1969 (1) TMI 40 - HC - Companies Law

Winding up Powers of tribunal on hearing petition and Power of Court to enlarge or abridge time

Issues Involved:
1. Default in payment of instalments under consent terms.
2. Jurisdiction of the court to extend time under Rule 7 of the Companies (Court) Rules, 1959.
3. The nature of the consent order and its implications.
4. Estoppel against the respondent company.
5. Exercise of discretion by the court in favor of the respondent company.

Issue-wise Detailed Analysis:

1. Default in Payment of Instalments under Consent Terms:

The petitioners filed a petition for winding-up the respondent company, which was accepted, and a consent order was passed on 24th April 1968. The company agreed to pay Rs. 1,50,000 in instalments. The company paid Rs. 1,10,000 by 30th July 1968. However, the cheque for the instalment due on 30th August 1968 was dishonoured. The company claimed this was due to an inadvertent error involving their bank accounts. Upon discovering the error on 5th September 1968, the company offered to pay the amount, which the petitioners declined. The company then sought condonation of the delay and an extension of time for payment.

2. Jurisdiction of the Court to Extend Time under Rule 7 of the Companies (Court) Rules, 1959:

Mr. Nariman, for the applicant-company, argued that Rule 7 of the Companies (Court) Rules, 1959, allows the court to extend time even after the time has expired. This rule is identical to Rule 310 of the Bombay High Court Rules (O.S.), 1957, and Rule 288 of the Bombay High Court Rules (O.S.), 1930. The court can extend time for doing any act or taking any proceeding upon such terms as the justice of the case may require, even if the application is made after the expiration of the time appointed. The decision in Yusuf v. Abdullabhai supported this interpretation, stating that the words "any order" in Rule 288 include an order by consent.

3. The Nature of the Consent Order and its Implications:

Mr. Cooper for the petitioners argued that the consent order could only be varied or set aside by consent and that it was a self-operative order, making the court functus officio after the time fixed had expired. However, the court held that an order admitting a winding-up petition is procedural and not final. It is not akin to a decree and falls within the ratio of the Supreme Court decision in Mahant Ram Das v. Ganga Das, which allowed for the extension of time even for self-operative orders. The court has jurisdiction to extend time under Rule 7 of the Companies (Court) Rules, even after the time fixed has expired.

4. Estoppel against the Respondent Company:

The court rejected the contention of estoppel, stating that the facts of the case did not attract the rule of estoppel. The consent terms did not contain any representation that the company would not apply for an extension of time. Even if such a representation was implied, it did not cause the petitioners to act upon it to their prejudice. The court found no prejudice caused by the company's application for extension of time due to a few days' inadvertent delay.

5. Exercise of Discretion by the Court in Favor of the Respondent Company:

The court found that the petitioners' refusal to accept payment on 5th September 1968 was perverse. The company had done all it could to remedy the inadvertent mistake and even offered to pay the last instalment before it was due. The court extended the time for payment of the Rs. 25,000 instalment to 27th September 1968 and advised the company to make the payments in cash and well in time. The company was ordered to pay the petitioners' costs of the summons.

Order of Division Bench:

The Division Bench upheld the decision of the single judge, emphasizing that Rule 7 of the Companies (Court) Rules allows the court to extend time even for consent orders. The Bench rejected the argument that the consent order was self-operative and that the court had no jurisdiction to extend time. The Bench also dismissed the estoppel argument and found that the company had made a valid offer to pay the balance amount. The Bench concluded that the court's discretion was correctly exercised in favor of the respondent company and dismissed the appeal with costs. The respondents were allowed to deposit the amount of Rs. 40,000 in court.

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