Patna High Court - Orders
Bihar State Handloom And Handicraft ... vs .......... on 16 May, 2017
Author: Shivaji Pandey
Bench: Shivaji Pandey
IN THE HIGH COURT OF JUDICATURE AT PATNA
Company Appeal (SJ) No.1 of 2010
======================================================
Dularchand Mukhiya
.... .... Appellant/s
Versus
Ranjeet Kumar Mishra & Anr.
.... .... Respondent/s
======================================================
With
Company Petition No.10 of 2011
======================================================
Dularchand Mukhiya S/O Late Chalitar Mukhiya Vill.- Nawadega, P.S.-
Biraul, P.O.- Balha, Distt.- Darbhanga
.... .... Petitioner/s
Versus
1. Chinnamastika Estate (P) Ltd. Manas Marg, North S.K. Puri,
Krishnapuri, Patna- 800001
2. Ranjeet Kumar Mishra S/O Sri Khur Khur Mishra R/O 305, Karpura
Pratibha Palace, Gandhi Path, Nehru Nagar, P.S.- Patliputra, Patna
.... .... Respondent/s
======================================================
With
Company Petition No.11 of 2016
======================================================
1. M/s ISGEC Heavy Engineering Ltd., a company incorporated under the
Companies Act, 1913 having its registered office at Radaur Road, Yamuna
Nagar, Haryana and Corporate office at A - 4, Sector - 24 NOIDA (U.P.)
through its Constituted Attorney & Associate Vice President - Legal, Mr.
Kapil Kumar Singh S/o Late D.V. Singh, C/o at A - 4, Sector - 24, NOIDA
(U.P.).
.... .... Petitioner
Versus
1. M/s HPCL BIO FUELS LTD., a Public Limited Company incorporated
under the Companies Act, 1956 having its registered office at House No.
271, Road No. 3E, New Patliputra Colony, Town, District Patna - 800013.
.... .... Respondent
======================================================
With
Company Petition No.9 of 2016
======================================================
Bihar State Handloom and Handicraft Corporation Ltd.
.... .... Petitioner/s
Versus
..........
.... .... Respondent/s
======================================================
Appearance :
Patna High Court COMP. APP.(SJ) No.1 of 2010 (29) dt.16-05-2017
2/31
(In COMP. APP. (SJ) No.1 of 2010)
For the Appellant/s : Mr. R.A. Singh
For the Respondent/s : Mr.
(In COM PET No.10 of 2011)
For the Petitioner/s : Mr. Ram Akwal Singh
For the Respondent/s : Mr.
(In COM PET No.11 of 2016)
For the Petitioner/s : Mr. Alok Kumar Agrawal
For the Respondent/s : Mr.
(In COM PET No.9 of 2016)
For the Petitioner/s : Mr. Dr. Anand Kumar
For the Respondent/s : Mr. Umesh Pd. Singh, Sr. Adv. (Amicus Curiae)
======================================================
CORAM: HONOURABLE MR. JUSTICE SHIVAJI PANDEY
ORAL ORDER
29 16-05-20171. The Ministry of Corporate Affairs, Government of India, has issued a Notification dated 7th December, 2016, thereby framed the Rule under Sub-sections 1 and 2 of Section 434 of the Companies Act, 2013 read with Sub-section 1 of Section 239 of the Insolvency and Bankruptcy Code, 2016, which has been intended that certain class of cases would be transferred to the National Company Law Tribunal (for short "N.C.L.T.") constituted under Section 408 of the Companies Act, 2013. Under this Rule, different natures and classes of company cases shall stand transferred to the Benches of the N.C.L.T. exercising respective jurisdiction.
2. Rule-3 deals with the transfer of pending Patna High Court COMP. APP.(SJ) No.1 of 2010 (29) dt.16-05-2017 3/31 proceedings relating to cases other than the winding up, such as, proceedings related to arbitration, compromise, arrangement and reconstruction except those which are reserved for order for allowing or otherwise of such proceeding. Rule-5 provides transfer of pending proceedings of the winding up with respect to inability to pay debts, which provides that all petitions relating to winding up under clause (e) of Section 433 of the Act on the ground of inability to pay its debts pending before the High Court, and where the petition has not been served upon the respondent as required under Rule-26 of the Companies (Court) Rules, 1959 shall stand transferred to the Bench of the Tribunal established under Sub-section (4) of Section 419 of the Act. Similarly, Rule- 6 also deals with the transfer of winding up cases with respect to clauses (a) and (f) of Section 433 of the Companies Act, 1959 to the Tribunal.
3. After the Notification, the Office has made a scrutiny of the class of the cases and number of cases would be treated to have been transferred to the Tribunal and accordingly, the Office has prepared the list of 14 cases, which were placed in the daily cause list, invited objection, if any, to be filed within 7 days. In pursuance thereof, the Office has Patna High Court COMP. APP.(SJ) No.1 of 2010 (29) dt.16-05-2017 4/31 received objection with respect to four cases i.e. (i) Company Appeal No. 1 of 2010 (at hearing stage), (ii) Company Petition No.10 of 2011 (at hearing stage), (iii) Company Petition No.9 of 2016 (at admission stage) and (iv) Company Petition No.11 of 2016 (at admission stage). The matters, where no objection was raised, were placed before the Hon‟ble Acting Chief Justice; direction has been obtained to transfer the records of aforesaid cases to the N.C.L.T., Kolkatta and with respect to four cases where objections were raised has been placed in the judicial side to pass appropriate order.
4. Before dealing with the question, which class/ nature of cases would be transferred to the Tribunal, it will be relevant to consider the Old Companies Act, 1956 as well as New Companies Act, 2013 including amendments which have been made in the New Companies Act. It will also to be seen what is the meaning, area of operation, aspect and effect of notice under Section 26 of the Companies (Court) Rules, 1959 with respect to transferring of pending winding up petitions under Clause (a), (e) and (f) of Section 433 of the Companies Act, 1956 as in both the Rules, where it has been mentioned, those cases in which, petitions have been served on respondent Patna High Court COMP. APP.(SJ) No.1 of 2010 (29) dt.16-05-2017 5/31 as required under Rule-26.
5. Before enactment of Companies Act, 2013 except reconstruction of the Sick Industrial Companies entire regime of corporate governance was administered under the Companies Act, 1956 including the winding up cases. After repealing old Companies Act, 1956, the new Companies Act, 2013 has been enacted and the new Act received the assent of the President on 29th August, 2013. The main aims and objects of the Companies Act, 2013 is to consolidate and amend the law relating to the Companies Act operating in this country. Before the enactment 2013 Act, the Corporate Law Administration was to deal with several subjects, primarily five important aspects were to be dealt with, namely, (i) rectification of register of members, (ii) scheme of compromise and arrangements, (iii) reconstruction of sick industrial companies, (iv) oppression and mismanagement and (v) winding up, was provided under different statutes and operating through different statutory bodies. The rectification, schemes, oppression, mismanagement and winding up matters were under the management of the Companies Act, the subject of revival or reconstruction of sick companies was under the Patna High Court COMP. APP.(SJ) No.1 of 2010 (29) dt.16-05-2017 6/31 purview by Sick Industries Companies Act, 1985. The subject of rectification, oppression and mismanagement were under the adjudicatory administration of Company Law Board whereas, the schemes for compromise, arrangement and winding up were under the jurisdiction of the High Court and subject of reconstruction of sick industries was dealt with by the B.I.F.R. To consolidate the entire Corporate Law Administration, it was brought under the umbrella of single adjudicatory body as well as the appellate body, namely the National Company Law Tribunal (N.C.L.T.) and National Company Appellate Tribunal (N.C.L.A.T.) constituted under Sections 408 and 410 of the Companies Act, 2013. Section 1(3) of Companies Act, 2013 provides Section 1 of 2013 Act would come into force at once but for the enforcement of rest section the Central Government may, by notification in the Official Gazette from time to time, appoint different dates for enforcement of different provisions of this Act and any reference in any provision of the Act shall be construed as a reference to coming into force of that provision. The entire Act has not been brought into force at once. The Central Government by a separate notifications has brought into force different provisions of 2013 Act in piecemeal still some provisions of Companies Act, 2013 has Patna High Court COMP. APP.(SJ) No.1 of 2010 (29) dt.16-05-2017 7/31 not been enforced.
6. Sections 408 and 410 of 2013 of 2013 Act confers the power upon the Central Government to constitute the N.C.L.T. and N.C.L.A.T. to exercise and discharge the powers and functions as are, or may be, conferred on them by the Act. In exercise of these powers, the Central Government through notification issued by the Ministry of Corporate Affairs on 1st June, 2016 constituted the N.C.L.T. and N.C.L.E.T. on 1st June, 2016.
7. On the same day i.e. on 1st June, 2016, the Central Government, in exercise of powers conferred by clause (a) of sub-section (1) of Section 434 of the Companies Act, 2013 appointed 1st June, 2016 as the date on which all matters or proceedings or cases pending before the Board of the Company Law Administration i.e. the Company Law Board shall stand transferred to the N.C.L.T. to dispose of such matters in accordance with the Companies Act, 2013 or the Companies Act, 1956, as the case may be.
8. By another Notification of the same date, the Central Government appointed 1st June, 2016 as the date on Patna High Court COMP. APP.(SJ) No.1 of 2010 (29) dt.16-05-2017 8/31 which various provisions of 2013 Act listed out in the notification shall come into force. In the meantime, the Parliament has enacted the Insolvency and Bankruptcy Code, 2016, which received assent of the President on 28th May, 2016. The Insolvency and Bankruptcy Code, 2016 seeks to consolidate or amend the laws relating to reorganization and insolvency resolution of the corporate body. The Insolvency and Bankruptcy Code, 2016 confer the jurisdiction to N.C.L.T. as an adjudicatory body for resolution of the insolvency, liquidation and bankruptcy of Corporate bodies. In that connection, relevant Sections are Sections 7, 8 and 9 of the Insolvency and Bankruptcy Code, 2016, which inter alia provides for initiation of corporate insolvency resolution process by Financial and operational creditors.
9. By Notification dated 7th December, 2016, the Central Government enforced the other provisions of the Companies Act, 2013 including the provisions relating to winding up with effect from 15th December, 2016. Whereas, on 7th December, 2016 the Central Government has framed the Rule in the name and style of „the Companies (Transfer and Pending Proceedings) Rules, 2016‟ which enumerates the Patna High Court COMP. APP.(SJ) No.1 of 2010 (29) dt.16-05-2017 9/31 transfer of various nature of proceedings pending before the High Court to the N.C.L.T. For the purposes of resolution of question raised in these cases, it is relevant to quote Rule-5(1) and Rule-6, which are as follows:-
"5(1). Transfer of pending proceedings of Winding up on the ground of inability of pay debts:- (1) All petitions relating to winding up under clause (e) of section 433 of the Act on the ground of inability to pay its debts pending before a High Court, and where the petition has not been served on the respondent as required under rule 26 of the Companies (Court) Rules, 1959 shall be transferred to the Bench of the Tribunal established under sub-section (4) of section 419 of the Act, exercising territorial jurisdiction and such petitions shall be treated as applications under sections 7, 8 or 9 of the code, as the case may be, and deal with in accordance with Part II of the Cod;
6. Transfer of pending proceedings of Winding up matter on the grounds other than inability to pay debts:- All petitions filed under clauses (a) and (f) of section 433 of the Companies Act, 1956 pending before a High Court and where the petition has not been served on the respondent as required under rule 26 of the Companies (Court) Rules, 1959 shall be transferred to the Bench of the Tribunal exercising territorial jurisdiction and such petitions shall be treated as petitions under the provisions of the Companies Act, 2013 (8 of 2013)"Patna High Court COMP. APP.(SJ) No.1 of 2010 (29) dt.16-05-2017 10/31
10. In the present case, the Transfer Rules postulates with respect to the cases relating to the proceeding of winding up with respect to clauses (e), (a) and (f) of Section 433 of the Companies Act, 1956.
11. For the purposes of these cases, Section 434 of the Companies Act, 2013 is also relevant. It will be useful to quote Section 434 of the companies Act, 2013, which reads as under:-
434. Transfer of certain pending proceedings:- (1) On such date as may be notified by the Central Government in this behalf,--
(a) all matters, proceedings or cases pending before the Board of Company Law Administration (herein in this section referred to as the Company Law Board) constituted under sub-section (1) of section 10E of the Companies Act, 1956 (1 of 1956), immediately before such date shall stand transferred to the Tribunal and the Tribunal shall dispose of such matters, proceedings or cases in accordance with the provisions of this Act;
(b) any person aggrieved by any decision or order of the Company Law Board made before such date may file an appeal to the High Court within sixty days from the date of communication Patna High Court COMP. APP.(SJ) No.1 of 2010 (29) dt.16-05-2017 11/31 of the decision or order of the Company Law Board to him on any question of law arising out of such order:
Provided that the High Court may if it is satisfied that the appellant was prevented by sufficient cause from filing an appeal within the said period, allow it to be filed within a further period not exceeding sixty days; and
(c) all proceedings under the Companies Act, 1956 (1 of 1956), including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies, pending immediately before such date before any District Court or High Court, shall stand transferred to the Tribunal and the Tribunal may proceed to deal with such proceedings from the stage before their transfer;
Provided that only such proceedings relating to the winding up of companies shall be transferred to the Tribunal that are at a stage as may be prescribed by the Central Government.
2. The Central Government may make rules consistent with the provisions of this Act to ensure timely transfer of all matters, proceedings or cases pending before the Company Law Board or the courts, to the Tribunal under this section."
12. Section 434 deals with transfer of proceeding pending before the Company Law Board, where sub-clause (b) Patna High Court COMP. APP.(SJ) No.1 of 2010 (29) dt.16-05-2017 12/31 of clause (1) of Section 434 provides that any person aggrieved by any decision or order of the Company Law Board made before such date may file an appeal to the High Court within 60 days from the date of communication of the order. Sub-clause
(c) of clause (1) of Section 434 is dealing with the transfer of cases relating to the arbitration, compromise, arrangements and reconstruction and winding up, pending immediately before the High Court, shall stand transferred to the Tribunal and the Tribunal will proceed with the matter from the stage before their transfer on such date as my be modified by the Central Government.
13. Section 434 does not deal with transfer of cases with respect to the appeal pending for admission or admitted against the order concerning to mismanagement and oppression pending before the High Court would also stand transferred to the National Company Law Appellate Tribunal. So, the cases with respect to the appeal is pending against the order of the Company Law Board with respect to the oppression and mismanagement would not stand transferred and the High Court would remain under the jurisdiction and power to adjudicate and decide such cases, but those cases in which the Patna High Court COMP. APP.(SJ) No.1 of 2010 (29) dt.16-05-2017 13/31 Company petition has been filed for liquidation on account of insolvency and non-payment of debt, in stipulation of Rule-5 and Rule 6, the cases where petition has not been served upon respondent as required under Rule 26 shall stand transferred and the same will be adjudicated under Sections 7, 8 and 9 of the Insolvency and Bankruptcy Code, 2016.
14. In the present case, the question would arise for consideration, the purpose, object and meaning of service of petition under Rule-26 of the Companies (Court) Rules, 1959 on the respondent. To appreciate and understand the scope, purpose and object of the Transfer Rules of the class and nature of cases would be transferred has to be understood in the background of ambit and scope of construction of provision requires purposive construction otherwise it will bring to absurd and destructive situation. To understand the nature of cases stood transferred, this Court will have to deal with different provisions of the Rules and the Form of the Company (Court) Rules, 1959.
15. It will be relevant to quote Rules, 26, 27, 28, 29, 95, 96, 99, Form Nos. 6 and 48 of the Companies (Court) Rule, 1995.
Patna High Court COMP. APP.(SJ) No.1 of 2010 (29) dt.16-05-201714/31
26. Service of petition - Every petition shall be served on the respondent, if any, named in the petition and on such other persons as the Act or these Rules may require or as the Judge or the Registrar may direct. Unless otherwise ordered, a copy of the petition shall be served along with the notice of the petition.
27. Notice of petition and time of service - Notice of every petition required to be served upon any person shall be in Form No. 6, and shall, unless otherwise ordered by Court or provided by these rules, be served not less than 14 days before the date of hearing.
28. Service on company - (1) Where a petition is presented against a company, it shall be accompanied by a notice of the petition in the prescribed Form together with a copy of the petition for service on the company and an envelope addressed to the company at its registered office or its principal place of business and sufficiently stamped for being sent by registered post for acknowledgment. The Registrar shall immediately on the admission of the petition send the notice together with the copy of the petition to the company by registered post.
(2) Every petition and, save as otherwise provided by these Rules or by an order of Court, every application, shall unless presented by the company, be served on the company at its registered office, or if there is no registered office, at its principal or last known principal place of business, by leaving a copy thereof with an officer or employee of the company, and in case no such person is available, in such manner, as Patna High Court COMP. APP.(SJ) No.1 of 2010 (29) dt.16-05-2017 15/31 the Judge or Registrar may direct, or, by sending a copy thereof by prepaid registered post addressed to the company at its registered office, or, if there is no registered office, at its principal or last known principal place of business, or to such person and at such address as the Judge Registrar may direct. Where the company is being wound-up the petition or application shall also be served on the liquidator, if any, appointed for the purpose of winding-up the affairs of the company.
29. Petitioner to effect service -Save as otherwise provided by these Rules and subject to any directions of the Judge or Registrar, the petitioner, applicant or any other person having the conduct of proceedings in Court, shall be responsible for the service of all notices, summons and other processes and for the advertisement and publication of notices, required to be effected by these rules or by order of Court.
95. Petition for winding-up - A petition for winding- up a company shall be in Form No.45, 46 or 47, as the case may be, with such variations as the circumstances may require, and shall be presented in duplicate. The Registrar shall note on the petition the date of its presentation.
96. Admission of petition and directions as to advertisement - 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 advertisements to be published and the persons, if any, upon whom copies Patna High Court COMP. APP.(SJ) No.1 of 2010 (29) dt.16-05-2017 16/31 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.
99. Advertisement of petition - Subject to any directions of the Court, the petition shall be advertised within the time and in the manner provided by rule 24 of these Rules. The advertisement shall be in Form No. 48.
FORM NO. 6 (See rule 27) [Heading as in Form No. 1] Company Petition No. .............. of 19 ....
Notice of petition To .................................................... Take notice that a petition under section.................of the Companies Act, 1956, for.........................presented by....................................... on the........ day of.............19..., was admitted on the ............................................. day of............19..., and that the said petition is fixed for hearing before the Company Judge on the.......................day of .........................................19.... If you desire to support or oppose the petition at the hearing, you should give me notice thereof in writing so as to reach me not later than ...........days before the date fixed for Patna High Court COMP. APP.(SJ) No.1 of 2010 (29) dt.16-05-2017 17/31 the hearing of the petition, and appear at the hearing in person or by your advocate. If you wish to oppose the petition, the grounds of opposition or a copy of your affidavit should be furnished with your notice. A copy of the petition will be furnished to you if you require it on payment of the prescribed charges for the same/is enclosed herewith (Name) Dated. .... (Sd) .........................
(Advocate for petitioner) Address:
[This notice should be served on or before the.............. ......... day of...................................19.........] FORM NO. 48 [See Rule 99] [Heading as in Form No.1] Company Petition No .............. of 19...............
..........................
‐Petitioner Advertisement of petition Notice is hereby given that a petition for the winding‐up of the above‐named company by the High Court at............. (or the District Court of...Patna High Court COMP. APP.(SJ) No.1 of 2010 (29) dt.16-05-2017 18/31
...............................) 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 Court, 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
16. Rule-26 to 29 falls in chapter Part-I:General. Rule-
26 postulates the service of petition. Rule-27 deals with the notice of petition and time of service, whereas Part III Patna High Court COMP. APP.(SJ) No.1 of 2010 (29) dt.16-05-2017 19/31 specifically dealing with winding up petition and its hearing.
Rule-26 does not provide the form and the manner in which the petition will be served. Rule-26 can be divided into two parts, first part provides every petition shall be served upon the respondent, which is mandatory in nature and second part prescribes the notice to such other persons as the Act or the Rules may require or as the Judge or the Registrar may direct, meaning thereby, in case, any person has been made as respondent, petition will be served. Another part of Rule provides that the notice would be served if the Act or Rules so provide or the Judge or Registrar may directs. Whereas, in Rule-27 the word has been used notice of petition shall be served upon any person in Form No.6, which makes it very clear that the notice is related to after admission of the case as in the Form it has been mentioned that "the case was admitted on the............day of .........19... and the said petition is fixed for hearing before the Company Judge" that itself indicates that the notice under Section 27 is post admission.
17. Rule-95 prescribes that the winding up proceeding will be presented in duplicate. Rule-96 stipulates that such petition be placed before the Judge in Chambers for admission Patna High Court COMP. APP.(SJ) No.1 of 2010 (29) dt.16-05-2017 20/31 of the petition and fixing a date for the hearing thereof and for directions as to advertisement to be published and the persons, if any, upon whom the copy of petition are to be served.
18. Rule-99 prescribes the petition shall be advertised in the manner provided under Rule-24 in Form No. 48. Form No.48 mentions in the following manner "Company 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." So, Rule-99 and the Form No.48 make it crystal clear that the notice is before admission stage. Rule-26, in view of this Court, is also related to the notice before the admission stage though Rule-26 does not speak about the admission, but the nature of formulation of these Rules have been arranged in such manner, giving purposive construction, as is different to the Rules 27 and 28 gives one and only Patna High Court COMP. APP.(SJ) No.1 of 2010 (29) dt.16-05-2017 21/31 inference of giving the notice prior to the admission.
19. The Hon‟ble Supreme Court in the case of National Conduits (P) Ltd vs. S. S. Arora, reported in A.I.R. 1968, S.C. 279, has held that when a petition is filed for winding up of a company, the High Court (i) may issue notice to the Company to show cause why the petition should not be admitted; (ii) may admit the petition and fix a date for hearing and issue a notice to the Company before giving directions about advertisement of the petition or (iii) may admit the petition, fix the date of hearing of the petition, and order that the petition be advertised and direct that the petition be served upon persons specified in the order. It has been further held that a petition for winding up cannot be placed for hearing before the Court unless the petition is advertised, which is clear from terms of Rule-24(2) of the Companies (Court) Rules, 1959, which prescribes as soon as the petition is admitted it must be advertised.
20. It will be relevant to quote paragraph No.4 of the said judgment, which reads as under:-
"4. Rule 96 of "The Companies (Court) Rules, 1959"
framed by this Court provides:
Patna High Court COMP. APP.(SJ) No.1 of 2010 (29) dt.16-05-201722/31
"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."
Rule 24 which relates to advertisement of petitions 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 news-paper in the regional language circulating in the State or the Union Territory concerned, as may be fixed by the Judge.
(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."
When a petition is filed before the High Court for winding up of .a company under the order of the Court, the High Court (i) may issue notice to the Company to show cause why the petition should not be admitted; (ii) may admit the petition and fix a date for hearing, and Patna High Court COMP. APP.(SJ) No.1 of 2010 (29) dt.16-05-2017 23/31 issue a notice to the Company before giving directions about advertisement of the petition; or (iii) may admit the petition, fix the date of hearing of the petition, and order that the petition be advertised and direct that the petition be served upon persons specified in the order. A petition for winding up cannot be placed for hearing before the Court, unless the petition is advertised that is clear from the terms of R. 24(2). But that is not to say that as soon as the petition is admitted, it must be advertised. In answer to a notice to show cause why a petition for winding up be not admitted, the Company may show cause and contend that the filing of the petition amounts to an abuse of the process of the Court. If the petition is admitted, it is still open to the Company to move the Court that in the interest of justice or to prevent abuse of the process of Court, the petition be not advertised. Such an application may be made where the Court has issued notice under the last clause of R. 96, and even when there is an unconditional admission of the petition for winding up. The power to entertain such an application of the Company is inherent in the Court, and R. 9 of the Companies (Court) Rules, 1959, which reads:-
"Nothing in these Rules shall be deemed to limit or otherwise affect the inherent powers of the Court to give such direction or pass such orders as may necessary for the ends of justice to prevent abuse of the process of the Court"
Iterates that power In In re. A. Company, (1894) 2 Ch 349 it was held that if the petition is not presented in good faith and for the legitimate purpose of obtaining a Patna High Court COMP. APP.(SJ) No.1 of 2010 (29) dt.16-05-2017 24/31 winding-up order, but for other purpose such as putting pressure on the Company, the Court will restrain the advertisement of the petition and stay all further proceedings upon it. We may state that the High Court of Punjab in Lord Krishna Sugar Mills Ltd. v. Smt. Abnash Kaur, A.I.R. 1961 Punjab 505 was right in observing that the Court in an appropriate case has the power to suspend advertisement of a petition for winding up, pending disposal of an application for revoking the order of admission of the petition, though we may hasten to state that we cannot agree with all the observations made in that judgment."
21. The Bombay High Court has also faced the same question in West Hills Realty Private Ltd. and Ors. vs. Neelkamal Realtors Tower Pvt. Ltd. (Company Petition No.331 of 2016) and has dealt with the issue and held that those petitions, even the petition pending for admission and notice has been served upon the respondent as required under Rule 26, shall continue to remain in the High Court and the petitions which are admitted even though notice has not been served as per Rule 26, shall not be transferred as N.C.L.T. otherwise putting the case under admission under Section 7, 8 or 9 of the Insolvency and Bankruptcy Code, 2016 will create anomalous position. Only those cases which are pending for admission and notice as provided under Rule-26 Patna High Court COMP. APP.(SJ) No.1 of 2010 (29) dt.16-05-2017 25/31 has not been served shall stand transferred.
22. It will be relevant to quote paragraph Nos. 9 to 11 of the said judgment, which read as under:-
9. Mr. Andhyarujina submitted that the mandate of Rule 26 is that a petition has to be served on the respondent and other persons only if the Act or Rules may require or if the Judge or Registrar may direct and that in default, every service of the petition must be accompanied by service of the notice of the petition. He then follows it up with his next submission that such notice of the petition is required to be in Form No. 6, which clearly provides for a notice post-
admission. He finally sums it up by submitting that every service of the petition under Rule 26 is, therefore, necessarily a post-admission service. There is a distinct fallacy in this argument. First of all, if a petition had to be served on the respondent as well as other persons only as and if the Act or the Rules may require or the Judge or the Registrar may direct, there was no need to make any separate provision for such service in Rule 26. The Act or the Rules or the order of the Judge or the Registrar, as the case may be, anyway would have provided for the same. A separate provision for such service would make little sense. Secondly, even lexicologically the structure of the sentence in Rule 26 providing for such service does not support the interpretation suggested by Mr. Andhyarujina. A correct reading of Rule 26 implies that the requirement of service of petition is provided for in Rule 26 itself. It contains two commands, Patna High Court COMP. APP.(SJ) No.1 of 2010 (29) dt.16-05-2017 26/31 namely, (i) every petition shall be served on the respondent, if such respondent be named in the petition, and (ii) every petition shall be served on such other person as the Act or the Rules may require or as the Judge or the Registrar may direct. In other words, if a respondent is named in the petition, the requirement of service of the petition on such respondent is the requirement of Rule 26 itself. One does not have to go to the other provisions of the Act or the Rules or the orders of the Judge or the Registrar for such requirement. There is one more circumstance provided in Rule 26 where service of the petition needs to be made, i.e. when a notice of the petition is to be served. The last sentence of Rule 26 provides that when a notice of the petition is to be served on the respondent or any other person then, unless otherwise ordered, a copy of the petition shall also be served. Rule 26 has no reference to the order of admission of the petition. Rules 27 and 28, on the other hand, make it clear that they together form the requirement of service of the notice of the petition on the respondent company after the petition is admitted and provide for the time and manner of such service. Rule 29, on the other hand, fixes the responsibility of any service under the Rules or directions of the court or the Registrar on the petitioner. The scheme of these four rules, thus, suggests that whereas service of the petition is mandatory on the respondent and, if the Act or the Rules provide or the Judge or the Registrar directs, on such other person/s, whereas notice of the petition on the respondent is obligatory only in the event of admission of the petition. So also, other Patna High Court COMP. APP.(SJ) No.1 of 2010 (29) dt.16-05-2017 27/31 persons are entitled to notice of the petition only if the Act or the Rules require or the Judge or the Registrar directs. In case of any service, whether service of the petition or of the notice of the petition, it is the petitioner who must execute it.
10. As a matter of fact, as held by our court in the case of Modern Dekor Painting Contracts (supra) as well as the earlier case of Extrusion Processes Pvt.
Ltd. v. Jivabhai Marghabhai Patel MANU/MH/0003/1966 :1966 Company Cases (Vol. XXXVI) 60, there is no right in a company to be issued a notice before a petition is admitted or the court fixes the date of hearing. The Companies (Court) Rules do not provide for any such notice, though it is permissible for the Judge or the Registrar to require such notice to be given to the company. In fact, as the Supreme Court in the case of National Conduits (P.) Ltd. v. S.S. Arora MANU/SC/0026/1967 : 1967 Company Cases (Vol.XXXVII) 786 has observed, when a petition is filed before a High Court for winding up of a company under the orders of the court, the High Court has three options. It may (i) issue notice to the company to show cause why the petition should not admitted; or
(ii) admit the petition, fix a date for hearing and issue a notice to the company before giving directions about advertisement of the petition; or (iii) may admit the petition, fix the date of hearing of the petition, order that the petition be advertised, and direct that the petition be served upon persons specified in the order. Whereas the requirements of Rules 27 and 28 of a Patna High Court COMP. APP.(SJ) No.1 of 2010 (29) dt.16-05-2017 28/31 post-admission notice of the petition to the company are absolute, the requirement of a notice at the stage of admission or before advertisement of the petition as provided in Rule 96, is a matter of discretion of the court. As held by the Allahabad High Court in the case of U.P. Twiga Fiberglass Ltd. v. Parekh Marketing P. Ltd. MANU/UP/0100/1983 : 1986 Company Cases (Vo.59) 886, Rule 26 is general in nature and does not control the requirement of Rule 96 to serve the "company". The notice to the company in Rule 96 is not required to be issued in any prescribed form. The company has only to be apprised of the fact that a petition for winding up has been filed. Such notice may be accompanied with a copy of the petition.
11. Mr. Andhyarujina and Mr. Madon submitted that the proviso to Rule 5 makes it clear that petitions to be transferred to NCLT must be at a pre-admission stage, since the proviso in terms requires the petitioner to submit all information required for admission of the petition under Section 7, 8 or 9 of the Code, as the case may be, within 60 days from the date of the transfer notification. Whilst it is true that the petitions that are to be transferred to NCLT must be at a pre- admission stage, the proviso does not imply that every petition at the pre-admission stage ought to be transferred to NCLT. All winding up petitions admitted by High Courts would have necessarily complied with the requirement of service under Rule 26, whereas petitions pending admission might or might not have complied with the requirement of such Patna High Court COMP. APP.(SJ) No.1 of 2010 (29) dt.16-05-2017 29/31 service. Those petitions, which are pending admission and which have been served on the respondent as required under Rule 26, shall continue to remain in the High Court pending their admission, whilst the petitions pending admission, which have not been served on the Respondent as required under Rule 26, shall be transferred to, and considered for admission under Section 7, 8 or 9 of the Code by, NCLT. That clearly appears to be the mandate of the transfer notification, particularly, Rule 5 thereof.
23. This Court is of the same view if the notice has been served in any manner either through the postal service or the notice of petition has been published under Rules 95, 96 in Form No.48 it will be treated that notice under Rule-26 has been served upon the respondent concerned, if different view is taken it will create anomalous position and destructive of its purpose and will not serve the purpose of transfer Rules framed by the Central Government.
24. The basic purpose and idea of framing of the Rule is that when the notice in any manner has been served on and before 15th December, 2016 those cases will be remained with the High Court.
25. Company Appeal No. 1 of 2010 is at hearing Patna High Court COMP. APP.(SJ) No.1 of 2010 (29) dt.16-05-2017 30/31 stage and notice has been effect will not be transferred, remained with the High Court. Company Petition No.10 of 2011 has been tagged with Company Appeal No. 1 of 2010 is also at hearing stage and notice has been issued to the respondent, but never affected, now the parties have appeared as it attached with the Company Appeal No. 01 of 2010, so it will not be transferred to the Tribunal, remained with the High Court. So far as the Company Petition No. 09 of 2016 is concerned, it is a fresh case and notice has not been issued, so it will be transferred to N.C.L.T. Kolkatta. The Company Petition No. 11 of 2016 where the notice has been affected on 09.012.2016 i.e. before 15.12.2016 will be remained with the High Court and the High court will deal with the aforesaid cases. This Court further holds that even those cases in which already the Hon‟ble Acting Chief Justice has granted approval for transfer will also be subject to satisfaction of conditions, as discussed hereinabove, though there is no objection for transfer from any party, but the notices having been served upon the respondent either through the postal machinery or through advertisement published in the newspaper, will remain with the High Court for adjudication.
Patna High Court COMP. APP.(SJ) No.1 of 2010 (29) dt.16-05-201731/31
26. Accordingly, the Office is directed to further hold scrutiny of records of cases, prepare fresh list of cases of transfer in terms of the present order.
27. This Court must appreciate Sri Umesh Prasad Singh, who assisted this Court as Amicus Curiae in deciding the issue raised in the present matters.
(Shivaji Pandey, J) pawan/-
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