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Judgment
M. S. Sonak, J
Heard learned Counsel for the parties.
Admit. With the consent of the learned Counsel for the parties, the appeal is taken up for final disposal.
The challenge in this appeal is to the order dated 21st June, 2018, by which the learned Company Judge has allowed Company Petition No. 829 of
2003 instituted by the respondent in terms of prayer clauses (a) and (b), which read as under :
“(a) that the Company Splendour Gems Limited having its registered office at 101Â103, Mittal Court, “A†wing, 10th floor, Nariman Point,
MumbaiÂ400 021 be would be under the provisions of the Companies act, 1956.
(b) that the Official Liquidator be appointed the Liquidator of the Company to take charge of the assets, books of account and properties of the
Company with all powers under the provisions of the Companies Act, 1956.â€
Mr. Zal Andhyarujina, learned Counsel for the appellant submits that the name of the company “Beautiful Diamonds Limited†was changed to
“Splendour Gems Limited†after due compliance with the provisions prescribed under the Companies Act, 1956. He submits that despite such
change of name, the petition was advertised in the newspaper as also in the official gazette in the name of “Splendour Gems Limitedâ€. He submits
that issuance of a proper advertisement in the proper name is a mandatory requirement prescribed in Rule 99 of the Company Court Rules, 1959 (said
Rules). He submits that as a result of the defective advertisement, no effective opportunity was available to all concerned parties to either oppose or
support the Company Petition. He therefore submits that the impugned order is liable to be set aside for failure to comply with the mandatory
provisions set out Rule 99 of the said rules.
Mr. Prakash Punjabi, learned Counsel for the respondent submits that the Rule 9 of the said rules retains inherent powers in
a Company Court and in the exercise of the such powers the learned Company Judge was justified in overlooking or even condoning the defect in
publication of the advertisement. He submits that in fact, there is a bar to a company changing its name during the pendency of petition seeking of its
winding up. He submits that no proper details as regards the change of name were ever submitted by the appellant before the learned Company Judge
and therefore, the appellant cannot be permitted to take any advantage of its own lapses. Mr. Punjabi submits that there is absolutely no case is made
out to interfere with the impugned order on merits. In such a situation, the impugned order may not be interfered on the basis of any technical
considerations as urged on behalf of the appellant.
The rival contentions now fall for our determination.
The procedure to be adopted by a Company Judge while dealing with a petition for winding up of a company is set out in part III of the said rules
comprising interÂalia Rule 95 to Rule 338. Rule 95 provides that the petition for winding up a company shall be in form No. 45, 46 and 47, as the case
may be with such variations as the circumstances may require and shall be presented in duplicate. The Registrar is then to note on petition the date of
its presentation.
Rule 96, interÂalia provides that upon filing of the petition, it shall be posted before the Judge in the chamber for admission of the petition and the
fixing of the date for 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.
Rule 99 provides that subject to any directions of the Court, the petition shall be advertised within a time and in the manner provided by rule 24 of
these rules and the advertisement shall be in Form No.48.
Form 48 appended to the said rules reads as follows :Â
FORM NO. 48
[See Rule 99]
[Heading as in Form No.1] Company Petition No. ….............. of …..19.....…......... Petitioner
Advertisement of Petitioner
Notice is hereby given that a petition for a windingÂup of the abovenamed company by the High Court at …...... (or the District Court of ….........)
was on the …........ day of …......19......., presented to the said Court by the said company [or where the petition was not presented by the
company, state the name and address of the petitioner and the capacity in which he presents the petition, e.g., creditor, contributory, etc.] and that the
said petition is directed to be heard before the Court on the …....... day of …......... 19.....Any creditor, contributory or other person desirous of
supporting or opposing the making of an order on the said petition should send to the petitioner or his advocate notice of his intention signed by him or
his advocate with his name and address, so as to reach the petitioner or his advocate not later than 5 days before the date fixed for the hearing of the
petition, and appear at the hearing for the purpose in person or by his advocate. A copy of the petition will be furnished by the undersigned to any
creditor or contributory on payment of the prescribed charges for the same.
Any affidavit intended to be used in opposition to the petition should be filed in Courts and a copy served on the petitioner or his advocate, not less than
5 days before the date fixed for the hearing.
Advocate for Petitioner.
[Emphasis supplied].
Since, form 48 refers to the heading as in form No.1, reference to Form No.1 is necessary and the same reads as follows:Â
FORM NO.1
[See rule 4]
General heading for proceedings
In the High Court at
[(Or) in the District Court of …...........]
Original Jurisdiction
In the matter of the Companies Act, 1956 and
In the matter of X.Y. Ltd.* (give the name of the company)
*Note. (1) Where the company is being woundÂup the words “in liquidation†should be inserted in brackets after the name of the company (see
rule 115).
(2) Where the company is woundÂup under the provisions of the Banking Companies Act, 1949 or the Insurance Act, 1938, the relevant Act should
be set out in the causeÂtitle along with the Companies Act, 1956. [Emphasis supplied].
The importance of advertisement of a winding up petition was emphasised by the Chancery Division, Companies Court in Applied Data Base Ltd.
Vs. Secretary of State for Trade and Industry â€" [1995] 1 BCLC 272 in the following terms:Â
 “Advertisement serves more than one purpose. One purpose is to enable creditors and other interested parties to attend and bring before the
court material relevant to its determination whether or not to make the winding up order sought. But another purpose is to tell the public what they are
entitled to know, namely, that a petition has been presented against the company, and accordingly as a warning to the public that any dealing with the
company should take place with that caution in mind. The advertisement may have serious consequences for the company because this warning may
be taken very seriously, but this is no more than what those dealing with the company are entitled to. The advertisement is not notice that the company
will be wound up, but that the petition has raised a serious question whether such an order ought to be made. If the petition does not raise such a
serious question, the presentation of the petition will constitute an abuse of process and on application by the company the court will restrain
advertisement and indeed dismiss the petition.
I can see no force in a complaint that advertisement will cause damage by informing existing or prospective members of the truth â€" that the future
of this company is in question and the grounds on which it is in question and that they should consider exercising their rights to require the return of
their membership fees. Indeed commercial honesty requires quite the opposite that they be fully informed and be enabled to take fully informed
decisions. Accordingly the second purpose of advertisement to which I have referred, namely, informing the public, requires that advertisement
proceed at once. The first purpose also has application. For it is common ground that all members past and present are entitled to the repayment of all
membership fee if the scheme is held to be a lottery. If this is so, not merely will the company be insolvent, but all such existing and past members
may rank as creditors and should be entitled to be presented and heard on the hearing of the petitionâ€.
This is precisely the reason why the form of the advertisement as prescribed in form 48 makes it clear that any creditor, contributor or other
person desirous or supporting or opposing the making of an order on the said petition should send to the petitioner or his advocate notice of intention
signed by him or his advocate with his name and address, so as to reach the petitioner or his advocate not later than 5 days before the date fixed for
the hearing of the petition, and appear at the hearing for the purpose in person or by his advocate. Any affidavit intended to be used in opposition to
the petition should be filed in the course and a copy served on the petitioner or his advocate, not less than 5 days before the date fixed for hearing.
Again, once a company petition for winding up is admitted, it ceases to be a petition on behalf of one petitioner, but becomes a petition on behalf of
several creditors in representative capacity. [See Ganesh Benzoplast Ltd. Vs. Kedia Distilleries Ltd. Â (2004) 2 Comp LJ 141 (MP) and Savera &
Co. Ltd. Vs. Fabulous Skin Supply Co. Â [1985] 58 Company CasesÂ227].Â
In National Conduits (P) Ltd. Vs. S. S. Arora â€" [1967] (37) Company Cases â€" 786, the Apex Court, after adverting to the said rules has held
that when a petition for winding up is presented to a Company Court, it may issue notice to the company to show cause as to why the same should not
be admitted; or it may admit the petition and fix a date for hearing and issue notice to the company before issuing directions about advertisement of the
petition; or it may admit the petition, fix date of hearing, and order the petition to be advertised and served upon persons specified in the order.
However, the Apex Court has made it clear that in terms of Rule 24(2), a petition for winding up cannot be taken up for final hearing before the court
unless such petition is advertised.
Similarly, in Ahmadur Rahman and others Vs. Registrar of Companies â€" 1973(43) Company Cases â€" 522, the Division Bench of the Gauhati
High Court held that, where an order for winding up was made without publishing advertisement about the petition for winding up as provided in rule
96 read with rules 24, 99 and Form No.48 of the said rules, the order for winding up was vulnerable.
In Falcon Gulf Ceramics Ltd. Vs. Industrial Designs Bureau â€" 1996(86) Company CasesÂ207, the Division Bench of the Rajasthan High Court,
while holding that the provision for advertisement of a company petition before a final winding up order is made, is mandatory, has explained that the
purpose of advertisement as contemplated by Rule 96 of the said rules is wholesome and meant for the benefit of creditors and shareholders.
As noted earlier, a petition seeking winding up of a company, once admitted assumes a representative character. This is a reason why the form of
the advertisement (Form No.48) affords notice to any creditors, contributors or other persons desirous of supporting or opposing such petition, so that
such persons may participate in the proceedings in which they are presumed to have legal interest. Therefore, if there is no advertisement of such
petition or if the advertisement is in an incorrect name, then, it is possible that such persons interested in either supporting or opposing the petition for
winding up are deprived of this valuable opportunity. An order for winding up of a company affects not only the company which is ordered to be
wound up, but also its creditors, contributors or other persons as referred to in FormÂ48 appended to the said rules. In the present case, the name of
the company was already changed. The advertisement was however published in the earlier name with no reference whatsoever to the changed
name. Therefore, it cannot be said that the error in the advertisement was so inconsequential as could be overlooked.
Mr. Punjabi, however contended that parties who have dealt with the company in its former name will be misled, if advertisement is issued in the
changed name. This is possible, but the same can be said about persons who may have dealt with the company in its changed name. In any case,
compliance with statutory requirements, cannot be deflected on basis of such considerations. The apprehension expressed by Mr. Punjabi can very
well be addressed by directing the advertisement in the changed name, at the same time indicating in brackets the former name of the company. In
fact, if the cause title to this appeal is perused, it is clear that this is what has been done by the appellant. The appeal has been instituted in the
changed name of
“Splendour Gems Limited†followed by a bracketed portion (formerly known as “Beautiful Diamonds Limitedâ€). The advertisement, in the
present case could always have been issued in such manner.
Mr. Andhyarujina contests the position that the factum of change of name was not disclosed in the winding up proceedings and therefore, this is
some case where the appellant seeks to take advantage of its own lapse. Rather than go into this dispute, we cannot but note that the petition for
winding up of a company, once admitted ceases to be a proceeding between the petitioner and the company concerned but such proceeding assumes
a representative character. Therefore, such a petition, once admitted concerns all parties referred to in FormÂ48 who may be interested in either
supporting or opposing the petition for winding up. Necessarily therefore, the provisions relating to advertisement of an admitted petition for winding up
of a company will have to be construed from such perspective.
There was no factual dispute that the name of the appellant was changed from “Beautiful Diamonds Limited†to “Splendour Gems
Limitedâ€. The issue as to whether such change was validly effected or not, really does not arise in a proceedings of the present nature. The only
issue involved in the present proceedings is whether the company could have been ordered to be wound up, when admittedly, the advertisement issued
in terms of the said rules, made no reference whatsoever to the changed name.
Rule 9 of the said rules, no doubt retains inherent powers in a Company Court to give such directions or pass such orders as may be necessary for
the ends of justice or to prevent the abuse of the process of the Court. As noted earlier, this is not a case of some inconsequential defect in the
advertisement. Rather this is a case where the advertisement does not even reflect the changed and correct name of the company. Therefore, the
contention that this is a case of deemed exercise of inherent powers, cannot be accepted.
For all the aforesaid reasons, we dispose of this appeal making the following order :Â
(a) The impugned order dated 21st June, 2018Â is set aside;
(b) The Company Petition No. 829 of 2003 is restored to the file of the learned Company Judge, so that the petition may proceed from the stage of
publication of advertisement, this time in the correct name of “Splendour Gems Limited†(formerly known as “Beautiful Diamonds Limitedâ€);
(c) We make it clear that we have not examined the merits of the matter, therefore, all contentions of all parties are left open for decision by the
learned Company Judge;
(d) Parties to appear before the learned Company Judge on 15th October, 2018 at 11.00 a.m. and produce an authenticated copy of this order.
The appeal is allowed in the aforesaid terms. There shall be no order as to costs.
Pending Notice of Motion does not survive and the same is disposed of.