2016 (12) TMI 1302 - HC - Companies Law

Winding up petition - inability to pay debts - Held that - The Company Petition is admitted and made returnable on 20 February 2017; The Petitioner is directed to advertise the Petition in two local newspapers, viz. Free Press Journal (in English) and NavShakti (in Marathi) and also in Maharashtra Government Gazette. Any delay in publication of the advertisement in the Maharashtra Government Gazette, and any resultant inadequacy of the notice shall not invalidate such advertisement or notice and shall not constitute noncompliance with this direction or with the Companies (Court) Rules, 1959; The Petitioner shall deposit an amount of ₹ 10,000/with the Prothonotary and Senior Master of this Court towards the publication charges, within a period of two weeks from the date of this order, with intimation to the Company Registrar, failing which the Petition shall stand dismissed for non-prosecution without further reference to the Court. After the advertisements are issued, the balance, if any, shall be refunded to the Petitioner; A copy of this order shall forthwith be served on the Company by hand delivery and by Registered Post AD by the Advocate for the Petitioner. On the application of Mr. Andhyarujina, learned Counsel for the Respondent, the Petitioner is directed not to advertise the petition for a period of four weeks from today.

Issues Involved:
1. Inability of the Respondent Company to pay its debts.
2. Validity of the power of attorney executed and notarized in the People's Republic of China for verifying the petition.

Issue-wise Detailed Analysis:

1. Inability of the Respondent Company to pay its debts:
The petition seeks the winding up of the Respondent Company due to its inability to pay its debts. The Petitioner claims to have sold, supplied, and delivered goods to the Respondent, as described in the invoices annexed as Exhibits “B1” to “B3” to the petition, amounting to USD 574,640. The Respondent has acknowledged its liability to pay USD 534,678.80 through emails dated 23 February 2013 and 29 March 2013, promising payment by March 2013 and April 2013, respectively. Despite these assurances, the Respondent failed to pay. The statutory demand notice issued by the Petitioner was replied to by the Respondent on 30 December 2014, admitting the debt but citing temporary financial difficulties. There was no defense on merits presented in the correspondence or at the hearing, except for the maintainability of the petition due to the Petitioner’s failure to verify the petition in accordance with law.

2. Validity of the power of attorney executed and notarized in the People's Republic of China:
The petition was verified by a constituted attorney based on a power of attorney executed in China. The Respondent contested the validity of this power of attorney, arguing that it was not recognized under Indian law due to the absence of a notification by the Central Government as required under Section 14 of the Notaries Act. The Petitioner countered this argument by citing Sections 85 and 57 of the Indian Evidence Act, which presume the execution and authentication of documents before a Notary Public and require judicial notice of notarial seals.

The power of attorney was executed by the Petitioner, a body corporate, through a duly authorized officer, based on a board resolution passed on 2 September 2014. The officer executed the power of attorney on 17 September 2014, authorizing the constituted attorney to sign and verify claims, including winding-up petitions. The power of attorney was attested by a Notary Public in China.

Rule 21 of the Companies (Court) Rules, 1959, allows for verification of petitions by an affidavit made by a director, secretary, or principal officer of the body corporate or any other person duly authorized by the Petitioner. The Registrar’s permission for the deponent to make and file the affidavit implies that the deponent was duly authorized.

The Court noted that authority can be conferred in various modes, not necessarily by a power of attorney. The validity of the authority, created in China, should be assessed based on the law applicable there. The Court held that Section 85 of the Evidence Act creates a presumption in favor of documents executed before and authenticated by a Notary Public, including foreign Notaries. Section 57 requires judicial notice of notarial seals, including those of foreign Notaries.

Section 14 of the Notaries Act, which deals with reciprocal recognition of notarial acts, does not control the interpretation of Sections 85 and 57 of the Evidence Act. The Court agreed with the views of the Delhi and Allahabad High Courts that Section 14 does not bar the recognition of notarial acts from countries not declared by the Central Government.

The Court found no merit in the Respondent’s contention regarding the lack of factual reciprocity between India and China. The Petitioner was not required to prove factual reciprocity in the absence of such a plea from the Respondent.

Order:
1. The Company Petition is admitted and returnable on 20 February 2017.
2. The Petitioner is directed to advertise the Petition in two local newspapers and the Maharashtra Government Gazette.
3. The Petitioner shall deposit ?10,000 with the Prothonotary and Senior Master of the Court for publication charges within two weeks, failing which the Petition shall stand dismissed for non-prosecution.
4. A copy of the order shall be served on the Company by hand delivery and Registered Post AD.

The Petitioner is directed not to advertise the petition for four weeks from the date of the order, as agreed by Counsel for both sides. The companion petition, Company Petition No.751 of 2015, is also admitted and returnable on the same date, with the advertisement dispensed with due to the advertisement ordered in the companion petition.

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