IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH CAPP No. 15 of 2008 DATE OF DECISION: February 10, 2009 COVENTRY COIL-O-MATIC (HARYANA) LIMITED …APPELLANT VERSUS ICICI BANK LIMITED AND ANOTHER …RESPONDENTS CORAM: HON’BLE MR. JUSTICE M.M. KUMAR HON’BLE MR. JUSTICE H.S. BHALLA Present: Mr. R.C. Setia, Senior Advocate, with Mr. S.S. Behl, Advocate, for the appellant. Ms. Jai Shree Thakur, Advocate, for the respondents. 1. Whether Reporters of local papers may be allowed to see the judgment? Yes 2. To be referred to the Reporters or not? Yes 3. Whether the judgment should be reported in the Digest? Yes M.M. KUMAR, J. The appellant is a company in liquidation and has invoked Section 483 of the Companies Act, 1956 (for brevity, ‘the Act’) challenging order dated 7.8.2008, passed by the learned Company Judge directing publication of the factum of admission of Company Petition No. 129 of 2004. The company petition was admitted on 26.5.2005. It is appropriate to mention that at the time of admission, learned counsel for the appellant was present before the Court and the reason for admission given in the order dated 26.5.2005 is that the appellant did not file reply CAPP No. 15 of 2008 despite repeated opportunities given. The order dated 26.5.2005 further reveals that the matter was to be listed for publication on 28.7.2005. However, order dated 26.5.2005 was challenged by invoking Section 483 of the Act in Company Appeal No. 13 of 2008. Alongwith the appeal applications for condoning the delay of 1050 days in filing and 72 days in re-filing the appeal were also filed. The Appellate Bench declined to condone the delay of 1050 days in filing the appeal although it has condoned the delay of 72 days in re-filing of the same. The operative part of the order dated 1.8.2008, rejecting the prayer made for condonation of delay in filing Company Appeal No. 13 of 2008 reads thus:- “ We have gone through the contents of the application and unable to agree with the contentions raised by the counsel for the appellant. A perusal of the above would show that no reasons whatsoever have been given by the applicant, which could explain an inordinate delay of 1050 days in filing the Company Appeal. There can be no dispute that where sufficient cause, as mentioned in Section 5 of the Limitation Act, has been shown by the applicant, it must receive a liberal construction so as to advance substantial justice. Delays in preferring appeals should be condoned in the interest of justice where no gross negligence or deliberate inaction or lack of bonafides is imputable to the party seeking condonation of delay. The period of limitation is primarily provided and is meant to see that the parties to the litigation do not resort to deliberate tactics but seek their remedy promptly. The courts must keep a balance and for that a distinction should be made between cases in which delay is 2 CAPP No. 15 of 2008 inordinate, which would cause prejudice to the rights of the other side. Where there is an inordinate delay, the Courts must take a cautious approach and do substantial justice to the parties to the litigation. The impugned order dated 26.05.2005 is an order admitting the petition for winding up of the applicant- Company, which was passed when despite various opportunities granted to the applicant/appellant to file reply to the application, no reply was filed. The counsel for the applicant/appellant was present in Court when this order was passed. The applicant/appellant cannot thus say that they were not aware of the order passed by the Company Court. The reasons mentioned for condonation of delay (reproduced above) do not fall within the expression sufficient cause. Rather it is an inordinate and unexplained delay of 1050 days in filing the appeal. We do not have any hesitation to hold that the delay is not bonafide but a deliberate one and can be termed as a dilatory tactics. This is a case where the delay is due to gross negligence and deliberate inaction lacking bonafides. That being so we are not inclined to condone the delay in filing the appeal. In view of the above facts and circumstances, we do not find any ground to condone the delay of 1050 days in filing the appeal and dismiss this application. As a consequence, Company Appeal No. 13 of 2008 is also dismissed.” 3 CAPP No. 15 of 2008 2. The appellant had earlier filed Company Application No. 732 of 2006 under Rule 9 of the Companies (Court) Rules, 1959 (for brevity, ‘the Rules’), seeking direction to the respondent to furnish the detail of the account to the appellant so that the account could be settled in accordance with the detail to be provided. The learned Company Judge has passed order of publication of the factum of admission on 7.8.2008 by observing as under:- “CA No. 732 of 2006 CP No. 129 of 2004 Present: Mr. Anand Chhibar, Advocate for petitioner Mr. S.s. Behl, Advocate for respondent Mr. Vinay Gupta, Advocate The petition was admitted on 26.5.2005. The order of admission has been challenged before the Hon’ble Division Bench. I am informed that the appeal stands dismissed. Let the publication regarding the factum of admission be made in the Indian Express (New Delhi Edition), Dainik Bhaskar (Regional Edition) and Official Gazette of Haryana Government. List on 3.10.2008.” 3. Mr. R.C. Setia, learned senior counsel for the appellant has raised two submissions before us. His first submission is that if directions were issued to the respondent, who had filed CP No. 129 of 2004, to furnish the details of dues then all such dues could have been paid and settled. His grievance is that the learned Company Judge without passing any order on the application has directed publication of factum of admission of the petition. Another submission made by the learned 4 CAPP No. 15 of 2008 counsel is that the Court should have issued a notice to the appellant before directing publication of the factum of admission. In support of the aforesaid submissions, learned counsel has placed reliance on a judgment of Hon’ble the Supreme Court in the case of National Conduits (P) Ltd. v. S.S. Arora, AIR 1968 SC 279. 4. Ms. Jai Shree Thakur, learned counsel for the respondents has, however, submitted that no notice is required to be issued to the appellant either under the Rules or in terms of the judgment of Hon’ble the Supreme Court in the case of National Conduits (P) Ltd. (supra) on which reliance has been placed by the appellant. She has submitted that the claim of the parties have to be satisfied after the claims have been invited by the Official Liquidator. 5. Having heard learned counsel for the parties, we are of the view that the appeal is liable to be dismissed. It is undisputed that order admitting the company petition was passed by the learned Company Judge on 26.5.2005. The same was challenged by the appellant in Company Appeal No. 13 of 2008 alongwith C.M. Nos. 103 and 104 of 2008 wherein prayer was made for condonation of 1050 days delay in filing of the appeal and condonation of 72 days delay in re-filing the sane. The Appellate Bench declined the prayer for condonation of delay in filing of the appeal although delay in re-filing was condoned. The basic reason for refusing condonation of delay is that no sufficient cause within the meaning of Section 5 of the Limitation Act, 1963 was shown by the appellant warranting condonation of delay and order dated 26.5.2005 was passed admitting the winding up petition for the reason that no reply was filed by the appellant despite various opportunities granted. The Appellate Bench has also noticed that the order of admission was passed in the presence of 5 CAPP No. 15 of 2008 the learned counsel for the appellant and, therefore, it cannot be their stand that they were not aware of the order passed by the Company Court. It was further held that the inordinate and un-explained delay of 1050 days in filing of appeal cannot be condoned as it was not bona fide but a deliberate act. The Appellate Bench termed the delay as a dilatory tactics and at best on account of gross negligence and deliberate in-action lacking bona fide. Thereafter the Company Judge was absolutely within its jurisdiction to proceed with the publication of notice of admission as he did vide impugned order dated 7.8.2008. 6. The argument of Mr. R.C. Setia has failed to impress whereby he has submitted that an order on the CA No. 732 of 2006 should have been passed granting the prayer of the appellant by issuing direction to the respondents to disclose the details of their dues so as to settle the accounts with them because such a course is not available in view of the provisions of Section 447 of the Act. It follows that the claim of the appellant alone is not to be considered. According to Section 447 of the Act an order for winding up of a company is to operate in favour of all the creditors and of all the contributories of the company as if it had been made on the joint petition by the creditors and all the contributors. The Bombay High Court in the case of S.P. Capital Financing Ltd. v. Bagade (India) Engineering Ltd., 2002 (109) Company Cases 657, rejected the application of one of the creditors who had filed a winding up petition holding that the prayer made by such creditors is not acceptable. It has been observed that Section 447 of the Act in its plain language provides that as soon as the order of winding up is passed the nature of the winding up petition undergoes a transformation from an individual petition to a petition on behalf of all the creditors and all the contributors. Therefore, 6 CAPP No. 15 of 2008 the petitioner was not permitted to withdraw the petition without the consent of all the creditors or contributories. Therefore, it is not surprising that the learned Company Judge did not feel the necessity of passing any order on the application so filed by the appellant. 7. The other issue raised by the learned counsel is that in pursuance of Rule 96 of the Rules a notice is required to be issued to the appellant for publication of the petition after its admission. Rule 96 of the Rules reads thus:- “96. Upon the filing of the petition, it shall be posted before the Judge in Chambers for admission of the petition and fixing a date for the hearing thereof and for directions as to the advertisements to be published and the persons, if any, upon whom copies of the petition are to be served. The Judge may, if he thinks fit, direct notice to be given to the company before giving directions as to the advertisement of the petition.” 8. A perusal of the aforesaid Rule postulates that for the purposes of admission, a winding up petition is required to be fixed before the Company Judge in chambers only. After admission, the Company Judge could fix a date for hearing and for issuance of direction for advertisement of the petition. The Company Judge has also been given discretion to issue notice to the company in liquidation before issuance of direction as to the advertisement of the petition. It is, thus, clear that there is neither any requirement of issuing a notice to the company in liquidation nor any precedent warranting inference of such a proposition of law. 9. The judgment of Hon’ble the Supreme Court in the case of National Conduits (P) Ltd. (supra) on which reliance has been placed, 7 CAPP No. 15 of 2008 does not advance the case of the appellant as no proposition of law canvassed by the appellant has been laid down therein requiring the learned Company Judge to issue notice to the company facing liquidation. There a director of the Private Limited Company had filed a petition under Section 433 and 439 of the Act for an order of compulsory winding up of the company. In its reply, the company had controverted the allegation made by the director and requested for taking off the file the winding up petition with a further prayer for its dismissal. The learned Company Judge directed that the director should have availed remedy under Section 397 and 398 of the Act and the petition for winding up was not bona fide. On an appeal filed by the director, the Appellate Bench held that once a petition was admitted then the learned Company Judge was bound forthwith to advertise the petition. That order was challenged before Hon’ble the Supreme Court. Allowing the appeal, Hon’ble the Supreme Court observed as under:- “ 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 24 (2). But that is not to say that as 8 CAPP No. 15 of 2008 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 admitted, it is still open to the Company to move the Court that in the interest of justice or to prevent abuse of the process of Court, the petition be not advertised. Such an applications may be made where the Court has issued notice under the last Clause of Rule 96, and even when there is an unconditional admission of the petition for winding up. The power to entertain such an application of the Company is inherent in the Court, and Rule 9 of the Companies Court Rules, 1959, which reads: "Nothing in these Rules shall he deemed to limit or otherwise affect the inherent powers of the 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." iterates that power. In, In re A Company, (1894) 2 Ch 349, it was held that it the petition is not presented in good faith and for the legitimate purpose of obtaining a winding-up order, but for other purpose such as putting pressure on the Company, the Court will restrain the advertisement of the petition and stay all further proceedings upon it. We may state that the High Court of Punjab in Lord Krishna Sugar Mills Ltd. v. Smt. Abnash Kaur, AIR 1961 Punjab 505 was right in observing that the Court in an appropriate case has the power 9 CAPP No. 15 of 2008 to suspend advertisement of a petition for winding up, pending disposal of an application for revoking the order of admission of the petition, though we may hasten to state that we cannot agree with all the observations made in that judgment. 5. H. R. Khanna, J., was apparently satisfied that the petition was not a bona fide petition and the respondent in presenting the petition was acting with ulterior motive and his attempt to obtain an order for winding up was "unreasonable". Before the High Court directed that the petition for winding up be advertised, the High Court was bound to consider whether the view expressed by H. R. Khanna, J., was right.” 10. The aforesaid observation made by their Lordships’ shows that there was no requirement for the Company Judge to forthwith advertise the petition after its admission. The Supreme Court has upheld the power of the Company Judge to suspend the advertisement of a petition for winding up in an appropriate case during the pendency of the application for revoking order of the admission. Therefore, the judgment in National Conduits (P) Ltd.’s case (supra) cannot be regarded as an authority for the proposition that after admission and before issuing direction for advertisement of the petition by publication, a notice to the company facing liquidation is required to be given. Even otherwise on the facts of the present case, the company petition was admitted on 26.5.2005 and direction for advertisement of the petition by publication have been issued on 7.8.2008 after Company Appeal No. 13 of 2008, filed by the appellant against the order of admission dated 26.5.2005, has been dismissed. A perusal of the original record of CP No. 129 of 2004 shows 10 CAPP No. 15 of 2008 that the learned Company Judge after admission of the petition on 26.5.2005 has kept the matter for hearing on 28.7.2005 with regard to issuance of direction for advertisement of petition by publication. On that date, the respondent had filed CA No. 456 of 2005. The prayer made in CA No. 456 of 2005 was for substituting the respondent by impleading M/s Kotak Mahindra Bank Limited by asserting that the respondent bank has assigned all its rights, title, interest and benefits in respect of its claim against the appellant company together with secured interest thereon to M/s Kotak Mahindra Bank Limited. The application was kept pending vide order dated 25.5.2006 by the learned Company Judge as the question of maintainability was required to be decided at the time of decision of the company petition. Thereafter at the instance of the appellant adjournments were sought on the plea that after the filing of reply, joint meeting of the respondent alongwith other secured creditors has taken place and then application bearing CA No. 732 of 2006 was filed to which reference has already been made and the time was further sought for challenging order of admission. After dismissal of the application seeking condonation of delay in filing the appeal, Company Appeal No. 13 of 2008 was also dismissed. Therefore, we do not find any ground to interfere with the order dated 7.8.2008 issuing direction for advertisement of the petition by publication in various newspapers and Official Gazette. Accordingly, the appeal fails and the same is dismissed. (M.M. KUMAR) JUDGE (H.S. BHALLA) February 10, 2009 JUDGE Pkapoor 11