Punjab-Haryana High Court
Vinod Krishan Khanna And Ors. vs Amritsar Swadeshi Textile Corporation ... on 12 October, 2006
Equivalent citations: [2006]134COMPCAS828(P&H), (2007)145PLR391, [2007]78SCL136(PUNJ&HAR)
Author: Hemant Gupta
Bench: Hemant Gupta
JUDGMENT Hemant Gupta, J.
1. This order shall dispose of C. A. No. 479 of 2006, filed by the respondent-company and C. A. No. 545 of 2006, filed by respondent No. 7 to seek an order to strike off the petition seeking winding up of the respondent-company.
2. The brief facts are that the present petition for winding up of respondent No. 1 company has been filed on April 5, 2006. On April 27, 2006, the notice of the petition was ordered to be issued to the respondents to show cause as to why the petition be not admitted. The alienation of the assets of the respondent-company, except in due course of the business of the company, during the pendency of the winding up petition, was ordered to be subject to the final order passed by this Court.
3. It may be noticed that earlier the petitioner has filed a civil suit (copy annexure P17), inter alia, claiming that the company as a legal entity is non est in the eyes of law. On April 27, 2006, learned Counsel for the petitioner made a statement that the civil suit shall be withdrawn within one week from the said date. The order dated April 27, 2006, reads as under:
Learned counsel for the petitioner states that he has the instructions to state that civil suit annexure P17 will be withdrawn within one week from today.
In view of the said statement, let notice of the petition be issued to the respondents for May 25, 2006, to show cause as to why the petition be not admitted.
Any alienation of any of the assets of the respondent-company, except in due course of the business of the company, during the pendency of the present petition, shall be subject to the final order passed by this Court.
4. After the said order was passed, the petitioner has caused advertisement to be published in the newspapers. The said advertisement, which appeared in the Tribune on June 2, 2006, reads as under:
Public Notice It is hereby brought to the notice of general public that vide order dated April 27, 2006, passed in Company Petition No. 61 of 2006, under Section 433(f) of the Companies Act for winding up the company on April 27, 2006, by hon'ble Mr. Justice Hemant Gupta, Judge, Punjab and Haryana High Court, Chandigarh. Re : Vinod Krishan Khanna and Ors. v. Amritsar Swadeshi Textile Corporation P. Ltd. and others, it has been ordered that 'any alienation of any of the assets of the respondent-company except in due course of the business of the company, during the pendency of the present petition, shall be subject to the final order passed by this Court'. Any person disregarding this notice shall do so at his own risk and responsibility.
Dated : May 31, 2006 Vinod Krishan Khanna 121, Race Course Road, Vimal Krishan Khanna Amritsar.
5. It is the case of the applicants in the aforesaid application that the said advertisement is without any direction of this Court required under Rule 96 of the Companies (Court) Rules, 1959 (hereinafter referred to as "the Rules") and that the conduct of the petitioners by advertising the winding up proceedings is abuse of process of the court and that this Court should take every effort to discourage such flagrant and serious breach. It is also pointed out that the company is a premier organization of woollen industry and it generates revenue of crores of rupees by way of foreign exchange, income-tax, sales tax, custom duty, service tax in addition to excise duty and the act of the petitioners by advertising the winding up proceedings at the pre-winding up stage clearly spells out the mala fide intention to create unimaginable harassment for the company ; damage the reputation and status of the company; hamper the business of the company; unduly pressurise the company to accede to their illegitimate demands ; create panic among the suppliers, customers, creditors, depositors and bankers and create confusion and restlessness among the employees of the company. Thus, it is alleged that the advertisement of the winding up proceedings has resulted in an irreparable loss and a serious injury to the company and has damaged its reputation and status.
6. In reply to the said application, it has been stated by the petitioner that the public notices were issued as the company was in the process of alienating some of the assets of the company during the pendency of the company petition. As per the said public notice, the petitioners have only brought to the notice of the general public not to purchase any of the assets of the company since there was interim injunction granted by this Court. The public notice was not a notice as contemplated under the Act, and that the advertisement carried out was only in regard to the order passed by the court being brought to the notice of the general public.
7. Learned Counsel for the applicants has vehemently argued that the notice published cannot be said to be a simpliciter notice for information or knowledge to the general public as the petitioners have not published the complete order of the court but only gave truncated version of the same and also have added few words as well. The said notice was misleading as the words not used in the order, have been made part of the notice and that on account of such advertisement, the applicants have suffered huge losses as many orders have been cancelled. Reliance is also placed upon a judgment of the Gujarat High Court Satellite Television Asian Region Ltd. v. Kunvar Ajay Designer Saree P. Ltd. [2004] 118 Comp Cas 609 and few other judgments of the Chancery Division. Reference is also made to the judgment of the hon'ble Supreme Court in National Conduits P. Ltd. v. S. S. Arora , to contend that such advertisement, prior to admission of the petition would be a cause of harassment and even of blackmail to the company. Once the petition is advertised, the business of the company is bound to suffer serious loss and injury.
8. On the other hand, learned Counsel for the petitioners has submitted that better care should have been exercised in publicizing the advertisement but such notice was issued in bona fide manner for information of the general public in respect of the restraint order passed by this Court. An affidavit has been filed today in court, wherein, the petitioners have tendered apology for publishing the name of the court and for not reproducing the entire order. The same is taken on record.
9. There is no dispute with regard to the proposition laid down by the hon'ble Supreme Court in National Conduits P. Ltd.'s case [1967] 37 Comp Cas 786 ; AIR 1968 SC 279, wherein it has been held that on account of the advertisement of a petition, the business of the company is bound to suffer serious loss and injury. In that case, the Division Bench of the High Court has held that once the petition is admitted the court is bound forthwith to advertise the factum of admission. It was found that in answer to notice to show-cause as to why the petition for winding up be not admitted, the company may show or contend that the filing of the petition amounts to an abuse of process of the court. If the petition is admitted, the company may move the court with a prayer that the petition be not advertised. It was further held that if the petition is not presented in good faith and for legitimate purpose of obtaining winding up order but for other purposes, then the court may restrain the advertisement of petition and stay further proceedings upon it. The question whether the public notice issued to bring the factum of ad interim injunction order passed by this Court to the information of the general public was not the issue raised or decided by the hon'ble Supreme Court in the aforesaid case.
10. In Satellite Television Asian Region Ltd.'s case [2004] 118 Comp Cas 609 the court issued notice of the petition for winding up of the company. However, before the date fixed for returning a notice, an advertisement was published in the newspaper in respect of the filing of the winding up petition. The company filed an application with a prayer to dismiss the winding up petition in the absence of the process of the court and for publicizing a premature advertisement of winding up in various newspapers without the directions thereof by the company court. That was not a case where there was any interim order passed and the notice was not published in the newspapers to inform the public about the interim order. The other judgments referred to by learned Counsel for the applicant-respondents, though deal with the factum of publication of advertisement in respect of winding up of the respondent-company, but none of the cases referred to, deals with the situation of an interim order being brought to the notice of the general public.
11. Therefore, I am of the opinion that mere publication of a notice to inform the general public about the interim order having been passed by this Court, cannot be said to be abuse of process of law, which may entail the dismissal of the petition for winding up itself.
12. In view of the apology tendered, I deem it appropriate to dismiss the present applications with liberty to the respondents to claim damages, if any, on account of termination of the contracts resultant to the public notice issued by the petitioners before an appropriate court. But, the petitioners have published the truncated version of the order particularly without disclosing the fact that the court has issued pre-admission show-cause notice, I impose a costs of Rs. 10,000 upon the petitioners. Such costs be deposited with the District Legal Services Authority, Amritsar, within two weeks from today.
13. Dismissed with aforesaid observations.
14. Main petition be listed for hearing on November 2, 2006.