Striking off Name of a Company - The Jurisdictional Issue

Jurisdiction is not given for the sake of the judge, but for that of the litigant

– Blaise Pascal

Recently the Delhi High Court in Money Market Services (India) Private Ltd. v. Union of India held that an order passed by Registrar of Companies (ROC) striking off the name of a Company can be challenged by way of writ petition only before the High Court, which has territorial jurisdiction over the said ROC.[1]

In this case, Money Market Services (India) Private Ltd. (MMSIPL) had filed a writ petition before the Delhi High Court, challenging the Order dated October 25, 2019 (Impugned Order) of the Registrar of Companies, Chennai (ROC Chennai). By way of the Impugned Order, the name of MMSIPL had been struck off from the Register of Companies. The challenge was primarily on the ground that since an investigation by the Serious Fraud Investigation Officer (SFIO) had been ordered against MMSIPL under Section 212 of the Companies Act, 2013 (Companies Act), the name of the company could not be struck off.[2]

The Respondent in the matter, Union of India (UoI), resisted the writ petition on the ground that Delhi High Court did not have territorial jurisdiction to hear it. UoI argued that since the Impugned Order was passed by ROC Chennai, courts in Delhi did not have jurisdiction to assess the same. Per contra, MMSIPL argued that Delhi High Court had the jurisdiction to hear the matter since the SFIO investigation was initiated on directions given by the Central Government and Authorities in Delhi. Therefore, a part of the cause of action had arisen in Delhi.

While examining this issue, the Delhi High Court observed that the writ petition challenged only the Impugned Order passed by ROC Chennai and not the Central Government’s directions ordering the SFIO investigation. Therefore, the cause of action arose on account of the Impugned Order and not the order directing SFIO investigation. Relying on the law laid down in Alchemist Ltd. v. State Bank of Sikkim[3]and Sterling Agro Industries Ltd. v. Union of India,[4] which deal with jurisdiction and forum conveniens, the Court concluded that it did not have jurisdiction to entertain the petition and dismissed the same, giving liberty to MMSPL to approach the appropriate forum. While passing this Order, the Delhi High Court also took note of orders passed by the Division Bench of the Court[5] wherein similar writ petitions were not entertained on the ground of lack of territorial jurisdiction.

While this judgment settles the law pertaining to the issue of territorial jurisdiction of a High Court to entertain such a challenge, the petition would have met the same fate had the High Court examined this issue also from the perspective of availability of an alternative efficacious remedy.[6]


[1] See: Money Market Services (India) Private Ltd. Vs. Union of India WP(C) 5723/2020, judgment dated August 28, 2020

[2] See: Rule 3 (1) of the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016

[3] See: (2007) 11 SCC 335: The Supreme Court inter alia held that a particular fact would constitute  ‘part of cause of action’ to confer territorial jurisdiction to a Court, when such fact constitutes a material, essential, or integral part of the cause of action

[4] See: 2011 SCC OnLine Del 3162: 5-judge bench of the Delhi High Court, while deciding the question of its jurisdiction to entertain a challenge the order of the Excise Officer in Madhya Pradesh, held that to determine jurisdiction, the doctrine of forum conveniens and the nature of cause of action are required to be scrutinized by the High Court depending upon the factual matrix of each case.

[5] See: Sanjay Agarwal & Anr. v. Union of India & Ors., W.P.(C) 7480/2018, decided on January 29, 2019; Vishal Bhati v. Union of India & Anr. W.P.(C) 9932/2018, decided on September 24, 2018; Prakash Chand Jain v. Union of India & Anr. W.P.(C) 9975/2018, decided on September 24, 2018

[6] While a High Court’s jurisdiction to entertain a writ petition cannot be curtailed by a statute, it is settled law that when there exists an alternative efficacious remedy, particularly in the nature of a statutory appeal, a High Court ought not exercise its writ jurisdiction See: Union of India vs. T.R.Varma, AIR 1957 SC 882 and Union of India vs. Major General Shri Kant Sharma and Anr. (2015) 6 SCC 773. Section 248 of the Companies Act, the ROC is empowered to order striking off a Company’s name from the Register of Companies, basis the grounds mentioned therein.[6]  Section 252 of the Companies Act provides that an appeal against the order of the ROC under Section 248 will lie before the National Company Law Tribunal.

 

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Photo of Radhika Dubey Radhika Dubey

Partner in the Dispute Resolution Practice at the New Delhi office of Cyril Amarchand Mangaldas. Radhika focuses on dispute resolution relating to corporate and commercial litigation, with special focus on arbitration (domestic and international). She regularly represents clients before various fora including Tribunals…

Partner in the Dispute Resolution Practice at the New Delhi office of Cyril Amarchand Mangaldas. Radhika focuses on dispute resolution relating to corporate and commercial litigation, with special focus on arbitration (domestic and international). She regularly represents clients before various fora including Tribunals, High Courts and the Supreme Court, in high stakes commercial disputes. She can be reached at radhika.dubey@cyrilshroff.com

Photo of Bishwajit Dubey Bishwajit Dubey

Partner in the Dispute Resolution Practice at the Delhi Office of Cyril Amarchand Mangaldas. Bishwajit focuses on disputes in relation to insolvency proceedings (under the Insolvency and Bankruptcy Code, 2016), product liability, infrastructure projects, corporate commercial, contractual, intellectual property and criminal matters. He…

Partner in the Dispute Resolution Practice at the Delhi Office of Cyril Amarchand Mangaldas. Bishwajit focuses on disputes in relation to insolvency proceedings (under the Insolvency and Bankruptcy Code, 2016), product liability, infrastructure projects, corporate commercial, contractual, intellectual property and criminal matters. He can be reached at bishwajit.dubey@cyrilshroff.com

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Senior Associate in the Dispute Resolution Practice at the New Delhi office of Cyril Amarchand Mangaldas. Shatrajit focuses on dispute resolution, including arbitration (domestic and international), insolvency as well as other corporate and commercial litigation. He can be reached at shatrajit.banerji@cyrilshroff.com

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Associate in the General Corporate Practice at the Delhi office of Cyril Amarchand Mangaldas. Ashlesha has experience in advising clients on various corporate and commercial matters including company laws, securities laws and foreign exchange laws. She also has experience in advising clients on…

Associate in the General Corporate Practice at the Delhi office of Cyril Amarchand Mangaldas. Ashlesha has experience in advising clients on various corporate and commercial matters including company laws, securities laws and foreign exchange laws. She also has experience in advising clients on equity and debt capital markets, having worked in the Capital Markets practice at the firm’s Delhi office. She can be reached at ashlesha.mittal@cyrilshroff.com.