TMI Blog2013 (1) TMI 227X X X X Extracts X X X X X X X X Extracts X X X X ..... tes. Respondents : Ms. Vibha Mahajan Seth, Advocate. Mr. Kanwal Chaudhary, Advocate for Official Liquidator. R.V. EASWAR, J. The short question that arises in this appeal is whether the company court can order winding up of a company without ordering the petition to be advertised. 2. The appellant is a company. A petition was filed by two shareholders for winding up of the company under section 433 of the Companies Act, 1956 before the company court. The company court (learned single judge) by the impugned order: (a) admitted the petition; (b) directed the company to be wound up; (c) appointed the official liquidator and directed him to take charge of the assets and records of the company and proceed in accordance with law an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a date for hearing and issue notice to the company before giving directions for advertising; or (iii) admit the petition, fix the date for hearing, order advertisement and direct service upon those who are 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). The judgment refers to Rule 96 of the Companies (Court) Rules, 1959 framed by the court which states that when an application for winding up is presented it shall be posted before the judge in Chambers for admission and fixing a date for hearing and for directions as to the advertisements to be published and the persons, if any, upon whom copies of the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntertain an application by the company that in the interest of justice or to prevent abuse of the process of the court, the petition for winding up be not advertised, to Rule 9 (supra), and observed that such an application may be made by the company even when there is an unconditional admission of the petition for winding up. It was observed that the power to entertain such an application is inherent in the court and Rule 9 only reiterates that power. Similarly, in a later Supreme Court decision, in Cotton Corporation Of India v. United Industrial Bank, AIR 1983 SC 1272 it was held that: - There is sufficient built- in safeguard in the provisions of the Companies Act and the Rules framed thereunder which would save the company from any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be advised to take. 6. It was contended on behalf of the respondent who had succeeded before the learned single judge that the purpose of the advertisement is the protection of the creditors and the shareholders of the company which is the primary consideration and the fact that the company sought to be wound up was not heard before the advertisement was ordered was not relevant. The answer to this contention is to be found in the judgment of the Supreme Court itself (supra). In the penultimate paragraph of the judgment (@ page 789), the court was examining the correctness of the view expressed by this court that the court must, as soon as the petition for winding up is admitted, advertise the petition. Rejecting the view, the Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt, therefore, should act with circumspection, care and caution and examine as to whether an attempt is made to pressurize the company to pay a debt which is substantially disputed. A Company Court, therefore, should be guarded from such vexatious abuse of the process and cannot function as a Debt Collecting Agency and should not permit a party to unreasonably set the law in motion, especially when the aggrieved party has a remedy elsewhere. 28. In the above mentioned facts and circumstances of the case, we are of the view that the order passed by the Company Court ordering publication of advertisement in the newspaper would definitely tarnish the image and reputation of the appellant company resulting in serious civil consequences and, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by him in his personal capacity for his own business in which the records of the company are also kept. This is something which, if the company judge thinks fit and proper, needs to be answered by the company if and when it moves an application before the company court invoking the inherent powers to dispense with the requirement of issuing a citation. The question before us is one of opportunity and fair procedure to be followed by the company court; we are not concerned with the merits of the claim of the company which would be for the company judge to decide. Moreover, the Supreme Court has observed in National Conduits (P) Ltd. (supra) that an application for dispensing with the citation may be made even when there is an unconditi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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