2012 (6) TMI 587 - HC - Companies Law

Winding up petition seeking advertisement - before admitting winding up petition and directing publication of company petition, it is necessary to consider question whether any prima facie case is made out by petitioning creditor Held that - when the learned judge has held that there was sufficient compliance of section 433(a), before ordering advertisement, the learned judge ought to have afforded opportunity to the appellant to put forth their case so as to be convinced about the prima facie case of the first respondent - statutory provisions regarding the inbuilt safeguard under the Act has not been complied with and the impugned order directing the effecting of advertisement and the appointment of the official liquidator as a provisional liquidator cannot be sustained - advertisement and publication of the winding up petition in the Official Gazette of Tamil Nadu and local dailies is set aside

Issues Involved:
1. Maintainability of the company petition.
2. Service of statutory notice under Section 434(1)(a) of the Companies Act.
3. Bona fide disputes regarding the debt.
4. Compliance with Rule 96 of the Companies (Court) Rules, 1959.
5. Appointment of the official liquidator and advertisement of the winding-up petition.

Detailed Analysis:

1. Maintainability of the Company Petition:
The appellant contested the maintainability of the company petition filed by the first respondent, arguing that the statutory notice under Section 434(1)(a) of the Companies Act was not served at the registered office of the appellant-company. The appellant also claimed that there were several disputes between the parties concerning the conversion charges and that these disputes could not be resolved within the framework of a company petition. The appellant further argued that the amount advanced by the first respondent was sufficiently secured by a mortgage, thus questioning the necessity of the winding-up petition.

2. Service of Statutory Notice:
The appellant argued that the statutory notice was not served at its registered office, which was a mandatory requirement under Section 434(1)(a) of the Companies Act. The learned single judge noted that although the notice was not sent to the registered office, the appellant had received it and responded through their counsel. The judge held that the non-service of notice at the registered office should not invalidate the company petition, as the appellant had acknowledged receipt and responded.

3. Bona Fide Disputes Regarding the Debt:
The appellant contended that there were bona fide disputes about the quantum of the debt and the conversion charges payable by the first respondent. The appellant argued that the first respondent was liable to pay several crores towards conversion charges and that these disputes could not be resolved in a company petition. The appellant also pointed out that the first respondent had filed a mortgage suit for the recovery of the amount, indicating that the winding-up petition was being used as a tool to recover the alleged debt.

4. Compliance with Rule 96 of the Companies (Court) Rules, 1959:
The appellant argued that the learned single judge did not comply with Rule 96, which requires a summary enquiry to determine whether a prima facie case has been made out before admitting the winding-up petition and ordering its advertisement. The judge must be convinced of the petitioning creditor's prima facie case, including the existence of a debt, its limitation, and the validity of the company's defense. The appellant claimed that no such enquiry was conducted, and they were not given an opportunity to argue the case on merits.

5. Appointment of the Official Liquidator and Advertisement of the Winding-Up Petition:
The learned single judge ordered the appointment of the official liquidator and directed the advertisement of the winding-up petition in two dailies and the Government Gazette. The appellant argued that this order was made without giving them an opportunity to present their defense on the merits of the case, thus violating the principles of natural justice. The appellant requested that the matter be remitted back to the single judge for a fresh consideration.

Conclusion:
The High Court set aside the impugned order dated October 25, 2010, which ordered the advertisement and publication of the winding-up petition. The court held that the statutory provisions regarding the inbuilt safeguard under the Act had not been complied with and that the appellant should have been given an opportunity to present their case. The matter was remitted back to the company judge for fresh consideration, with the direction to afford the appellant an opportunity to put forth their case regarding the prima facie grounds of the petition. The applications filed by various parties seeking to implead themselves were closed, with liberty to work out their remedy before the company judge.

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