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2013 (5) TMI 187 - HC - Companies LawApplication for Restoration of the name of company by the creditors - Record shows that the company M/s Value Advisory Services Private Ltd. (VAS- hereinafter referred to as the Company ) was struck off from the Register of the Registrar of Companies (ROC) on 29.12.2006 which was pursuant to a Simplified Exist Scheme, 2003 - Test of locus standi - The appellant (company) is aggrieved by the order wherein the application filed by him under order I Rule 10 read with Section 151 of the Code of Civil Procedure seeking impleadment in the proceedings pending under Section 560(6) of the Companies Act, 1956 had been dismissed. Held that Merely because a financial loss would be suffered by the appellant qua the arbitration Awards which had been passed against him would not entitle him to come under the exception seeking a refusal of the restoration of the company. The position of the company vis- -vis this stand is that a healthy company who was admittedly operational at the time when its name was struck off would be deprived of its right to function as a going concern and in the bargain would not be permitted to recover its dues which amounts have accrued to it under the Awards of the Arbitral Tribunal. The positive averments made by the petitioners in the petition (C.P. No. 200/2011) alleging to be creditors of the company were dully supported by the balance sheet of the company which is an undisputed document. The elaborate submission of the learned senior counsel for the appellant that the petitioners are in fact nothing but stooges of the company thus does not hold water. They had prima facie established themselves as creditors of the company. The last submission urged by the petitioner was based on the principle of res judicata. - Held that - The object of Section 11 of the Code is to confer finality to a decision arrived at by a competent court between interested parties after a genuine context; once the matter has been determined by such a competent Court neither party can be permitted to re-open it in a subsequent litigation. The plea of the appellant being that the petitioners before the single Judge were nothing but stooges of the company and since the order was binding upon the company, it would operate as a res judicata qua the two petitioners as well has already been answered by this court by holding that the petitioners had set up a valid claim of being creditors of the company dully supported by the balance sheet of the company which document remained un-assailed even by the ROC and which document in fact reflected that the company had a liability of more than Rs.10 lacs towards its creditors which included the aforenoted two petitioners. Impugned order in no manner suffers from any infirmity.
Issues Involved:
1. Impleadment of the appellant in proceedings under Section 560(6) of the Companies Act, 1956. 2. Validity of the arbitration awards given the company's status. 3. Allegations of mala fides and collusion in the restoration petition. 4. Locus standi of the appellant. 5. Application of res judicata. Issue-wise Detailed Analysis: 1. Impleadment of the Appellant: The appellant, M/s ZTE Corporation, challenged the dismissal of its application seeking impleadment in proceedings under Section 560(6) of the Companies Act, 1956. The company, M/s Value Advisory Services Private Ltd. (VAS), was struck off from the Register of the Registrar of Companies (ROC) on 29.12.2006. The appellant had entered into a consultancy agreement with the company, leading to disputes resolved through arbitration in Singapore. The company obtained partial and final awards in its favor, which the appellant contested, arguing the company was non-existent at the time of the awards. 2. Validity of the Arbitration Awards: The appellant contended that the arbitration awards were nullities as the company was struck off the ROC register at the time of the awards. The company filed an execution petition to enforce the awards, which the appellant objected to on the grounds of the company's non-existence. The court noted that the appellant had alternative remedies, including filing objections during the execution proceedings. 3. Allegations of Mala Fides and Collusion: The appellant alleged that the restoration petition filed under Section 560(6) was collusive between the company and its creditors, aiming to execute the arbitration awards fraudulently. The court examined the petitioners' claims, supported by the company's balance sheet, and found no evidence of collusion. The company's liabilities towards the petitioners were undisputed, and the ROC's report supported the restoration. 4. Locus Standi of the Appellant: The court addressed the appellant's locus standi, referencing the Chancery Division's judgment in Jayham Ltd., In re, which allowed a third party to intervene in restoration applications. The court accepted the appellant's locus standi but noted that the appellant had alternative remedies. The court emphasized that restoration should be the rule, not the exception, and discretionary power should be exercised cautiously. 5. Application of Res Judicata: The appellant argued that the principle of res judicata barred the restoration petition, citing a previous order denying the company's restoration. The court rejected this argument, stating that the previous order was between the company and the ROC, and the current petitioners were not parties to that proceeding. The plea of constructive res judicata was also dismissed, as the petitioners had established themselves as creditors with valid claims supported by the company's balance sheet. Conclusion: The court found no merit in the appellant's arguments and upheld the restoration of the company's name. The appellant's objections could be raised during execution proceedings. The petition was dismissed with costs, emphasizing the discretionary nature of restoration under Section 560(6) and the importance of fairness and justice in enabling the company to recover its dues. The court highlighted that the doctrine of res judicata did not apply, and the petitioners' claims were valid and supported by evidence.
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