2009 (7) TMI 762 - HC - Companies Law

Appeal overturns winding-up order due to non-compliance with Companies Act, 1956.

Kothari Industrial Corporation Ltd. Versus Kotak Mahindra Bank Ltd.

The appeal challenges the winding-up order of the appellant-company under the Companies Act, 1956, citing non-compliance with mandatory statutory ... Winding up - whether none of the statutory provisions, which are mandatory in nature for ordering winding up of the company, has not only been taken note of, but also followed in this case? Held that:- There is no dispute about the way in which the order of winding up is passed by the company court, i.e., the order of the company court is passed without following the mandatory statutory provisions, which is evident from paragraph 5 of the order, wherein the company court has categorically stated that on notice, the respondent has filed its counter disputing the averments contained in the company petition.Upon hearing the parties on pre-admission notice stage the impugned order of winding up is passed. As none of the mandatory statutory provisions are followed and on pre-admission notice and upon hearing the appellant-company it was directed to be wound up. Thus the order of the company court ordering winding up is quite contrary to the statutory requirements and in violation of the requirements, the order would amount to illegal order not supported by the statute, thus the order impugned in this appeal is set aside the matter is remitted to the company court to pass orders on the petition in accordance with the statutory provisions. Issues:1. Validity of the winding up order passed by the company court.2. Adherence to mandatory statutory provisions for ordering winding up.3. Applicability of pre-admission notice and advertisement requirements.4. Legal implications of passing orders against statutory provisions.5. Comparison with previous judgments on remitting matters to lower courts.Analysis:Issue 1: The appeal challenges the order of the company court dated 8-4-2009, directing the winding up of the appellant-company under the Companies Act, 1956. The appellant contests the validity of this order on various grounds, primarily focusing on the failure to adhere to mandatory statutory provisions for ordering winding up.Issue 2: The appellant argues that the company court's order did not follow essential statutory provisions, specifically rules 96 and 24 of the Companies (Court) Rules, 1959, and section 443(2) of the Companies Act, 1956. The failure to admit the company petition and the absence of required advertisement procedures are highlighted as key deficiencies in the winding up process.Issue 3: The rules governing the admission and advertisement of a winding up petition are crucial in ensuring procedural fairness. Rule 96 mandates that the petition be posted before the Judge for admission and directions on advertisement. Rule 24 specifies the advertisement requirements, emphasizing the need for proper notice before the hearing. The absence of these steps in the present case raises significant concerns regarding procedural compliance.Issue 4: The judgment underscores the importance of following statutory provisions in legal proceedings. It emphasizes that when a statute prescribes a specific procedure, deviation from it is impermissible. Any order passed against statutory requirements is deemed illegal, highlighting the significance of upholding legal standards and procedural integrity in judicial decisions.Issue 5: The judgment distinguishes previous cases cited by the respondent's counsel, emphasizing that the specific circumstances and legal frameworks of those judgments do not apply to the present case. The court reiterates the special nature of company law, which necessitates strict adherence to prescribed procedures and safeguards, ultimately leading to the decision to set aside the impugned order and remit the matter back to the company court for proper adjudication in accordance with statutory provisions.