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TMI Blog1999 (4) TMI 490X X X X Extracts X X X X X X X X Extracts X X X X ..... -1998 petition was admitted. It was ordered that admission of petition be advertised in two newspapers as per rules. At the request of the learned counsel for the petitioner to suspend the operation of the order on the ground that the petitioner-company intends to prefer an appeal against the impugned order of admission, the operation of the impugned order was suspended to enable the petitioner to prefer an appeal and to bring stay order. The petitioner-company preferred an appeal in OSA. No. 2 of 1999. The appellate Court on 24-2-1999 dismissed the appeal at the admission stage observing that the Company Judge, having been satisfied, prima facie, that the petitioner-company is indebted to the respondent- Corporation, has admitted the petition, that no final order has yet been passed and at this stage there is no reason to entertain this appeal. It was also observed that it would be open to the petitioner to make an applica- tion for any relief whatsoever before the Company Judge and the dismissal of the appeal will not be taken into consideration by passing appropriate order in the facts and circumstances of the case and demand of justice. 3. The petitioner has alleged almos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f admission of the petition cannot be granted because it is clear case of the petitioner inability to pay the debts and, therefore, application is liable to be dismissed. 5. In the reply affidavit, it is alleged that there are about 2500 employees working in the two units of the petitioner-company and the plea of bona fide dispute can be adjudicated in the Civil Court, therefore, advertise- ment should be deferred till completion of trial. 6. At the outset, it is to be remarked that the learned Advocate appearing for the petitioner-company has stated that the petitioner-company does not press its plea for revocation of the order of admission dated 24-12- 1998, but only press its demand for postponement of publication of the order of the admission in newspapers until the petition is decided on merits. 7. Relying on the case of National Conduits ( P. ) Ltd. v. S.S. Arora AIR 1968 SC 279, it has been argued on behalf of the petitioner-company that financial status of the petitioner-company is very sound and about 2500 workers are employed in two units of the petitioner-company and, therefore, admission of petition should not be advertised in the newspapers until th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtisement required by these Rules." 11. The Apex Court in the case of National Conduits ( P. ) Ltd ( supra ) considering the aforesaid rules has observed that when the petition is filed before the High Court for winding up of the company under the order of the Court, the High Court ( i ) may issue notice to the Company to show cause why petition should not be admitted; ( ii ) may admit the petition and fix a date for hearing and issue a notice to the company before giving directions about advertisement of the petition; or ( iii ) may admit the petition, fix the date of hearing of the petition, and order that the petition be advertised and direct that the petition be served upon persons specified in the order. A petition for winding up cannot be placed for hearing before the Court, unless the petition is advertised; that is clear from the terms of rule 24(2). But that is not to say that as soon as the petition is admitted, it must be advertised. In answer to a notice to show cause why a petition for winding up be not admitted, the company may show cause and contend that the filing of the petition amounts to an abuse of the process of the Court. If the petition is admitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the reason why the learned Judges clearly held in the said decision ( supra ) and in the decision in Cotton Corpn. of India Ltd. v. United Industrial Bank Ltd. (3) [1984] 55 Comp. Cas 423 (SC) , that there is 'sufficient' built-in safeguard in the provisions of the Compa-nies Act and the rules framed there under, which would save the Company from any adverse consequences. The built-in safeguards are ones referred to by us in the foregoing paragraphs." It has also been observed in the case of Soujanya Hotels ( P. ) Ltd ( supra ) that Rule 9 of the Companies (Court Rules) 1959 enjoins "the Company Court to give such directions or pass such orders as may be necessary for the ends of justice to prevent abuse of the process of the Court. The inherent power preserved by this rule enables either party and in partic- ular, the company against which this petition is filed, to file an application for revoking the admission and also in a given case to stay the order directing the advertisement. All these facts and circumstances are stated to be the built-in safeguards, which enable the prevention of abuse of the process of the Court." 13. Relying on the case of National ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court admits the petition and simultaneously orders that petition be advertised and directs that petition be served on the persons specified in the order; the respondent-company is competent to move the Court that in the interests of justice or to prevent the abuse of the process of Court, the petition should not be advertised. Similarly, when the High Court issues show-cause notice to the company as to why the petition should not be admitted, the respondent-company may show cause that petition should not be admitted and submit that filing of the petition is abuse of process of Court and it should be dismissed. But where in answer to the show- cause notice to the respondent-company before admission of petition, both sides are heard before admission and, thereafter petition is admitted for hearing; Advertisement of petition in newspapers is mandatory because petition for winding up cannot be placed for hearing before the Court unless the petition is advertised under rule 96, read with rule 24 particularly in the light of sub-rule (2) of rule 24 ibid. The advertisement in the last course is the requirement of law. 17. In the case on hand as noted above notice before admission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectly paid the amounts shown in the invoices to Reliance against the goods delivered to it. These questions may, however, be decided during the course of enquiry if the parties to the petition adduce oral evidence in support of their rival contentions. Therefore, on the basis of the aforesaid material on record, it is difficult to conclude at this stage of the proceedings that the respondent-company had not accepted the Hundies for consideration, that is to say, not against the goods purchased on credit through Srinivasa Fibre. True that as per one of the terms of the sanction letter dated 25-9-1995, the petitioner-Corporation had a second charge over the goods but it is of no help to the petitioner-Corporation because this again, prima facie, shows that the bill discounting facility was provided to Srinivasa Fibre against the goods transacted and it was not a simple money transaction." 18. The defence of novation of contract was also not accepted for the reasons stated in the Paragraph 11 of the impugned order. Then in Paragraph 15 of the impugned order, it was found that prima facie it appears that the respondent-company is indebted to the petitioner- Corporation. There ..... X X X X Extracts X X X X X X X X Extracts X X X X
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