Clarify how provisions of dormancy and strike-off of Companies Act are to apply: Kerala High Court asks Ministry of Corporate Affairs

The Kerala High Court on Tuesday directed the Ministry of Corporate Affairs to clarify how the provisions on dormancy and striking-off of companies in the Companies Act were to operate, and to explain how they were to apply if their operation overlapped. (South Hill Treatwood Pvt. Ltd. v. Union of India and connected cases) .A bench of Justice N Nagaresh was hearing a batch of petitions challenging the strike-off of certain private companies from the company register on account of failure to furnish mandated statutory returns..Advocate Navod Prasannan Pattali, counsel for some of the petitioners, argued that the Registrar of Companies could not have resorted to striking off the companies from the companies register when there was a less prejudicial mode available, that is, declaring the company as dormant..Section 248(1)(c) of the Companies Act requires a Registrar to strike a company off the register if it fails to furnish returns within the time stipulated. Section 455 of the same legislation mandates a Registrar to declare a company as dormant, if it has not undertaken significant accounting transactions for a period of two years, or if has been inactive, the Counsel explained..Since both of these provisions of the law were mandatory, the Registrar ought to have chosen the route that was relatviely beneficial to the company, which in this case was to declare the company as dormant, he argued..Had this been resorted to, the companies would have remained on the register even if they failed in furnishing returns. They would then be able to make good their defaulted returns under one or more of the amnesty schemes notified by the government from time to time, the Counsel additionally submitted..The latest scheme, the Companies Fresh Start Scheme 2020, allowed companies that defaulted on filing corporate compliances to make good their defaults without incurring additional penalties or charges by September this year..DIN of Disqualified Company Directors can be reactivated to avail the benefit of the Centre's Fresh Start Scheme: Kerala HC [Read Judgment].The Additional Solicitor General was directed to respond to these submissions by the date of the next hearing, which is presently scheduled for Monday, December 14..The Court is presently hearing petitions by directors of private companies disqualified for failing to furnish returns on time..Madras High Court upholds validity of proviso to Section 167(1)(a) of the Companies Act, 2013.The directors have approached the court aggrieved that their disqualification has resulted in a situation where their companies themselves have been struck off, preventing them from availing the government’s various fresh start/amnesty schemes and filing returns..The batch includes around 200 petitions presently.