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While dealing with an appeal filed by the Registrar of Companies against a batch of LLPs, the National Company Law Appellate Tribunal (NCLAT) has remarked that adoption of a bloodthirsty approach by Authorities against compliant entities is unwarranted.
The remark was made by two-member Bench of Member (Judicial) Bansi Lal and Member (Technical) Balvinder Singh in an appeal preferred by Registrar of Companies, Maharashtra, Mumbai (Appellant) against Five LLPs (Respondents).
The Respondents, namely Acadia Hotels and Resorts LLP, Agility Steel and Developers LLP, Brickstone Construction LLP, Grishmak Travels and Transport LLP and Rakshak Properties LLP were initially incorporated as Private Limited Companies under Companies Act, 1956. As a sequel to the decision taken by the erstwhile Directors, the Respondent companies took necessary steps to convert the erstwhile Private Limited Companies into LLPs in accordance with Section 56 of the LLP Act, 2008.
Certificates of registration came to be issued in their favour by the Appellant and the Respondents got converted into LLPs. As per the Respondents’ case, after their conversion to LLPs in the year 2012, they filed information with regard to LLP agreements (Form – 3), the annual return (Form – 11) and the statement of account and solvency (Form – 8) with the concerned authorities.
Form – 3 along with the relevant fees were accepted by the Ministry of Corporate Affairs whereas Form 11 and 8 submitted by the Respondents were accepted by the Appellant.
However, Form – 8 for the financial year 2015-16 was not accepted on the pretext that the Form could not be filed until Form – 3 for the initial agreement was filed. This rejection was in spite of the fact that Form – 3 had been filed way back in 2012 and Forms – 8 and 11 were even accepted from 2012 to 2016 without raising any objections.
Subsequently, after filing an RTI application, the Respondents came to know that Form – 3 which was filed earlier was not taken on record as it was declared invalid due to certain objections. The Respondents were then informed that they would have to file fresh Form-3 after paying a penalty of about Rs. 10,86,000 for removal of objections as regards each of the Respondents.
The Respondents, therefore, filed a petition against the Appellant before the NCLT praying for liberty to allow them to remove the objections and file a fresh Form – 3 without penalties besides allowing them to file their Form – 8 and Form – 11.
NCLT allowed the petition holding that there was no wilful negligence on the part of Respondents, particularly, when they had been filing their Form – 8 and Form – 11 till the year 2015-16 without any objection from the Appellant herein which was possible only after submission of Form No. 3.
Aggrieved by the order, the Appellant moved the NCLAT.
The NCLAT recorded that the NCLT had found that the Respondents had submitted their Form – 3 as early as 2012 and subsequently, they were allowed to file Form No. 8 and 11 till the year 2015-16. The objection as regards Form No. 3 was raised only from the financial year 2015-16 after the computerized system was introduced from 2013 by the Ministry of Corporate Affairs.
Since the Respondents had filed Form-3 prior to 2013, the same was not captured in the database of the computerized system of the MCA, it was noted. Moreover, it was observed that the LLPs who filed Form-3 since 2013, though defective, were even allowed to file Rectified/Revised Form 3 without any fine or penalty.
The NCLAT then proceeded to test if the appeal was maintainable in view of the period of limitation under Section 421 of the Companies Act, 2013.
It stated that the aggrieved person can prefer an appeal within a period of 45 days from the date on which a copy of the order of the Tribunal is made available to the person aggrieved. A delay not exceeding 45 days can be condoned by the NCLAT on a sufficient cause being shown to its satisfaction.
The appeal in the present case was filed after the time period of 90 days. They acknowledged that the NCLT order which was pronounced on September 6, 2018, and was brought to its knowledge by the Respondents on September 28, 2018. The appeal could not be preferred within the period of limitation as a certified copy of the order was not available.
The NCLAT observed that the Appellant was admittedly a party to the proceedings before NCLT and the order was pronounced in the presence of its counsel. Therefore, knowledge has ordinarily to be reckoned from the date of the order as the Appellant was not a stranger to the proceedings, it stated.
Even if it be assumed that the Appellant was not aware of the pronouncement of the impugned order, it could have applied for a certified copy the moment it learnt about the order, the NCLAT remarked.
It further noted that the Appellant, in the application, has also not spelt out as to what prevented it from obtaining a certified copy of the order or why the appeal was not filed with a prayer to allow time for obtaining the certified copy/ exemption from filing of a certified copy.
The NCLAT thus remarked,
“It is shocking that no ground much less a lawful excuse or a reasonable cause has been assigned to demonstrate that there was a sufficient cause which prevented the Appellant from filing the appeal within the prescribed period of limitation i.e. 45 days or even the extended time i.e. 90 days. The appeal is hopelessly time-barred.”
It nonetheless also examined the merits of the case.
To examine the issue, the NCLAT recorded that the Respondents complied with the procedure as was in vogue when the Respondents were converted from Private Companies into LLPs.
“If, the Form-3 filed by the Respondents prior to 2013 was not captured in the database of the computerized system of MCA, that cannot work to the detriment of the Respondents who complied with the procedure as was in vogue at the relevant time, i.e. in 2012 and in the event of the Respondents being required to file a Rectified / Revised Form-3, same needed to be communicated to the Respondents…While switching over to a computerized system the Appellant as also other concerned authorities were supposed to notify the affected persons and allow them to file the Rectified/Revised Forms as mandated without slapping any penalty on them”
In consonance with NCLT, the NCLAT held that it was “manifestly clear that no delinquency can be attributed to Respondents for non-compliance or breach.”
The NCLAT was thus constrained to remark,
“Adopting a bloodthirsty approach and that too against compliant entities is unwarranted more so when such entities complied with the legal requirements and made compliances in accordance with the then prevailing system.”
In view of the above, the appeal was dismissed on point of limitation as well as merits.
The Appellant was represented by Advocate Kamal Kant Jha. The Respondents were represented by Advocates Amit Shroff, Akhil Nene.