The Bombay High Court has passed interim directions in a writ petition, holding that the Registrar of Companies (RoC), Mumbai, illegally and fraudulently incorporated a company with a name strikingly similar to the registered company, in clear violation of Section 4(2)(a) of the Companies Act, 2013 read with Rule 8 of the Companies (Incorporation) Rules, 2014. The Court cancelled the registration of the impugned company and directed the transfer of monies lying in its bank account to the liquidation account of the corporate debtor.
The petitioner company was incorporated on July 30, 2012, as Sangeeta Aviation Services Private Limited and was admitted into CIRP on August 10, 2021, followed by liquidation on October 20, 2023, with the petitioner appointed as Liquidator. During the CIRP period, a new company- Sangeeta Aviation Service Private Limited (Respondent No.3) was incorporated on November 9, 2021, despite the near-identical name differing only by the deletion of the letter “s” from “Services”.
The Liquidator alleged that the incorporation was fraudulent and enabled illegal diversion of payments legitimately due to the corporate debtor from the authorities. It was further alleged that a suspended director of the corporate debtor (Respondent No.5) signed documents on behalf of the newly incorporated company, opened bank accounts, and misrepresented the identity of the entity to siphon funds. Upon discovery, the bank account of Respondent No.3 was frozen, and separate proceedings were initiated before other High Courts to recover diverted amounts.
The Division Bench comprising Justice Manish Pitale and Justice Shreeram V. Shirsat examined Rule 8 of the Companies (Incorporation) Rules, 2014, and found that the name Sangeeta Aviation Service Private Limited was clearly and impermissibly similar to that of the petitioner company. The Court noted additional indicators of fraud, including the same registered address, use of a common domain name, replication of company letterheads, and documentary evidence showing diversion of funds immediately after receipt.
The Court expressed serious concern over the conduct of the RoC, particularly noting that in its reply affidavit, the RoC had relied on a non-existent and fabricated version of Rule 8. The RoC’s attempt to justify the incorporation based on the automated SPICe+ system was rejected, with the Court observing that the lack of human oversight cannot excuse a blatant statutory violation.
Holding that the fraud could not have been perpetrated but for the wrongful registration of Respondent No.3, the Court allowed prayers directing the RoC to cancel the registration of the fraudulent company, and directed HDFC Bank to transfer the balance amount lying in the account of Respondent No.3 to the liquidation account of the corporate debtor.
On the prayers seeking inquiry, investigation, penalties, and compensation against RoC officials, the Court granted the RoC four weeks to file an additional affidavit explaining the misquoting of the law and its role in the registration process.
Appearances:
For the Petitioner – Mr. Manoj Mishra, Advocate.
For Respondent – Mr. Ashish Mehta, with Mr. Yash Palan, Advocates.
