2018 (9) TMI 1704 - HC - Companies Law

Winding up petition - whether the company could have been ordered to be wound up, when admittedly, the advertisement issued in terms of the said rules, made no reference whatsoever to the changed name? - Held that - Rule 9 of the said rules, no doubt retains inherent powers in a Company Court to give such directions or pass such orders as may be necessary for the ends of justice or to prevent the abuse of the process of the Court. As noted earlier, this is not a case of some inconsequential defect in the advertisement. Rather this is a case where the advertisement does not even reflect the changed and correct name of the company. Therefore, the contention that this is a case of deemed exercise of inherent powers, cannot be accepted. For all the aforesaid reasons, we dispose of this appeal making the following order (a) The impugned order dated 21st June, 2018 is set aside; (b) The Company Petition No. 829 of 2003 is restored to the file of the learned Company Judge, so that the petition may proceed from the stage of publication of advertisement, this time in the correct name of Splendour Gems Limited (formerly known as Beautiful Diamonds Limited ); (c) We make it clear that we have not examined the merits of the matter, therefore, all contentions of all parties are left open for decision by the learned Company Judge; (d) Parties to appear before the learned Company Judge on 15th October, 2018 at 11.00 a.m. and produce an authenticated copy of this order.

Issues Involved:
1. Validity of the advertisement of the winding-up petition.
2. Compliance with the statutory requirements for advertisement.
3. Impact of the change of the company's name on the winding-up proceedings.
4. Exercise of inherent powers by the Company Court.

Issue-wise Detailed Analysis:

1. Validity of the advertisement of the winding-up petition:
The appellant contended that the advertisement of the winding-up petition was defective as it was published under the former name "Beautiful Diamonds Limited" instead of the current name "Splendour Gems Limited." This defect, according to the appellant, violated Rule 99 of the Company Court Rules, 1959, which mandates proper advertisement to ensure all concerned parties have the opportunity to participate in the proceedings. The Court emphasized the importance of advertisement, stating it serves multiple purposes: informing creditors and interested parties to attend the hearing and notifying the public about the petition, which acts as a cautionary measure. The Court concluded that the advertisement in the incorrect name deprived interested parties of a valuable opportunity to support or oppose the petition.

2. Compliance with the statutory requirements for advertisement:
The Court examined the procedural rules for winding-up petitions, particularly Rule 99 and Form No. 48, which prescribe the format and content of the advertisement. The Court noted that the advertisement must include the correct name of the company to ensure it reaches all relevant parties. The failure to advertise the petition under the correct name "Splendour Gems Limited" was deemed a significant error, as it misled potential creditors and contributors who may have dealt with the company under its new name.

3. Impact of the change of the company's name on the winding-up proceedings:
The Court acknowledged that the company's name had changed from "Beautiful Diamonds Limited" to "Splendour Gems Limited" and that this change was duly registered. The appellant argued that the advertisement should have reflected the new name to comply with statutory requirements. The respondent's concern that parties familiar with the former name might be misled was addressed by suggesting that the advertisement could include both the new and former names. The Court agreed with this approach, stating that the advertisement should have been issued as "Splendour Gems Limited (formerly known as Beautiful Diamonds Limited)."

4. Exercise of inherent powers by the Company Court:
The respondent argued that the Company Court could overlook the defect in the advertisement using its inherent powers under Rule 9 of the Company Court Rules. However, the Court held that this was not a case of an inconsequential defect but a significant error affecting the rights of interested parties. Therefore, the inherent powers could not be invoked to condone such a defect. The Court emphasized that compliance with statutory requirements is crucial and cannot be bypassed based on technical considerations.

Conclusion:
The Court set aside the impugned order dated 21st June 2018, and restored Company Petition No. 829 of 2003 to the file of the learned Company Judge. The petition was to proceed from the stage of publication of advertisement, this time in the correct name "Splendour Gems Limited (formerly known as Beautiful Diamonds Limited)." The Court clarified that it had not examined the merits of the case, leaving all contentions open for decision by the learned Company Judge. The appeal was allowed, and the pending Notice of Motion was disposed of.

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