Landmark Case Laws on Striking Off of Companies and Director Liability

Sitaram Singh Construction Pvt. Ltd. v. Union of India(2010) 156 Comp Cas 127 (Pat)

Court: Patna High Court

Registar of Companies (ROC) Removed Sitaram Singh Construction Pvt. Ltd. name from register without giving any notice and without publishing any notification to the corporation in the Official Gazette.

The Court's ruling:

Patna high court ruled that the strike -off was unlawful because mandatory procedural measures was not followed notice was not published in the Official Gazette in accordance with Section 560(3). Court revoked strike-off and company name was reinstated in the register.

Legal Conclusion:

A corporation cannot be arbitrarily shut down, even if it is not operating. Legally binding and necessary procedural precautions include publishing in the Gazette and providing notice.

Dwarka Portfolio Pvt. Ltd. v. ACIT

Court: Income Tax Appellate Tribunal (ITAT), Delhi

Dwarka Portfolio Pvt. Ltd a company that had been struck off by the registrar of companies under the companies Act ,2013 was attempted by the Income Tax Department to recover outstanding tax dues

Under Section 179 of the Income Tax Act, which allows recovery from directors in certain cases of private companies. Revenue authorities further tried to recover the dues directly from the directors of the company

The Court's ruling:

Income Tax Appellate Tribunal ruled that striking off a company does not extinguish its tax liabilities. According to Section 248(6) of the Companies Act, 2013 makes it clear that even after dissolution, a company’s assets can be used to satisfy debts.

However, ITAT also Mention that directors cannot be personally liable unless it is established that recovery from the company is not possible and directors were responsible for the default.

The department must follow due process, and cannot bypass legal safeguards by targeting directors directly.

Legal Conclusion:

If Company is struck off it can not escape from past tax dues. And directors personal liability cannot be imposed automatically there must be proof of default and due procedure under both Income Tax and Company Law.

Also Read

The Striking Off Process for Companies Under theCompanies Act, 2013

Srikishen Dhoot v. Kamalapurkar

(1974) 44 Comp Cas 478 (Bom)

Court: Bombay High Court

The case is about liability of a director of a company that had been struk off

The question before the court was that director will be personally held liable for the company’s debts or not ?

The Court's ruling:

The High Court of Bombay held that Personally director will not be held liable for company debt because company no longer exist on paper. Court added that limited liability protection remains intact after strike-off, unless specific grounds exist to pierce the corporate veil

Legal Conclusion:

Directors of a company that has been struck off are not personally liable for the company’s debts, unless they were already personally accountable. Striking off does not change the nature of corporate liability.

Smt. Narmada Choudhury & Ors. v. Motor Accident Claims Tribunal1994 (1) TAC 364 (MP)

Court: Madhya Pradesh High Court

This case is a claim for moter accident compensation from a company which was no longer operational. The question before the court was if company is no longer in action

libility to pay the compensation will be on director of the company or not ?

The Court's ruling:

MP High Court stated that unless any personal wrongdoing is proven a director cannot be held personally liable for a company’s debts in context of Section 543 of the Companies Act,

Legal Conclusion:

If any misconduct, fraud, or breach of duty proven in legal proceedings liability will be personal on Director. Only just because company is no more in action directors are not automatically liable for the company debts