IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 30/03/2011 CORAM THE HON'BLE MR.JUSTICE VINOD KUMAR SHARMA COMP.A.NO.1286 of 2010 in C.P.No.78 of 2008 ORDER : VINOD KUMAR SHARMA, J. The applicant claiming himself to be with a shareholder of M/s.Sree Visalakshi Mills Private Limited, Vishalakshi Nagar, Madurai, has moved this application for setting aside the order dated 3.12.2008 in C.P.No.78 of 2008 ordering the winding up of M/s Sree Visalakshi Mills Private Limited (hereinafter called the Company). 2. It is pleaded in the affidavit that the applicant holds 10% of shares of paid up capital of the company. However nothing has been mentioned about total paid-up-capital of the company. However, as per the records, the authorised share capital of the company was Rs.80,00,000/- (Rupees eighty thousand only) and subscribed capital Rs.40,00,000/- (Rupees forty thousand only). Therefore 40,000 shares would represent 10% of the subscribed share capital of the company. 3. It is pleaded in the application that after the company was ordered to be wound up, the Official Liquidator took steps to sell the property of the company by auction. The applicant, being aggrieved by the auction, challenged the auction proceedings in this Court. The Division Bench of this Court vide order dated 12.1.2010 in OSA.Nos.370 to 372/2009 set aside the sale. 4. It is the case of the applicant that while going through the records of the winding up proceedings, it was noticed that certain mandatory procedures were not complied with prior to the passing of an order dated 3.12.2008. The mandatory provisions which are said to have been violated are that the direction of this Court to publish the petition in English Daily "Deccan Chronicle" and one issue of Tamily Daily "Dina Thanthi" and Tamil Nadu Government Gazette fixing the date of hearing on 22.7.2008, was not strictly complied with, as the case title of the company, was not mentioned in the advertisement, nor the notice was in the form prescribed under the Companies Court Rules, 1959. 5. The case of the applicant is that there was thus violation of the statutory provision of law, as the company petition was not advertised in the form prescribed. Therefore, the impugned order directing to wind up of the company deserves to be recalled. 6. It is also the case of the applicant that even Rule 113 of the Companies Court Rules was not complied with, and that the order of winding up was passed without giving adequate opportunity, to file objections. 7. One of the question to be decided in this case is "whether it is open to the applicant to challenge the order of winding up on merits?" 8. The learned Counsel for the applicant vehemently contended, that under Rules 6 and 9 of the Companies Court Rules, 1959 read with Section 466 of the Act, this Court has the power to recall the order, on an application moved by the contributory. 9. In support of his contention, the learned Counsel for the applicant relies on a judgment of the Hon'ble High Court of Karnataka in G.T.Swamy and another vs. Goodluck Agencies and another in (1990) 69 Compcas819 (Kar), wherein the Honourable High Court of Karnataka after considering the provisions of the Companies Act held as under: "27. I have no doubt in my mind that regard being had to the provisions of rules 6 and 9 of the Rules framed by the Supreme Court in exercise of the powers under Section 643 of the Act, the power of the company court to recall the winding up order is recognised by the Supreme Court in the aforesaid two decisions. But the exertion of that power is dependent on the facts and circumstances of each case. Perhaps, considerations which are relevant in regard to the order of winding up under section 433(e) may not be relevant for an order of winding up under the "just and equitable" clause. Further, the power of the company court, under section 443 of the Act, on hearing a winding up petition, may be noticed. Section 443 reads as under : "(1) On hearing a winding up petition, the court may- (a) dismiss it, with or without costs; or (b) adjourn the hearing conditionally or unconditionally; or ) make any interim order that it thinks fit; or (d) make an order for winding up the company with or without costs, or any other order that it thinks fit: Provided that the court shall not refuse to make a winding up order on the ground only that the assets of the company have been mortgaged to an amount equal to or in excess of those assets, or that the company has no assets. (2) Where the petition is presented on the ground that it is just and equitable that the company should be wound up, the court may refuse to make an order of winding up, if it is of opinion that some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy. (3) Where the petition is presented on the ground of default in delivering the statutory report to the Registrar, or in holding the statutory meeting, the court may- (a) instead of making a winding up order, direct that the statutory report shall be delivered or that a meeting shall be held; and (b) order the costs to be paid by any persons who, in the opinion of the court, re responsible for the default." 10. The application is opposed by the workers on the ground that the company in liquidation had employed 850 workers. Right from the year 1998, the company was not able to meet its liabilities towards wages to its employees. It is also the contention of the learned Counsel of the workers, that on 22.10.2008, a settlement was entered into by the company with the workers, undertaking therein to pay a sum of Rs.3.22 Crores on revival of the company. 11. However, in the application, no offer in this regard is made. The workers, therefore, oppose the revival of the company, on the ground that the dues which are payable would be denied or in any case delayed. 12. The learned Counsel appearing for Mr.K.R.Palaniappan opposed the application by contending that the company was ordered to be wound up, though the claim of the petitioner stands satisfied, but the company petition cannot be revived at this stage only for want of defect in publication of notice and in the news paper as the company particulars were duly disclosed in the notice published in Government Gazette though it was not mentioned in the publication in the news papers. 13. The learned Deputy Official Liquidator also opposes the application primarily on the ground that after taking over the unit, more than Rs.1 Crore has been spent towards advertisement etc. and nothing is mentioned in the affidavit with regard to refund of this amount to the Official Liquidator. 14. It is also the contention of the learned Deputy Official Liquidator that in pursuance of the order dated 25.1.2011, the petitioner has failed to satisfy the Official Liquidator, that he holds 10% of the shares in the company as claimed in the affidavit. The contention of the Official Liquidator is that in spite of the time taken, the applicant has failed to prove by primary evidence showing holding of shares by the applicant in the company. 15. The learned Counsel for the applicant on the other hand contends that the necessary document i.e, letter written to the Income Tax Officer, Ward-I was placed on record, which shows that under the partition deed, 30,000 equity shares of the company were transferred in the name of the petitioner. 16. The learned Counsel for the applicant also pointed out that even in the Dividend Register, an entry regarding payment of Rs.33,000/- by way of dividend has been shown. 17. The annual return with the Registrar of Companies also shows the applicant to be a shareholder in the company. 18. This contention of the learned Counsel for the applicant deserves to be rejected, for the simple reason that even though the averments made in the affidavit are that he holds 10% of the subscribed equity shares, but even as per the stand taken he only hold 30,000 equity shares, whereas the requirement of 10% share is 40,000 shares, as subscribed capital of the company is Rs.40,00,000/- (Rupees forty lakhs only). 19. On consideration, I find no force in this application. Firstly, for the reason that the petition itself is not maintainable. Though the jurisdiction of this Court to recall the order of winding up cannot be disputed, in view of the law laid down in the case of G.T.Swamy and another vs. Goodluck Agencies and another in (1990) 69 Compcas819 (Kar), however, in that very decision in paragraph No.16, the Honourable High Court of Karnataka has observed as follows: "29. For these reasons, I am unable to agree with the contentions of Mr.Vijayashankar that the only relief that the applicants could obtain in this case is an order staying the winding up proceedings before this court avid not an order of recall. He further submitted that even if this court were to grant the relief of recall, the company petition stands restored to file and the petitioners must advertise the petition once again in the newspaper. This rule regarding the advertisement of the petition is found in rule 24 of the rules. This rule comes into play only when the petition comes up for the first time for making an order of winding up. Now that the winding up order is recalled, the company (in liquidation) is taken out of winding up. This is the effect of the order of recall. Recall does not mean in this case that the company petition is revived for disposal on merits. I do not find that rule 24 mandates that the petitioners should take out fresh advertise merit in the newspaper. So, instead of advertisement of the petition afresh, the appropriate order to make is to direct the petitioner to file the certified copy of the order of recall with the Registrar of Companies. These are no opposing creditors and if there are any other creditors who feel aggrieved by the order of recall, they could approach this court for appropriate reliefs and it is open to this court to consider after notice to all the parties concerned." 20. A reading of the Judgment of Hon'ble Karnataka High Court shows that the application for recall would not be maintainable if the remedy of appeal is available. As a matter of fact, the Honourable High Court of Karnataka, has held that when order is challenged on merit, it can only be by appeal, and in case proposal showing revival of company as running concern can be entertined to set aside winding up order in exercise of jurisdiction under Rules 6 and 7 of the Companies Rules. In the present case, there is no proposal to revive, nor anything is disclosed as to how the petitioner proposes to meet with the liabilities of the company. The challenge to winding up order is only on merit. This Court cannot set aside order passed, by holding it to be bad in law in exercise of inherent jurisdiction. To set aside the order which is said to have been passed in violation of law can only be set aside in appeal by the appellate court, and not with this Court or in a review petition by this Court but certainly not under Rules 6 and 7 of the Company Rules as it is a settled law that inherent power cannot be exercised when the specific remedy is available. 21. The judgment of the Honourable High Court of Karnataka in G.T.Swamy and another vs. Goodluck Agencies and another in (1990) 69 Compcas819 (Kar), has no application to the facts of the present case. In the said case there was no objection to revival of the company by any body. In the present case, the workers as well as the Official Liquidator have opposed the application as no proposal whatsoever has been disclosed in the application as to how the petitioner proposes to meet the liabilities of the company to revive it as a running unit. The question framed is answered against the applicant. The application for revival of the company in exercise of Rules 6 and 9 would be maintainable but the order cannot be challenged on merit, as the remedy would be review or appeal. Consequently, finding no merit in this company application, it is ordered to be dismissed. No costs. 30.03.2011 Index : Yes Internet : Yes tsi VINOD KUMAR SHARMA, J. tsi COMP.A.NO.1286 of 2010 in C.P.No.78 of 2008 30.3.2011