1999 (4) TMI 490 - HC - Companies Law

Summary

Issues Involved:
1. Application for revoking the order of admission or deferring the advertisement of the admission.
2. Financial status and ability of the petitioner-company to pay its debts.
3. Potential hardship and loss to the petitioner-company due to advertisement.
4. Legal provisions and precedents regarding the advertisement of winding-up petitions.

Detailed Analysis:

1. Application for Revoking the Order of Admission or Deferring the Advertisement:
The petitioner-company filed an application to revoke the order of admission passed in C.P. No. 91 of 1997 or, alternatively, to defer the advertisement of the petition's admission in newspapers. The respondent-Corporation opposed this, arguing that the petition was admitted after elaborate arguments and that deferring the advertisement would allow the petitioner to delay the proceedings unjustifiably. The petitioner-company later withdrew its plea for revocation and only pressed for postponement of the advertisement until the petition was decided on merits.

2. Financial Status and Ability to Pay Debts:
The petitioner-company argued that its financial status was sound, with assets exceeding liabilities and substantial reserves for the financial years 1996-97 and 1997-98. It contended that it had paid significant amounts in Central Excise duty and income tax, indicating its ability to pay debts. The petitioner also claimed that the initiation of winding-up proceedings was an abuse of the court process and that the advertisement would cause significant harm to its business.

3. Potential Hardship and Loss Due to Advertisement:
The petitioner-company emphasized that advertising the petition's admission would cause immeasurable hardship and loss to its business. It cited a certificate from Reliance Industries stating that no amount was due under the Hundies in question, suggesting a bona fide dispute that should be resolved during the trial. The company also highlighted that 2500 employees could be affected if the business suffered due to the advertisement.

4. Legal Provisions and Precedents Regarding Advertisement:
The court examined Rule 96 and Rule 24 of the Companies (Court) Rules, 1959, which mandate advertising a winding-up petition unless the judge orders otherwise. The court referred to the Supreme Court's decision in National Conduits (P.) Ltd. v. S.S. Arora, which clarified that while a petition for winding-up cannot be placed for hearing unless advertised, the court has inherent power to prevent abuse of process and may defer advertisement in the interest of justice.

The court also considered precedents from Soujanya Hotels (P.) Ltd. v. N. Satyanarayana Murthy and Falcon Gulf Ceramics Ltd. v. Industrial Designs Bureau, which emphasized the court's discretion to defer advertisement if the petition was found to be an abuse of process or filed with mala fide intentions. However, the court noted that in this case, the petition was admitted after hearing both sides, and prima facie evidence suggested that the petitioner-company was indebted to the respondent-Corporation.

Conclusion:
The court concluded that the advertisement of the petition's admission was mandatory as per the rules, especially since the petition was admitted after hearing both sides. The court found no abuse of process by the respondent-Corporation and dismissed the application to defer the advertisement. The court emphasized that the financial status and other concerns of the petitioner-company would be considered during the final hearing of the petition. The application to defer the order of publication of the admission of the petition in newspapers was dismissed.