NEPC MICON LIMITED O S A NO 88 OF 1998 NEPC AGRO FOODS LIMITED O S A NO 89 OF 1998 Vs. HINDUSTAN THOMPSON ASSOCIATES LIMITED

JUDGEMENT

(1.) FOR the The appellants in these two appeals are private limited companies, incorporated under the provisions of the Companies Act, 1956, having their registered office at No. 36, Walajah Road, Anna Salai, chennai. The appellants have challenged the order of this court passed under company jurisdiction, in C. A. Nos. 408 and 409 of 1998 in C. P. Nos. 17 and 18 of 1997, in these appeals. The aspect to be considered in these appeals is, whether the impugned order is devoid of various statutory safeguards against admission, advertisement and publication of winding up petitions " In order to appreciate the legality of the impugned order, it is appropriate to refer to the objects of the company, the position of the parties and how the demand was made, which led to the filing of the company petitions. The main objects of the company are : (i) to carry on business of manufacturers, sellers, importers, exporters, suppliers, lessors or lessees and dealers of all kinds of power generation equipment including windmills and turbines, hydro-turbines, thermal turbines, solar modules, panels, (ii) to generate, accumulate, distribute, supply electricity and other power (subject to and in accordance with law) for the purpose of light, heat, motive power and for all other purposes for which electric and other energy can be employed; (iii) to carry on business of generating energy by any other non-conventional methods and deal in the said equipment, accessories and tools; (iv) to provide all types of engineering facilities including construction, technical consultancy and architectural services related to the use, application, installation, erection, operation and maintenance of all kinds of power generation and its related produce; (v) to enter into foreign collaboration, contract, sole selling agency agreement for installation, erection, operation and maintenance of all kinds of power generation equipment, products, either manufactured, sold, supplied and dealt with by the said company or by otherwise. The respondent was appointed as the advertising agent of the appellant companies, vide letter dated August 12, 1993, after having accepted the standard terms set out by the respondent. It is the grievance of the respondent herein that though bills were presented with supporting vouchers as required, even after acknowledgment, payments to the tune of Rs. 1, 52, 43, 258. 98 with interest at 24 per cent. per annum, which comes to Rs. 36, 31, 954. 59 in C. P. No. 17 of 1997 and Rs. 1, 11, 67, 630. 80 with interest at 24 per cent. per annum amounting to Rs. 20, 13, 314 in C. P. No. 18 of 1997, have not been forthcoming from the appellants herein, in respect of several bills. Hence the respondent herein filed two company petitions viz. , C. P. Nos. 17 and 18 of 1997 on January 17, 1997, under sections 433 and 439 of the Companies Act, 1956, for winding up the appellant companies and also filed two company applications in C. A. Nos. 408 and 409 of 1998 on March 6, 1997, for advertising the winding up petitions, under rule 24 of the companies (Court) Rules (hereinafter referred to as "the Act" and "the Rules", for short), before this court under company jurisdiction. On March 19, 1998, the appellants herein filed four applications (two applications in each of the company petitions), viz. , C. A. Nos. 470 to 473 of 1998, seeking revocation of the admission and stay of all further proceedings, inter alia, contending that the amount claimed is disputed and if the petitions are admitted it would make the court an instrument, in possible cases, of harassment and even blackmail, consequently, the business of the company is bound to suffer serious loss and injury. Without advertisement was directed to be published in the Government Gazette and local dailies by order dated June 9, 1998.

(2.) THE learned senior counsel, T. R. Rajagopal, contended that on presentation of the winding-up petition, seeking advertisement thereof has certain serious consequences on the status, standards, financial viability and stability and the operational efficiency of the company. He further urged that where the debt is bona fide disputed, a petition for winding-up is not an alternative to the suit to recover the same, but may be a strategy to take an unfair advantage. He also invited our attention to the impugned order, wherein there are no findings as to whether presentation of the petition was bona fide, reasonable or otherwise, in the sense, with an ulterior motive resulting in abuse of the process of the court. Section 433 of the Act sets out the circumstances in which a company may be wound up by the court, one such being where the company is unable to pay its debts. Section 434 sets out the circumstances and situations in which a company may be deemed to be unable to pay its debts. Rule 95 of the Rules provides the at the petition for winding-up of a company shall be presented in the Registry. THEn comes rule 96, which is very material. It provides that (i) the court may issue notice to the company to show cause as to why the petition should not be admitted; (ii) it may admit the petition and fix the date for hearing and issue notice to the company before giving directions about the advertisement of the petition; and (iii) it may admit the petition, fix up the date for hearing of the petition and order that the petition be advertised and direct that the petition be served upon the persons, who are connected with the order. Rule 24, which relates to the advertisement of the petition provides : " (1) Where any petition is required to be advertised, it shall, unless the judge otherwise orders, or these Rules otherwise provide, be advertised not less than fourteen days before the date fixed for hearing, in one issue of the Official Gazette of the State or the union Territory concerned, and in one issue each of a daily newspaper in the english language and a daily newspaper in the regional language circulating in the State or the Union Territory concerned, as may be fixed by the judge; and (2) Except in the case of a petition to wind up a company the judge may, if he thinks fit, dispense with any advertisement required by these Rules. "rule 9 of the Rules reads thus :" Nothing in these Rules shall be deemed to limit or otherwise affect the inherent powers of the court to give such directions or pass such orders as may be necessary for the ends of justice to prevent abuse of the process of the court. "rule 96 of the Rules, which is very material provides :" 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 advertisement to be published and the persons, if any, upon whom copies of the petition are to be served. THE judge may, if he thinks fit, direct notice to be given to the company before giving directions as to the advertisement of the petition. "