In Mr. Hemang Phophalia v. The Greater Bombay Co-operative Bank Limited and Another (decided on September 5, 2019), the National Company Law Appellate Tribunal ("NCLAT") held that a creditor can submit an application requesting the restoration of a dissolved/struck-off company's name in the register of companies in order to start a Corporate Insolvency Resolution Process ("CIRP") against the said company.
In the instant case titled Mr. Hemang Phophalia v. The Greater Bombay Co-operative Bank Limited and Another the issue raised for clarification before the NCLAT was:
If the name of a corporate debtor is removed from the register of companies, may an application under Section 7 or Section 9 of the IBC for initiating CIRP still be maintained against that corporate debtor?
With regard to this issue, The relevant portions of Chapter XVIII of the Companies Act, which deal with removing company names from the register of companies, were replicated by NCLAT. According to Section 248(6) of the Companies Act, the Registrar must be satisfied that adequate arrangements have been made for realising all amounts owed to the company and for the payment or discharge of its liabilities and obligations within a reasonable period of time before issuing an order to remove the name from the register of companies. If necessary, the Registrar must also obtain the necessary commitments from the managing director, director, or other individuals in charge of the management of the company. It is therefore up to the adjudicating authority to give directions and make provisions deemed just for putting the name of the company and all other persons in the same position nearly as may be as if the name of the company had not been struck off if an application is filed by a creditor (be it a financial creditor or an operational creditor) or workman (operational creditor) before the expiry of twenty years as prescribed. The assets may remain even if the Corporate Debtor's name is removed. In such a situation, the NCLAT determined that an application under Sections 7 and 9 of the IBC will be maintainable against a company, even if the company's name has been struck out, in light of the requirements of the Companies Act.
If an application is submitted by creditors or employees within twenty years of the date required by the Companies Act, the adjudicating authority, which is also the tribunal, has the authority to reinstate the name of the company and all other individuals in their respective positions for the purpose of initiating CIRP under Sections 7 and 9 of the IBC. The Corporate Debtor and its directors, officials, etc. were considered to have been restored in the current case after the application under Section 7 was admitted.
The NCLAT categorically stated that,
“In view of the aforesaid provision, we hold that the Adjudicating Authority who is also the Tribunal is empowered to restore the name of the Company and all other persons in their respective position for the purpose of initiation of Corporate Insolvency Resolution Process under Sections 7 and 9 of the I&B Code based on the application, if filed by the Creditor (Financial Creditor or Operational Creditor) or workman within twenty years from the date the name of the Company is struck off under sub-section Company Appeal (AT) (Insolvency) No. 765 of 2019 Page 10 of 10 (5) of Section 248. In the present case, application under Section 7 having admitted, the Corporate Debtor and its Directors, Officers, etc. deemed to have been restored in terms of Section 252(3) of the Companies Act.”