Bombay High Court
Shantilal Khushaldas And Bros. Pvt. ... vs Smt. Jayabala Suresh Shah And Another. on 17 December, 1993
Equivalent citations: [1997]90COMPCAS399(BOM), 1994(1)MHLJ432
JUDGMENT
M.G. Chaudhari J.
1. The company petition was lodged by the petitioners therein on September 4, 1992. They have prayed that the company, namely, Shantilal Khushaldas and Bros. Pvt. Ltd. be wound up under the provisions of the Companies Act and a liquidator be appointed. The company has taken out judge's summons praying that the petition be rejected in limine. In the affidavit in support 10 grounds have been set out for which it is submitted that the petition is liable to be rejected in limine. In ground No. 6 it is contended that the letter dated January 23, 1991, which purports to be a notice under section 434 of the Companies Act, 1956, does not comply with the provisions of the said section. It was, however, at the time of arguments that learned counsel for the company Mr. Kakodkar submitted that the notice relied upon by the petitioners, which is the foundation of the petition, could not be relied upon or taken advantage of for the present petition by the petitioners in view of an earlier petition being Company Petition No. 5-S of 1991, for similar reliefs for winding up founded on the basis of the same notice having been rejected by this court by its judgment and order dated February 12, 14, 1992. The question, therefore, that arises for consideration is whether a second petition is maintainable on the strength of the statutory notice which was availed of for the purpose of filing the earlier petition for winding up and that petition came to be rejected.
It may not be out of place to mention here that the earlier petition was rejected on the ground that the petitioners therein were not authorised to institute the proceedings on behalf of the petitioners. The court held that the power to do so itself was lacking. Hence the petition was rejected and the judge's summons was made absolute. It is submitted by learned counsel for the petitioners-creditors that the earlier petition was thus rejected only on a technical ground and not on the merits and, therefore, no question can arise of the notice on the basis of which that petition was filed being rendered ineffective for the purpose of the present petition.
Section 433 of the Companies Act, enumerates the circumstances in which a company may be wound up by the court. Clause (e) thereof provides that if the company is unable to pay its debts, that may be a ground on which the company may be wound up.
Section 434 of the Act lays down the circumstances when a company is deemed unable to pay its debts. Clause (a) of sub-section (1) thereof reads as follows :
"If a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding five hundred rupees then due, has served on the company, by causing it to be delivered at its registered office, by registered post or otherwise, a demand under his hand requiring the company to pay the sum so due and the company has for three weeks thereafter neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the creditor...."
This provision lays emphasis on the following requirements :
(a) The company must be indebted in a sum exceeding Rs. 500 then due. The words "then due" therefore, necessarily refer to the date on which the notice is issued.
(b) A notice is served on the company in the manner set out therein containing a demand under the signature of the creditor and such demand is required to pay the sum so due. That action goes to show that the sum so due would be the sum due on the date on which the notice is served containing a demand and it is only when for a period of three weeks the company has neglected to pay the sum in accordance with the demand that winding up of the company can be asked for.
Section 439 sets out the provisions as to applications for winding up. It is the case of the petitioners that the amounts shown in paragraph 21 of the petition were due from the company to the two petitioners respectively and that despite the advocate's letter served on the company dated January 23, 1991, in the nature of statutory notice under section 434 of the Companies Act, the company has failed and neglected to pay the amounts due. The said notice exhibit "B" to the petition was dated January 23, 1991, and it, therefore, referred to the amounts due as on that date. On the basis of that notice the earlier petition for winding up had been filed.
The provisions of Order XXIII of the Code of Civil Procedure, 1908, would apply to the proceedings under the Companies Act. That provides insofar as material for the present purpose to be noted (see sub-sections 3 and 4) that where a suit must fail by reason of some formal defect the plaintiff shall be precluded from instituting a fresh suit in respect of the subject-matter of the such suit or such part of the claim which was covered by the suit unless the plaintiff had withdrawn the suit on the ground of formal defect with liberty to institute a fresh suit in respect of the subject-matter of the suit. It must, however, be stated that the bar arising under Order XXIII in the circumstances set out therein would relate to the subject-matter of the suit and the cause of action relating to that subject-matter. In other words what would be barred would be the remedy based upon the same cause of action. That would not be the same thing under the provisions of sections 433 and 434 of the Companies Act. Although the requirement to serve a notice is a condition precedent for instituting a winding up petition, it is still in the realm of procedure and does not in any manner shut out the remedy or the cause of action on the basis of which a creditor may be entitled to apply for winding up of the company on grounds as may be available for that purpose under the provisions of the Act. Thus, the remedy of the creditor to proceed against the company by a winding up petition based upon the subject-matter of the notice would always be available to him despite the fact that the earlier petition founded on the said notice may have been rejected on technical grounds.
However, it is contended by Mr. Kakodkar that even though the above may be the position in law, the second petition cannot be filed without serving a fresh notice under section 434 of the Companies Act and that the notice on the basis of which the petition is filed must be deemed to have exhausted itself when the earlier petition was rejected. According to learned counsel, the notice would not enure for the purpose of a second petition after the process under section 434 read with section 433 of the Act had once been over notwithstanding the fact that the earlier petition may have been rejected on a technical ground. Learned counsel stated that it will still be open to the creditors to serve a fresh notice under section 434 and file a proper petition for winding up, if so advised, but that the present petition would not be maintainable.
Mr. Usgaonkar, learned counsel for the petitioners-creditors, however, submitted that the notice could not be said to have been exhausted and it would be available as a valid notice for the purpose of instituting the present winding up petition. His submission is that since the remedy to file the winding up petition is not barred by reason of the rejection of the earlier petition merely on a technical ground, the notice would entitle the creditors to file a fresh petition and, therefore, the present petition should be regarded as maintainable.
Learned counsel referred to the decision in the case of Amar Nath Dogra v. Union of India, . In that case, it was held in connection with notice under section 80 of the Code of Civil Procedure, as follows :
"If the plaint which is being considered by the court has been preceded by a notice which satisfies the requirements of section 80, Civil Procedure Code, then the fact that before the plaint then under consideration, there had been another plaint which had been filed and withdrawn cannot on any principle, be held to have exhausted or extinguished the vitality of the notice issued."
Relying upon the ratio of this judgment, learned counsel submitted that the same principle would apply to the notice served under section 434 of the Companies Act, and, therefore, the petition is maintainable on the basis of that notice. I have already held that the claim founded on the basis of the notice that was issued continues to remain alive. In other words, the vitality of the notice is not exhausted. In the instant case, the situation is slightly different. The question is not whether the notice, if it cannot be availed of, precludes the creditors from basing their claim in a petition for winding up filed afresh on the contents of that notice for the purpose of filing the second petition but is whether by reason of rejection of earlier petition that very notice will enure for the purpose of founding the second petition. Learned counsel also drew my attention to the decision of the Supreme Court in Sheodan Singh v. Daryao Kunwar, . In that case, it was held that where the decision in the former suit is not on the merits it would not be res judicata in a subsequent suit. The decision does not help in resolving the question that arises in this matter and I have already held above that the rejection of the petition earlier would not come in the way of the creditors in pursuing their remedy of winding up after serving a fresh notice.
In this connection, I find considerable force in the submission of Mr. Kakodkar for the company that the perspectives are different relating to a notice under section 80 of the Civil Procedure Code, 1908, and the suit filed on its strength and a petition filed under section 434 of the Companies Act. He submitted that procedural irregularities in a suit which is a matter of right can be controlled but not in a petition and that since the discretion of the court in a winding up petition can be exercised either way, the remedy of a petition for winding up is a creature of statute and in the absence of the requirement of section 434 being complied with strictly cannot be entertained. Learned counsel further submitted that, if there happens to be any disconformity in the contents of the notice given and the grounds available when the second petition is filed that would not be washed away.
In my view having regard to the language of clause (a) of sub-section (1) of section 434 which contemplates that the statutory notice therein must relate to the amount "then due" and a demand having been made to pay all the amount "so due", the petition for winding up based upon such notice would be relatable to the demand contained in the said notice. The possibility, therefore, of either the company paying some of the dues mentioned in that notice or some additional claim having become available to the creditors to seek the remedy of winding up in the second petition would not be ruled out. In other words on the date on which the notice is served on the company it must be clearly told as to what amount was claimed from it as the amount due on the date of the notice. In the instant petition in paragraph 24 reference has been made to the petitioners' advocate's letter dated February 20, 1991. In clause (vii) thereof it is stated that the amount paid to petitioner No. 2 on two occasions remained without being included in the said notice by oversight and that the statement of claim was filed as correct statement on the earlier occasion. That goes to show that a situation can arise where there is likelihood of variations in the contents of the notice and actual position on the date of filing the petition. In a petition for winding up where the discretion of the court is invoked strict compliance with the requirements of section 434 of the Companies Act, will have to be insisted upon.
In the aforesaid view of the matter, I am inclined to hold that the present petition is incompetent and is not maintainable.
In the affidavit in support several other grounds have been raised pointing out alleged non-compliance with the various requirements of the Act in support of the contention that the petition is not maintainable. However, I do not think it necessary to deal with them in view of my aforesaid conclusion.
In the result the judge's summons is made absolute in terms of prayer (a) and petition is rejected with liberty to the petitioners therein to file a fresh winding up petition after serving a fresh notice on the company in accordance with section 434 of the Companies Act. The petitioners also will be at liberty to adopt the contents of the notice dated January 23, 1991. Exhibit "B" to the petition in the fresh notice to be served under section 434 of the Act with necessary variations, if any, required to be made in order to demand the sum "then due". No order as to costs.