Jharkhand High Court
Date Cables Ltd. And State Bank Of India vs Dcm Shriram Consolidated Ltd. And Ors. on 14 June, 2002
Equivalent citations: 2003 AIR - JHAR. H. C. R. 373, (2002) 2 JLJR 553 (2002) 2 JCR 470 (JHA), (2002) 2 JCR 470 (JHA)
Author: M.Y. Eqbal
Bench: M.Y. Eqbal, H.S. Prasad
JUDGMENT M.Y. Eqbal, J.
1. These two appeals arose out of the common order dated 10.9.1996 passed in a Company Petition No. 5 of 1995 (R) whereby learned Single Judge allowed the Company Petition and directed for winding up of the appellant Company M/s. Date Cables Limited. Since common question of law and facts are involved in these two appeals, the same are disposed of by this common order.
2. Respondent DCM Shriram Consolidated having its registered office at New Delhi filed a petition under Sections 433(e)(f), 434 and 439 of the Companies Act. 1956 against the appellant M/s. Date Cables Limited for winding up of the appellant Company M/s. Date Cables Ltd. on the ground inter alia for non-payment of dues and also on the ground that the company became insolvent and it has become indebted to various creditors. In the said Company Petition, appellant State Bank of India was made proforma respondent. The case of the petitioner respondent DCM Shriram Consolidated Ltd. (in short DCM) was that the appellant M/s. Date Cables Ltd. was established for manufacture of all types of PVC. XLPE and rubber insulated cables. The said company was said to be indebted to the petitioner for a sum of Rs. 18,89,548/-. The said Date Cables placed order on the petitioner's Company for supply of various items of PVC in 1993. The terms of the payment offered were through letter of credit of Rs. 13 lacs through its bank. It was alleged that although components were supplied but payment was delayed and the period of letter of credit was expired. Petitioner sent its representative several times but payment was not made and the bank of the respondent Company asked the petitioner to deal the matter directly with the Company. The petitioner therefore believed and there was reason to believe that the appellant Company became insolvent and heavily indebted and there was no scope of getting payment consequently Company Petition was filed.
3. Learned Single Judge after hearing counsel appearing for the two companies allowed the application and passed an order for winding up of the appellant Company namely, M/s. Date Cables Limited.
4. Mr. Kameshwar Prasad, learned senior counsel for the appellant State Bank of India in LPA No. 282/97(R) assailed the impugned order of the learned Single Judge as being illegal and wholly without jurisdiction. Learned counsel firstly submitted that all the secured creditors of a company must be heard before passing winding up order of that company. Learned counsel submitted that the appellant State Bank of India was made party respondent in the Company petition because of the fact that the bank was one of the biggest creditors of the respondent Date Cables Limited as all the bills of M/s. Date Gables Ltd. being routed -through bank under letter of credit. Learned counsel then submitted that M/s. Date Cables Limited became habitual defaulter of the bank and accordingly appellant-Bank instituted Mortgage Title Suit No. 65/95 against M/s. Date Cables Limited and decree was passed in 1995 in favour of the Bank for a sum of Rs. 7,57,57,697.68 paise and after passing of the said preliminary mortgage decree the appellant Bank applied for preparation of a final decree which is pending before the Court. Learned counsel further submitted that although the Company Petitioner namely, DCM Shriram Consolidated Ltd. was aware that the appellant Bank is one of the major creditor of the Date Cables Ltd. and accordingly it had arrayed the appellant Bank has party respondent. Despite the above fact the winding up order was passed without giving any notice or opportunity of hearing to the appellant-Bank. We find much force in the submission of Mr. Kameshwar Prasad, learned Senior Counsel appearing for the appellant-Bank.
5. Admittedly, in the Company Petition the appellant Bank was impleaded as proforma respondent. In the Company Petition notice was issued only to the respondent-M/s. Date Cables Ltd. and not to the appellant-Bank. From perusal of the record of the Company case and the impugned order of winding up, it further appears that on being noticed respondent-Date Cables Ltd. appeared and prayed for time to file its counter-affidavit which was allowed and at the instance of the court both the Companies namely. DCM Shriram Consolidated Ltd. and Date Cables Ltd. were asked for settlement. Thereafter, it appears that since no settlement could be arrived at between the two companies, the learned Judge passed an order dated 21.5.1996 to the effect that if the dues are not cleared by 30.7.1996 the order for winding up will be passed. On 30.7.1996 both the parties made a joint prayer to adjourn the case for two weeks and on 20.8.1996 it seems that Mr. M.M. Banerjee learned Advocate appearing for the M/s. Date Cables Ltd. withdrew from the case by stating that he has not received any instruction from his client. Learned Judge fixed the case for passing final order on the winding up petition and on 10.9.1996 the impugned order of winding up of the Company was passed, admittedly and evidently, it is therefore clear that before passing the impugned order of winding up of the Company, the respondent-appellant namely, State Bank of India although arrayed as party respondent was neither given any notice nor opportunity of hearing before the impugned order was passed.
6. As noticed above, Company Petition for winding up of the Company was filed on the sole ground that the said Company was unable to pay its debt as contemplated under Section 436(e) of the Companies Act. It was also admitted in the Company Petition that all bills in respect of supply of articles were routed through the appellant Bank and letter of credit was issued by the Bank on the basis of which payment was agreed to be made. Petitioner Company also not disputed the fact that the appellant bank was also creditor of the Company against which winding up application was filed.
7. Section 643 of the Companies Act confers power to the Supreme Court to make rules in consultation with the High Courts in all the matters relating to winding up of the Companies which, by this Act, are to be prescribed and also make rules consistent with the Code of Civil Procedure as to the mode of proceeding to be had for winding up with the Company in the High Courts and in Courts subordinate thereto. In exercise of that power the Supreme Court framed rules called Companies (Court) Rules. 1959, Rule 6 provides practice and procedure of the Court having jurisdiction under the Act and the provisions of the Code of Civil Procedure so far as applicable shall apply to all proceedings under the Act. Rule 19 provides that the summons of the Company Petition shall be served upon every person against whom an order is sought and such other person as the Judge may direct. Rule 24 of the said Rules provides for advertisement of the Company Petition in the daily newspaper. For better appreciation Rules 25 and 26 are worth to be quoted herein below.
"25. Contents of advertisement.--Except as otherwise provided in these rules, such advertisement shall be in Form No. 5 and shall state the date on which the petition was presented, the name and address of the petitioner and his advocate, the nature of the petition and the date fixed for hearing. It shall, unless otherwise ordered, further state that any person who intends either to oppose or support the petition at the hearing should send notice of his intention to the petitioner or his advocate so as to reach him not later than two days previous to the day fixed for the hearing, and in the case of a petition for winding up, not later than five days previous to the day fixed for the hearing of the petition.
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 alongwith the notice of the petition."
8. It is therefore, clear that the purpose of service of notice to the public at large including creditors is that if they intend to oppose or support the winding up petition, they could participate in the hearing before the Court. In the instant case, as noticed above, learned Judge has not followed the procedure provided under the Companies Act or Companies (Court) Rules, 1959. Admittedly, appellant State Bank of India was also one of the secured creditor and was although party in the Company Petition was not even noticed or given opportunity of hearing before the impugned order of winding up of the Company was passed. We are, therefore, of the considered view that the impugned order of winding up of the Company cannot be sustained in law on the sole ground.
9. For the reasons aforesaid, these appeals are allowed and the impugned order is set aside. The matter is remanded back to the learned Single Judge for hearing the Company Petition afresh and for passing appropriate order in accordance with law.
H.S. Prasad, J.
10. I agree.