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TMI Blog2012 (6) TMI 587X X X X Extracts X X X X X X X X Extracts X X X X ..... dran, JJ. AR.L. Sundaresan and G. Ethirajulu for the Appellant. Srinivasa Moorthy, and K. Jaichandran for the implead Petitioner. K. Rajasekaran and K. Moorthy for the Respondent. JUDGMENT Mrs. R. Banumathi, J. Being aggrieved by the order passed by the learned single judge dated October 25, 2010 admitting C.P. No. 132 of 2008 ( Sri Anjaneya Cotton Mills Ltd. v. Sheela Rani Textiles Ltd. [2010] 160 Comp. Cas. 211/[2011] 107 SCL 87 (Mag.) (Mad)) and ordering notice of publication of the company petition in two dailies, viz., Business Line (English edition) and Daily Thanthi (Tamil edition) and also in the Government Gazette in accordance with the Companies (Court) Rules, 1959 and appointment of the official liquidator as the provisional liquidator of the appellant-company with a direction to take over all assets and records of the appellant-company, the present appeal is filed. Factual background of the appeal is as follows : 2. The first respondent herein filed company petition under sections 433(e) and 434 read with section 439(1)(b) of the Companies Act, 1956 seeking for a direction to wind up the appellant-company and to appoint the official liqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osit and Rs. 45 lakhs towards deposit repayable in 10 instalments together with interest at the rate of 12 per cent per annum. On January 19, 2006 the appellant executed a deed of hypothecation hypothecating four generator sets in favour of the first respondent as security for the sum of Rs. 45 lakhs and therefore, the first respondent has a charge over the said properties. Against the appellant-company, one M/s. Dipalee Traders, Mumbai filed C.P. No. 295 of 2003 for winding up and the same is pending in this court. 4. It is the further case of the first respondent that after doing conversion work for some time, the appellant failed to continue the same due to electricity disconnection and requested the first respondent to advance further amount of Rs. 32.32 lakhs towards electricity bills and the same was also paid by the first respondent under a supplementary agreement dated April 17, 2007 under which the appellant agreed to repay the said amount at the rate of Rs. 5 lakhs per month on 25th of every month. At the request of the appellant, the first respondent also gave a further amount of Rs. 68,79,261 for the purpose of electricity payment and other liabilities and a simple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and issued notice under section 13(2) of the SARFAESI Act on December 7, 2006. As there was no response from the appellant, the IDBI issued notice under section 13(4) of the SARFAESI Act and also took physical possession of the properties of the appellant on February 12, 2007. The IDBI issued the SARFAESI Act notice for auctioning the properties and the same was published fixing the auction on March 21, 2007. Challenging that notice issued by the IDBI, the appellant filed a writ petition and obtained an order of stay against the auction proceedings. On petition filed by the IDBI, the Madurai Bench directed the parties to work out the possibility of settlement. In pursuance of the same, a meeting was convened and no settlement could be arrived at. However, the High Court, Madurai Bench by order dated July 25, 2007 allowed the writ petition. 7. After the disposal of the writ petition, the IDBI fixed auction sale of the secured properties of the appellant on December 26, 2007. Challenging the same, the appellant preferred SARFAESI appeal before the Debts Recovery Tribunal, Madurai in S.A. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company petition as preliminary issue. 9. Upon considering the contentions and material adduced on either side, the learned single judge held that notice had been received by the appellant and that the appellant had also sent reply and in such circumstances, non-serving of statutory notice in the registered office of the company would not stand in the way of proceeding further and on that ground the company petition cannot be thrown out. The learned judge further held that the ledger account produced by the first respondent would show that as on September 8, 2006, an amount of Rs. 1.62 crores is payable by the appellant and that the appellant has also acknowledged his liability, the learned judge held that the objection raised regarding the maintainability of the company petition is not sustainable. Observing that there are clinching documents to show the liability the learned judge admitted the company petition and directed the effecting of notice of publication of the petition in two dailies and also in the Government Gazette. The learned judge also appointed the official liquidator as the provisional liquidator of the company and directed the official liquidator to file th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the previous failed one-time settlement scheme before March 26, 2011 but the appellant paid only Rs. 50 lakhs as against Rs. 380.01 lakhs and failed to pay the balance of Rs. 330.01 lakhs within the stipulated period. Learned counsel for the IDBI would further submit that the IDBI has been incurring huge expenses for securing assets, which are taken possession in pursuance of the initiation of action under the SARFAESI Act and prayed for issuance of direction giving liberty to the IDBI to proceed under the SARFAESI Act. 14. In the counter affidavit, regarding maintainability of the company petition, the appellant primarily raised three objections : (i) that the statutory notice under section 434(1)(a) of the Companies Act was not served in the registered office ; (ii) that there are many disputes between the parties and that the first respondent is liable to pay several crores to the appellant towards the conversion charges and the same cannot be resolved in a company petition ; and (iii) the amount advanced by the first respondent is sufficiently safeguarded by security by way of mortgage executed by Jeyarani. 15. The grievance of the appellant is that before the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice sent by the appellant, the learned single judge held that there is no point in harping upon the hyper technicality. The learned single judge further observed that it is not as if the registered notice was sent to an unknown place, but only sent to the residence of the director and on receipt of the said notice the appellant has chosen to send reply. Referring to the decision of Rajearajeswari Packaging Products v. Dev Fasterners Ltd. [2002] 108 Comp. Cas. 715/37 SCL 248 (Mad.), the learned single judge held that even if the statutory notice issued by the first respondent was not sent to the registered office of the appellant-company, the same shall not stand in the way of considering the company petition and the company petition cannot be thrown out. 18. Though there is a mandatory requirement to serve the statutory notice in the registered office, in the facts and circumstances of the case, and considering the fact that the appellant had sent the reply through their counsel the learned single judge held that the non-service of notice at the registered office cannot be a ground to throw out the company petition and we do not find any reason to interfere with the said fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e statutory rules, a summary enquiry was made and on being satisfied that the petitioning creditor/first respondent has made out a prima facie case, the learned single judge admitted the company petition and also directed advertisement of the petition. 21. Submitting that the appellant-company was already defunct and that the summary enquiry held by the learned single judge is sufficient compliance of the statutory rules, learned counsel for the first respondent placed reliance upon a Division Bench judgment of the Karnataka High Court in the case of Airwings (P.) Ltd. v. Viktoria Air Cargo GmbH [1995] 84 Comp. Cas. 688. 22. Section 433 of the Companies Act sets out the circumstances in which the company may be wound up by the court, one such being section 433(e) inability to pay debts. Section 434 sets out the circumstances and situations in which a company may be deemed to be unable to pay its debts. The Companies (Court) Rules envisage : ( i ) presentation of application for winding up in the manner prescribed in rule 95 ; (ii) admission of the winding up petition after such presentation under rule 96 ; and (iii) the direction as to advertisement, which is also und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petition to prove its claim by a suit or in any other manner. 27. In National Conduits (P.) Ltd. v. S.S. Arora [1967] 37 Comp. Cas. 786, the hon'ble Supreme Court considered the question of admission of the company petition and the circumstances in which the advertisement to be made and held as under (page 788 of 37 Comp Cas) : ". . . (2) Except in the case of a petition to wind up a company, the judge may, if he thinks fit, dispense with any advertisement required by these Rules. When a petition is filed before the High Court for winding up of a company under the order of the court, the High Court (i) may issue notice to the company to show cause why the 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 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y manner, for finding out whether there is a prima facie case made out by the petitioning creditor for enabling the court to take any action by way of admission and advertisement of the petition." 30. It is fairly well-settled that the winding up petition is not a recognised mode for recovery of debt. On a conjoint reading of rule 24 and rule 96 read with provisions of section 433, it is clear that there is a need to hold a summary enquiry after issuing notice to the company before ordering admission of the company petition and the advertisement of the company petition. Before admitting the company petition and directing the publication of the company petition, it is necessary to consider the question whether any prima facie case is made out by the petitioning creditor. The court has to be convinced of prima facie grounds. Before admitting and advertising the winding up petition, under section 433(e) of the Companies Act, the court in a summary enquiry has to arrive at a satisfaction on the aspects like : (i) whether the petitioning creditor is a creditor to whom the company owes an ascertained sum of money or substantially ascertained sum of money ; (ii) whether the said deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that the appellant advanced arguments only on the question of service of statutory notice to the company to its registered office and that they prayed for taking up maintainability of the company petition as a preliminary issue. Further contention of the appellant is that when the learned judge has ordered notice of company petition, opportunity ought to have been afforded to the appellant to show that there is a bona fide dispute between the parties in respect of the quantum of the amount and that there are no proper and effective averments in the petition that the appellant is not able to pay off the debt as contemplated under section 433(e) of the Companies Act. 33. We have carefully perused the materials. As rightly contended by learned senior counsel for the appellant, to secure the amount advanced, Jeyarani had executed two mortgage deeds on April 20, 2006 and September 8, 2006. For recovery of the amount, the first respondent had already filed suit on mortgage in O.S. No. 39 of 2007. The appellant also contends that the first respondent is liable to pay the amount towards the conversion charges. In the writ petition challenging the notice under section 13(2) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisional liquidator cannot be sustained. M.P. Nos. 1 to 3 of 2011 36. M.P. No. 1 of 2011 is filed by one P. Muthuraja, General Secretary, Madurai Rural District Textile Works Union (CITU), Samayanallur, Madurai seeking to implead himself as a party respondent and is represented by learned counsel Mr. K. Srinivasamurthy on behalf of M/s. Row and Reddy. M.P. No. 2 of 2011 is filed by one Mothilal, Branch Secretary of INTUC Dhesiya Panchalai Thozhilar Sangam, Thenur seeking to implead himself as a party-respondent and is represented by Mr. K. Jayachandran, learned counsel. M.P. No. 3 of 2011 is filed by one D.M. Athisivan, Branch Secretary of Dhiravida Panchalai Thozhilar Munnetra Sangam, Thenur seeking to implead himself as a party-respondent and is also represented by Mr. K. Jayachandran, learned counsel. Since we are remitting the matter back to the company judge, these applications are closed and the workmen are at liberty to work out their remedy before the company judge by putting forth their case at the appropriate stage. 37. For the foregoing reasons, the impugned order dated October 25, 2010 made in C.P. No. 132 of 2008 ordering advertisement and publication of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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