Company winding up order set aside despite two-year delay when criminal proceedings caused incarceration

Delhi HC set aside the final winding up order of a company despite a belated application filed in November 2007 seeking recall of the September 2005 order. The court accepted the appellant's circumstances, noting his involvement in criminal proceedings since 2001 including two years of incarceration. The court held that delay alone cannot bar judicial relief when compensated by costs. The matter was remanded to the Company Judge for consideration on merits, with the appeal and application being allowed.

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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.

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