Under the Scheme, Defaulting Companies have an opportunity to make good their previous filing defaults under the Companies Act by making such filings with the RoC (without paying any additional fee). Further, the Scheme envisages that, post the closure of the Scheme, such Defaulting Companies may apply for grant of immunity from launch of any prosecution or proceedings from penalty due to the default of non-filing such belated forms/documents, by filing e-Form CFSS 2020 (which has been introduced under the Scheme). The opportunity to seek immunity (post the completion of the filing) shall be available for a period of six months from the date of closure of the Scheme. The Scheme clarifies that the immunity to be granted under the Scheme shall only be in relation to the penalty arising out of the delayed filings and not against any other proceedings arising due to any consequential or substantive violation of law associated with such past non-compliances.

With respect to the applicability, the Scheme provides for certain specific cases where the Scheme shall not be applicable, which inter-alia includes Defaulting Companies (a) against which action for striking-off has already been initiated by the RoC or where application for strike off has been filed with the RoC; (b) which have amalgamated as per the terms of the Companies Act; (c) which has already filed application for obtaining dormant status; and (d) which are vanishing companies. Further, the Scheme clarifies that filings in relation to increase in authorised share capital or charge related documents cannot be made under the Scheme.

Defaulting Companies under CIRP

CIRP of a company under the IBC, is initiated from the date the Hon’ble National Company Law Tribunal (“NCLT”) passes the order for initiating the CIRP (based on the application of a financial creditor, corporate applicant or operational creditor, as the case may be, for initiating CIRP). As per the provisions of IBC, when a company is admitted into CIRP, inter-alia a moratorium is declared on the continuation and initiation of legal proceedings against such company. Further, under the CIRP the powers of the board of directors of such company is suspended and the management of the affairs of the company vests with the Interim Resolution Professional/Resolution Professional (“IRP/RP”), so appointed. The IRP/RP has the responsibility for complying with the requirements under any applicable law on behalf of the company during the CIRP.

The Scheme provides that it is applicable on all Defaulting Companies except for the companies specified in negative list under the Scheme. However, the negative list does not categorically exclude the Defaulting Companies undergoing CIRP. Moreover, the FAQs with respect to the Scheme, (as introduced by the MCA) do not touch upon the Defaulting Companies undergoing CIRP. Therefore, without any specific exclusion from the Scheme or the FAQs issued by the MCA on the subject, it may be interpreted that Defaulting Companies which are undergoing CIRP, shall also be allowed to avail the benefit under the Scheme.

Procedural Difficulties

Before analysing the process to be followed by Defaulting Companies undergoing CIRP for availing the benefit under Scheme, it must be noted that prior to the Scheme, MCA had released a Circular No. 08/2020 dated March 06, 2020 (“MCA Circular”), with respect to the process of filing to be followed by the companies undergoing CIRP. As per the MCA Circular, the IRP/RP/Liquidator of a company undergoing CIRP is required to file the requisite order of NCLT approving him/her as the IRP/RP/Liquidator of such company (as the case may be) with the RoC in e-Form INC- 28 by selecting his/her designation as Chief Executive Officer (CEO). Further, upon approval of the said e-Form INC-28, the IRP/ RP/ Liquidator (as the case may be) shall be responsible for filing all forms for and on behalf of such company with the RoC by way of an attachment to e-Form GNL-2, till the time such company is undergoing CIRP.

Going by the above interpretation that Defaulting Companies undergoing CIRP can avail the benefits of the Scheme and in view of the MCA Circular, as all filings of a company undergoing CIRP is required to be made under e-Form GNL-2 only, it seems that the filings of the belated forms/documents by the Defaulting Companies undergoing CIRP under the Scheme shall also be made by way of an attachment to e-Form GNL-2, as against making the filing in the requisite applicable e-Form. However, in the absence of any clarity, uncertainty still looms over the procedure to be followed by the IRP/RP of such Defaulting Companies. Further, it is also required to be seen as to how the MCA will deal with the approval of such delayed filings by the Defaulting Companies undergoing CIRP, if such filings are made as an attachment to e-Form GNL-2.

Conclusion

The COVID-19 situation remains volatile and all government offices (including the MCA and the offices of the RoC) have been working at minimal capacity with no or minimal public dealing. Without any clarity on the subject matter, applicability and the process to be followed by the Defaulting Companies undergoing CIRP, as per the Scheme still remains in doubt. As non-compliance of statutory and other filings is a common feature in the companies under CIRP, it would be most prudent if the position is clarified by way of a circular/FAQs/amendment to the Scheme by the MCA at the earliest, so as to clear the uncertainty surrounding the issue. As during a CIRP, the IRP/RP is responsible to control the affairs of such a company, a clarification in this regard would also provide a sense of comfort to the IRP/RP in-charge of such companies to avail the opportunity by making good any past defaults and to comply with the procedural requirements.

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