2008 (1) TMI 620 - HC - Companies Law

Winding up - Circumstances in which a company may be wound up - Held that - In the event of dealings by the Company with its assets between the date of presentation of the winding up petition and the date when a valid petition comes into existence after re-verification of the same, third parties may have acquired valuable rights in the company s assets, which, it may be difficult to assail or set aside. The winding up order would come into existence on the date of such re-verification and this would create a good deal of confusion regarding the assets of the company and rights of third parties. In each case it would be a question of fact. These aspects, in our view, are required to be considered by the learned Company Judge on the basis of the facts and the pleadings before the learned Company Judge and, therefore, to the aforesaid extent we set aside the order passed by the learned Company Judge in respect of the affidavit and remand back the matter to the learned Company Judge to consider the same in accordance with law.

Summary

Issues:
Challenge to findings and conclusions of the learned Single Judge under the Companies Act regarding debt payment and maintainability of the petition based on affidavit and power of attorney.

Analysis:
1. The appellant filed an appeal challenging the findings of the learned Single Judge under the Companies Act. The petition was filed by the respondent under sections 433, 434, and 439 of the Companies Act, claiming that the appellant was indebted and unable to pay its debt.

2. Objections were raised regarding the maintainability of the petition due to the affidavit not being in the prescribed form and the power of attorney not being stamped. The learned Company Judge held that these issues were curable defects.

3. The Company Judge allowed for the amendment of the affidavit as the defect was curable. Regarding the unstamped power of attorney, the Court held that it could be rectified by impounding the document and paying the penalty as per the law.

4. The Court found no fraud but a bona fide mistake in asserting the power of attorney was duly stamped. The appellant challenged these findings in the appeal.

5. The appeal challenged the findings, and both parties' counsels were heard.

6. The power of attorney was initially unstamped, but later stamped after objections were raised. The Court noted the obligation to ensure proper stamping when relying on such documents.

7. The Court found no fraud or misrepresentation by the power of attorney holder, stating that no prejudice was caused to the appellant.

8. The issue of the affidavit not being in the prescribed form was discussed. The Court considered the mandatory nature of the Rules under section 643 of the Companies Act.

9. The Court referred to previous judgments emphasizing substantial compliance with the rules and forms, rather than strict adherence to technicalities.

10. Citing previous cases, the Court discussed the importance of substantial compliance with requirements and whether defects in the petition could be fatal.

11. The Court referred to a case where defects in a petition were rectified by filing an amended petition, highlighting the possibility of curing defects.

12. Another case was referenced concerning the commencement of winding up proceedings and the relevance of Rule 21 and Form No. 3 in such situations.

13. The Court discussed how a winding up petition relates back to its presentation date and the implications of any delay or defects in the petition.

14. The Court set aside the order regarding the affidavit and remanded the matter to the Company Judge for further consideration, especially regarding limitations and other issues.

15. The Court clarified that its opinions were tentative, leaving room for the Company Judge to consider the case's merits based on available facts and pleadings.

16. The appeal was disposed of accordingly, with the case being remanded for further consideration by the Company Judge.