2025 (12) TMI 609 - SCH - Companies Law

Offer to deposit not unconditional admission; appeal under Section 483 Companies Act restored for decision on merits

SC held that the appellant's offer to deposit the claimed amount in winding up proceedings did not constitute an unconditional admission of liability and ... Winding Up of Company - Deciding the appeal on merits or on the basis of statements - whether on the statement of the appellant that it would make deposit of the amount claimed by the respondent-company, the appeal should have been disposed of by putting the said statement on record, or it should have been decided on merits? - HELD THAT:- The order impugned gives an impression that the appellant conceded to deposit after extending some arguments. It may also indicate that the Court prima facie did not agree with the contentions made on behalf of the appellant. However, on taking into consideration the observations made in paragraphs 5 and 6 of the impugned order, it appears that the High Court had put a condition on withdrawal of the amount to be deposited by the appellant and had not expressed any opinion on whether the amount was actually due and payable by the appellant to the respondent. In fact, the respondent was required to furnish security to the satisfaction of the Registrar General for withdrawing the amount so deposited. Interestingly, the condition of furnishing security was not there in the order of the Company Judge. The High Court also observed that if it was not invoked, the security so furnished would stand discharged. In our view, all of this would indicate that the intention of the appellant was not to unconditionally admit its liability and, therefore, it can be inferred that the appellant made the offer not merely to seek extension of the timeline given by the Company Judge to make the deposit but to show his bona fides in raising the dispute so that his appeal could be heard and decided on merits. The appellant must get an opportunity to address its statutory appeal on merits before the Division Bench of the High Court under Section 483 of the Companies Act, 1956 - it is deemed appropriate to modify the order passed by the High Court dated 06.11.2017 by treating the same as an interim order allowing deposit of the amount specified for consideration of the appeal preferred by the appellant on merits. The impugned order of the High Court dated 06.11.2017 stands modified to the extent indicated below: (i) The operative part of the order dated 06.11.2017 directing that “the appeal is disposed of”, shall stand deleted; and Company Appeal No. 12/2017 of the appellant shall stand restored on the file of the High Court and shall be decided in accordance with law. (ii) The amount deposited by the appellant in terms of the order of the High Court dated 06.11.2017 read with order of this Court dated 29.01.2018 shall abide the final decision on the aforesaid company appeal. Appeal allowed in part. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the appellate court was justified in disposing of the statutory company appeal solely on the basis of the appellant's statement agreeing to deposit the claimed amount, without adjudicating the appeal on merits. 1.2 Whether the order of the appellate court dated 06.11.2017 should be treated as a consent/concession order barring further challenge. 1.3 How the deposit made pursuant to the orders dated 06.11.2017 and 29.01.2018 is to be treated pending adjudication of the restored company appeal. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Disposition of statutory appeal on the basis of deposit statement without decision on merits Interpretation and reasoning 2.1 The Court examined the tenor and contents of the order dated 06.11.2017, noting that at first reading it might suggest that the appellant, after arguments, conceded to deposit the amount and that the appellate court was not inclined to accept the appellant's contentions on merits. 2.2 However, on a closer reading of paragraphs 5 and 6 of the order, the Court emphasized that: (i) withdrawal of the deposit by the respondent was made conditional on furnishing security to the satisfaction of the Registrar General; (ii) the appellate court expressly refrained from expressing any opinion on whether the amount was actually due and payable; and (iii) the statement of the appellant that it would invoke the arbitration clause under the agreement was specifically recorded, along with an observation that if arbitration was not initiated, the security would lapse. 2.3 These features, particularly the insistence on security for withdrawal and the express neutrality of the appellate court on the existence or extent of liability, were contrasted with the order of the Company Judge, in which no such security condition had been imposed. 2.4 The Court inferred from these elements that the appellant's intention was not to unconditionally admit liability but to demonstrate bona fides in contesting the winding up claim and to keep its disputes alive for adjudication (including by arbitration). The offer to deposit was therefore treated as a measure to show bona fides rather than an acceptance of the claim in satisfaction. 2.5 The Court also took into account that the special leave petition had been filed before expiry of the time allowed for deposit, reinforcing that the appellant did not intend final disposal of the appeal on the basis of the deposit alone. Conclusions 2.6 The Court held that, in the circumstances, the appellant ought to have been given an opportunity to have its statutory appeal under Section 483 of the Companies Act, 1956 decided on merits. 2.7 The order dated 06.11.2017 was to be treated as an interim order permitting deposit for the purpose of enabling consideration of the appeal on merits, and the direction that 'the appeal is disposed of' was ordered to be deleted. 2.8 The company appeal was directed to be restored to the file of the High Court for decision in accordance with law, with all contentions on merits left open. Issue 2 - Character of the appellate court's order as a consent/concession order Interpretation and reasoning 2.9 It was argued on behalf of the respondent that the appellate order should be treated as one based on concession or consent, arising from the appellant's offer to deposit the amount after the appellate court allegedly indicated disinclination to accept the appellant's arguments. 2.10 The Court rejected this characterisation by focusing on the express terms of the order: the conditional nature of withdrawal by the respondent, the requirement of security, the absence of any finding regarding the debt being indisputably due, and the express reservation of comments on the necessity of arbitration. 2.11 The presence of conditions inconsistent with an unconditional admission of liability, and the explicit reservation of the parties' rights and contentions, led the Court to hold that the order could not properly be treated as a final consent order embodying a concluded settlement or concession on liability. Conclusions 2.12 The Court concluded that the order of 06.11.2017 could not be treated as a pure consent or concession order so as to bar challenge or preclude adjudication of the statutory appeal on merits. Issue 3 - Treatment and disposition of the deposit pending final adjudication Legal framework (as discussed) 2.13 The Court referred to its earlier interim order dated 29.01.2018, by which, while issuing notice, it allowed the appellant further time to deposit the amount mentioned in the impugned order with interest, stayed the winding up process including appointment of the Provisional Liquidator, and provided that failure to deposit within the extended time would result in dismissal of the special leave petition. Interpretation and reasoning 2.14 It was recorded that the requisite deposit had been made pursuant to the order of 29.01.2018 and was presently held in a fixed deposit receipt. 2.15 Consequent upon the Court's decision to treat the High Court's order as interim and to restore the company appeal, it became necessary to direct how the deposited amount should be dealt with pending final adjudication. Conclusions 2.16 The Court directed that: (a) The amount deposited by the appellant in terms of the order dated 06.11.2017 read with the order dated 29.01.2018 shall abide the final decision in the restored company appeal. (b) The fixed deposit amount, on maturity, shall be transmitted to the Registrar of the High Court, who shall deal with the amount in terms of the order dated 06.11.2017 as modified by the present order. (c) If the respondent does not furnish security for withdrawal of the amount as stipulated, the said amount shall be invested in a fixed term deposit with a nationalised bank and shall abide further orders of the High Court in the appeal. 2.17 The Court clarified that it expressed no opinion on the merits of the company appeal or on the underlying dispute, and all contentions of the parties in that regard were left open for determination by the appellate forum.