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TMI Blog2014 (5) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... liquidator in respect of the respondent company. He shall forthwith take over all the assets and records of the respondent company and proceed according to law. Citation shall be published in the 'Statesman' (English) and 'Jansatta' (Hindi) for 16.03.2009. Petitioner may take steps accordingly. " 2. Feeling aggrieved by the aforesaid order, the respondent-company filed an appeal to the Division Bench in Co. Appeal No. 19/2009. By order dated 7th January, 2013, the Division Bench allowed the appeal and set aside the order of the learned Single Judge. The matter was remanded with the direction that the company petition be disposed of in accordance with law and with a further direction that in case an application is moved by the company under Rule 9 within 7 days, the same may also be decided in accordance with law. 3. On 27.2.2013, the matter was taken up by the learned Company Judge. It was submitted on behalf of the company that since the order dated 16.2.2009 was set aside in appeal, any steps taken pursuant to the said order were required to be undone, and in particular the possession of the premises and the records had to be returned to the company. This prayer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No further clarification is required. The said judgment dated 7.1.2013 shall be read in the light of the present clarification. The Review Petition is disposed of in the above terms." 5. Thereafter on 24.5.2013, the learned Company Judge took up for consideration CA 898/2013 filed by the petitioners seeking appointment of the provisional liquidator and publication of the citation. The learned Company Judge issued notice on the application and also directed the official liquidator to file a status report disclosing the funds position of the Company. It was observed that the question of appointing the official liquidator as provisional liquidator will be considered after the pleadings in the application are complete and after hearing both the sides. The matter was accordingly directed to be listed on 25.10.2013. On that date, the learned counsel for the respondent sought and was allowed 3 days' time to file a short affidavit with an advance copy given to the learned counsel for the petitioners. The short affidavit was filed and when the matter was being heard, the respondent moved CA Nos. 2159 and 2160 of 2013 which were directed to be list ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch to its earlier order was to clarify that the judgment dated 16.2.2009 of the Company Judge "to the extent it records findings - prima facie observations warranting admission of the petition would stand". The Division Bench was thus quite categorical in holding that the order passed by the learned Company Judge on 16.2.2009 would stand insofar as it admits the winding up petition. The order passed by the Division Bench in the review petition has undisputedly become final, no appeal having been preferred against it. It is also not denied that the respondent-company did not file any application before the Company Court under Rule 9 of the CCR within 7 days from the date on which the Company Appeal was originally disposed of, seeking dispensation of the advertisement of the winding up petition. The order passed by the Division Bench in the review petition having become final, it is not open to the respondent-company to re-agitate or try to reopen the order dated 16.2.2009 passed by the learned Company Judge insofar as it admits the winding up petition. To permit the respondent-company at this stage to do so would amount to not only ignoring the finality attained in the earlier proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring. On the basis of this direction, the learned counsel contends that it cannot be taken that the company petition has been admitted, since the respondent has been given further liberty to file a reply in the main company petition. It is also argued that it is only on the basis of this direction that I had, on 25.10.2013, granted three days' time to the respondent-company to file a short affidavit. The contention is that in the light of the order dated 27.2.2013 and the further development pursuant to the order dated 25.10.2013, it cannot be said that the winding up petition has been admitted. This argument overlooks - conveniently, if I may say so without meaning any offence to anyone - the order passed by the Division Bench in the review petition on 5.4.2013. Once the Division Bench has held that the findings and prima facie observations of the learned Company Judge in his order dated 16.2.2009 warranting admission of the company petition would stand, the directions given by this Court in its order dated 27.2.2013 directing the respondent-company to file a further reply and also directing the petitioners to file a rejoinder thereto, have to be read and understood only in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 16.2.2009) 9 Annexure R-9 to 12 (4 orders of the Institute of Chartered Accountants of India) Annexure R-1 to R-3 in the reply in CA 84/2013 In addition to the aforesaid, the learned counsel for the petitioners also submitted that the statement of the respondent-company in paragraph 11 of the additional affidavit that R-1 to R-8 were not considered by the learned Company Judge while disposing of the company petition by order dated 16.2.2009 is incorrect. According to her, these annexures were considered in the aforesaid order and by including these annexures in the additional affidavit, the respondent-company was merely seeking a review which is impermissible. These findings were not challenged by the respondent-company in the appeal before the Division Bench. My attention was also drawn to the order passed by the ICAI, referred to in para 15 of the additional affidavit, in which the petitioner Mr M K Mahajan has not been found guilty of any misconduct. It is further pointed out that there are two petitioners in the company petition and petitioner No.2 is a shareholder and therefore, even assuming that petitioner No.1 cannot sustain the company petition in view of the orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emand, Annexure-F, by claiming Rs. 9,50,000/-. He stresses that this indicates the malicious and ill founded story by the petitioner. With regard to notice of demand, Annexure-F, the respondents have admitted receiving an envelop but state that the contents of the envelop were waste paper. It is alleged that when the explanation for this action was sought from the petitioners, no reply was given to the same by the petitioners. Further, the respondents allege that petitioners have deliberately filed an incomplete Memorandum Of Association of the company, as the missing pages would have revealed that petitioner No. 1 was an ex director and a partner in the firm which Audited the accounts of the Respondent Company. Learned Counsel for the respondent further submits that several irregularities have been observed in the tax returns filed by the respondent company, and thus they cannot be relied upon by the Court." The contention of the respondent-company, adverted to in para 7, has been dealt with in para 12 of the order. The learned Company Judge noted that the balance sheet of the respondent-company as on 31.3.2000 showed a closing balance of Rs. 9,50,000/- outstanding in favour of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2.2009, on the merits of the company petition and on the question whether the petition deserves to be admitted is elaborate and it deals with all substantive contentions raised by the petitioners as well as the respondent-company. The winding up petition was admitted not only under clause (e) of section 433 of the Companies Act but it was also admitted under clauses (c) and (f) of the section. Under clause (c), if the business of the company is suspended for more than a year, it may be directed to be wound up. Under clause (f), a company can be wound up if it is just and equitable to do so. The learned Company Judge has devoted more than 15 paragraphs on the question whether it is just and equitable to wind up the company. After noticing the rival submissions on facts and after adverting to the mutual allegations by both the sides, the learned Company Judge held that "the fact that the business of the company has been carried on in a non-transparent and clandestine manner is clearly evident from contradictory stand taken by the company".He found that the claim of the respondent-company that the sale proceeds of some lands in Nangloi were used to purchase the Mundka land was not co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same issue i.e., admission of the winding up petition, is sought to be reargued or reopened. This is not permissible. 16. Mr. Sarat Chandra however drew my attention to the judgment of the Kerala High Court George v. Athimattam Rubber Co. Ltd. AIR 1964 Ker. 212 and the judgment of the Punjab High Court in Lord Krishna Sugar Mills v. Smt. Abnash Kaur AIR 1961 Punjab 505. It is submitted on the basis of the judgment of the Kerala High Court (supra) that even after the Court has admitted a winding up petition, it can on being moved for the purpose by the company or some other interested person, stay proceedings and revoke the admission. On the basis of the judgment of the Punjab High Court (supra) it is argued that since advertisement of a winding up petition filed by a creditor on the ground that that company is unable to pay its debt may have serious consequences, it can be suspended for the time being, at least until the petition for revoking the order of admission and for rejection thereof on the ground that it was filed mala fide, has been disposed of. In the Kerala judgment, which is of a learned single judge, it is however seen that on facts, there was no admission of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the company petition was rightly admitted or not, on the same facts and averments. This judgment of the Supreme Court cautions the company courts against not considering the substantive nature of the defence put up by the respondent-company in answer to the winding up petition. This judgment of the Supreme Court is therefore not relevant to the dispute which has arisen in the case before me. The judgment of the Bombay High Court in Aggarwal Industries Ltd. v. Golden Oil Industries (P.) Ltd. AIR 1999 Bom. 362 is a case in which it was found by the company court that the order of winding up was passed ex-parte and it was obtained by fraud. Where an order of a Court is obtained by fraud it is certainly a serious matter with drastic consequences and therefore the Bombay High Court found no difficulty in expressing its displeasure and in imposing heavy costs. In that case it was noticed that the petitioner suppressed material facts in the winding up petition. This judgment does not apply to the present case, as can be seen hereafter. 17. I now turn to the application in C.A. No. 2160/2013 filed by the respondent-company seeking to bring petitioner No. 1 i.e. Mr. M.K. Mahajan t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Court will consider the interest of the shareholders and the creditors; the substratum will be held to have disappeared when the object for which it was incorporated has substantially failed or it is impossible to carry on the company's business except at a loss. The submission is that the respondent-company can be revived, and that its business has come to a standstill only because of the long drawn litigation which started sometime in 2004 or 2005. Attention was also drawn to the judgment of a Division Bench of this Court in Bhaskar Stoneware Pipes (P.) Ltd. v. Rajinder Nath Bhaskar [1988] 63 Comp. Cas. 184, in which it was held that where the just and equitable clause of Section 433 is invoked, the crux of the question is whether there was a breach of a basic mutual understanding and not whether there was any illegal act. 18. Despite the aforesaid contentions, I did not hear the learned counsel for the respondent-company making any specific submission as to any false averment in the company-petition or in the affidavit or pointing out how the petitioner No. 1 committed perjury by making a false pleading before the Court. In the application in C.A. No. 2160/2013, however ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioner No. 1 for the financial years 1997-98 to 1999-2000 he has shown income only of a few thousands whereas the loans alleged to have been given by him to the respondent-company and to other companies amounted to more than Rs.11,00,000/- in each of them. The petitioner did not explain how he could advance loans amounting to lakhs of rupees when his income was only in a few thousands. 19. It is further stated in the company application that there are several other occasions in which the petitioner No.1 furnished false or untrue facts and evidence and, therefore, there is a dire necessity to cross-examine him. This is the basis on which the respondent-company has filed the C.A. 2160/2013 under Order XIX Rule 2 read with Section 151 of the CPC and Rule 9 of the CCR. 20. Ms. Mahajan, learned counsel for the petitioner submitted that all the pleas taken in the present application, including the plea based on Order XIX Rule 2, were taken before the learned Company Judge in the first instance who found no merit in them. She, therefore, opposed the application and submitted that no notice should be issued and that the application should be rejected in limine. 21. I am in agreement wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r No.1 falsely claimed that he resigned from the respondent-company as a Director on 08.07.1999. (b) The petitioner No. 1 could not explain as to how he could make huge investment in the respondent-company and two other companies, (amounting to Rs. 11 lakhs or more in each of them) even though in the returns of income filed by him he disclosed income of only a few thousands. (c) The petitioner No.1 falsely stated that M/s. Kumar Mahajan & Co., Chartered Accountant were the statutory auditors of the respondent-company only up to September, 2001, whereas they resigned as statutory auditors vide their resignation letter dated 22.03.2003. 23. In addition to the above allegations which are common in the reply affidavit dated 26.09.2006 filed by the respondent-company and the present application there are certain embellishments in the present application which are as follows:- (a) That the signature of Mr. Gulshan Gandhi, a Director of the respondent-company in Form No.32 was forged by petitioner No.1; (b) The petitioner No.1 claimed in the affidavit that he did not sign any audited a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ners, the learned Company Judge held that the explanation furnished by the petitioner for the discrepancy is satisfactory; the learned Company Judge has also accepted the breakup of the claim of Rs. 59,06,780/- made in the winding-up petition. In paragraph 15, the learned Company Judge referred to the argument of the petitioner that the petition was prepared only on the basis of the documents/statements maintained by the respondent-company and provided to the petitioner and proceeded to record that on a comparison of the statements/tabulations, it was clear that the discrepancy in the amount claimed to be due to petitioner No.1 has arisen "on account of an error of accounting on the part of the company itself". Eventually in paragraph 18 it was found by the learned Company Judge that there was a bona fide debt to the extent of Rs. 7,50,000/- payable to petitioner No. 1. It needs to be emphasised that this finding was arrived at by the learned Company Judge not merely on the basis of the company petition, but also after getting the counter-affidavit of the respondent-company on record and also after getting an additional affidavit from the petitioner together with the reply filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No such pleas or allegations were made in the appeal filed against the admission order dated 16.02.2009 which appeal in any case was only against the rolled up procedure followed by the learned Company Judge, and which did not question the admission order on merits. The order of the Division Bench dated 05.04.2013 passed in the review petition filed by the petitioners attained finality; this Court clarified that the admission order made by the learned Company Judge would remain undisturbed and it was only the question of appointing the provisional liquidator and advertisement of the winding-up proceedings that will have to be decided by the learned Company Judge. Thus even after the merits of the admission order became final, the respondent-company is making a last ditch or desperate attempt to stall the proceedings by making the present application seeking to enforce the attendance of petitioner No. 1, taking advantage of some orders passed by the disciplinary committee of the ICAI in the case of the petitioner No. 1. Such a conduct on the part of the respondent-company cannot be countenanced. 27. For the aforesaid reasons I do not think I would be justified in issuing notice to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as. 805 (Bom.); (ii) Bharti Telecom Ltd. v. Altos India Ltd. [2000] 24 SCL 227 (Punj. & Har.); (iii) Brunton & Co. Engg. Ltd., In re [1988] 63 Comp. Cas. 299 (Ker.). 30. These submissions were countered by Mr. Sarat Chandra, learned counsel for the respondent-company who submitted that it was open to him even then to argue that the winding-up petition ought not to have been admitted and, therefore, there was no question of appointment of a provisional liquidator or publication of the citation. He also referred to several authorities some of which have been adverted to in the earlier part of this order. His main concern was that a hasty publication of citation would be injurious to image of the company, if ultimately his argument that the winding-up petition ought not to have been admitted was accepted. It was while these arguments were being addressed, that Mr. Sarat Chandra wanted to file a short affidavit for which liberty was granted. Thereafter, in the course of the arguments - on 19.11.2013, to be precise - he brought to my notice that certain applications have been filed by the respondent-company which have to be heard befo ..... 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