TaxTMI 
TaxTMI 
2013 (12) TMI 1764
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....bsequent events as a justification for filing the applications. 2. Company Application No. 680 of 2013 and batch, in C. P. No. 70 of 2010 and batch, are filed to recall and set aside the order in C. P. No. 70 of 2010 and batch dated August 21, 2012, and to dismiss the company petitions. The applicant, in C.A. No. 680 of 2013 and batch, is the respondent in C. P. No. 70 of 2010 and batch; and the respondents, in C.A. No. 680 of 2013 and batch, are the petitioners in C. P. No. 70 of 2010 and batch. Parties shall, hereinafter, be referred to as they are arrayed in C. P. No. 70 of 2010 and batch. 3. The petitioners filed C. P. No. 70 of 2010 and batch seeking winding up of the respondent-company under the provisions of the Act and for appointment of the official liquidator, attached to the High Court of Andhra Pradesh, as the liquidator of the company with all powers under section 50 of the Act. The petitioners are individuals who were allotted flats in the "Hill County" apartment complex located at Bachupally village, Quthbullapur Mandal, Ranga Reddy District. Agreements of sale were entered into between the petitioners and the respondent, during the years 2006 to 2008. All the ....
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....company petitions were elaborately heard for their "admission". In its order, in C. P. No. 70 of 2010 and batch dated August 21, 2012, this court rejected the preliminary objections of the respondent-company to the maintainability of the winding up petitions, i.e., (1) the agreements of sale, and the clauses therein, could not be examined as the said documents were not adequately stamped or registered, and (2) since arbitration proceedings had already been instituted, the remedy of the petitioners was to submit their claims before the arbitrator, and not to file winding up petitions. Thereafter, the contentions urged, both on behalf of the petitioners and the respondents, were examined on their merits. This court held that none of the contentions, urged on behalf of the respondent-company, constituted a bona fide dispute necessitating dismissal of the company petition at the stage of admission; neither was the defence of the respondent in good faith and of substance nor was it likely to succeed in point of law; the respondent had also not adduced prima facie proof of the facts on which their defence depended; the amount due was a "debt"; the petitioners were creditors, and the resp....
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....es taking into account not only its existing liabilities but also those which were contingent and prospective; even in cases where the company was unable to pay its debts when they became due, although its assets including its capital exceeded its liabilities, such a company must also be held to be "commercially insolvent" and as being unable to pay its debts; in the case on hand, the balance-sheet of the respondent-company reflected that, even without taking into account its contingent and prospective liabilities, the total assets of the respondent-company was less than one-third its total existing liabilities; its net worth had completely eroded, and it was commercially insolvent; and the respondent-company must, therefore, be deemed to be "unable to pay its debts" on a conjoint reading of section 433(e) and section 434(1)(c) of the Companies Act. 7. On the question whether the company petition should be admitted this court held that, in the light of the order of the Company Law Board and M/s. IL and FS being inducted into the management of the respondent-company, as M/s. IL and FS held 80 per cent. of the share capital, and had invested more than Rs. 150 crores, in the respon....
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....la Apr' 12 Jul' 12 Oct' 12 Dec' 12 Feb' 13 Mar' 13 Ooty Apr' 12 Jul' 12 Oct' 12 Dec' 12 Feb' 13 Mar' 13 Munnar May' 12 Aug' 12 Nov' 12 Jan' 13 Feb' 13 Mar' 13 Manali May' 12 Aug' 12 Nov' 12 Jan' 13 Feb' 13 Mar' 13 As a case for admission of the company petitions have been made out by the petitioners, I consider it appropriate to exercise discretion under section 433 read with section 443(1) of the Companies Act to defer further hearing of the company petition beyond the promised date of handing over the apartments to the buyers, i.e., till June 21, 2013, subject to the following conditions. The respondent-company shall file half-yearly financial statements certified by a chartered accountant, for the financial year 2012-13, within one month of completion of the half-year, along with an application to this court to receive the said report. For the half-year period from April to September, 2012, the financial statements certified by a chartered accountant, based on an examination of the books of accou....
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.... No. 1026 of 2012 requesting this court to receive their financial statements for the half-year ended September, 2012 (from April, 2012 to September, 2012) certified by M/s. Leela Sundaram and Co., chartered accountants. They also filed their audited financial statements, for the year 2011-12, as audited by M/s. S. R. B. C. and Co., chartered accountants. Along with C.A. No. 680 of 2013 is enclosed a copy of the order of the Company Law Board, Principal Bench, New Delhi in C.A. No. 123 of 2013, dated March 12, 2013, whereby the period of completion of the Hill County project was extended till June 30, 2013. C.A. No. 693 of 2013 was filed by the respondent-company requesting this court to receive the audited financial statements for the year 2012-13 audited by S. R. B. C. and Co. LLP, chartered accountants. C.A. No. 831 of 2013 was filed by the petitioners enclosing thereto a copy of the order passed by the National Consumer Disputes Redressal Commission, New Delhi in First Appeal No. 327 of 2012 and batch dated July 8, 2013, confirming the order passed by the Andhra Pradesh State Consumer Disputes Redressal Commission in C. C. No. 13 of 2010 and batch dated April 27, 2012. C.A. No.....
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....in C. P. No. 70 of 2010 and batch dated August 21, 2012, concluded that, as a case of admission had already been made out by the petitioners under section 433(e) read with both section 434(1)(a) and 434(1)(c) of the Act, there would be no further hearing on merits, including on the maintainability of the company petitions and whether there existed a bona fide dispute. While observing that it is only if the respondent-company's audited financial statements for the year ending 2011-12 and 2012-13 reflected that its net worth had become positive, and it had completed construction of all the apartments as promised by it in its letter dated September 8, 2011 (the schedule date for completion of all apartments was February, 2013), would this court examine whether it should exercise its discretion not to admit the company petitions. It was also made clear that, in case the respondent-company's audited financial statements showed that its net worth for the year 2012-13 continued to be negative, the company petitions would stand admitted automatically, and the order of admission shall be advertised, provided the petitioners, in this batch of company petitions, did not file applicati....
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....been established; application for meters, for the villas and apartments, was submitted on September 20, 2013; preparatory works are being completed by the respective teams in close co-ordination with the electrical consultants; documentation formalities, for transfer of 40 per cent. common areas to the Panchayat/HMDA, are being complied with; the Maytas Hill County project is near completion in all respects, and is ready for occupation; and the time granted by this court for completion of construction has been efficiently utilised. 15. Sri S. Prabhakar, learned counsel for the petitioners, would submit that the averments in the "recall" petitions', in C.A. No. 680 of 2013 and batch, is an obfuscation of the truth; on the one hand, in the affidavit in C.A. No. 680 of 2013, dated June 21, 2013, an impression was sought to be given that the project had been completed, though the applicant-company itself admitted later that they had approached the Company Law Board and had obtained an order dated July 19, 2013, extending time, for the completion of the project, up to September 30, 2013; on completion of construction of a building, the builder is required to submit a certificate ....
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....ect as basic amenities such as water, electricity, drainage, elevator, gas pipeline, etc., were yet to be provided; the affidavit filed by the developer on May 20, 2013, revealed that a substantial part of the work, even according to them, was still going on; the said affidavit, on the face of it, did not inspire confidence; it was clear that the apartments were not habitable; and the claim of the developer, that the flats were ready and would be handed over to the purchasers by June, 2013, was factually incorrect. 18. In their letter dated September 8, 2011 (which weighed with this court in deferring admission of the company petition and its advertisement), the respondent-company had assured their customers that construction of the subject apartments would be completed by February, 2013, and the apartments handed over by March, 2013. It is evident, both from the affidavit filed by the respondent-company in C.A. (SR) No. 6198 of 2013, dated September 20, 2013 and the written submissions filed on its behalf on the conclusion of the hearing of these applications, that an occupancy certificate has not yet been obtained from the concerned authorities; transfer of 40 per cent. common....
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....e-sheet, the unsold inventory of villas and apartments of Rs. 292 crores, along with the receivables from the already sold units of Rs. 72 crores, constitute the total value of current assets of Rs. 364 crores; it has invested Rs. 45.32 crores in the equity shares and debentures of Jubilee Hills Landmark Projects Ltd.; along with its subsidiaries, it has land development rights and other assets in the form of loans and advances of around Rs. 261.70 crores; the market value of the balance land of 12.50 acres of the Hill County project is Rs. 43.75 crores; one of its subsidiaries owns 45.90 acres of land at Malkapur, the market value of which is Rs. 25.25 crores; another fully owned subsidiary owns 25.60 acres of land at Visakhapatnam, the market value of which is Rs. 217.60 crores; and a third wholly owned subsidiary owned 25.47 acres of land at Isnapur, the market value of which was Rs. 25.48 crores. It is, however, admitted that the land of 12.50 acres of the Hill County project is partly under income-tax and partly under civil court attachment, and the lands at Visakhapatnam and Isnapur are under civil court attachment. It is further submitted that, after deducting the provisions....
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....may be worth more (or less) if sold as a going concern; financial statements are basically estimates prepared in conformity with the Indian GAAP, which requires companies to make judgments, estimates and assumptions which may or may not change in future; accounting concepts, conservatively, require estimation of all losses and contingent liabilities; it does not, however, allow accounting of unrealised profits and contingent assets; the negative net worth as at March 31, 2011, of Rs. 626.24 crores and Rs. 767.86 crores as at March 31, 2013, is because the financial statements of the respondent-company were prepared on a historical cost basis; and, as a result thereof, the current and actual net worth of the company is not fully reflected therein. 22. On the other hand the petitioners, in their affidavit filed in support of C.A. No. 831 of 2013, state that several of the units in the Hill County project were still mortgaged with the Hyderabad Urban Development Authority, and the order of the National Consumer Disputes Redressal Commission also imposed a fresh liability, as the respondent-company has to return back the amounts received by it from 66 purchasers. In their counter-af....
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....bind the company so as to oppose the claim of amalgamation; and the respondent-company cannot be allowed to blow hot and cold and continue to claim this sum of Rs. 261.70 crores as debts due to them. The petitioners highlight certain discrepancies, which they claim exist, in the auditors report. They refer to note No. 25(D), of the notes of the audited financial statements for the year ending March 31, 2013, that the Ministry of Corporate Affairs Serious Fraud Investigating Office had directed investigation of the books and other records of the respondent-company, under section 209A of the Companies Act, vide its letter dated June 23, 2011; the respondent had sent their replies to the Serious Fraud Investigating Office; and, as their replies did not lend themselves to any meaningful conclusion, a de novo enquiry is in progress. 23. Sri S. Prabhakar, learned counsel for the petitioners, would submit that the aspect of historical cost, to determine the net worth, was agitated at the time of admission, and is being re-agitated in the "recall" petition; the valuation report of Cushman and Wakefield was pressed into service, at the time of the hearing of the company petition for its ....
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....t as at March 31, 2009, that the accumulated losses of the respondent were Rs. 518,04,82,387 resulting in complete erosion of its net worth; in their audit report, annexed to the balance-sheet as at March 31, 2010, the auditors had stated that the respondent-company had incurred a loss of Rs. 41,35,16,269 during the financial year 2009-10; and its accumulated losses were Rs. 559,39,98,656 resulting in complete erosion of its net worth. This court, thereafter, examined the contents of the balance-sheet as at March 31, 2009 and observed that, as against its liabilities (secured loans plus unsecured loans) of Rs. 777,51,67,157 the assets of the respondent-company (fixed assets plus investments plus net current assets) was merely Rs. 259,51,84,770 i.e., the total outstanding dues were nearly three times its available assets; the balance-sheet as at March 31, 2010, reflected an even more dismal financial picture of the respondent-company; and, while the liabilities of the respondent-company (secured and unsecured loans) as at March 31, 2010, was Rs. 798,08,08,090 its assets (fixed assets plus investments plus net current assets) was merely Rs. 238,73,09,434 i.e., the total debt due by t....
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....ed had the company ceased to be a going concern. From the audited balance-sheet, as at March 31, 2011, it is evident that, while the liabilities (secured and unsecured loans) of the respondent-company were Rs. 852,87,17,498 its assets (fixed assets plus investments plus net current assets) was merely Rs. 226,63,15,264 i.e., the total debt due by the respondent increased to more than 3.75 times its available assets. 27. In their audit report, for the financial year 2011-12, it is stated that the respondent-company had incurred a loss of Rs. 77,41,61,858 during the year; and the accumulated losses were Rs. 703,90,64,092 resulting in complete erosion of its net worth. The auditors reiterate what they had stated in their earlier audit report for the financial year 2010-11. The balance-sheet and profit and loss account of the respondent-company was prepared in a different form, for the financial year 2011-12. While the noncurrent liabilities as at March 31, 2012, is shown as Rs. 848,10,12,849 its assets (non-current assets plus current assets minus current liabilities) is stated to be Rs. 144,44,48,757 i.e., the total debt due by the respondent-company increased to nearly six times i....
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.... determining the value of land. The submission of Sri S. Ravi, learned senior counsel appearing on behalf of the respondent-company, that the assets should be valued at its net current value, and the liabilities determined after excluding certain provisions therefrom, is but an attempt to have the order of this court dated August 21, 2012, reviewed in the guise of a "recall petition". It would be wholly inappropriate for this court to examine these contentions in a recall petition when the respondent-company is, admittedly, not seeking review of the earlier order of this court dated August 21, 2012. 30. As the twin requirements of (1) the respondent completing construction of the apartments as promised in its letter dated September 8, 2011 (i.e., by February, 2013) and (2) its net worth as reflected in its audited financial statements turning positive by the end of the financial year 2012-13, have not been complied with, the company petitions stand automatically admitted and the order of admission should have been advertised as the petitioners have not filed any application under rule 100 seeking permission to withdraw the company petitions. 31. The petitioners were prevented....
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.... seek review of the order of this court dated August 21, 2012, but for its recall on the basis of the subsequent developments in the progress of the company; this court has the power to recall its order under rules 9 and 6; and its inherent powers empower this court to recall its own order in the interests of justice. 34. Sri S. Prabhakar, learned counsel for the petitioners, would submit that the order in C. P. No. 70 of 2010 and batch dated August 21, 2012, is not an ex parte order, but was passed after hearing all the parties at length; a "recall petition" is, therefore, misconceived; the contention that this court should "re-visit" its order dated August 21, 2012, is also misconceived; the order of this court in C. P. No. 70 of 2010 and batch dated August 21, 2012, is appealable under section 483 of the Act; the so called "recall petition" is a review petition in disguise; the earlier order of this court dated August 21, 2012, does not suffer from an error apparent on the face of the record necessitating its being reviewed; in the absence of a plea of fraud, the recall petition is devoid of substance; the so called "recall" petition is only an attempt to delay further procee....
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....exclude merely procedural orders or those which do not affect the rights or liabilities of parties (Shankarlal Aggarwala (supra), Central Bank of India Ltd. v. Gokal Chand AIR 1967 SC 799, Bachharaj Factories Ltd. v. Hirji Mills Ltd. AIR 1955 Bom. 355 and Horst Kurves GmbH (supra). As an appeal, under section 483 of the Act, is not against a judgment, the test to be applied is not whether the order determines the rights and liabilities of the parties, but whether the order affects any rights or liabilities of the parties. If the order or decision affects the rights or liabilities of the parties, it would be an order other than a mere procedural order and would, therefore, constitute an order or decision against which an appeal would lie under section 483 of the Act (Horst Kurves GmbH (supra) and Shankarlal Aggarwala (supra). The order of this court dated August 21, 2012, affected the rights of the respondent-company as it determined, for the purpose of admission of the company petitions, the question of maintainability, that the company was unable to pay its debts attracting the ingredients of section 434(1)(a), and that the company was commercially insolvent attracting section 434....
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....ght for cannot be granted, under section 151 of the CPC or under analogous provisions contained under rule 9 of the Rules (O. P. Jalan v. Deccan Enterprises (P.) Ltd. [2000] 100 Comp Cas 193 (AP)). 38. Even if a power of review is said to be available, as rule 6 makes the provisions of the CPC applicable to these proceedings, its exercise is permissible only under very limited circumstances including that the order suffers from an error apparent on the face of the record. There is a real distinction between a mere erroneous decision and a decision which can be characterised as vitiated by "error apparent". A "review" is by no means an "appeal" in disguise (Gurdip Singh Uban (supra) and Thungabhadra Industries Ltd. v. Government of Andhra Pradesh AIR 1964 SC 1372). It is wholly unnecessary for this court to dwell on this aspect any further as the respondent-company is, admittedly, not seeking review of the order of this court dated August 21, 2012, but its "recall". There is a distinction between a review petition and a recall petition. While in a review petition the court considers on merits whether there is an error apparent on the face of the record, in a recall petition the c....
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....make a new law on the subject (P.R.M. Abdul Huq v. Katpadi Industries Ltd. AIR 1960 Mad 482; Narsingh Das v. Mangal Dubey [1882] ILR 5 All 163 and Khosla Fans (India) (P.) Ltd. (in liquidation), In re [1983] 53 Comp Cas 858 (Punj. & Har.)). As the existence of the inherent power of the court is recognised under rule 9, there is no question of implying any powers outside the limits of the Rules (Padam Sen v. State of Uttar Pradesh AIR 1961 SC 218 and Manohar Lal Chopra v. Rai Bahadur Rao Raja Seth Hiralal AIR 1962 SC 527). The inherent power has its roots in necessity and its breadth is co-extensive with the necessity (Smt. Usha R. Shetty v. Radeesh Rubber (P.) Ltd. [1995] 84 Comp Cas 602 (Karn) and Newabganj Sugar Mills Co. Ltd. v. Union of India AIR 1976 SC 1152). Exercise of inherent jurisdiction is within the discretion of the court, and exercise of discretionary power demands a high degree of care, caution and circumspection (Dilip B. Sheth v. Official Liquidator of Alang Industrial Gases Ltd. [2012] 171 Comp. Cas. 231 (Guj.)). No party has a right to insist on the court's exercising its inherent jurisdiction and the court would exercise it only when it considers it absolut....
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....ch any litigant possesses. Specific powers have to be conferred on the courts for passing such orders which would affect such rights of a party. Such powers cannot come within the scope of inherent powers of the court in matters of procedure, which powers have their source in the court possessing all the essential powers to regulate its practice and procedure (Padam Sen (supra) and Manohar Lal Chopra (supra). 40. A party, seeking recall of the order, has to establish that the procedure followed by the court suffered from such illegality that it vitiated the proceeding and invalidated the order made therein, inasmuch as the opposite party concerned was not heard for no fault of his, or that the matter was heard and decided on a date other than the one fixed for hearing of the matter which he could not attend for no fault of his. In such cases, therefore, the matter has to be re-heard in accordance with law without going into the merits of the order passed. The order passed is liable to be recalled not because it is found to be erroneous, but because it was passed in a proceeding which was itself vitiated by an error of procedure or mistake which went to the root of the matter and....
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....he winding up of companies. There is no provision in Part VII of the Act, including section 443, which expressly or impliedly impinges on the court's inherent power that is conferred under rule 9 of the Rules (G. T. Swamy (supra). 42. Let us now examine whether the Rules, either expressly or by necessary implication, prohibit exercise of the inherent power under rule 9 to "recall" an order such as the one passed by this court dated August 21, 2012. Section 443(1)(c) of the Act enables the court, on the hearing of a winding up petition, to make any interim order that it thinks fit. Section 443(1)(d) enables the court to make an order for winding up the company with or without costs. Part III of the Rules relates to winding up. Rule 95 requires the petition, for winding up a company, to be in Form 45, 46 or 47, as the case may be, with such variations as the circumstances may require. Rule 96 relates to admission of a petition and directions as to advertisement and, thereunder, upon the filing of the petition, it shall be posted before the judge in chambers for admission of the petition and fixing a date for the hearing thereof and for directions as to the advertisements to be....
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....t that is not to say that as soon as the petition is admitted, it must be advertised. In answer to a notice to show cause why a petition for winding up be not admitted, the company may show cause and contend that the filing of the petition amounts to an abuse of the process of the court. If the petition is admitted, it is still open to the company to move the court that, in the interest of justice or to prevent abuse of the process of court, the petition be not advertised. Such an application may be made even where the court has issued notice under the last clause of rule 96, and even when there is an unconditional admission of the petition for winding up. The power to entertain such an application of the company is inherent in the court under rule 9 (National Conduits (P.) Ltd. (supra); U.P. Twiga Fiberglass Ltd. v. Parekh Marketing (P.) Ltd. [1986] 59 Comp Cas 886 (All.) and Cotton Corpn. of India Ltd. (supra). The closing sentence of rule 96 permits notice to be given to the company "before giving directions as to the advertisement of the petition", and not before "admission". It defines the latest point of time at which notice may be given to the company when a petition is post....
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.... power to review an interlocutory order, to recall and cancel previous orders or orders which cause injustice. It also possesses a power to stay the proceedings or prevent abuse of the process of the court (Manohar Lal Chopra (supra); (Dasari) Venkatacharyulu v. Manchala Yesobu AIR 1932 Mad. 263; Sita Ram Sahu v. Kedarnath Sahu AIR 1957 All 825 and Smt. Anuradha v. Santosh Nath Khanna AIR 1976 Delhi 246). 46. When an ex parte order of admission of a company petition is passed, and notice is issued thereafter to the company before giving directions as to the advertisement of the petition, the company is entitled to seek recall of the "admission of the company petition" as they were not afforded an opportunity of being heard on whether the petitioning-creditor has made out a prima facie case, for winding up the company, necessitating its admission. The question as to whether the "admission", once made under rule 96, should be revoked is a matter of "discretion" vested in the court (Demach Engineers (P.) Ltd. v. Mrs. Winny Xavier [1987] 62 Comp. Cas. 499 (Ker.)). Even in those exceptional cases, where a company petition is admitted, the date of its hearing is fixed, the petition is....
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....thinks fit, to dispense with any advertisement of the petition required by the Rules except in the case of a petition to wind up a company. In view of sub-rule (2) of rule 24, the publication of the advertisement of a petition to wind up a company cannot be dispensed with. As these twin conditions have not been satisfied, the company petition stands admitted automatically, and the petition is required to be listed for hearing to enable this court to finally decide whether or not an order of winding up should be passed. In view of rule 24(2), read with rule 99 of the Rules, such a hearing can take place only after the winding up petition is advertised. In the absence of an advertisement, as required by rule 96 read with rules 99 and 24 and Form 48 being published, no order of winding up of the company can be passed (MVI Ahmadur Rahman v. Registrar of Companies [1973] 43 Comp. Cas. 522 (Gau.) and National Conduits (P.) Ltd. (supra). While the court has the power to postpone advertisement of the petition, the petition for winding up cannot be placed for hearing before the court unless the petition is advertised (Lt. Col. R.K. Saxena v. Imperial Forestry Corpn. Ltd. [2002] 36 SCL 705 (....
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....should be allowed or dismissed. These prima facie findings will only open the door for a detailed enquiry at a later stage. Though these findings may also be on jurisdictional aspects, they remain prima facie, and are not final and conclusive between the parties (Airwings (P.) Ltd. v. Viktoria Air Cargo GmbH [1995] 84 Comp. Cas. 688 (Kar.). 50. After advertisement, other creditors or even the company itself can show at the stage of trial that, despite the prima facie finding which has resulted in admission and advertisement of the petition, there is no case for winding up of the company or that there are relevant circumstances which would entitle the court to dismiss the winding up petition at the stage of trial, even after admission and advertisement, in the exercise of its powers under section 443 of the Act. An order of admission and advertisement, which throws open a debate in presence of all concerned, does not foreclose the very same debate between the main contesting parties namely, the petitioning-creditor and the respondent-company. These proceedings are representative in nature and are in the nature of a class litigation. Any finding reached prima facie, for taking fur....
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.... the discretion of the court, it is mandatory for the court to afford the respondent-company an opportunity of being heard after admission of the company petition and before an order for winding up is passed. 53. Section 444 of the Act requires the court, making an order of winding up and within a period not exceeding two weeks from the date of passing the order, to cause intimation thereof to the official liquidator and the Registrar of Companies. Section 445(1) obligates the petitioner in the winding up proceedings, and the company, to file with the Registrar of Companies a certified copy of the order of winding up within thirty days from the date of the making of the order. Under section 445(2), on the filing of a certified copy of the winding up order, the Registrar shall make a minute thereof in his books relating to the company, and shall notify in the Official Gazette that such an order has been made. Under section 447 of the Act an order, for winding up a company, shall operate in favour of all the creditors and of all the contributories of the company as if it had been made on the joint petition of a creditor and of a contributory. Section 449 stipulates that, on a wind....
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....must be in liquidation and the validity of the order of the winding up has to be accepted (Sonajuli Tea & Industries Ltd. v. Ashkaran Chatter Singh [1982] 52 Comp. Cas. 568 (Cal.)). The validity of the winding up order cannot be questioned on such an application. The order to stay may reserve liberty to any dissentient creditor or the official receiver to apply within a limited time to remove the stay. Frequently, a stay is applied in pursuance of a scheme of arrangement sanctioned by the court (Halsbury's Laws of England, Volume 7, paragraph 1375). 55. The judgments relied on behalf of the respondent-company, in support of the contention that a "recall petition" can be entertained by the court under its inherent jurisdiction, are all cases where an order of winding up had already been passed. In Sudarsan Chits (I.) Ltd. v. O. Sukumaran Pillai [1985] 58 Comp Cas 633 (SC), the question which arose for consideration was whether the winding up proceedings were pending or had come to an end when the Appellate Bench of the High Court froze the winding up order by keeping it in abeyance. The winding up order, made by the learned company judge in respect of the appellant-company, h....
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.... recall application contending that, subsequent to the order of winding up, they had paid a part of the sum due to the respondent-company (the petitioner in the company petition); the balance was paid after filing the application; the company (in liquidation) was, therefore, not due any sum to the petitioning-creditor company; the only two creditors of the company had no objection to receive the amounts due to them after the company (in liquidation) started making profits; they had not even entered appearance before the court when advertisement of the company petition was ordered; the company had great potential to run its business profitably; about 23 persons had come forward to invest in the equity capital of the company; and the order of winding up would cause them considerable prejudice. It is in this factual matrix that the Karnataka High Court held that the exercise of the power of the court, under rules 6 and 9 of the Rules, can be sought for in cases where the applicants are not aggrieved by the order of the winding up in the sense that the same is bad in law; their prayer was that the winding up order should not be given effect to as they had settled all claims against the....
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....upra), and the Gujarat High Court in Dilip B. Sheth (supra), to contend that an application to recall the pre-admission order of this court dated August 21, 2012, is maintainable, though it is an order on merits after hearing the respondent-company and was not passed ex parte, is therefore misplaced. V. Can the debt due to the petitioners, which was within limitation when the winding up petitions were filed, be said to be now barred by limitation, and the petitioners as no longer being the creditors of the respondent-company ? 59. Sri S. Niranjan Reddy, learned counsel for the respondent-company, would submit that the cumulative claims of all the company petition is Rs. 7.73 crores; the petitioners, who had sought winding up of the applicant-company, are no longer "creditors" of the company by reason of their failing to assert their rights within the period of limitation prescribed in law; as the petitioners are no longer entitled to the relief consequent to the winding up of the company, and have ceased to be the creditors of the respondent-company, the present petitions for winding up cannot continue; the petitioners are now not even "contingent creditors", and are not enti....
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....rtant facet of litigation; the applicant's submission that the claim of the petitioners is barred by limitation, consequent upon efflux of time between the filing of a company petition and its adjudication almost three years thereafter, cannot be allowed to be raised at this stage in view of the embargo placed by this court in its order dated August 21, 2012; in its affidavit, filed in support of the "recall" petition, the respondent-company agreed to furnish security of Rs. 7.73 crores (rupees seven crores and seventy three lakhs only) as deemed appropriate by this court to establish its bona fides; within a few weeks thereafter, the applicant has now taken a "U turn" suggesting that the claims of the petitioners herein are barred by limitation; and, in any event, this submission is ill founded in view of the law declared in several judgments of the High Courts. 61. Filing of a winding up petition is not analogous to the filing of a suit. Section 14 of the Limitation Act is of no assistance as the petitions for winding up, and the eventual suit for which cause of action may be claimed, do not "relate to the same matter in issue". The object of a winding up petition is to ha....
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.... the original petition. The specific provision of law, extending the period of limitation, under section 28(7) of the Provincial Insolvency Act and section 441(2) of the Companies Act, must be given effect to (Ram Chand Puri v. Lahore Enamelling and Stamping Co. Ltd. [1960] 30 Comp. Cas. 515 (Punj.)). 63. The creditor may well take the risk to pursue his remedy in a civil court or wait for the decision of the winding up proceedings. He may well say to himself that, if the order of winding up is going to be made, it would be a waste of time and money on his part to pursue a remedy in a civil court. The financial state of the company may be such that it may be inadvisable to pursue the ordinary remedy in a court of law and he may well decide to await the decision of the company court and take his chance on receiving a portion of the dividends which would be paid out to the creditors. Simply because there is no specific embargo on the filing of the civil suit, after the winding up petition is presented, does not mean that he is compelled to pursue that remedy. Section 446(1) of the Act provides that, once the winding up order is made, no further proceedings or suits can be filed wi....
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.... while computing the period of limitation; and, even if the petitioners were pursuing the remedy of winding up under the Company Law Board, they ought to have filed a suit for recovery of the amount due to them within the period of limitation. In J.A. Dixit v. Official Liquidator AIR 1963 All 284; Benares Cotton & Silk Mills Ltd. v. Sulbha Devi Gupta [1986] 60 Comp. Cas. 639 (All.); Chandbali Steamer Service Co. Ltd., In re [1960] 30 Comp. Cas. 61 (Cal.) and General Rolling Stock Co. In re [1872] L. R. 7 Ch. App. 646, the view taken is that the debt of the company, not barred by limitation on the date of presentation of a winding up but which gets barred by the date of the winding up order, cannot be entertained or allowed by the official liquidator. On the other hand the opinion expressed in Indian Turpentine and Rosin Co. Ltd. v. Pioneer Consolidated Co. of India Ltd. [1988] 64 Comp. Cas. 169 (Delhi); S. Abdul Muthalibu v. K.M. Mohammed Abdul Khader [1962] 32 Comp Cas 1102 (Mad) and Ram Chand Puri (supra), is that a debt, not barred at the time of presentation of the winding up petition, is provable in liquidation though it gets time barred when the winding up order is passed. ....
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.... is of a special nature that was the result of this court considering the peculiar financial situation of the applicant-company and the progress shown over the past three years as a result of the efforts of lending and accommodation of various financial institutions and the promoters of the applicant-company; and the impugned order of which recall is sought in the present applications, is not a final order, but an interlocutory order passed by this court which can be altered, modified or varied at any time. 69. Interlocutory orders are of various kinds. Some like orders of stay, injunction or receiver are designed to preserve the status quo pending the litigation and to ensure that the parties might not be prejudiced by the normal delay which proceedings, before the court, usually take. They do not, in that sense, decide in any manner the merits of the controversy in issue in the suit and do not, of course, put an end to it even in part. Such orders are capable of being altered or varied by subsequent applications for the same relief, though normally only on proof of new facts or new situation which subsequently emerge. If applications are made for a relief on the same basis, af....
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....ar (supra). Order 39, rule 4 of the CPC can be invoked only when an urgent order ex parte has been passed under rule 3, or when an injunction already in force has, owing to fresh circumstances, become inappropriate (Sitaram Madan Ahir v. Rajkunwarbai AIR 1959 MP 275; and Ravishankar (supra). 71. Section 481 of the Act relates to dissolution of the company and, under sub-section (1) thereof, when the affairs of a company have been completely wound up or when the court is of the opinion that the liquidator cannot proceed with the winding up of a company and it is just and reasonable, in the circumstances of the case, that an order of dissolution of the company should be made, the court shall make an order that the company be dissolved from the date of the order, and the company shall be dissolved accordingly. Section 481(2) requires a copy of the order to be forwarded by the liquidator to the Registrar of Companies, within thirty days, who is required to make in his books a minute of the dissolution of the company. Rule 281 of the Rules stipulates that, as soon as the affairs of the company have been fully wound up, the official liquidator, in a winding up by the court, shall appl....
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....ification for their seeking recall of the earlier order of this court dated August 21, 2012, relate to the progress made by them in the construction of the apartments of the "Hill County Project"; deferment, of repayment of loans, by institutional investors; and the settlements, arrived at with some of other creditors, which are said to be awaiting regulatory approvals. None of these have any bearing on the question whether or not the respondent-company continues to be unable to pay its debts on a conjoint reading of section 433(e) with section 434(1)(a) and (c) of the Act. These "subsequent events" have neither any bearing on, nor do they alter the factual situation in which this court had recorded its, prima facie, finding of the inability of the respondent-company to pay its debts either under section 434(1)(a) or 434(1)(c) of the Act as the dues payable to the petitioners still remain, and the audited balance-sheets of the respondent-company as at March 31, 2012 and March 31, 2013, continue to show that it is still suffering huge losses and its "net worth" has completely eroded. VII. The action of the respondents is not bona fide : 75. In the affidavit, filed in support o....