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TMI Blog2012 (6) TMI 587X X X X Extracts X X X X X X X X Extracts X X X X ..... ant-company, the present appeal is filed. Factual background of the appeal is as follows : 2. The first respondent herein filed company petition under sections 433(e) and 434 read with section 439(1)(b) of the Companies Act, 1956 seeking for a direction to wind up the appellant-company and to appoint the official liquidator as the liquidator. Case of the first respondent is that the appellant is a limited company with authorised share capital of Rs. 5 crores divided into 50 lakhs shares of Rs. 10 each and its main object is to carry on the business of manufacturing, bleaching, dyeing, printing and selling yarn, cotton and/or staple fibre, cloth and other fabrics made from raw cotton, jute, wool and other suitable materials and generally to carry on the business of cotton spinning and as weaving mill proprietors in all branches. One M/s. Sivakami Textiles Ltd. borrowed loans from various banks including the Industrial Development Bank of India-second respondent bank to the tune of Rs. 4,49,63,000 and it was unable to repay the loan because of recession and the matter was referred to the Board for Industrial and Financial Reconstruction and by the order dated May 26, 2000, Sivakami ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt dated April 17, 2007 under which the appellant agreed to repay the said amount at the rate of Rs. 5 lakhs per month on 25th of every month. At the request of the appellant, the first respondent also gave a further amount of Rs. 68,79,261 for the purpose of electricity payment and other liabilities and a simple mortgage deed was executed by Mrs. J.S.P. Jeyarani wife of R. John Sundara Pandian, who is one of the directors of the appellant in favour of the first respondent on July 12, 2006 and the said document was registered as Document No. 2679 of 2006. A further advance of Rs. 16,68,000 was paid towards electricity charges to the appellant and for that, the said Mrs. J.S.P. Jeyarani, one of the directors of the appellant-company executed another simple mortgage deed dated September 8, 2006 mortgaging further extent of property. It is stated that till September, 2006, the total advance amount paid by the first respondent to the appellant was Rs. 1.92 crores. At the request of the appellant, for the purpose of making payment of Deepavali advance to the workers, the first respondent made a further payment of Rs. 16.62 lakhs by way of two cheques drawn in UTI Bank for Rs. 9.62 lakhs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der dated July 25, 2007 allowed the writ petition. 7. After the disposal of the writ petition, the IDBI fixed auction sale of the secured properties of the appellant on December 26, 2007. Challenging the same, the appellant preferred SARFAESI appeal before the Debts Recovery Tribunal, Madurai in S.A. No. 140 of 2007 and obtained order of stay and the same is stated to be pending. Again the appellant approached the IDBI with a revised one-time settlement proposal and the one-time settlement was approved for an amount of Rs. 890 lakhs envisaging payment of the entire principal before March 31, 2009. The same was accepted by the appellant and the appellant paid only Rs. 270 lakhs against Rs. 890 lakhs. Thereafter, there was re-revised one-time settlement and the due date for paying the amount was fixed as March 26, 2011. The appellant paid only Rs. 50 lakhs against Rs. 380.01 lakhs and failed to pay the balance of Rs. 330.01 lakhs within the stipulated period. 8. Before the learned single judge, the company petition was resisted by the appellant contending that the mandatory requirement under section 434(1)(a) of the Companies Act-the statutory notice was not served at the registere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admitted the company petition and directed the effecting of notice of publication of the petition in two dailies and also in the Government Gazette. The learned judge also appointed the official liquidator as the provisional liquidator of the company and directed the official liquidator to file the report within two months of taking over possession of the assets and records of the company. 10. We have heard Mr. AR. L. Sundaresan, learned counsel appearing for the appellant and Mr. K. Rajasekaran, learned counsel appearing for the first respondent and Mr. K. Moorthy, learned counsel appearing for the second respondent. 11. Challenging the impugned order, learned senior counsel for the appellant Mr. AR. L. Sundaresan appearing along with Mr. G. Ethirajulu has submitted that the appellant as well as the first respondent had argued only the limited point of maintainability of the company petition, but by the impugned order, the learned judge has decided the entire company petition and appointed the official liquidator to take over the entire company and the impugned order is in violation of the principles of natural justice. Learned senior counsel would further submit that in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wards the conversion charges and the same cannot be resolved in a company petition ; and (iii) the amount advanced by the first respondent is sufficiently safeguarded by security by way of mortgage executed by Jeyarani. 15. The grievance of the appellant is that before the learned single judge both the appellant as well as the first respondent argued only the limited point of maintainability of the company petition to decide the question whether statutory notice was issued to the registered address of the company before filing of the company petition as a preliminary issue and without giving an opportunity to the appellant to put forth its defence on merits, the learned single judge has appointed the official liquidator. 16. By perusal of the affidavit, it is seen that in paragraph No. 9 of the counter, the appellant has raised the plea of non-compliance of mandatory requirement under section 434(1)(a) of the Companies Act. Section 434(1)(a) of the Companies Act contemplates a demand notice to be served on the company by causing it to be delivered at its registered notice or otherwise a demand under his hand requiring the company to pay the sum so due and the company has for thre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct that the appellant had sent the reply through their counsel the learned single judge held that the non-service of notice at the registered office cannot be a ground to throw out the company petition and we do not find any reason to interfere with the said finding. 19. Re. Contention non-compliance of rule 96 : Referring to ledger account of the appellant-company as produced by the first respondent, learned single judge held that the appellant was due to pay to the respondent an extent of Rs. 1,62,79,092 and that the appellant had also acknowledged its liability and the objection raised by the appellant regarding the amount is not sustainable and on those findings, the learned single judge ordered the company petition to be admitted and ordered publication of the company petition be effected in two dailies. Learned senior counsel for the appellant Mr. AR. L. Sundaresan submitted that there is a bona fide dispute between the parties in respect of the quantum of the amount received and conversion charges payable by the first respondent to the appellant and the statutory provisions have not been strictly complied with. Learned senior counsel would further submit that even at the ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isage : (i) presentation of application for winding up in the manner prescribed in rule 95 ; (ii) admission of the winding up petition after such presentation under rule 96 ; and (iii) the direction as to advertisement, which is also under rule 96. These are three distinct steps. Rule 96 envisages the fourth step, namely the hearing. The form of the advertisement is set out in Form No. 48 to the Rules. 23. Rule 96 of the Companies (Court) Rules, 1959 reads as under : "Upon 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 advertisement 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." 24. Rule 24, which refers to advertisement of petition, provides : "(1) Where any petition is required to be advertised, it shall, unless the judge otherwise orders, or these Rules otherwise provide, be advertised not less than fourteen days before the date fixed for hearing, in one issue of the O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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 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 the court, the petition be not advertised." 28. From the above decision of the Supreme Court, it is evident that the admission of the company petition and advertisement of the same as provided in the rules are mandatory and in the absence of its admission, the company petition was bound to be rejected. Rule 96 confers a discretionary power on the judge not to give any direction at the initial stage but if after receipt of the notice the company appears and satisfies that there is a bona fide dispute as to the debt and that the presentati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s like : (i) whether the petitioning creditor is a creditor to whom the company owes an ascertained sum of money or substantially ascertained sum of money ; (ii) whether the said debt is within limitation ; (iii) whether the defence of the company is valid or bona fide. The aforesaid three points will have a direct bearing on the competence of the petitioning creditor to maintain such a petition. 31. Learned senior counsel for the appellant has submitted that the appellant-company has advanced arguments only on the question of service of statutory notice to the company and no opportunity was given to the appellant-company to argue the case on merits that there is a bona fide dispute between the parties in respect of the quantum of the amount received. Learned senior counsel would further submit that the first respondent himself is liable to pay several crores to the appellant towards conversion charges and therefore the alleged claim made in the company petition has to be adjusted from the conversion charges payable to the appellant by the first respondent and terms and obligations of the parties are of civil nature and the same cannot be resolved in a company petition. Learned se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o contends that the first respondent is liable to pay the amount towards the conversion charges. In the writ petition challenging the notice under section 13(2) of the SARFAESI Act in W.P. No. 2547 of 2007, in the statement of accounts of the appellant-company, Anjaneya Cotton Mills has been shown as one of the secured creditors to whom Rs. 1,93,20,000 is stated to be the amount due. In this regard, learned senior counsel has drawn our attention to the agreements entered into between the appellant and the first respondent regarding the conversion of yarn and that the first respondent is liable to pay the amount to the appellant towards the conversion charges. The merits of the contention of the appellant could be gone into only if opportunity was afforded to the appellant before ordering advertisement in the dailies and in the Official Gazette. 34. Normally, there is no interval between the admission of winding up and the directions as to the advertisement of the petition. As per first part of rule 96, when a petition is posted before a company judge for admission of the petition, it is also simultaneously posted for direction after admission. Therefore, in the normal case, notice ..... X X X X Extracts X X X X X X X X Extracts X X X X
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