Applicability of IBC proceedings in Struck Off Companies By CS Akash Sharma

Can Corporate Insolvency Resolution Process be initiated against a company which has been struck off under Section 248 of the Companies Act, 2013?

Striking off means the removal of a company´s name from the register of the companies. A company may be struck off the register and dissolved if an application has been submitted to the Registrar or the Registrar concludes that it is not in operation.

Effect of Strike off:

By virtue of a legal process, a company is a separate legal entity, so is its death process. In case of dissolution of a company pursuant to the company’s name being removed from the Register by the ROC in terms of Section 248 of the Act, the corporate status of an entity ceases to subsist, its functionality stops and for all practical purposes, corporate activities come to an end. Moreover, there will be a restriction from operating bank accounts and directors may have to vacate their office due to non-filing of statutory forms.

Question: Whether a CIRP can be initiated against a struck off company?

Section 250 of CA, 2013 says that “Where a company stands dissolved under section 248, it shall on and from the date mentioned in the notice under sub-section (5) of that section cease to operate as a company and the Certificate of Incorporation issued to it shall be deemed to have been cancelled from such date except for the purpose of realizing the amount due to the company and for the payment or discharge of the liabilities or obligations of the company”
In view of Section 250 the company stands dissolved and cease to operate as a company on and from the date mentioned in the notice u/s 5 of Section 248 but even after the company is struck off it can enforce payment due to it and it is under obligation to make payment of amount due to others.

So, it is loudly clear that CIRP can be initiated against a struck off company.

[Citation: C.P. (IB) No. 200/7/NCLT/AHM/2017]

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