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Sushiladevi and ors. Vs. Basakha Singh and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtDelhi High Court
Decided On
Case NumberCompany Appeal No. 390 of 1970 and Civil Petition Appeal No. 13 of 1967
Judge
Reported inILR1973Delhi759
ActsCompanies Act, 1956 - Sections 391; Companies Court Rules, 1959 - Rule 101
AppellantSushiladevi and ors.
RespondentBasakha Singh and ors.
Advocates: D.S. Golani,; Asha Goel and; Rajeev Behl, Advs.
Excerpt:
.....dealt with an application filed under section 439(8) of the companies act, 1956, filed by unpaid creditors of the company, seeking to become, the party of the petition for winding up that stood dismissed as withdrawn - it was specified, in reply to the aforesaid petition that once a winding up petition was decided, the proceedings would be concluded and thereforee, no permission would be allowed to anyone to become a party -further, it was also made clear that the rule 101 of the companies (court) rule, 1959, cannot be enforced to revive the earlier petition that ceased to exist on the board of court - - (1) this is an application under section 439(8) of the companies act 1956 read with rule 101 of the companies (court) rules and order i, rule 10 and section 151 of the code of civil..........and directed to be heard as preliminary issues. the following issues were framed: '1. whether the present application for the relief claimed is maintainable under section 439(8) and section 391 of the companies act read with rule 101 of the companies (court) rules, 1959 and order i rule 10 civil procedure code 2. whether the petition is supported by a valid affidavit 3. whether, assuming the facts mentioned in the application to be correct, sh. jassumal mamtani is not competent to file this petition on behalf of smt. sushila devi and ganga devi and 4. whether the present petitioners have locus standi to the this petition, as the winding up petition c.p. no. 13/67 has already been dismissed ?'no arguments have been addressed to me qua issue nos. 2 and 3 and, thereforee, i decide the same.....
Judgment:

D.K. Kapur, J.

(1) This is an application under Section 439(8) of the Companies Act 1956 read with Rule 101 of the Companies (Court) Rules and Order I, Rule 10 and Section 151 of the Code of Civil Procedure as well as Section 391 of the Companies Act. This is an application by Smt. Sushila Devi, Smt. Ganga Devi and Shri Inder Kumar Marntani directed against M/s. Basakha Singh & Co. (P)Ltd. and the official Liquidator. From the facts disclosed in the application, it appears that the applicants claim to be unpaid creditors of the company. It is stated that there are Hundis due sometime in 1966 drawn in favor of the applicants. Apparently on 13th June, 1967, a winding up petition was filed by one Gauri Dikshit in this court which was numbered as Company Petition 13 of 1967. That petition remained pending for a considerable period but there was a settlement between the petitioning creditors and the respondent company, which led to the winding up petition being withdrawn. It is stated that this settlement was recorded in C.A. 316 of 1970 and the Provisional Liquidator, who had been appointed by the court, was also discharged and all property and assets were ordered to be handed back to the company. According to the petitioner, the compromise between the company and the creditor, which took place in those proceedings, was entered into without taking into account the petitioners claim against the company. Moreover, the withdrawal of the winding up petition is stated to be due to fraudulent preference by the company. For the purpose of defending this petition, the company and the Official Liquidator have taken certain objections. As far as the Official Liquidator is concerned no reply as such has been filed but it is stated that the order passed by the Company Judge discharging the Provisional Liquidator is conclusive of the matter and the company is no longer been wound up. As far as the company itself is concerned, it is stated that the petition is no longer maintainable and other objections also have been taken. Four issues were framed which were all treated as requiring no evidence and directed to be heard as preliminary issues. The following issues were framed:

'1. Whether the present application for the relief claimed is maintainable under section 439(8) and section 391 of the Companies Act read with Rule 101 of the Companies (Court) Rules, 1959 and Order I Rule 10 Civil Procedure Code 2. Whether the petition is supported by a valid affidavit 3. Whether, assuming the facts mentioned in the application to be correct, Sh. Jassumal Mamtani is not competent to file this petition on behalf of Smt. Sushila Devi and Ganga Devi and 4. Whether the present petitioners have locus standi to the this petition, as the winding up petition C.P. No. 13/67 has already been dismissed ?'

No arguments have been addressed to me qua issue Nos. 2 and 3 and, thereforee, I decide the same in favor of the petitioners. It now remains to consider issue Nos. 1 and 4 which are the substantial issues in this present case. The question requiring decision is whether the petitioners can maintain this application after the winding up petition has already been decided.

(2) I have had the opportunity of looking at the records of C.P. 13 of 1967 wherein the Provisional Liquidator was appointed. The said petition for winding up of the company is on the ground of inability to pay debts. The proceedings terminated by an order, dated 3rd August, 1970, wherein it was stated that there had been a settlement between the creditor as well as the other creditors and the company in terms of the statements recorded in C.A. 316/70 and the petition was dismissed in terms of that settlement. This meant that the company petition came to an end on 3rd August, 1970, as a result of a settlement. I am not concerned with the correctness or otherwise of that decision. It is only sufficient to note that C.A. 316/70 has also been placed before me, which shows that a number of creditors and petitioners appeared before the court and accepted payment. The present petitioners did not, however, take part in those proceedings. There is nothing to show that the present petitioners took any part in the winding up petition.

(3) The present petition was brought on 17th September, 1970. A question has arisefa as to how this application can be brought and as to what sort of relief the petitioners can get by moving an application of this sort. Once a winding up petition has been decided it is not possible to permit any one to become parties thereto because the proceedings are at an end. It is submitted by the learned counsel for the applicants, that, in fact, if the original petitioner withdraws a winding up petition then it is open to other persons like creditors to join the petition and support the same. For this purpose reliance is placed on Rule 101. There is no doubt that if a petitioner is found entitled to present a petition on account of not being a contributory or creditor or otherwise fails to prosecute the petition or withdraws the same or fails to appear then the court has sufficient power to enable another creditor or contributory to prosecute the petition. This does not mean that such an application can be made after the petition has been allowed to be withdrawn. The procedure in this respect is set out in Rule 99 to Rule 102 of the Companies (Court) Rules and may be summarised.

(4) Once a winding up petition has been admitted a direction is given by the court to have the same advertised and this is provided for by Rule 99, The form for the advertisement is form No. 48 appended to the Rules. After the advertisement has been made then the petition cannot be withdrawn except with the leave of the Court. Rule 100 of the Rules deals with the procedure for permitting the withdrawal of the petition for winding up which provides that the petition will not be allowed to be withdrawn before the date fixed in the advertisement for the hearing of the petition. The object of this Rule is to enable other creditors who wish to support the petition to be present at the date of hearing and, thus, to support the petition even if the original petitioning creditor or contributory wishes to withdraw the same or have it dismissed. In the conduct of company affairs it is quite often the case that the petitioning creditor is satisfied outside the court by the management of the company, sought to be wound up. Hence, in order to enable the winding up petition to be satisfactorily decided, a provision has been made to enable other creditors to support the petition even though the original creditor may be paid off and induced to withdraw the petition for winding up. ' Thus, if the original creditor withdraws his petition, then Rule 101 can be brought into operation and other creditors or other persons competent to maintain the petition may be permitted to be substituted as parties to the petition. In case such a contingency arises, then substitution has to be done in accordance with Rule 102. This procedure is to allow the new creditor who has been substituted to set out the grounds on which he supports the petition. Thus, in a case where a creditor brings a winding up petition on the ground of non-payment of debts following a statutory notice and seeks to withdraw the petition, another creditor may be allowed to support the petition either on ground that he has served a statutory notice which has not been complied with or on account of a claim that the company is insolvent or for any other reason. This, in short, is the procedure to be followed in case substitution of a new creditor for the petitioning creditor is sought.

(5) In the present case, the facts on record show that the company petition brought by Shri Gauri Dikshit, which was numbered as C.P. 13/67 remained pending in the Court for several years and was only decided on 3rd August, 1970 when various creditors made a .statement that they had settled the matter with the company sought to be wound up and had received payments. There is nothing to show that the settlement was a settlement between the company and all its creditors. In fact, it was not a decision under Section 391 of the Companies Act and was not a scheme. It was only an application concerning the company and the petitioners and supporting creditors before the court. Such a settlement has no effect at all on the rights of parties who are neither petitioning creditors nor supporting creditors. It is not absolutely necessary that in cases in which there is a settlement between the petitioning creditors and supporting creditors with the company that all the other creditors should also be parties. It is sufficient for the purpose of this case to note that the winding up petition was withdrawn as having been settled and the Provisional Liquidator was discharged. It is the submission of Mr. D. S. Golani, counsel for the applicants, that the Official Liquidator was negligent in not disclosing the names of all the other creditors of the company. I do not see how the Official Liquidator was concerned with the withdrawal of the winding up petition, which is a matter between the creditors and the company.

(6) Having set out the circumstances and the law applicable to cases of this type for substitution of creditor for the petitioning creditor, I come to the conclusion that this petition has been brought too late.. The winding up petition has already been allowed to be withdrawn. It has already leased to be on the Board of this Court. It cannot now be resuscitated or revived the present petition which seeks to nullify the withdrawal of the winding up petition and the discharge of the Provisional Liquidator does not now lie because no proceedings are pending in the court. It is true that the petitioners contend with the withdrawal of the winding up petition, was on account of fraud or fraudulent preference. This, in my view, does not give the court any jurisdiction to revive the proceeding which is already terminated. If the petitioners had any remedy it was to either proceed on their own behalf whether by way of winding up petition or suit or they should have joined the proceedings which was pending in this court. They cannot now be heard. In this way I decide issue Nos. 1 and 4 in favor of the respondents and against the petitioners. I find that the present petition is not maintainable under Section 439(8) of Section 391 or Rule 101 of the Company (Court) Rules. I also hold that the petitioners have no locus standi to file the petition as the winding up petition (C.P. 13/67) has already been dismissed. The ground of dismissal of that petition is immaterial.

(7) I now take up an alternative submission made by Mr. D. S. Golani in view of my decision concerning these two issues. It is submitted that his application may be permitted to be treated as a willing up petition. This would mean that in law this application for substitution and revival of the old proceedings would have to be treated as a fresh winding up petition. The reason for this prayer, according to the learned counsel, is that a number of years have passed during which those proceedings have been pending. I may note that the winding up petition remained pending for about 3 years and this petition for restoring the winding up petition after it had been dismissed as withdrawn has also been pending for 3 years. Thus, a total period of six years has passed. Mr. D. S. Golani submits that the passage of time really leaves the petitioner without any proper remedy at this stage. This, of course, is only a suggestion. He does not admit that proceedings would now be barred by time. Without expressing any view as to whether the petitioners are entitled to the deduction of time under the Limitation Act or any other provision of law, I think it would not be proper to permit this application to be changed into a winding up petition, for one thing there are no allegations in the petition to show that the company is unable to pay its debts. It is stated in the application that in response to the legal notices the company had declared that it was unable to pay its debts. But no documents showing this have been filed. This averment has been totally denied by the company. I do not think an application for reviving the previous winding up petition can itself be treated as a winding up petition. This is particularly, so after the passage of so many years. I, thereforee, refuse the request of Mr. D. S. Golani to permit the conversion of this application into a winding up petition. I also very much doubt whether I can give permission to convert an application of the present type into a winding up petition. In the result. I dismiss the application of the petitioners with costs. Costs. Rs. 100.00 in each case. Costs is to be shared equally by all the respondents.


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