2016 (1) TMI 1522 - HC - Companies Law

Airline company gets ex parte winding-up order set aside with interim stay granted

Credit Suisse AG Versus Spice Jet Ltd.

The HC set aside the ex parte order dated 14.10.2015 in a company winding-up petition against the airline company. The court found that while no notice ... Principles of natural justice - Prayer to set aside the exparte order - prayer to pass an order of interim stay of all further proceedings - HELD THAT:- Admittedly, on 17.08.2015, no notice was issued in C.P.No.363 of 2015. But C.A.No.888 of 2015 has been filed, for appointment of the Official Liquidator, High Court, Madras, as the Provisional Liquidator of the Company, with all powers, to take charge of the assets, properties, stock in trade and books of account of the Company, pending disposal of the Company Petition. The other application in C.A.No.887 of 2015, has been filed for an injunction, restraining M/s. Spicejet Ltd., Chennai, its directors, officers, servants, agents or anyone acting through or under them from in any manner alienating, encumbering, dealing with, disposing or creating any third party rights, interests or charge in or over the assets of the Company, sought to be wound up, pending disposal of the Company Petition. Vakalat ought to have been filed. Admittedly, it was not filed before or on the hearing date. But it is the contention of M/s. Spicejet Ltd., Chennai, that on 14.10.2015, when a Junior Counsel, attached to the Office of the learned counsel on record, was instructed to appear before this Court and when the matter was called for, he did not do so. It is also the contention of M/s. Spicejet Ltd., Chennai that they have a valid case to oppose the Company Petition and that they would be put to great loss and hardship, if the ex parte order, dated 14.10.2015, is not set aside. Averments of the deponent is supported by an affidavit of Mr. Syed Thaga, Advocate. Conclusion - The ex parte order set aside and an interim stay of proceedings granted, with conditions to prevent asset alienation by M/s. Spicejet Ltd. Application disposed off. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions addressed in the judgment are as follows:Whether the ex parte order passed on 14.10.2015 in Company Petition No. 363 of 2015 should be set aside.Whether an interim stay of all further proceedings in Company Petition No. 363 of 2015 should be granted.Whether the absence of representation by M/s. Spicejet Ltd. at the hearing constitutes sufficient cause for setting aside the ex parte order.Whether the conduct of M/s. Spicejet Ltd. in the proceedings lacks bona fide.What terms should be imposed on M/s. Spicejet Ltd. if the ex parte order is set asideRs.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Setting aside the ex parte orderRelevant legal framework and precedents: The judgment refers to precedents such as Rafiq v. Munshilal and Collector, Land Acquisition v. Mst. Katiji, which emphasize that a party should not suffer due to the fault of their counsel and that courts should adopt a liberal approach in condoning delays.Court's interpretation and reasoning: The court considered whether M/s. Spicejet Ltd. had a bona fide reason for their absence at the hearing. It noted that the absence was due to a delay in filing the vakalat and the late arrival of the junior counsel.Key evidence and findings: The court found that M/s. Spicejet Ltd. had not filed a vakalat despite being aware of the proceedings. However, it accepted the explanation provided by the junior counsel and supporting affidavits.Application of law to facts: The court applied the principles from the cited precedents, recognizing that a party should not suffer due to counsel's inaction.Treatment of competing arguments: The respondent, M/s. Credit Suisse AG, argued that M/s. Spicejet Ltd.'s conduct lacked bona fide. The court considered this but ultimately found the reasons for absence plausible.Conclusions: The court decided to set aside the ex parte order, allowing M/s. Spicejet Ltd. to defend the Company Petition.Issue 2: Granting an interim stay of further proceedingsRelevant legal framework and precedents: The court referenced the necessity of maintaining a balance of convenience and ensuring justice is served.Court's interpretation and reasoning: The court acknowledged the need to prevent any irreversible actions that could affect the assets of M/s. Spicejet Ltd. during the pendency of the proceedings.Key evidence and findings: The court noted that M/s. Spicejet Ltd. had not alienated any assets during the proceedings.Application of law to facts: The court applied the principle of balance of convenience, deciding that an interim stay was necessary to protect the interests of both parties.Treatment of competing arguments: The respondent sought to impose terms on M/s. Spicejet Ltd. if the stay was granted. The court agreed to impose terms to ensure compliance.Conclusions: The court granted an interim stay of proceedings, with conditions to prevent asset alienation by M/s. Spicejet Ltd.Issue 3: Bona fide conduct of M/s. Spicejet Ltd.Relevant legal framework and precedents: The court considered whether the conduct of M/s. Spicejet Ltd. in the proceedings demonstrated bona fide intentions.Court's interpretation and reasoning: The court weighed the explanations provided by M/s. Spicejet Ltd. against the respondent's allegations of deliberate absence.Key evidence and findings: The court found that M/s. Spicejet Ltd. had communicated with the respondent regarding the proceedings, indicating awareness and intent to participate.Application of law to facts: The court applied the principle that a party should not be penalized for counsel's fault if the party itself acted in good faith.Treatment of competing arguments: The court acknowledged the respondent's concerns but found the explanations of M/s. Spicejet Ltd. credible.Conclusions: The court concluded that M/s. Spicejet Ltd.'s conduct was bona fide, warranting the setting aside of the ex parte order.3. SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning: 'The problem that agitates us is whether it is proper that the party should suffer for the inaction, deliberate omission, or misdemeanour of his agent. The answer obviously is in the negative.'Core principles established: The judgment reinforces the principle that a party should not suffer due to the fault of their counsel and emphasizes the importance of ensuring justice over procedural technicalities.Final determinations on each issue: The court set aside the ex parte order and granted an interim stay of proceedings, with conditions to prevent asset alienation by M/s. Spicejet Ltd.The judgment highlights the court's commitment to ensuring that procedural lapses by legal representatives do not unjustly penalize the parties they represent, and underscores the importance of maintaining a balance of convenience in legal proceedings.