1998 (12) TMI 490 - HC - Companies Law

Summary

Issues Involved:
1. Setting aside the ex parte winding-up order.
2. Compliance with Companies (Court) Rules, 1959.
3. Allegations of abuse of process by the petitioning creditor.
4. Adequacy of notice and service to the applicant-company.

Detailed Analysis:

1. Setting Aside the Ex Parte Winding-Up Order:
The applicants, respondent-company in the main company petitions, sought to set aside the ex parte winding-up orders dated 25-4-1997 and requested the restoration of the petitions to be heard on merits. The court noted that the company was not served notice as required under the Companies (Court) Rules, 1959, after the admission of the winding-up petition. The failure to serve notice as mandated by rules 27 and 28 was a significant procedural lapse, warranting the setting aside of the ex parte winding-up order. The court emphasized that the mistake of the court should not harm the litigant, and the omission by the Company Registrar to issue notice prejudiced the applicant-company.

2. Compliance with Companies (Court) Rules, 1959:
The court highlighted the mandatory nature of rules 27, 28, and 29 of the Companies (Court) Rules, 1959, which require the issuance and service of notice to the company after the admission of a winding-up petition. The court referred to the precedent set in Modern Dekor Painting Contracts (P.) Ltd., which underscored the necessity of compliance with these rules. The court ruled that non-compliance with these mandatory provisions necessitates the dismissal of the winding-up petition under rule 31. The court found that the Registrar's failure to issue notice to the applicant-company as required by these rules was a sufficient ground to set aside the ex parte winding-up order.

3. Allegations of Abuse of Process by the Petitioning Creditor:
The applicant-company contended that the winding-up petition was an abuse of the court's process, used to pressurize the company into succumbing to the petitioning creditor's demands. The court, however, did not delve into the underlying disputes between the parties, focusing instead on the procedural lapses in the service of notice. The court noted that the applicant-company had a bona fide dispute regarding its liability and a good case on merits, further justifying the setting aside of the ex parte order.

4. Adequacy of Notice and Service to the Applicant-Company:
The court found that the applicant-company was not properly served with notice of the winding-up petition as required by the Companies (Court) Rules. The communication from the petitioning creditor's advocate to the applicant-company's new advocates did not constitute proper notice under the rules. The court noted that the applicant-company had no knowledge of the hearing date, and the failure to serve notice prevented the company from appearing in court. The court emphasized that the procedural requirements for serving notice are mandatory and cannot be substituted by informal communications.

Conclusion:
The court set aside the ex parte winding-up orders dated 25-4-1997 in both Company Application No. 363 of 1997 in Company Petition No. 422 of 1992 and Company Application No. 364 of 1997 in Company Petition No. 430 of 1992. The court directed that the company petitions be restored to the file for hearing and final disposal on merits. The court also waived the requirement for further notice, treating the service of notice as sufficient, and directed the applicant-company to file an affidavit-in-reply within six weeks, with the petitioning creditor allowed to file a rejoinder within four weeks thereafter. No costs were awarded.