2017 (5) TMI 995 - HC - Insolvency and Bankruptcy

Application for restoration of the company in the register - Jurisdiction of this Court to entertain an application for recalling the order passed under Section 560(6) of the Companies Act - Held that - Admittedly, the original proceeding originating from a Company Petition filed under Section 560 of the Act is neither reserved for orders for allowing nor otherwise pending as on this date and therefore the application for recalling the order cannot come within the purview of Rule 3 of the said Rules. The power of recalling the order is a vested power upon the Company Court and emanates from Rule 9 of the Company Court Rules. it originates and / or arise from the original proceeding and there was no intention of the legislature to include such applications within the periphery of Rule 3 thereof. This Court therefore does not find any substance in the preliminary objection raised by the Director of the company and is therefore answered in negative. Whether the order was obtained by suppressing the material facts and by committing fraud on the Court? - Held that - The application for restoration of the company in the register contains the simplicitor statements that the company was active but because of the person responsible for filing the annual return and the balance sheet, the same could not be filed. In the instant petition, the present applicants disclosed that the company applied for voluntary winding up under EES (Easy Exit Scheme)-2011 before the Registrar of Companies and wanted the company to be wound up under Section 484 of the Companies Act, 1956 by passing a special resolution. A declaration duly verified by affidavit was also filed in compliance with Section 488 of the said Act declaring that the company had been inoperative since past three years. The said declaration contains the categorical statement that there is no litigation pending against or involving the company when in fact the Complaint Case being No. 5939 of 2003 was pending before the learned Metropolitan Magistrate at Kolkata involving the said company. It is further stated that the said application was filed under the said scheme disclosing that there are two Directors namely Subhas Dutta and Partha Dutta when it would appear that they were not the Directors. The aforesaid facts having been specifically denied in the opposition. It is no longer res-integra that the Court can recall its order if obtained by suppression of the material fact or by practicing fraud. The Company Petition was silent on the above aspect and there is no hesitation to say that there was a conscious and deliberate suppression of those facts

Summary

Issues Involved:
1. Recording the death of a petitioner.
2. Jurisdiction of the High Court to entertain an application for recalling an order under Section 560(6) of the Companies Act.
3. Suppression of material facts and fraud on the Court.

Issue-wise Detailed Analysis:

1. Recording the death of a petitioner:
In C.A. 780 of 2016, the application was for recording the death of one Basant Kumar Chirimar, Petitioner No. 2, who died on January 8, 2016, during the pendency of the application. The Court, after reviewing the application, found no grounds to disallow the prayer and thus allowed the application, ordering in terms of prayer A to E of the Judges Summons.

2. Jurisdiction of the High Court to entertain an application for recalling an order under Section 560(6) of the Companies Act:
In C.A. 243 of 2014, the primary issue was whether the High Court had jurisdiction to entertain an application for recalling an order passed under Section 560(6) of the Companies Act, 1956. The name of the company was struck off from the register, and an application under Section 560(6) was filed for restoration. The application was initially allowed, but a subsequent application was filed for recalling the order. The preliminary objection was raised that the High Court lacked jurisdiction due to Rule 3 of the Companies (Transfer of Pending Proceedings) Rules, 2016, which mandates the transfer of proceedings to the National Company Law Tribunal (NCLT) except those reserved for orders.

The Court examined Rule 3, which states that all proceedings, except those relating to winding up, shall be transferred to NCLT. The proviso exempts proceedings reserved for orders. The Court interpreted "proceeding" to include all steps in a judicial action and concluded that the application for recalling an order is not covered under Rule 3. Therefore, the High Court retained jurisdiction to entertain the application for recalling the order.

3. Suppression of material facts and fraud on the Court:
The merit of the application for recalling the order was examined next. The original application for restoration of the company’s name claimed that the company was active but failed to file annual returns due to the accountant's negligence. However, the present applicants disclosed that the company had applied for voluntary winding up under the Easy Exit Scheme (EES)-2011 and declared it inoperative for three years, with no pending litigation, which was false as there was a pending complaint case. The Court found that there was deliberate suppression of these facts in the original petition.

The Court cited a similar case where it was held that a company which had applied for its name to be struck off could not later apply under Section 560(6) unless it demonstrated an obvious mistake shortly after the name was struck off. The Court concluded that the order was obtained by suppressing material facts and practicing fraud.

Conclusion:
The application in C.A. 243 of 2014 was allowed, the order dated August 12, 2013, in C.P. 537 of 2013 was recalled, and the Company Petition No. 537 of 2013 was restored to its original file and number.