NCLT Orders Restoration of SL Contractors Pvt. Ltd. to Facilitate Tax Recovery

Tribunal mandates restoration despite non-compliance to enable Income Tax Department to pursue pending liabilities.

In a significant ruling, the National Company Law Tribunal (NCLT) New Delhi Bench has ordered the restoration of SL Contractors Private Limited's name to the Register of Companies. The decision, delivered by Member (J) Ashok Kumar Bhardwaj and Member (T) Reena Sinha Puri, underscores the necessity of restoring the company primarily to facilitate the Income Tax Department's efforts to recover pending tax liabilities.

The tribunal heard the appeal filed by the directors of SL Contractors Pvt. Ltd., challenging the striking-off of their company's name by the Registrar of Companies (RoC) for prolonged non-compliance with statutory filings. The company, incorporated in 2014, had failed to file its annual returns and financial statements since the fiscal year 2015-16. Despite claims of continued business operations and the unfortunate demise of their compliance professional leading to lapses, the tribunal found insufficient evidence to support the company's operational status at the time of being struck off.

Nevertheless, the tribunal acknowledged the Income Tax Department's report, which highlighted pending tax demands against the company, including a significant liability of Rs. 7.62 crore under Section 147 of the Income Tax Act, 1961. The department expressed no objection to the restoration, emphasizing the need to proceed with recovery actions.

The tribunal ordered the company's name to be restored, subject to several conditions, including the payment of a cost of Rs. 9 lakh to the Prime Minister's Relief Fund and the settlement of outstanding tax liabilities with the Income Tax Department. The company must also comply with statutory obligations under the Companies Act, 2013, and the Income Tax Act, 1961.

This restoration underscores the legal principle that outstanding tax liabilities can justify the reinstatement of a company, even in the face of procedural non-compliance. The decision follows precedents set by higher judicial authorities, including the NCLAT and the Supreme Court, reinforcing the priority of tax recovery over procedural lapses.

The tribunal's order mandates that SL Contractors Pvt. Ltd. regularize its statutory filings within 45 days of restoration and comply with all legal obligations, ensuring its transition from "struck off" to "active" status. The RoC has been directed to effectuate this change promptly.

The ruling reflects the judiciary's balanced approach, ensuring compliance with statutory obligations while allowing the tax authorities to exercise their rights for revenue recovery. This decision serves as a reminder for companies about the importance of maintaining regular compliance and the potential repercussions of neglecting statutory duties.

Bottom Line:

Restoration of a company's name in the Register of Companies becomes necessary to enable the Income Tax Department to pursue recovery of outstanding tax liabilities, even if the company fails to prove operational status at the time of striking-off.

Statutory provision(s): Companies Act, 2013 Sections 252(3), 248, 455; Income Tax Act, 1961 Sections 147, 272A(1)(d), 271AAC(1), 271A

SL Contractors Private Limited v. Registrar of Companies, (NCLT)(New Delhi Bench) : Law Finder Doc Id # 2817730