2003 (5) TMI 420 - HC - Companies Law

Issues Involved:
1. Condonation of delay in filing applications.
2. Application of Order 37, Rule 4 vs. Order 9, Rule 13 of the Code of Civil Procedure.
3. Knowledge of the ex parte decree.
4. Impact of pending winding up proceedings on the decree.
5. Validity and effect of the provisional liquidator's appointment.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing Applications:
The application for condonation of delay (IA No. 6013 of 2003) was filed one day before the hearing and was not accompanied by the necessary application (IA No. 9740 of 2002). The court held that for the application to merit consideration, it should have been filed along with IA No. 9740 of 2002. The absence of such filing rendered the application non-maintainable and served no useful purpose, leading to its dismissal. Furthermore, no explanation was provided for the inordinate delay, reinforcing the dismissal.

2. Application of Order 37, Rule 4 vs. Order 9, Rule 13 of the Code of Civil Procedure:
The application (IA No. 9740 of 2002) was filed beyond the prescribed period of limitation and lacked an accompanying application for condonation of delay, warranting its dismissal. The court emphasized that the application seemed to be filed under Order 9, Rule 13 rather than Order 37, Rule 3(4), highlighting the stringent requirements of Order 37 for summary suits. The court reiterated that while Order 9, Rule 13 requires showing sufficient cause for non-appearance, Order 37, Rule 4 demands showing special circumstances and a substantial defense. The Supreme Court in Rajni Kumar v. Suresh Kumar Malhotra underscored that under Order 37, Rule 4, the defendant must show special circumstances and facts entitling them to defend the suit, which was absent in the present case.

3. Knowledge of the Ex Parte Decree:
The court rejected the contention that the judgment-debtor only gained knowledge of the ex parte decree upon receiving notice in execution proceedings. The judgment-debtor had been served by publication, and the court noted that the judgment-debtor had sufficient knowledge of the decree by July 2001, as evidenced by their participation in winding up proceedings where the decree was mentioned. The court concluded that the judgment-debtor failed to show sufficient cause and diligence, which is crucial under the stringent provisions of Order 37, Rule 4.

4. Impact of Pending Winding Up Proceedings on the Decree:
An objection was raised that the decree was non-executable as it was passed during the pendency of a winding up petition. The court distinguished between civil suits filed before and after the appointment of a provisional liquidator. The court noted that a collusive petition could delay a civil suit, but the primary intent of Section 446 of the Companies Act is to protect creditors' interests. The court referenced several judgments, including A.M. Padmakshi v. Sudarsan Chits (India) Ltd. and Vysya Bank Ltd. v. Official Liquidator, which held that pending actions could continue without immediate leave under Section 446 and that leave could be granted post facto. The court concluded that the suit was maintainable when filed, and the subsequent appointment of a provisional liquidator did not invalidate the decree.

5. Validity and Effect of the Provisional Liquidator's Appointment:
The court examined the impact of the provisional liquidator's appointment on the suit. The suit was filed before the provisional liquidator's appointment, and the winding up petition was dismissed, lifting the provisional liquidator's appointment. The court emphasized that the objective of Section 446 is not to delay legitimate claims but to ensure maximum benefit for creditors. The court dismissed the argument that the decree was non-executable due to the provisional liquidator's appointment, as the winding up petition was ultimately dismissed.

Conclusion:
The application was dismissed with costs of Rs. 2000, as it lacked merit and failed to meet the stringent requirements of Order 37, Rule 4. The court underscored the importance of showing special circumstances and a substantial defense in summary suits and rejected the arguments regarding the impact of the winding up proceedings and provisional liquidator's appointment on the decree.

← Previous Next →