Striking Off The Names Of Shell Companies: Streamlining The Statutory Provisions

Abstract

The objective of this paper is to argue that there is a need for streamlining the provisions relating to the power of the Registrar of companies to strike off the name of a company. The power is exercised by the Registrar in a summary proceeding without winding up the affairs of that company. In recent years, Indian jurisdiction has witnessed a mega use of the power of striking off in which more than 3,00,000 companies’ names were struck off deeming them to be shell companies. However, after the study of reported cases under the statutory provisions dealing with the power of Registrar, it can be highlighted that an abrupt exercise of the power vested with the Registrar without discharging his duty is creating various problems. The corporate control dilutes and the affected stakeholders are left clueless. This exercise of power by the Registrar is becoming a constant machinery of litigation between the stakeholders and the Registrar himself. Therefore, there is an urgent need to relook into the provisions. The paper intends to suggest certain effective interventions that can help the central government in carrying out its action against money laundering through shell companies and relieve the Registrar from unnecessary litigation. At the first instance, the paper explains the provisions for removal of names of companies from the register of companies in the Companies Act, 2013. Then the recent actions that were taken under these provisions and their after-effects have been discussed. Subsequently, the paper attempts to find certain defects in the provisions relating to striking off and makes certain suggestions to amend the provisions that can result in curbing the litigation between the Registrar and other stakeholders.