2015 (8) TMI 1588 - HC - Companies Law

Setting aside the order of final winding up of the company - delay in seeking recall of the winding up order - Rule 6 read with Rule 9 of the Companies (Court) Rules 1959 - HELD THAT - Undoubtedly the application which was filed in November 2007 seeking recall of the order dated 14th September 2005 was belated. The appellant had put together his peculiar circumstances responsible for the delay in filing the application. However it cannot be lost sight of the fact that the appellant stood implicated under the criminal proceedings since the year 2001 and there is substance in the submission made that the appellant s energies were devoted to sorting out the criminal prosecution in which he was also incarcerated for a period of two years. In any case it is well settled that the delay by itself would not shut down the doors of the court to a person where such a delay can be compensated by way of imposition of costs. Attention is drawn to the order dated 20th November 2013 issued by the Sub-Judicial Magistrate CBI Lucknow directing the prosecution to file a correct list of investors based on details obtained from both the liquidators at Allahabad and New Delhi or from any other legal source as soon as possible and also the details of all those investors who are yet to receive the money due from the appellant. It is submitted by the appellant that no such details have been furnished till date. The company application No. 1261/2007 shall be placed for consideration on merits for directions before the Company Judge on 3rd September 2015. This appeal and the application are allowed.

Summary

Issues:
1. Setting aside of a final winding up order of a company.
2. Delay in seeking recall of the winding up order.
3. Justification for initiating winding up proceedings against the company.
4. Consideration of the company application on its merits.

Detailed Analysis:
1. The appellant challenged an order directing the final winding up of a company, M/s Cyberspace Limited, based on misappropriation of investors' funds. The winding up petition was admitted, and the final winding up order was passed when no representation was made by the company. The appellant sought to recall the winding up order, citing reasons for the delay in filing the application, including lack of awareness due to incarceration and transfer to different jails. The application was rejected primarily due to the appellant's failure to explain the delay adequately.

2. The appellant contended that the winding up proceedings were not justified, challenging the CBI report and emphasizing the absence of charges being framed despite the passage of time. The appellant also submitted the statement of affairs of the company to the Official Liquidator. The Court noted that the delay in filing the application was due to the appellant's involvement in criminal proceedings and incarceration, which did not bar access to the court. The Court highlighted that delay alone should not preclude access to justice, especially when costs can compensate for the delay.

3. The Court considered the necessity of winding up orders as a last resort, emphasizing efforts to continue a company's operations lawfully. The appellant argued against the satisfaction of statutory provisions for winding up and highlighted technical objections in the proceedings. The Division Bench set aside a previous order rejecting the recall application, emphasizing the need for a statement of affairs to be submitted.

4. The Court recalled the order rejecting the application, subject to the payment of costs, and directed the matter to be considered on its merits before the Company Judge. The parties were allowed to raise all legal pleas for proper adjudication. The Court clarified that the decision did not express an opinion on the merits of the contentions raised by the appellant. The application was allowed in favor of the appellant, emphasizing the consideration of merits over mere delay in seeking recall of the winding up order.