Companies Act Section 249

Companies Act, Section 249: Restrictions on Making Application Under Section 248 in Certain Situations

Section 249 of the Companies Act, 2013 lays down specific restrictions and conditions under which a company is prohibited from making an application to the Registrar of Companies (ROC) under Section 248(2) for the removal of its name from the register of companies. This provision is designed to prevent misuse of the name-striking process and to ensure that only genuinely inactive or defunct companies use this mechanism for voluntary closure.

The restrictions are particularly relevant to ensure that companies do not evade regulatory scrutiny, avoid liabilities, or compromise ongoing legal or administrative processes by prematurely applying for name removal.

Sub-section (1): Situations Prohibiting Filing of Application for Name Removal

A company shall not be permitted to file an application under Section 248(2) for striking off its name from the register if, at any time during the preceding three months, any of the following events or actions have occurred:

(a) Change of Company Name or Registered Office Location Across States

If the company has either:

Changed its name, or
Shifted its registered office from one State to another, then it is barred from applying for name removal under Section 248(2). Such changes are seen as indicators of continued operations or a shift in business strategy rather than winding down.

(b) Disposal of Property or Rights for Value

If the company has made any sale or disposal for value of its property or rights immediately before ceasing its business operations, such disposal must be in the ordinary course of business. However, if the disposal appears to be for any other purpose, such as avoiding liabilities or asset stripping, the company is prohibited from applying for name removal.

This ensures that the company is not attempting to realise gains from its assets while simultaneously seeking dissolution.

(c) Engagement in Activities Other Than Statutorily Necessary

If the company has engaged in any business activity other than those activities which are:

Necessary or expedient for filing an application under Section 248(2),
Required for concluding the affairs of the company, or
Mandatory to comply with legal or statutory obligations, then it shall be ineligible to apply for voluntary name removal.

This clause restricts companies from engaging in new or continued operations just before attempting to strike off their name.

(d) Pending Compromise or Arrangement with Tribunal

If the company has filed an application to the National Company Law Tribunal (NCLT) seeking approval for any compromise or arrangement (e.g., with creditors or shareholders), and the matter is still pending or not yet concluded, then the company cannot file an application for removal of its name until the process is complete.

This ensures that ongoing legal proceedings take precedence over voluntary dissolution.

(e) Company is Undergoing Winding Up

If the company is already being wound up under:

Chapter XX of the Companies Act, 2013 (which deals with winding up), or
The provisions of the Insolvency and Bankruptcy Code, 2016 (IBC), then the company is prohibited from using Section 248(2) to remove its name. Such companies must complete the formal winding-up process through designated legal routes.

Sub-section (2): Penalty for Filing Application in Violation

If a company knowingly or unknowingly files an application under Section 248(2) in contravention of the above restrictions specified in sub-section (1), such action shall attract penal consequences.

The company shall be liable to pay a fine which may extend up to ?1,00,000 (One Lakh Rupees).

This penalty serves as a deterrent to companies from attempting to bypass the conditions laid down in the statute.

Sub-section (3): Mandatory Withdrawal or Rejection of Application

If an application for name removal is already filed under Section 248(2) and it later comes to the notice of either:

The company, or The Registrar of Companies (ROC), that any of the prohibitory conditions under sub-section (1) are applicable, then:

The company must withdraw the application immediately, or
The ROC shall reject the application suo motu (on his own initiative) to prevent the misuse of the provision.
This ensures regulatory control and upholds the integrity of the process by disallowing companies from escaping scrutiny through procedural loopholes.