and annual returns upon restoration.
4. Counsel submitted that Company Petition filed under Sections 241 and 242 of the Companies Act highlights oppression and mismanagement by Respondent Nos. 2 to 5, detrimental to R-1 Company and Petitioners. Despite the Company’s name being struck off, the Tribunal retains authority to adjudicate the petition. Section 248(8) of the Companies Act confirms the Tribunal’s power to wind up a Company even if its name has been struck off
Decision: NCLT
Rationale:
1. NCLT relying om various decisions held that Company Petition bearing CP No.115/BB/2022 is not maintainable and accordingly, CA No.62 of 2023 is hereby allowed and CP No.115/BB/2022 is liable to be dismissed as not maintainable. However, the Petitioners in the main C.P. are at liberty to seek restoration of the Respondent No.1 Company u/s 252 of the Companies Act, 2013 in accordance with Law; for seeking further relief if they so desire.
Order:
