Sections 251 and 252 of Companies Act 2013: Fraudulent Removal of Name and Appeal to NCLT
Sections 251 and 252 form part of Chapter XVIII of the Companies Act, 2013, which deals with removal of names of companies from the Register of Companies. Section 251 addresses a fraudulent application by a company for removal of its own name, while Section 252 provides remedies before the National Company Law Tribunal (NCLT) against striking off and for restoration of a company.
Quick overview of Sections 251 and 252
| Provision | Subject | Key effect |
|---|---|---|
| Section 251 | Fraudulent application for removal of name | Protects creditors and other affected persons where an application under Section 248(2) was made to evade liabilities, deceive creditors or defraud another person. |
| Section 252(1) | Appeal against Registrar's order | An aggrieved person may appeal to the NCLT within three years from the Registrar's order. |
| Section 252(2) | Effect of restoration order | The company must file the NCLT order with the Registrar within thirty days; the Registrar then restores the name and issues a fresh certificate of incorporation. |
| Section 252(3) | Application for restoration | The company, member, creditor or workman may apply within twenty years from publication of the Section 248(5) notice, subject to the statutory grounds. |
Section 251: Fraudulent application for removal of name
Section 251 applies where a company makes an application under Section 248(2) for removal of its name and the application is found to have been made to evade the company's liabilities, deceive creditors or defraud another person.
Meaning and consequences of Section 251
The provision prevents voluntary striking off from being used as a device to escape lawful liabilities. Even after the company has been notified as dissolved, persons in charge of its management may be jointly and severally liable to persons who suffered loss or damage because of the dissolution. The responsible persons may also be punished for fraud in the manner provided by Section 447 of the Companies Act, 2013.
In addition to the consequences under Section 251(1), the Registrar of Companies may recommend prosecution of the persons responsible for filing the application under Section 248(2).
Section 251 in substance
Sub-section (1): If the application under Section 248(2) was made to evade liabilities, deceive creditors or defraud any other person, persons in charge of management remain jointly and severally liable for resulting loss or damage and may face punishment for fraud under Section 447.
Sub-section (2): The Registrar may also recommend prosecution of the persons responsible for filing the application.
Section 252: Appeal to Tribunal and restoration of company name
Section 252 gives the NCLT jurisdiction to consider appeals and restoration applications relating to companies whose names have been removed from the Register of Companies under Section 248.
Section 252(1): Appeal by a person aggrieved
A person aggrieved by an order of the Registrar notifying a company as dissolved under Section 248 may appeal to the NCLT within three years from the date of the Registrar's order. If the Tribunal concludes that removal of the company's name was not justified because the statutory ground relied on by the Registrar did not exist, it may order restoration.
Before an order is passed, the Registrar, the company and all persons concerned must receive a reasonable opportunity to make representations and be heard. The second proviso also permits the Registrar to approach the Tribunal within three years where striking off occurred inadvertently or on the basis of incorrect information furnished by the company or its directors.
Section 252(2): Filing the NCLT restoration order
When the NCLT orders restoration, the company must file a copy of the order with the Registrar within thirty days. On receipt of the order, the Registrar is required to restore the company's name in the Register of Companies and issue a fresh certificate of incorporation.
Section 252(3): Application by company, member, creditor or workman
A company, member, creditor or workman aggrieved by the striking off may apply to the NCLT before expiry of twenty years from publication in the Official Gazette of the notice under Section 248(5). The Tribunal may restore the company where it is satisfied that, at the time of striking off, the company was carrying on business or was in operation, or where it is otherwise just that the company be restored.
The Tribunal may also issue directions and make provisions considered just to place the company and other persons, as nearly as possible, in the position in which they would have been if the company's name had not been struck off.
Difference between an appeal under Section 252(1) and an application under Section 252(3)
| Point | Section 252(1) | Section 252(3) |
|---|---|---|
| Who may approach NCLT | Any person aggrieved by the Registrar's order | Company, member, creditor or workman |
| Time limit | Three years from the Registrar's order | Before expiry of twenty years from publication of the Section 248(5) notice in the Official Gazette |
| Main statutory test | Removal was not justified because the ground on which the Registrar acted was absent | Company was carrying on business or in operation when struck off, or restoration is otherwise just |
NCLT procedure for Section 252 matters
Rule 87A of the National Company Law Tribunal Rules, 2016, inserted by the 2017 amendment, provides for an appeal under Section 252(1) or an application under Section 252(3) to be filed in Form NCLT-9 with necessary modifications. A copy is to be served on the Registrar and such other persons as the Tribunal may direct, ordinarily not less than fourteen days before the hearing date.
Where restoration is ordered, the NCLT may direct delivery of a certified copy to the Registrar, publication of the order, payment of costs where directed, and filing of pending financial statements and annual returns within the time specified by the Tribunal. The exact directions depend on the order passed in the particular case.
Important connected provisions
- Section 248: Power of Registrar to remove the name of a company and voluntary application for removal of name.
- Sections 249 and 250: Restrictions on voluntary applications and effect of a company being notified as dissolved.
- Section 447: The general Companies Act provision governing punishment for fraud, which is expressly referred to in Section 251(1)(b).
Official legal resources
For the latest statutory text and filing information, refer to the official India Code, the Ministry of Corporate Affairs, and the National Company Law Tribunal. The NCLT is the Tribunal that deals with restoration of company names under Section 252.
Frequently asked questions
What is a fraudulent application for removal of a company's name?
For Section 251, it is an application under Section 248(2) made with the object of evading company liabilities or with the intention to deceive creditors or defraud another person.
What is the time limit for an appeal under Section 252(1)?
The statutory period is three years from the date of the Registrar's order.
Who can seek restoration under Section 252(3)?
The company itself, a member, creditor or workman may apply, subject to the requirements and twenty-year period stated in Section 252(3).
Does restoration automatically erase earlier defaults?
No. Restoration places the company back on the register, but the NCLT may direct completion of pending statutory compliances, and restoration does not by itself remove liabilities arising from earlier non-compliance.
Disclaimer: This article is a general legal information resource. Statutory provisions, rules, forms, fees and filing procedures may change. The current Act, rules, MCA requirements and the relevant NCLT order should be checked for a specific matter.