2006 (2) TMI 291 - HC - Companies Law

Court reinstates company petition, emphasizes procedural compliance, allows amendment, warns of dismissal for non-compliance.

The court set aside the dismissal of a company petition at the admission stage due to procedural errors, directing the appellants to file a proper ... Company when deemed unable to pay its debts Issues:1. Dismissal of company petition at the admission stage.2. Requirement of proper application for amendment in the company petition.3. Ignoring the subsequent affidavit filed in pursuance of the court order.4. Applicability of Companies (Court) Rules in winding up petitions.5. Setting aside the order of the learned company judge and remanding the case.Issue 1: Dismissal of company petition at the admission stageThe appellants filed a company petition claiming they had advanced amounts to the respondent-company as a loan. The learned company judge dismissed the petition at the admission stage, noting the lack of loan details in the petition and absence of supporting documents. The judge observed that the grounds raised did not provide a factual basis for winding up the company, as no dividends were paid on allotted shares and the company's objects had allegedly failed.Issue 2: Requirement of proper application for amendment in the company petitionAfter the respondent-company filed a counter, the company judge directed the petitioners to file an affidavit disclosing all facts for winding up. The judge held that the subsequent affidavit filed without amending the original petition was inadmissible. The court emphasized the need for following the prescribed forms under the Companies (Court) Rules for filing winding up petitions.Issue 3: Ignoring the subsequent affidavit filed in pursuance of the court orderThe appellants were not at fault for not filing an amendment application as the court had ordered an additional affidavit. The court criticized the judge's approach for not allowing the petitioners to rectify the affidavit filing error. The court highlighted that actions of the court should not prejudice any party and emphasized the importance of following court orders.Issue 4: Applicability of Companies (Court) Rules in winding up petitionsThe court discussed the applicability of the Companies (Court) Rules, emphasizing the need for adherence to procedural requirements. The judge's decision to ignore the subsequent affidavit due to non-compliance with the rules was deemed incorrect, and the court directed the appellants to file a proper amendment application within a specified timeframe.Issue 5: Setting aside the order of the learned company judge and remanding the caseThe court set aside the judge's order and remanded the case, directing the appellants to file a proper amendment application within two weeks. The decision highlighted the importance of allowing parties to rectify procedural errors and emphasized that the failure to file the application within the prescribed time would result in the dismissal of the company petition. The appeal was allowed based on the non-consideration of the additional affidavit and procedural irregularities in filing the affidavit.