2019 (4) TMI 801 - HC - Companies Law

Service of petition - format of the notice of the petition - Rule 26 read with Rule 27 of the Companies (Court) Rules 1959 - Held that - Pursuant to the Insolvency and Bankruptcy Code, 2016, (IBC), the Companies Act, 2013 was amended in the manner specified in the 11th Schedule to the IBC. Section 434 of the Companies Act, 2013 was substituted to provide that the proceedings relating to the winding up of the companies shall be transferred to the NCLT that are at a stage that may be prescribed by the Central Government . A further amendment took place to Section 434 with effect from 17th August, 2018 providing for filing of an application for transfer of the proceedings. Pursuant to the above amendments brought about by the IBC, the 2016 Rules, were made. Rule 5 thereof provided for transfer of pending proceedings of winding up on the ground of inability to pay the debts . Rule 5 (1) provided that a petition seeking winding up under Section 433 (e) of the Companies Act, would stand transferred to the NCLT where the petition has not been served on the Respondent as required under Rule 26 of the Companies (Court) Rules, 1959 . A careful reading of Rule 26 shows that it is mandatory to serve a copy of the petition along with the notice of the petition with the exception being an order of the Court to the contrary - In the present case, it is an admitted position that no notice was actually issued in the winding up petition to the Respondent. There was no occasion, therefore, for service of notice in Form-6 on the Respondent. The Appellant s contention that several hearings did take place before the learned Company Judge and therefore that in itself would tantamount to notice to the Respondent does not answer the mandatory requirement of Rule 26 read with Rule 27 viz., that there a formal notice has to be issued (even if it is called a pre-admission notice ) on the Respondent and such notice has to be served upon the Respondent in Form-6. Appeal dismissed - decided against appellant.

Summary

Issues:
Transfer of Company Petition to NCLT based on lack of notice served on Respondent in winding up petition.

Analysis:
The appeal was against transferring the Company Petition to NCLT due to the absence of a notice served on the Respondent. The Appellant had booked a residential plot and paid a significant amount, later seeking a refund due to reduction in plot size. The Respondent assured repayment, but legal action was initiated under Companies Act, 1956. The Respondent agreed to abide by the agreement terms, leading to a delay in issuing a winding-up notice. The Single Judge noted the absence of a notice to show cause for winding up due to the peculiar circumstances. The Respondent later argued that the Company Court lacked jurisdiction due to a notification by the Ministry of Corporate Affairs, leading to a series of hearings and arguments.

The judgment relied on the Supreme Court's interpretation of Rules 26 and 27, emphasizing the pre-admission scenario for notice issuance. The Appellant cited judgments from the Bombay High Court to support retention of the petition in the High Court. However, the Court analyzed the amended Companies Act, 2013, and the subsequent Rules, emphasizing the need for proper notice service as per Rule 26. The Court referred to previous judgments and the specific language of the Rules to clarify the mandatory nature of notice issuance before retaining a winding-up petition in the Company Court.

Ultimately, the Court dismissed the appeal, finding no grounds to interfere with the Single Judge's decision. The judgment highlighted the importance of following procedural requirements, specifically the issuance of a formal notice to the Respondent as mandated by the Rules. The appeal was dismissed, and related applications were disposed of accordingly.