2011 Supreme(Mad) 4262

High Court of Judicature at Madras
R. BANUMATHI & B. RAJENDRAN
T. Narayanan
Versus
The Official Liquidator High Court, Madras as the liquidator of Sri Visalakshi Mills Private Limited & Another
O.S.A.No.155 of 2011 & M.P.Nos.1 to 3 of 2011
Decided on : 19-10-2011

The non-compliance of procedural mandatory requirement would not vitiate the winding up order after three years, especially when the appellant had the opportunity of fighting out the litigation in the earlier round. The appellant, being son of the Director of the Company, knew about the pendency of the proceedings all along since his father was defending the same. The appellant was not put to any prejudice by the procedural irregularity in the advertisement - non-mentioning of the Company Petition number and cause title in the paper publication.

Headnote:

Winding Up Order - Procedural Irregularity - Companies Court Rules - [OMISSION OF COMPANY PETITION NUMBER AND CAUSE TITLE IN ADVERTISEMENT] - [The Companies (Court) Rules envisage the presentation of an application for winding up in the manner prescribed in Rule 95; the admission of the winding up petition after such presentation under Rule 96 and the duration as to advertisement under Rule 96. Rule 99 specifically deals with advertisement of petition for winding up. As per Rule 99, subject to any directions of the Court, the petition shall be advertised within the time and in the manner prescribed by Rule 24. The form of advertisement is set out in Form No.48 to the Rules. That is the heading as in Form No.1 containing 'Company Petition Number', 'name of the petitioner', and 'presentation of the Petition for winding up', etc.]. The Court held that the non-compliance of procedural mandatory requirement would not vitiate the winding up order after three years, especially when the appellant had the opportunity of fighting out the litigation in the earlier round. The appellant, being son of the Director of the Company, knew about the pendency of the proceedings all along since his father was defending the same. The appellant was not put to any prejudice by the procedural irregularity in the advertisement - non-mentioning of the Company Petition number and cause title in the paper publication. The appellant, being son of the Director of the Company, knew about the pendency of the proceedings all along since his father was defending the same. It is stated that the appellant was aware that the possession of the properties had been taken over by the Official Liquidator. Earlier, by the Order dated 24.9.2008, the Court directed the Official Liquidator to take possession of the properties of the Company. As against the said order dated 24.09.2008, the Company preferred appeal in O.S.A.No.312 of 2008. Because of non-compliance of the direction of the Court to pay Rs.5 lakhs to the petitioning creditor, by the order dated 1.12.2008, the said O.S.A.No.312 of 2008 came to be dismissed. Subsequently, when the matter came before the single Judge, the appellant paid a sum of Rs.9,93,000/- to the petitioning creditor and assured to pay the balance amount of Rs.45,015.50ps and subsequently the entire amount was settled to the petitioning creditor. On 19.2.2009, the Court directed the Company to pay Rs.25,08,395/- to the Official Liquidator. Inspite of direction from the Court the amount due to the Official Liquidator was not paid and the Court directed the Official Liquidator to proceed with the sale. The property was sold in the public auction and on 15.09.2009, the sale was confirmed by the Court and consequent order was passed on 14.10.2009 allowing the Official Liquidator to hand over the properties. Challenging the sale, appellant filed appeals - O.S.A.Nos.370 and 372 of 2009. Having challenged auction sale, in the earlier round of appeals - O.S.A.Nos.370 and 372 of 2009, it is not open to the appellant to contend that he was not aware of the proceedings and that the defect in the advertisement has caused prejudice to him.

Fact of the Case:

The appellant, son of the Managing Director of the Company in liquidation, sought to set aside the winding up order dated 3.12.2008 on the ground of irregularity in the initial advertisement in the two newspapers dated 3.7.2008. The Company challenged the order of appointment of the Official Liquidator to take possession of the properties and to give police protection and the Company failed to comply with the Order of the Court made in O.S.A.No.312 of 2008. In the second round of litigation, the Company also challenged the sale of assets of the Company. The appellant, claiming to be the Contributory, invoked the inherent jurisdiction of the Company Court to re-agitate the matter on the ground of irregularity in the initial advertisement in the two newspapers dated 3.7.2008 and that the said irregularity in the publication in the news papers would vitiate the order of winding up (3.12.2008).

Finding of the Court:

The Court found that the non-compliance of procedural mandatory requirement would not vitiate the winding up order after three years, especially when the appellant had the opportunity of fighting out the litigation in the earlier round. The appellant, being son of the Director of the Company, knew about the pendency of the proceedings all along since his father was defending the same. The appellant was not put to any prejudice by the procedural irregularity in the advertisement - non-mentioning of the Company Petition number and cause title in the paper publication.

Issues: The issues revolved around the appellant's claim to set aside the winding up order dated 3.12.2008 on the ground of irregularity in the initial advertisement in the two newspapers dated 3.7.2008 and the Company's challenge of the order of appointment of the Official Liquidator to take possession of the properties and to give police protection and the Company's failure to comply with the Order of the Court made in O.S.A.No.312 of 2008. The Company also challenged the sale of assets of the Company.

Ratio Decidendi: The Court held that the non-compliance of procedural mandatory requirement would not vitiate the winding up order after three years, especially when the appellant had the opportunity of fighting out the litigation in the earlier round. The appellant, being son of the Director of the Company, knew about the pendency of the proceedings all along since his father was defending the same. The appellant was not put to any prejudice by the procedural irregularity in the advertisement - non-mentioning of the Company Petition number and cause title in the paper publication.

Final Decision: The Appeal was dismissed with the following directions and observations: The Indian Bank, Asset Recovery Management Branch, Madurai is directed to deposit Rs.1,04,63,659/ with the Official Liquidator, High Court, Madras towards the expenses incurred by the Official Liquidator from out of the common establishment charges of the Official liquidator. On such deposit, the Official Liquidator shall hand over the possession of the assets of the company in liquidation to the Indian Bank. The Indian Bank shall associate the Official Liquidator in the SARFAESI proceedings before DRT by impleading the Official liquidator in the proceedings pending before DRT. The Indian Bank, being the lead Bank, is permitted to bring the properties to sale in the SARFAESI proceedings pending before DRT. The sale proceeds shall remain with the Indian Bank and the Indian Bank shall file the report before the Single Judge in C.P.No.78 of 2008. Upon filing of such report, the learned single Judge shall pass appropriate orders for apportionment of the sale proceeds. Indian Bank shall file a report before the single Judge as well as the Official Liquidator. The Company Court shall pass appropriate orders for working out the legitimate dues of the workers pari passu with the secured creditors and other dues payable to the electricity Board, E.S.I.Corporation, E.P.F.Organisation and other claims. However, there is no order as to costs. Consequently, the connected miscellaneous petition in M.P.No.1 of 2011 is closed. M.P.No.2 of 2011 filed by the Workers Union and M.P.No.3 of 2011 filed by the Indian Bank, Asset Recovery Management Branch, Madurai are disposed of directing the Indian Bank and the workmen to file impleading applications before the single Judge in C.P.No.78 of 2008 to implead themselves. On such applications being filed, the learned single Judge is required to implead the Indian Bank and the workmen in the C.P.