2011 (10) TMI 764 - HC - Indian Laws

Summary

Issues Involved:
1. Whether the appellant, son of the Managing Director of the company in liquidation, can seek to set aside the winding-up order dated 3.12.2008 on the grounds of irregularity in the advertisement of the winding-up petition.
2. The locus standi of the appellant as a contributory.
3. Compliance with mandatory advertisement requirements under Rule 99 and Form 48 of the Companies (Court) Rules.
4. Procedural irregularities in advertisement and their impact on the winding-up order.
5. Settlement of dues to the petitioning creditor and implications for the winding-up order.
6. Invocation of inherent powers of the Court under Rule 9 of the Companies (Court) Rules.
7. Directions for further proceedings, including the role of the Official Liquidator and Indian Bank in the sale process under SARFAESI Act.

Issue-wise Detailed Analysis:

1. Irregularity in Advertisement and Setting Aside the Winding-Up Order:
The primary question was whether the appellant could invoke inherent powers of the Company Court under Rule 9 of the Companies Court Rules to set aside the winding-up order dated 3.12.2008 due to alleged irregularities in the advertisement of the winding-up petition. The appellant argued that the advertisement did not comply with mandatory requirements, which should vitiate the winding-up order. However, the Court found that procedural irregularities in the advertisement, such as non-mentioning of the company petition number and cause title, did not cause any prejudice to the appellant, who was aware of the proceedings through his father, the Managing Director.

2. Locus Standi of the Appellant as a Contributory:
The appellant claimed to be a substantial shareholder holding around 10% of the company's paid-up capital. However, the Court found that the appellant failed to produce primary evidence, such as share certificates, to prove his shareholding. The Court emphasized that a contributory must satisfy the requirements of Section 439(4)(b) of the Companies Act, which mandates holding shares for at least six months during the eighteen months immediately before the commencement of winding-up proceedings. The appellant did not meet this requirement, and the Court held that he lacked locus standi to file the petition.

3. Compliance with Mandatory Advertisement Requirements:
The Court examined whether the advertisement of the winding-up petition complied with Rule 99 and Form 48 of the Companies (Court) Rules. The appellant argued that the advertisement was defective as it did not contain the company petition number and cause title. The Court acknowledged the procedural irregularity but found that the Gazette publication was in accordance with the rules, and the irregularity did not cause any prejudice to the appellant.

4. Procedural Irregularities and Impact on the Winding-Up Order:
The Court considered whether procedural irregularities in the advertisement could vitiate the winding-up order. It concluded that procedural irregularities alone, without showing prejudice, could not be a ground to set aside the winding-up order after three years. The appellant, being aware of the proceedings through his father, could not claim prejudice due to the irregularity in the advertisement.

5. Settlement of Dues to the Petitioning Creditor:
The appellant argued that the winding-up order should be set aside as the dues to the petitioning creditor had been settled. However, the Court noted that the company owed substantial amounts to secured creditors, workmen, and statutory authorities. The appellant did not propose any plan to settle these dues or revive the company, and the Court found no justification to set aside the winding-up order based on the settlement with the petitioning creditor alone.

6. Invocation of Inherent Powers under Rule 9:
The Court held that the inherent powers under Rule 9 of the Companies (Court) Rules could not be invoked to set aside the winding-up order when a specific remedy by way of appeal was available. The appellant, being aware of the proceedings and having participated in earlier litigation, could not invoke inherent jurisdiction to challenge the winding-up order.

7. Directions for Further Proceedings:
The Court directed Indian Bank to deposit Rs. 1,04,63,659 with the Official Liquidator towards expenses incurred. Indian Bank was permitted to bring the properties to sale under SARFAESI Act, associating the Official Liquidator in the proceedings before DRT. The sale proceeds would remain with Indian Bank, and the Company Court would pass appropriate orders for apportionment of the sale proceeds among the secured creditors, workmen, and other statutory authorities.

Conclusion:
The appeal was dismissed, and the Court provided detailed directions for further proceedings, ensuring the interests of secured creditors, workmen, and statutory authorities were protected. The inherent powers of the Court could not be exercised to set aside the winding-up order, and procedural irregularities in advertisement did not justify setting aside the order after three years.