1998 (7) TMI 566 - HC - Companies Law

Summary

Issues Involved:
1. Whether the petition for winding up was valid despite not being advertised in the Official Gazette as required by rule 24(1) of the Companies (Court) Rules, 1959.
2. Whether the court has discretion to direct the manner and method of publishing the notice of a winding-up petition.
3. Whether the Supreme Court's decision in National Conduits (P.) Ltd. v. S.S. Arora mandates that a winding-up petition must be advertised in the Official Gazette.
4. Whether the non-compliance with the advertisement requirements under rule 24(1) renders the winding-up order invalid.

Detailed Analysis:

1. Validity of the Petition for Winding Up Without Advertisement in the Official Gazette:
The applicant contended that the order for winding up was invalid as the notice of the petition was not published in the Official Gazette, as required by rule 24(1) of the Companies (Court) Rules, 1959. The court acknowledged that the fact of non-publication in the Official Gazette was undisputed. However, the court noted that the publication was made in two newspapers as directed by the court during the admission of the petition.

2. Court's Discretion in Directing the Manner and Method of Publishing the Notice:
The court examined whether it has the discretion to direct the manner and method of publishing the notice of a winding-up petition. Rule 24(1) states that a petition must be advertised in an English daily, a regional language daily, and the Official Gazette unless the judge orders otherwise. The court emphasized that the phrase "unless the Judge otherwise orders" qualifies the entire requirement of sub-rule (1), thereby granting the court discretion in determining the time and mode of advertisement.

3. Interpretation of the Supreme Court's Decision in National Conduits (P.) Ltd. v. S.S. Arora:
The applicant relied on the Supreme Court's decision in National Conduits (P.) Ltd. v. S.S. Arora, arguing that a winding-up petition cannot be heard unless advertised as per rule 24(1). The court clarified that the Supreme Court did not address whether the specific manner of advertisement under rule 24(1) is a condition precedent for hearing the petition. Instead, the Supreme Court held that a petition must be advertised before being heard, but it did not mandate the exact manner of advertisement.

4. Non-compliance with Advertisement Requirements Under Rule 24(1):
The court analyzed whether non-compliance with the advertisement requirements under rule 24(1) invalidates the winding-up order. The court distinguished between substantive requirements and procedural requirements. It held that the requirement to advertise a petition is substantive, while the manner and method of advertisement are procedural. The court concluded that as long as the advertisement was made in accordance with the court's directions, the validity of the order is not affected. The court also referenced other rules and cases to support its conclusion that the manner of advertisement is ultimately within the court's discretion.

Conclusion:
The court rejected the application, holding that the non-publication of the notice in the Official Gazette did not vitiate the winding-up order as the advertisement was made in accordance with the court's directions. The court emphasized that the manner of advertisement is within the court's discretion, and substantial compliance with the advertisement requirement suffices. The interim order staying the operation of the winding-up order was extended until 5-8-1998 to allow the applicant to pursue an appeal.