Full Judgment Text
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CASE NO.:
Appeal (civil) 183 of 2000
PETITIONER:
M/S.ASSOCIATED JOURNALS LTD.
RESPONDENT:
THE MYSORE PAPER MILLS LTD.
DATE OF JUDGMENT: 11/07/2006
BENCH:
Dr.AR.LAKSHMANAN & LOKESHWAR SINGH PANTA
JUDGMENT:
J U D G M E N T
Dr.AR.LAKSHMANAN, J.
None appears for the appellant despite service of notice on the
appellant.
It appears that the previous counsel sought direction from this
Court to discharge him as advocate-on-record. Notice was also sent by
speed post A.D./Courier to M/s Associated Journals Ltd., Lucknow, U.P. and
M/s Associated Journals Ltd., New Delhi requesting them to contact them
otherwise they will not be in a position to attend to the above matter and will
seeks direction from this Court for discharge as advocate-on-record. When
the matter was taken up for hearing on 12.04.2006, a submission was made
by the learned counsel appearing for the appellant that no reply has been
received from the addressee till date and, therefore, further time may be
granted. The matter was adjourned by four weeks. Even today, there is no
representation on behalf of the appellant. The counsel is also not present in
the Court.
We have heard Ms.Pragya Singh Baghel, learned counsel appearing
on behalf of the respondent and also perused the original record which has
been received from the High Court.
This appeal is directed against the final judgment and order
dt.27.10.1997 passed by the High Court of Judicature at Allahabad, Lucknow
Bench in Company Appeal No.1 of 1994. By the said order, the High Court
dismissed the said Company Appeal holding inter alia that the learned
Company Judge did not commit any error of law in allowing the appellant to
file fresh affidavit to remove the defects in verification of the company
petition. The High Court further held that the finding of the learned
Company Judge regarding the sufficiency of the reasons for advertisement
were not final.
The said Company Appeal No.1 of 1994 which has been dismissed
by the High Court had been filed by the appellant herein against the order
dt.10.01.1994 passed by the learned Company Judge of the said Court in
Company Petition No.3 of 1987 whereby the respondent, namely, the Mysore
Paper Mills Ltd. were directed to file a fresh affidavit to remove the defect in
the verification accompanying the said Company Petition and thereafter for
the listing of the petition for passing orders regarding advertisement.
We have perused the grounds of appeal filed in this Court. It is
stated in the grounds that the learned Company Judge had reached a prima
facie conclusion that the debt being claimed by the respondent in the
Winding Up Petition was payable by the appellant and that the defence
purported to be raised on behalf of the respondent company was not a bona
fide defence and cannot be validly considered effective enough to refuse the
order of advertisement. The respondent was allowed to file a fresh affidavit
correcting the defect in the verification of the Winding Up Petition filed by
the respondent and further fixed the Winding Up Petition for passing orders
regarding advertisement.
The case of the appellant company has been that the sum of money
claimed by the respondent in the Winding Up Petition was not outstanding
inasmuch as the said sum of money had already been paid to M/s General
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Trading & Sales Corporation who were the mutual agent of the appellant and
the respondent. Hence no debt was due and payable by the appellant to the
respondent. There was, therefore, no question of the appellant company
being unable to pay any debts to the respondent. The Winding Up Petition
filed by the respondent was, therefore, wholly without any basis or
foundation in law and hence not maintainable.
Company Appeal No.1 of 1994 was filed against the order
dt.10.01.1994 passed by the Company Judge in Company Petition No.3 of
1987. In the said appeal, the appellant had challenged the order of Company
Judge on several grounds. We are not now considering the merits of the
grounds alleged in this appeal since it is premature for this Court to deal
with the same at this stage.
It is submitted by the appellant that in view of the mandatory
statutory provisions of Rule 18 and 21 of the Companies (Court) Rules, 1959
governing the verification of the contents of the Winding Up Petition, the
said Winding Up Petition was not maintainable in the light of the admitted
fact that the petition had not been verified by the respondent in accordance
with the provisions of the said Rule 21. It is further submitted that because
the Winding Up Petition which is not supported with affidavit in accordance
with law and is violative of Rules 18 and 21 of the Companies (Court) Rules,
1959 and is not in prescribed form is not liable to be admitted at all and is
liable to be dismissed by the company court and also the appellate court.
It is further urged that the defect in verification of the Winding Up
Petition arising out of non-compliance with Rule 21 of the Companies (Court
) Rules, 1959 was fatal to the Winding Up Petition and the said Petition ought
to have been dismissed on that ground alone. It is also further contended
that the defect in verification of the Winding Up Petition on account of non-
compliance with the provisions of Rule 21 of the Companies Court (Rules)
cannot be corrected by filing fresh affidavit by the respondent after a lapse
of over several years from the date of institution of the Winding Up Petition.
It is further contended that a defect in the verification of the Winding
Up Petition arising out of non-compliance with the provisions of Rule 21 of
the Companies (Court) Rules, 1959 cannot be cured by filing a fresh affidavit
after a lapse of over 10 years as directed by the High Court in the impugned
judgment.
The respondent filed counter affidavit to the Civil Appeal. The
respondent after denying averments made in the appeal grounds answered
the preliminary objection raised by the appellant for the first time before the
learned Single Judge is merely an afterthought and an attempt to somehow
escape from their liability of payment of the outstanding dues to the
respondent company. Ms.Pragya Singh Baghel, learned counsel for the
respondent further submitted that the technical plea raised by the
respondent regarding defective affidavit was raised after seven years of
filing the petition. Assuming without admitting that the affidavit was not
verified as per the Company Rules, the learned counsel submitted that if this
objection was taken earlier the respondent would have cured the defect.
The learned Company Judge after perusing the affidavit filed by the
respondent herein was of the opinion that the contents of paras 1 to 25 of
the affidavit are true to be best of knowledge, information and belief of the
deponent who is the Director (Finance) of the appellant company.
It was further held :-
"Rule 21 of the Companies (Court) Rules require the petition to be
verified by affidavit made by the petitioner and such an affidavit is to be filed
along with the petition and is to be in Form No.3 appended to the Rules.
Form in paragraph-2 requires the contents of the petition to be true
to the knowledge of the deponent and the contents based on information to
be stated and verified separately. To this extent, the verification is not
proper."
The learned Single Judge has also referred to a judgment of the
Division Bench of the said Court in Company Appeal No.1 of 1993 in The
Pradeshiya Industrial & Investment Corporation of Uttar Pradesh Limited vs.
North India Petro Chemicals Limited and another which was decided on
27.08.1993. The Division Bench considered the aforesaid case and some
others and found :-
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"Considering the aforesaid decisions the ground which has been
canvassed in favour of treating a defect in verification as fatal is that it may
create confusion about the date of the institution.
Rule 21 of the Companies (Courts) Rules requires the verification to
be made in a specific manner. Yet it does not provide that non-compliance
of this rule would render the winding up petition infructuous. As has been
pointed out by the Hon’ble Supreme Court rules of procedure are only to
ensure certain ends. Verification is insisted upon to render the person who
verifies, responsible for the statement contained in the petition so that it can
be read as evidence. In case it is not duly verified, the same result can be
achieved by requiring the petitioner to verify the petition. Going beyond this
would render the dispensation of justice subject to minor technicalities of
procedure which can never be the intention of law. The rules of procedure
are meant to advance the cause of justice and not to frustrate it. We are,
therefore, in respectful disagreement with the decision of Calcutta High
Court and Punjab High Court and are of the view that any defect in
verification can be justified. The petitioner can be required to re-verify the
affidavit and once it stands duly verified, the petition would be in order to be
proceeded with in accordance with law.
Dismissing the petition for not confirming to the prescribed form of
verification would be taking a hypertechnical view of the matter. A person
would be penalised for the inadequacy of his counsel as it can be assumed
that such a mistake cannot be deliberate nor has it been so suggested in
this case. Mechanical insistence on compliance with the rules and dismissal
for technical infraction does not subserve substantial healthy justice but
merely multiplies litigation and consequent harassment because even after
the petition is dismissed on the ground, it would always be open to the
petitioner to bring another petition with the same allegations and for the
same relief, only after correcting the form of verification. This correction can
be permitted in this very petition. Such dismissal is all the more justified
when the purpose of the provision would be amply met by getting the
mistake corrected."
In view of the aforesaid discussion, the learned Company Judge
found that the objection raised on behalf of the respondent company (the
appellant herein) was not tenable. The learned Company Judge has further
directed that the respondent herein can be required to file a fresh affidavit
complying with the provisions of law.
Aggrieved by the said order passed by the Company Judge, the
appellant preferred Company Appeal No.1 of 1994. We have carefully
perused the judgment of the Division Bench. The learned judges of the
Division Bench dismissed the appeal filed by the appellant herein and
directed that after fresh affidavit as required in the order dt.10.01.1994 has
been filed, the Company Petition be listed before the learned Company
Judge for passing fresh orders regarding advertisement of the Company
Petition. It is useful to reproduce the finding recorded by the Division Bench
:-
"We are in full agreement with the law laid down by the Division
Bench and the petitioner has been rightly provided opportunity to rectify the
defect of the affidavit by filing fresh affidavit for removal of the defect in
swearing clause of the affidavit. The case of the respondents is not
prejudiced in any manner nor there was any bar of limitation to come in the
way. The winding up petition has already been admitted and any
amendment or correction to rectify the defect of the affidavit by filing fresh
affidavit at this stage would not be so fatal to dismiss the petition. The
Court has always discretion to allow the amendment of pleadings,
reswearing or reverification of the petition. The defects thus could be cured
subsequently even after filing of the petition."
In this context, it is beneficial to reproduce Form No.3 of the
Companies (Court) Rules, 1959 :-
"FORM NO.3
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[See rule 21]
[Heading as in Form No.1]
Company Petition No.......of 19....
Affidavit verifying petition
I, A.B., son of .........aged .........residing at .......do, solemnly affirm
and say as follows :-
1. I am a director/secretary/........./of ..........Ltd., the petitioner in the
above matter *(and am duly authorised by the said petitioner to make this
affidavit on its behalf).
[Note.-This paragraph is to be included in cases where the petitioner
is the company.]
2. The statements made in paragraphs.......of the petition herein now
shown to me and marked with the letter ‘A’, are true to my knowledge, and
the statements made in paragraphs..........are based on information, and I
believe them to be true.
Solemnly affirmed, etc.
*Note.- To be included when the affidavit is sworn to by any person
other than a director, agent or secretary or other officer of the company."
Rule 21 of the Companies (Court) Rules, 1959 prescribes the
procedure for verification of affidavit. Rule 21 is reproduced as under :-
"R.21. Affidavit verifying petition.- Every petition shall be verified by
an affidavit made by the petitioner or by one of the petitioners, where there
are more than one, and in the case the petition is presented by a body
corporate, by a director, secretary or other principal officer thereof; such
affidavit shall be filed along with the petition and shall be in Form No.3:
Provided that the Judge or Registrar may, for sufficient
reason, grant leave to any other person duly authorised by the petitioner to
make and file the affidavit."
The affidavit filed by the respondent herein is available at page 63 of
the paperbook. Para 2 of the said affidavit is reproduced as under :-
"2. That I have read the contents of the accompanying Company
Petition and have understood the contents thereof.
I, the deponent abovenamed do hereby swear that the contents of
paragraphs nos.1 and 2 of this affidavit, those of paragraph nos.1,2,
3,4,5,6,7,8,9,10,11,12,13,14,15,16,17,18,19,20,21 and 22 of the accompanying
petition are true to the best of my knowledge, information and belief, that no
part of its is false and nothing material has been concealed in it. So help me
God."
A careful perusal of the affidavit filed by the respondent and Form
No.3 as prescribed under Rule 21 would show that there is substantial
compliance of the said Rule. A Three-Judge Bench of this Court in an
identical matter in Malhotra Steel Syndicate vs. Punjab Chemi-Plants Ltd.,
(1993) Suppl.3 SCC 565 has also opined that even if there is some slight
defect or irregularity in the filing of affidavit, the appellant should have been
given an opportunity to rectify the same. In the instant case, the same
liberty was given to the respondent by the Company Judge as also by the
Division Bench of the High Court. We are, therefore, of the opinion that the
Division Bench was right in dismissing the appeal filed by the appellant.
This Court has in catena of decisions held that substantial
compliance is enough. Rules are undoubtedly statutory and the forms are to
be adopted wherever they are applicable. The Rules relating to the affidavit
and the verification cannot be ordinarily brushed aside, but then what is
required to be seen is whether the petition substantially complies with the
requirements and, secondly, even when there is some breach or omission,
whether it can be fatal to the petition. In the instant case, both the learned
Company Judge and also the Division Bench were of the opinion that there
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is substantial compliance of Rule 21. In Khaitan Overseas & Finance Ltd. vs.
Dhandhania Bros.P.Ltd., (2002) 1 Comp LJ 274, a petition was filed by the
Chairman-cum-Director of the company. He annexed with the petition a
resolution of the Board of Directors permitting him to execute necessary
petitions, documents, applications, affidavits and to lodge a suit to recover
dues from the debtor company. This was held to include the authority to file
a Winding Up Petition also. The affidavit accompanying the petition was
signed, sworn and affirmed on oath in the prescribed manner. The court
said that the affidavit conformed with the requirements of law.
We are of the opinion that the Rules of procedure cannot be a tool to
circumvent the justice. In fact, the Rules are laid to help for speedy disposal
of justice. The learned Judges of the Division Bench has appreciated that
the technical plea raised by the respondent regarding defective affidavit was
raised after seven years of filing the petition. The learned counsel submitted
that the appellant is raising the defence of technical plea to protect himself
from the consequence of his default and this plea cannot be considered
effective enough to review the order of advertisement. Assuming without
admitting that the affidavit was not verified as per the Company Rules, the
learned counsel has correctly submitted that if this objection was taken
earlier the respondent would have cured the defect.
For the aforesaid reasons, we are of the opinion that the appeal has
no merit and the order passed by the learned Judges of the Division Bench
confirming the order passed by the Learned Company Judge does not call
for any interference by this Court. The appeal stands dismissed
accordingly. No costs.
The interim order passed by this Court dt.01.05.1998 granting stay of
the order under challenge shall stand vacated. The Company Court is now
at liberty to proceed further in accordance with Companies (Court) Rules,
1959 and dispose of the Company Petition as expeditiously as possible.
We place on record our appreciation for the able assistance
rendered to us by Ms.Pragya Singh Baghel, learned counsel for the
respondent at the time of hearing.