2002 (8) TMI 617 - HC - Companies Law

Summary

Issues Involved:
1. Revival and restoration of the Company Petition No. 76 of 1997.
2. Validity of the memorandum of compromise under the Foreign Exchange Regulation Act, 1973.
3. Procedure for revival of the company petition under the Companies Act, 1956.
4. Inherent powers of the court under the Companies (Court) Rules, 1959 and Civil Procedure Code, 1908.
5. Binding nature of the compromise agreement.

Issue-Wise Detailed Analysis:

1. Revival and Restoration of the Company Petition No. 76 of 1997:
The applicant sought to revive and restore Company Petition No. 76 of 1997, initially filed for winding up the respondent-company due to its inability to pay debts. The petition was dismissed based on a memorandum of compromise on 23-11-2001, which allowed for the revival of the petition if the respondent defaulted on the agreed payments. The respondent failed to adhere to the terms of the compromise, prompting the applicant to file the present application for revival.

2. Validity of the Memorandum of Compromise under the Foreign Exchange Regulation Act, 1973:
The respondent argued that the memorandum of compromise was void due to a violation of section 47(2) of the Foreign Exchange Regulation Act, 1973, which requires permission from the Reserve Bank of India (RBI) for certain financial transactions. The court found that the RBI had granted permission for the applicant to receive the interest amount, subject to the condition that it be credited to an NRO Account. Therefore, the memorandum of compromise was not void and was legally binding.

3. Procedure for Revival of the Company Petition under the Companies Act, 1956:
The respondent contended that the revival of the company petition required following the procedure afresh, as proceedings under section 433 of the Companies Act, 1956, are in rem. However, the court held that the inherent powers of the court under the Companies (Court) Rules, 1959, and Civil Procedure Code, 1908, allowed for the revival of the petition without following the procedure afresh, as the original order provided for such revival.

4. Inherent Powers of the Court under the Companies (Court) Rules, 1959, and Civil Procedure Code, 1908:
The court emphasized that inherent powers are rooted in necessity and are co-extensive with the need to prevent abuse of process and to meet the ends of justice. The court cited several precedents, including decisions from the Apex Court, affirming that inherent powers can be exercised where the Code is silent and where there is no express bar by any statute.

5. Binding Nature of the Compromise Agreement:
The court highlighted that the compromise agreement, dated 23-11-2001, was not against public policy and was legally binding on both parties. The respondent, having avoided winding up due to the compromise, could not now oppose its implementation. The court referred to several Supreme Court decisions underscoring the binding nature of compromise agreements and the estoppel against parties who seek to resile from such agreements.

Conclusion:
The application for revival of the company petition was allowed, as the respondent had defaulted on the terms of the compromise, and the court's inherent powers supported the revival to meet the ends of justice.