Substantial Investment in Balance Sheet Essential for Revival: NCLT Chandigarh

Substantial Investment in Balance Sheet Essential for Revival: NCLT Chandigarh

Introduction

The National Company Law Tribunal (NCLT), Chandigarh Bench has held that a company cannot be revived under Section 252(3) of the Companies Act, 2013 in the absence of substantial investment reflected in its balance sheet.

Factual Background

The petitioner, Gurmeet Singh, filed a petition under Section 252(3) seeking restoration of a company’s name that had been struck off. He argued that the company had substantial investments/assets and that revival would enable it to file all pending statutory documents with the Registrar of Companies (RoC), Punjab and Chandigarh, along with payment of requisite fees.

The petitioner also claimed that the company had investments in Stylam Industries Ltd., a listed company, which indicated continuing business interests.

Procedural Background

The Tribunal examined whether the petitioner had established just and equitable grounds for restoration, as required under Section 252(3), and whether the company’s financial position supported revival.

Issues

1. Whether a company can be revived under Section 252(3) of the Companies Act without substantial investment reflected in its balance sheet?

2. Whether the petitioner has demonstrated just and equitable grounds for restoration of the company’s name?

Contentions of the Parties

• Petitioner’s Contention: The petitioner argued that the company’s alleged substantial investments in Stylam Industries Ltd. justified its revival.
• RoC’s Contention: The Registrar of Companies objected, submitting that the petitioner had failed to provide proof of ongoing business activity or sufficient financial disclosures to justify revival.

Reasoning and Analysis

The Bench comprising Mr. Harnam Singh Thakur (Judicial Member) and Mr. Shishir Agarwal (Technical Member) held that:

• The applicant’s reliance on Urvashi Infrastructure was misplaced, as no succession certificate or supporting documents were produced. The death certificate was also filed belatedly and without any affidavit regarding other heirs.
• No valid balance sheet or financial statements were placed on record to substantiate the claim of substantial investments.
• The mere assertion of shareholding in Stylam Industries Ltd., without financial disclosures or evidence of ownership at the time of striking off, was held to be insufficient.
• The Tribunal observed that despite the RoC’s objections and absence of opposition from the Income Tax Department, the petitioner had failed to prove ongoing business activity or any other just and equitable ground for revival.

Implications

This ruling emphasizes that revival petitions under Section 252(3) require concrete financial evidence. Mere claims of investments or shareholding, without substantiating records such as balance sheets or audited financials, will not suffice.

Outcome

The NCLT dismissed the petition, holding that the petitioner had failed to establish just and equitable grounds for revival of the company.

Representation

• In this case the petitioner was represented by Mr. Vishav Bharti Gupta and Ms. Ubhai Bharti Gupta, Advocates. Meanwhile the ROC was represented by Mr. Krishan Paul Dutt, ARoC. (Assistant Registrar of Companies)