2006 (7) TMI 324 - SC - Companies Law

Whether the petition substantially complies with the requirements? Even when there is some breach or omission whether it can be fatal to the petition? Held that - The learned Judges of the Division Bench has appreciated that the technical plea raised by the respondent regarding defective affidavit was raised after seven years of filing the petition. The learned counsel submitted that the appellant is raising the defence of technical plea to protect himself from the consequence of his default and this plea cannot be considered effective enough to review the order of advertisement. Assuming without admitting that the affidavit was not verified as per the Company Rules, the learned counsel has correctly submitted that if this objection was taken earlier the respondent would have cured the defect. Thus the appeal has no merit and the order passed by the learned Judges of the Division Bench confirming the order passed by the learned Company Judge does not call for any interference by this Court.

Issues Involved:
1. Representation of the appellant.
2. Validity of the winding up petition due to defects in affidavit verification.
3. Sufficiency of reasons for advertisement of the winding up petition.
4. Compliance with procedural rules (rules 18 and 21 of the Companies (Court) Rules, 1959).

Detailed Analysis:

1. Representation of the appellant:
The appellant's previous counsel sought discharge from representation, citing lack of communication from the appellant despite repeated notices. When the matter was heard, the appellant's counsel was absent, and no representation was made on their behalf.

2. Validity of the winding up petition due to defects in affidavit verification:
The appellant argued that the winding up petition was not maintainable due to non-compliance with rules 18 and 21 of the Companies (Court) Rules, 1959, which govern affidavit verification. The appellant contended that the defect in verification was fatal and could not be cured by filing a fresh affidavit after several years. The respondent countered that the defect was a technicality raised belatedly and could have been rectified earlier if pointed out.

3. Sufficiency of reasons for advertisement of the winding up petition:
The High Court dismissed the Company Appeal, holding that the Company Judge did not err in allowing the respondent to file a fresh affidavit to correct the verification defect. The High Court also noted that the Company Judge's findings on the sufficiency of reasons for advertisement were not final. The appellant argued that the debt claimed was already paid to a mutual agent, thus no debt was due, making the winding up petition baseless.

4. Compliance with procedural rules (rules 18 and 21 of the Companies (Court) Rules, 1959):
The appellant emphasized that the winding up petition did not comply with the mandatory verification requirements under rule 21, rendering it inadmissible. The respondent's affidavit did not follow the prescribed format, which the appellant argued should lead to the petition's dismissal. The respondent maintained that substantial compliance with the rules was sufficient and that the defect could be cured by filing a fresh affidavit.

Judgment:
The Supreme Court upheld the High Court's decision, emphasizing substantial compliance with procedural rules. The Court noted that procedural rules are meant to advance justice, not to create hurdles. The defect in the verification was not deemed fatal, and the respondent was allowed to file a fresh affidavit to rectify it. The Court dismissed the appeal, stating that the technical plea raised by the appellant was an attempt to evade liability. The interim stay granted earlier was vacated, and the Company Court was directed to proceed with the winding up petition expeditiously.

The Court highlighted that procedural rules should not be used to circumvent justice and that substantial compliance is sufficient. The decision underscored the importance of rectifying procedural defects to ensure the smooth administration of justice.

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