Gujarat High Court
Girish Bhagwatprasad Huf vs Bhupendra Bhagwatprasad Patel & 3 on 6 November, 2015
Author: S.G.Shah
Bench: S.G.Shah
O/COMA/34/2013 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
COMPANY APPLICATION NO. 34 of 2013
In COMPANY PETITION NO. 264 of 2008
In COMPANY APPLICATION NO. 427 of 2008
With
COMPANY APPLICATION NO. 449 of 2011
In COMPANY PETITION NO. 264 of 2008
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE S.G.SHAH
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of
the judgment ?
4 Whether this case involves a substantial question of
law as to the interpretation of the Constitution of
India or any order made thereunder ?
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GIRISH BHAGWATPRASAD HUF....Applicant(s)
Versus
BHUPENDRA BHAGWATPRASAD PATEL & 3....Respondent(s)
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Appearance in Company Application no.34 of 2013
MR NAVIN G PAHWA, ADVOCATE with MR PRATIK Y JASANI, ADVOCATE
for the Applicant(s) No. 1
MR SN SOPARKAR, SENIOR ADVOCATE WITH MR AS VAKIL, ADVOCATE
for the Respondent(s) No. 1 - 1.2 , 2
Appearance in Company Application no.449 of 2011
MR DS VASAVADA, ADVOCATE for the Applicant(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE S.G.SHAH
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O/COMA/34/2013 CAV JUDGMENT
Date : 06/11/2015
CAV JUDGMENT
1. Heard senior counsel Mr.S.N.Soparkar with learned advocate Mr.A.S.Vakil for the petitioner in Company Petition no.264 of 2008 and thereby, opponent in Company Application no.34 of 2013, whereas learned advocate Mr.Navin Pahwa with learned advocate Mr.Pratik Jasani for the applicant in Company Application no.34 of 2013. Though other litigants are not of much concerned at present, their advocates have remained present throughout the hearing and supported the petitioner in main Company Petition no.264 of 2008. They are learned advocates Mr.Roshan Desai for the Official Liquidator being opponent in Company Petition, learned senior advocate Mr.S.I.Nanavati for the original land owners i.e. lessor of the land in question and learned advocate Mr.Sachin D.Vasavada for the Union of the employees. However, though learned advocate Mr.S.D.Vasavada has submitted that the Union of employees is supporting the proposed Scheme of revival, it is mainly because of the fact that several employees have died without getting their dues and original petitioners/proposers have offered some more amount towards interest than actual legal dues. It cannot be ignored that irrespective of such submission, such Union has already filed one Company Application no.449 of 2011 seeking/praying to join the Textile Labour Association as respondent in Company Petition no.264 of 2008.
2. The matter has to be taken up for immediate final hearing pursuant to the directions of the Hon'ble Supreme Court of India, which are referred herein after and therefore, after assigning the matter to this Page 2 of 82 HC-NIC Page 2 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT Court, by special administrative order dated 29.9.2015, the matter was listed for the first time on 1.10.2015, the parties are heard on different dates viz.6.10.2015, 7.10.2015, 9.10.2015, 12.10.2015, 13.10.2015, 14.10.2015, 19.10.2015, 20.10.2015 and 21.10.2015. Thereafter, the matter was listed for making the papers in order, since some of the papers are torn and the files, which were in four parts, were not in proper order and condition. Meanwhile, considering the piecemeal hearing and arguments, because of paucity of time, due to listing of regular admission and final hearing matters of regular business of Special Civil Application against orders of the trial Court, both the parties were requested to submit note of written arguments. Such notes of written arguments are also taken on record.
3. The applicant herein is Astik Girish Bhagwatprasad who wants to appear in Company Petition no.264 of 2008 wherein original petitioners are Bhupendra Bhagwatprasad and Riverfront Properties Pvt. Ltd., who have proposed the Scheme of revival, hence they are respondents in this application.
4. I have perused the notes of arguments and available record.
5. The controversy to be resolved at present, though rests on a narrow compass that whether prayer in Company Application no.34 of 2013 can be allowed at this stage or not, as both the parties have argued the matter at length, to realise the real dispute and to resolve the same, I have no option, but to narrate the relevant information in detail, even at the cost of making this order lengthy and bulky, though the Company Application is for a short issue that whether applicant in such application being Girish Bhagwatprasad HUF Page 3 of 82 HC-NIC Page 3 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT through its Karta and Manager - Astik Girishchandra can be permitted to take his objections on record of the Company Petition and though such objections are filed by the applicant for opposing the sanction of Scheme of compromise/revival of the Company in liquidation and to consider such objections before deciding the petition finally, applicant can be permitted to appear and submit his case or not. Even as on date, i.e. for last five years, such application is yet to be decided finally. With such Judges Summons for appropriate direction, an affidavit in support of it is filed with several annexures to prima facie prove the contents of such affidavit and it results into several controversies and rounds of litigation between different parties.
6. However, at present, before proceeding further, it would be appropriate to recollect the directions of Hon'ble the Supreme Court of India, which according to the original petitioner, is to decide the Company Petition expeditiously and thereby, the Court has to take-up this matter on day-to-day basis when it is specially assigned to this Court as aforesaid.
7. It has been agreed between the parties that initially the Court has to pass an order deciding Company Application no.34 of 2013 and by all means, either of the party may challenge such order before higher authority.
8. The first direction by the Hon'ble Supreme Court of India to expedite the Company Petition is found in its order dated 18.11.2009 in Special Leave Petition (Civil) no.29282 - 29284 of 2008, which reads as under:-
Page 4 of 82HC-NIC Page 4 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT "Stand over for three months.
In the meantime, we are directing the Company Judge to expeditiously hear and dispose of the pending Company Petition No.264 of 2008 filed by respondent No.4 herein (Shaan Zaveri) under Section 391 of the Companies Act. It is made clear that this Company Petition No.264 of 2008 is for revival of the Company. It is well settled that revival is on alternative to winding-up. This Court is of the view that an attempt should be made by the Company Court to see that the defunct Company can be revived. It is with this idea that this order is being passed today. "It is made clear that the Company Court will decide the revival application uninfluenced by any observations made in the pending impugned judgment of the Gujarat High Court keeping in mind the interest of the workmen."
Stand over for three months accordingly.
In S.L.P.(C) No....CC 18408/2009:
Delay condoned.
Issue notice.
Mr.Sanjay R. Hegde, Advocate, takes notice.
In S.L.P.(C) Nos.1866/2009, 29632/2008, 29952/2008, 12919/2009, 2583/2009:
I.A.Nos.2 & 4 for impleadment, I.A.No.1 for deletion of name of respondent No.5 and I.A.No.3 for correction of the name of Respondent No.10 are allowed in S.L.P.(C) No.1866/2009.
In the above Special Leave petitions, we are informed that some owners/original petitioners herein are in the process of moving the Company Court to frame appropriate Schemes under Section 391 of the Companies Act. Some of them are yet to move the Company Court. For those who are yet to move the Company Court, we are giving them two weeks' time to do so.
Since the workers' interest is being protected by the method, we are adjourning the entire group by a period of three months so that if some concrete arrangement is arrived at, then, we need not examine the merits of the pending Special Leave Petitions.
The Company Court will decide the applications uninfluenced by the observations made in the impugned judgment. The pendency of these S.L.Ps.will not preclude the Company Court from framing the Schemes."
9. Such order is passed in S.L.P., which was filed by Jabal Laskhari & Ors. being legal heirs of the original land owner and objecting to the Scheme as proposed. Bare perusal of such order makes it clear that when the Hon'ble Supreme Court of India has directed this High Court to dispose of such Company Petition, what Hon'ble Supreme Court of India has said is practically to the effect that -
"This Court is of the view that an attempt should be made by the Company Court to see that defunct Company can be revived. It is Page 5 of 82 HC-NIC Page 5 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT with this idea that this order is being passed today. It is made clear that the Company Court will decide the revival application uninfluenced by any observations made in the pending impugned judgment of the Gujarat High Court keeping in mind the interest of the workmen." Thereby, the direction of the Hon'ble Supreme Court of India to proceed further in revival of the Company is mainly for and in the interest of the workmen. Again in last paragraph of such order, the Hon'ble Supreme Court of India has reiterated that the workers' interest is being protected and therefore, entire group of petitions has been adjourned for three months, so as to see that some concrete arrangement is arrived at, but the most material and important observation in such order is to the effect that the Company Court has to decide the applications uninfluenced by any observations made in the impugned judgment. Therefore, when this Company Application is filed in the year 2013 i.e. after such order dated 18.11.2009, wherein also Court has practically permitted the owners and some original petitioners to move the Company Court for framing appropriate Scheme under Section 391 of Companies Act, practically, the record will show that why Company Petition could not be heard till date. It will not be out of place to mention the situation emerging from the record that as many as five Courts have endorsed in this matter that it should not be listed before such Court.
10.Above information is necessary to be recollected here pursuant to the order dated 1.9.2015 by Hon'ble Supreme Court of India whereby it has been observed and directed as under:-
"We have been apprised by Mr. Apurva Vakil, learned counsel appearing for the respondent No.4, who is the petitioner before the High Court in Company Petition No.264 of 2008, that though there has been a request by this Court for proceeding with the matter as per the Page 6 of 82 HC-NIC Page 6 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT suggestions given, the same has not yet been done. Regard being had to the earlier orders passed, we reiterate the request and expect the High Court to dispose of the petition by end of November,2015. We would also request the High Court not to grant adjournment to either of the parties and the parties are directed not to seek any adjournment before the High Court. Let this matter be listed in the second week of January, 2016.
The Registrar (Judicial) is directed to send a copy of this order to the Registrar General of the High Court of Gujarat, so that he can place it before the concernedCompany Judge."
11.Therefore, it seems that the Hon'ble Supreme Court of India has considered that this High Court is not taking up the matter even after its direction. In any case, now, after assigning this matter by a special administrative order, this Court has taken up the matter almost on day-to-day basis and hence, I hope and believe that now the applicant would not have a grievance so far as hearing of the matter is concerned.
12.However, on merits of the case, one more order of the Hon'ble Supreme Court of India in Special Leave Petition (Civil) Nos.29282 to 29284 of 2008 dated 16.10.2015 i.e. during actual hearing of this matter before this Court is also material to be recollected here wherein the Hon'ble Supreme Court of India has observed and directed as under:-
"The proceedings going on before the learned Company Judge as regards the Scheme, shall continue but the ultimate result shall be subject to the final result of this special leave petition. It is submitted that the petitioner has filed Co.Appl.No.34 of 2013 before the Company Judge. The learned Company Judge shall consider the same in accordance with law. It is further submitted that status quo as regards the landed property shall be maintained till the final decision in this special leave petition."
13.Therefore, it becomes clear that this Court has to proceed further, both in Company Application No.34 of 2013 and in Company Petition No.264 of 2008, but its result would be subject to the outcome of the S.L.P. before the Hon'ble Supreme Court of India. However, pursuant to previous direction dated 1.9.2015, this Court Page 7 of 82 HC-NIC Page 7 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT has to decide this application by the end of November, 2015.
14.However, for deciding the main petition, first these Company Application no.34 of 2013 needs to be dealt with in accordance with law and thereby, when applicant of this application has filed a Judges Summons for appropriate directions, it is to be taken care of. Learned advocate for both the parties have agreed to decide such application and Judges Summons first, since, Court has to first decide this Application, before deciding the main Company Petition, so as to enable the original petitioners to oppose the objections by filing affidavit-in-reply if Company Application is allowed.
15.Thereby, the present application is now taken up for hearing and practically, all the parties have argued on limited issues so far as present application is concerned, wherein on 6.2.2013, the applicant has filed Judges Summons for appropriate directions and prayed for following orders:-
"A) This Hon'ble Court may be pleased to take up on record the objections filed by the applicant for opposing the sanction of Scheme of compromise/revival of the company in liquidation and be pleased to consider the same before deciding the petition finally, in the interest of justice and equity;
B) That this Hon'ble Court be pleased to grant such order and further reliefs may be deemed fit and proper by this Hon'ble Court, in the interest of justice;
16. In such Judges Summons, with an endorsement that affidavit of A Girishchandra, the applicant herein will be made in support of this summons and thereby, an affidavit dated 5.2.2013 by Astik is Page 8 of 82 HC-NIC Page 8 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT attached and annexed with such Judges Summons with a heading that "affidavit in support of Judges Summons for appropriate direction". Therefore, the record categorically shows that a Judges Summons has been filed in main Company Petition no.264 of 2008 with aforesaid prayers and it was registered as Company Application no.34 of 2013, which is received by the learned advocate for the opponents on 6.2.2013, when it was objected by an endorsement that the hearing has almost concluded and thereby, respondents are strongly objecting such application. Therefore, though the respondents have all the rights to oppose this application, prima facie, it cannot be said that the application is only of two pages and that too only with two prayers, which are reproduced herein above, as repeatedly submitted by learned senior counsel Mr.Soparkar for the respondents, contending that when there is no reason assigned whatsoever in support of such prayers, so also when there is not a word mentioned in the Judges Summons for not filing it within time, such application cannot be allowed, since it is devoid of any substance. Therefore, atleast, affidavit in support of the Judges Summons dated 6.2.2013 certainly needs to be referred to as a pleading by the applicant in support of such Judges Summons. Perusal of such affidavit makes it clear that the applicant herein has categorically stated on oath that he is one of the original shareholders of the company in liquidation and that upon having learnt that a Scheme for compromise/revival of the company in liquidation has been framed by one Riverfront Properties Pvt. Ltd. and others, who are respondents herein, the applicant has gone through the papers of the said Scheme and learnt that there have been various manipulations and fraud committed by the concerned company framing the said Scheme of Page 9 of 82 HC-NIC Page 9 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT compromise. It is further submitted that applicant has prepared a detailed objection in the form of an affidavit, objecting the said Scheme of compromise by putting on record all the relevant and necessary documents and the objections so raised are annexed to such application, which is in the form of an affidavit. It is also submitted that such objections are very much relevant for the consideration of the petition pertaining to the revival of the Company in liquidation and that if such objections are not considered by the Court, the applicant and his family members will be severely prejudiced. It is further submitted that applicant has also filed O.J.M.C.A. no.187 of 2012 praying certain reliefs, which application is ordered to be tagged with the proceedings of the present petition and that it would also be in the interest of justice that the objections of the applicant are taken on record and considered before deciding both the proceedings finally. The reference to "both the proceedings" seems to be with reference to O.J.M.C.A. no.187 of 2012 and Company Petition no.264 of 2008. With such contentions, it is prayed that the Hon'ble Court may be pleased to pass suitable orders in terms of reliefs prayed in the Judges Summons in the interest of justice.
17. As stated in the affidavit itself, there is one annexure attached to such affidavit, which are objections, are in the form of affidavit against sanctioning of Scheme of compromise/arrangement of Prasad Mills Ltd. (in liquidation) and its creditors, workmen and shareholders. Therefore, technically, it is part of the main affidavit and thereby, supporting document to Judges Summons. Learned senior counsel Mr.Soparkar has repeatedly and vehemently argued and submitted that the applicant should not be allowed to refer such Page 10 of 82 HC-NIC Page 10 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT objections or to argue in support of such objections unless such objections are ordered to be taken on record and even during the course of oral submission, many a times, it is objected that disclosing of certain facts amounts to disclosing the factual details of objections, contending that it is not permissible and that Court should not allow the applicant to refer to the factual details of his objections since they are not yet taken on record. Though such issue needs to be answered that whether such objections can be considered or not, prima facie, it becomes clear and certain that,at present, we are not deciding the Company Petition based upon such objections, but we are deciding that whether such objections should be allowed to be taken on record so as to call upon the original original petitioners in Company Petition no.264 of 2008 that they are now supposed to answer that even if such objections are put forward, the Scheme of compromise or revival of the Company in liquidation is to be allowed. I fail to realize that in such circumstances, unless the Court examines and verifies that whether there is a substance in the objection or not, how it can be decided that such objections are permitted to be taken on record or not. Even, if factual details of objections raised by the applicant cannot be relied upon to decide this Company Application, points of objections are certainly material to consider even in this Company Application to ascertain that whether there is any substance in such objections or not, so as to decide that whether applicant shall be granted a leave to appear and to object the Scheme on any such point of objections. If it is repeatedly submitted that the Court should not even look in to the subject of objections and should not permit the applicant to even refer the ground or subject of objection then though Company Application may not be allowed solely on Page 11 of 82 HC-NIC Page 11 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT such presumption, certainly presumption would be against the original petitioners that they are afraid that if Court looks into the grounds or subjects of objections, which is fruad in this case, then Court may allow the Company Application. When main ground and subject of objections is commission of fraud, it is clear that if fraud is not committed by the original petitioners, though they have legal right to oppose and resist the Company Application, if at all they are keen to expedite the Company Petition, which could have been decided during the time consumed in deciding this Company Application. They could have prayed for costs against applicant for frivolous objections. But, it seems that when Hon'ble Supreme Court of India has also observed that outcome of this matter shall be result of the S.L.P. by the applicant must be given a reasonable opportunity to represent their case where they alleged fraud.
18. It seems that to avoid such a situation, a technical view has been taken by the opponent by referring Rule 34 of the Companies (Court) Rules, 1959, emphasizing that these Rules are statutory Rules framed by the Hon'ble Supreme Court of India in exercise of the powers conferred u/s.643 of the Companies Act and after consulting all the High Courts and therefore, it must be strictly followed without any deviation. Irrespective of any such submission, which are dealt with herein in detail, one principle of procedural law is to be kept in mind that, ultimately, the procedural law is only to sub-serve the basic jurisprudence and principle of law and it would never ever override the basic jurisprudence. It is also well-settled that the principle of natural justice certainly entails that in every judicial procedure, the essence of judicial system is that in any litigation, both sides of the dispute must be Page 12 of 82 HC-NIC Page 12 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT heard before decision. (AIR 1983 SC 75). Rule 34 of the Companies (Court) Rules, 1959 reads as under:-
"34. Notice to be given by persons intending to appear at the hearing of petition.- Every person who intends to appear at the hearing of a petition, whether to support or oppose the petition, shall serve on the petitioner or his advocate, notice of his intention at the address given in the advertisement. The notice shall contain the address of such person, and be signed by him or his advocate, and save as otherwise provided by these Rules shall be served(or if sent by post, shall be posted in such time as to reach the addressee) not later than two days previous to the day of bearing, and in the case of a petition for winding-up, not later than five days previous to the day of hearing. Such notice shall be in Form No. 9, with such variations as the circumstances may require, and where such person intends to oppose the petition, the grounds of his opposition , or a copy of his affidavit, if any, shall be furnished along with the notice. Any person who has failed to comply with this Rule shall not,except with the leave of the Judge, be allowed to appear at the hearing of the petition. "
19. The next being Rule 35 deals with the aspect of list of persons, intending to appear, to be filed, which provides that the petitioner in main petition either for winding up or in compromise or revival in a Company Petition or his advocate shall prepare a list of the names and the addresses of the persons, who have given notice of their intention to appear at the hearing of the petition and such list shall be in Form no.10 and shall be filed in Court before the hearing of the petition. However, for compliance of the provisions of Rule 35, there must be compliance of Rule 34, which provides for issuance of notice in Form no.9 by the proposed objector or supporter.
20. Wheres, Rule 36 deals with the procedure at the hearing of the petition and provides that - at the hearing of the petition, the Judge may either dispose of the petition finally, or give such directions as may be deemed necessary for the filing of counter affidavits and reply affidavits, if any, and for service of notice on any person who, in his opinion, has been omitted to be served or has not been properly served with the notice of the petition and may adjourn the petition to enable the parties to comply with his directions.
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21.Therefore, when both the sides have considered this Judges Summons and affidavit as one under Rule 34, both the sides have emphasized their submission by interpreting Rule 34.
22. Bare perusal of Rule 34 makes it clear that every person who intends to appear at the hearing of the petition, either to support or even to oppose the petition, shall serve on the applicant or his advocate, notice of his intention containing his own address, signed either by him or by his advocate and unless otherwise provided by this Rule, such notice shall be served not later than two days prior to the day of hearing and in the case of petition for winding-up, not later than 5 days prior to the day of hearing. Such notice shall be in Form 9 with such variations as the circumstances may require and where such person intends to oppose such petition, the grounds of his opposition or copy of his affidavit, if any, shall be furnished along with the notice with a clause that any person, who has failed to comply with this Rule, shall not except with the leave of the Judge, be allowed to appear at the hearing of the petition. Therefore, though there is specific procedure prescribed in such Rule i.e. a condition to serve a notice as stated in first part of the Rule two days prior to the day of hearing, last sentence of the Rule practically nullifies the strictness of the procedural mandate which purports that if anybody fails to comply with such Rule, then, he shall not be allowed to appear at the hearing of the petition, except with leave of the Judge. Thereby, if the Judge i.e. Court grants leave to a person to appear in the hearing of the petition, who has failed to comply with the procedural part of the Rule, regarding advance service of notice, such person can appear at the hearing of Page 14 of 82 HC-NIC Page 14 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT the petition. Thereby, practically, bare reading of the Rule makes it clear that the provision is purely discretionary in nature except with a condition that if someone fails to serve the notice in the period prescribed under the Rule, then, he has to seek leave of the Judge i.e. Court to appear and for granting such leave, there is no restriction on the Court in whatsoever manner. Thereby, if we read only first part of Rule 34, then, practically, it provides an absolute right upon every person to appear either to support or to oppose the main Company Petition by serving a notice as prescribed and where such person intends to oppose such petition, he can file the grounds of his opposition or a copy of his affidavit.
23.Therefore, the submission by learned senior counsel Mr.Soparkar that grounds of opposition should not be referred to at all at the stage of deciding such application under Rule 34 is misconceived, since the Rule itself provides that grounds of objections is to be filed with the intention to appear at the hearing of the petition and the perfect reading of Rule 34 makes it clear that if such intention is disclosed in prescribed period of hearing,then, practically, Court has to take care of such objections since objector can file such grounds of objections on record with disclosure of intention for appearance. Whereas, in absence of disclosure of such intention prior to two days of day of hearing, the objector has to simply seek leave of the Court and there is nothing in the Rule, which restricts the Court's powers to grant such leave in any manner whatsoever.
24.Unfortunately, though Rule 34 is so clear and probably that may be the reason that there are no reported judgments on such Rule 34 at present, it has been repeatedly and vehemently argued before this Page 15 of 82 HC-NIC Page 15 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT Court that if notice of intention is not served two days prior to the day of hearing, then, such objector should not be allowed to oppose the petition. Though there are some more issues and disputes between both the parties regarding consideration of actual day of hearing and period of limitation, the discussion herein above makes it clear that, practically, when any person fails to serve a notice, as prescribed in the first part of the Rule, then, he is entitled to seek leave of the Judge to allow him to appear at the hearing of the petition and if leave is granted by the Judge, then, he can appear at the hearing of the petition, either in support or to oppose the petition and in that case, the procedural Rule for hearing would apply wherein once leave is granted, it is the duty of the original petitioner or his advocate to provide such objector a copy of the petition and give such directions as may be necessary for filing of counter affidavit and reply affidavit and may adjourn the petition to enable the parties to comply with such directions. Thereby, even the day or date of hearing is also uncertain, once somebody either issues notice intending to appear or seek leave of the Judge or Court for such appearance.
25.Therefore, now, when Rule 34 provides that grounds of objections is to be filed with the notice, it becomes part of the record and hence, objection by learned senior counsel Mr.Soparkar not to allow the applicant to refer the ground of objections, cannot sustain. At the most, when main petition is yet to be heard on its own merits, the Court must pre-decide that because of such objections whether the Company Petition can be dismissed or not. But, even in extending an opportunity to appear and to resist the petition, the affidavit in support of Judges Summons with grounds Page 16 of 82 HC-NIC Page 16 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT of opposition can certainly be looked into and without expressing its credibility, atleast those grounds must be referred to realize that whether their existence in ground, which permits the applicant or whether there is any genuine ground by the applicant to appear and oppose the main petition.
26. Unfortunately, learned senior advocate Mr.Soparkar has repeatedly relied upon the first part of Rule 34 contending that such application is beyond the period of limitation, though specific period of limitation in this regard is nowhere specified in any statute, contending that date of hearing is fixed by the first order dated 14.10.2008 in Company Petition no.264 of 2008 as 17.11.2008 and therefore, if such notice of intention to appear is not served on or before 15.11.2008, then, it is beyond the period of limitation and thereby, barred by limitation and therefore, in absence of a prayer to condone the delay, such application cannot sustain and hence, to be dismissed summarily. There is no substance in such contention as discussed herein above, even if such application is not filed in time, the objector can pray for a leave of the Court to appear and he can appear, if such leave is granted and therefore, when the applicant has categorically stated in Judges Summons that this Hon'ble Court may be pleased to take up on record the objections filed by the applicant in opposing the sanction of Scheme of compromise, revival of the Company in liquidation and be pleased to consider the same before deciding the petition finally, is practically, nothing, but a prayer seeking leave to appear in the main petition with objections, which are filed with such Judges Summons. Therefore, to decide whether such leave is to be granted or not, one has to certainly look into such objections Page 17 of 82 HC-NIC Page 17 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT to consider whether they are genuine or not and thereby, whether leave should be granted or not. Therefore, such objections are certainly required to be looked into.
27.In view of above discussion, before proceeding further in the manner in which learned advocate has dragged this Court in their own manner, it would be appropriate to atleast list the reasons for objections, at the most without entering into its correctness or otherwise. However, in fact, such objections are otherwise also subject matter in connected applications, which has been challenged upto the Hon'ble the Supreme Court of India and therefore, in S.L.P. (Civil) no.29632 of 2008 with connected S.L.P.s, Hon'ble the Supreme Court of India has while directing this Court to proceed further in this matter without further delay, observed and directed that status-quo as regards the landed property shall be maintained till the final decision of the S.L.P. and that the ultimate result of the Scheme shall be subject to the final result of such S.L.P. Thereby, even if Scheme is approved, it would be subject to result of the S.L.P., wherein present applicant has agitated one of the objection, which is raised herein regarding illegal transfer of their shares in favour of original petitioner no.2 i.e. Riverfront Properties Pvt.Ltd. The list of objection with the affidavit in support of Judges Summons discloses atleast following objections as against the approval of Scheme as proposed.
A) The applicant has preferred Misc.Civil Application no.87 of 2012 challenging the deed of assignment dated 25.8.2007 in favour of petitioner no.2 and with a prayer to declare it as void since the transfer of shares and thereby, deed of assignment is void ab initio. The issue involved in such Misc.Civil Application is directly connected with adjudication of the Company Petition and Page 18 of 82 HC-NIC Page 18 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT therefore, until and unless such application is finally heard and decided, the present proceeding seeking revival of Company, cannot be proceeded.
Practically, this objection has been taken care of when Hon'ble the Supreme Court of India has observed that decision in this petition is subject to final result of the S.L.P., wherein this issue is under consideration before the Hon'ble Supreme Court of India. Thereby, practically, such objection has already been taken care of and therefore, now, there is no reason to say that such objection is not to be looked into.
B) That proposed Scheme is nothing, but an eye-wash and that original petitioners are trying to grab the entire chunk of land by defrauding the legitimate right of the objectors, who are also sufferers and that original original petitioners are not interested in revival of the Company, as there is no plant and machinery or workers and there is no sufficient cause for reviving the Company. If the land is sold through normal process of auction, then, sale proceeds can be utilized for discharging the dues of the Company by paying all legitimate dues to everyone and it can also be helpful to the contributors of the Company and that would be in the interest of all since all concerned will be repaid the actual amount without any compromise.
C) That IDBI Bank has unauthorizedly used the blank transfer forms for transferring the shares belonging to the objectors and handed over the share certificates to the petitioner no.2 in violation of agreement and law, though IDBI Bank was holding the shares as pledgee and not as owners of the shares.
D) The petitioner no.2 has misrepresented before this Court in Company Application no.414 of 2007 when Official Liquidator has opposed such request. At present, such issue is pending before Hon'ble the Supreme Court of India.
E) IDBI Bank and petitioner no.2 joined their hands and committed fraud on the Court and therefore, they have not joined the present applicants as party in such Company Application no.414 of 2007.
F) Though petitioner no.2 was never a shareholder and though shares, cannot be transferred when Company is under liquidation, petition is filed jointly by original petitioners no.1 and 2 for revival of the Page 19 of 82 HC-NIC Page 19 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT Company without disclosing that how it would serve purpose of revival.
G) Though we may not enter into factual details and veracity of such objections at this stage, when original original petitioners are objecting to accept such objections on record, the fact remains that there are serious objections and allegations against the original original petitioners and atleast so far as one of the objection is concerned, as on date, even the Hon'ble Supreme Court of India has protected the right of the present applicants by confirming that result of this main petition shall ultimately be subject to the final result of such S.L.P.
28.With above background, if we recollect here the order dated 18.11.2009 by Hon'ble the Supreme Court of India, directing to expedite the Company Petition, instead of reading only those lines, which confirms that Company Petition is to be decided at the earliest, one must read the reason for such direction, more particularly, when it is observed by Hon'ble Supreme Court of India in such order dated 18.11.2009 that the Company Court will decide the revival application uninfluenced by any observations made in the pending impugned judgment of the High Court, keeping in mind the interest of the workmen. Therefore, two things are material, (1) the orders of this High Court in connected applications in this group, which are impugned before the Hon'ble Supreme Court of India, are not to be looked into by this Court while considering the petition for revival, (2) as interest of the workmen is to be kept in mind. Therefore, now, we have to consider the rival submissions before deciding such application.
29.Learned advocate Mr.Navin Pahwa for the applicant had read out Sections 41(2), 428, 433, 444, 446, 447, 449, 451, 454, 456, 466, 467, 469, 475, 481 and also Sections 528, 529, 529(A) and 530 of Page 20 of 82 HC-NIC Page 20 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT Chapter 5 of the Companies Act, 1956 to apprise the Scheme of the Companies Act. He is also relying upon the provisions of Section 391(1)(b). With reference to Section 41(2), it is emphasized that it would be necessary to consider that who is member of the Company, so also the provisions of winding-up u/s.433, more particularly Sub-Section (e) & (f) and Sub-Section 2 of Section 441 for considering the date of winding-up. He has also emphasized on preferential payment u/ss.529(A) and 530.
30.With reference to Section 391, it is submitted that though there are different views by different High Courts, the Section specifically provides that the compromise prayed for by the original petitioner is beyond the scope of such provision, since the compromise is permissible either between the company and its creditors or any class of them and either between a Company and its members or any class of them; whereas, so far as Company in liquidation is concerned, it may be by Liquidator only. Therefore, it is submitted that sponsor of the revival Scheme or compromise is neither a member nor a creditor, though he is claiming to be a member, since that issue is under challenge and in consideration before the Hon'ble the Supreme Court in pending S.L.P., wherein Hon'ble the Supreme Court has observed that ultimately decision in this application and petition would be subject to result of that S.L.P.. Therefore, unless it is clear that sponsor of the Scheme is entitled to propose such Scheme of so-called compromise or revival, Scheme is not maintainable at all. It is further submitted that in any case, all such compromise or arrangement shall always be subject to the result of all pending litigation since the proviso makes it clear that the Court shall not sanction the compromise unless the Page 21 of 82 HC-NIC Page 21 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT proposer of the Scheme submits to the Court all relevant information, which includes pendency of any investigation proceedings in relation to the Company u/ss.235 and 251 and the like. Therefore, when Company is in liquidation, it cannot be said that the Court shall sanction the compromise, irrespective of any factual details.
31.Reference was also made to Section 393, contending that all necessary information as to compromise or arrangement for creditors and members is necessary to disclose and when original original petitioners have failed to disclose status of the present applicant, such Scheme cannot be sanctioned without extending any opportunity to the present applicant to represent his case. Thereby, by and large, applicant has challenged the validity of the Scheme also and so far as the factual details of the Scheme is concerned, learned advocate Mr.Pahwa has pointed out that it is not for the benefit of the workmen and that on the contrary, workmen would not get any benefit out of such Scheme, but it is only with a view to get the valuable properties valuing Crores of rupees under the pretext of "compromise" and "revival of the Company", and thereby, original petitioners are avoiding to dispose of the properties of the Company by public auction, which would fetch more than Rs.400 Crorers, as against the so-called amount spent or invested by the original petitioner, which is approximately only Rs.7.5 Crores. Thus, petitioners would get the property worth more than Rs.400 Crores at the price of Rs.7.5 Crores i.e. 54 times less than actual price i.e. at the price of less than 2%. To clarify such factual details, it has been disclosed that the Company is wound-up on 23.8.1998 and Official Liquidator Page 22 of 82 HC-NIC Page 22 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT was appointed, who has sold out and disposed of all movable properties, including the plant and machinery of the Company for making payment on behalf of the Company as per law and, now, only 36971 sq.mtrs. open space at the prime location of the city i.e. adjoining to Ellisbridge and Victoria Garden on the bank of river Sabarmati is left. When the Government has proposed a Scheme to develop the riverfront, the original petitioner - a builder Company has tried to grab the land under the pretext of such revival Scheme by spending less than Rs.10 Crores, when the market rate of the land is Rs.1,25,000/- per sq.mtr. in the area. Therefore, if the Scheme is perused, it clearly transpires that it is a Scheme for arrangement with the creditors and not for revival of the Company. It is not a Scheme for revival of the Company, whereby the workmen would be benefited in any manner whatsoever. At this stage, it should be recollected here that when the Hon'ble Supreme Court of India has by its order dated 18.11.2009 observed that the Company Judge has to expeditiously hear and dispose of the Company Petition, it is made clear that revival of the Company is to be decided keeping in mind the interest of the workmen and therefore, it is contended that practically except offering their legitimate dues and that too after such delay, Scheme does not propose anything in the interest of the workmen, even though a temptation was given to them, that they will be paid something more than their actual dues for such delayed payment. To substantiate his argument, learned advocate Mr.Pahwa has referred the Scheme in question, which categorically discloses in clear terms that even petitioner no.1 is also only ex-Director of the Company, when the Company is in liquidation, and thereby, Scheme is not proposed by the Liquidator Page 23 of 82 HC-NIC Page 23 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT and that sponsor Company is engaged in the business of civil construction and real estate development and therefore, the Scheme is not for revival of the Company for the benefit of the workmen. Mr.Pahwa has also read out and referred Sub-Clause 8 of Clause 7 of the Scheme, wherein there is reference of Clause 7 (vii) and therefore, both such Clauses are relevant at present, which read as under:-
" 7(vii): This Scheme is conditional upon and shall not become operative until all the following conditions are fulfilled, viz.
(a) sanction by the High Court of Gujarat under Section 391 of the Act, and necessary Order or Orders being passed and the same being filed with the Registrar of Companies, Gujarat;
(b) Liquidator of the Company hands over peaceful possession of all the properties and assets of the Company; whether moveable or immoveable, which are so far not disposed off, alienated or transferred by his office under the directives or order/s of the High Court of Gujarat, in the same order and condition in which he had taken possession of from the Company.
7(viii): In the event of any of the aforesaid sanctions and approvals, referred to in the preceding Clause 7(vii) above, not being obtained and/'or the Scheme not being sanctioned by the High Court and/or the order or orders not being passed as aforesaid before 31.03.2009 or within such further period or periods as may be considered by a Sponsor without any limitations, the Scheme of Arrangement shall stand revoked, cancelled and be of no effect."
32.Bare perusal of the above clause of the Scheme makes it clear that if such Scheme is not sanctioned by the High Court on or before 31.3.2009, the Scheme or Arrangement shall stand revoked, cancelled and be of no effect unless sponsor so declares that he wants to continue with such Scheme beyond such specific time and therefore, in absence of such disclosure, the present Scheme is not in force, and thereby, unless sponsor discloses the Scheme to be continued and publishes notices thereof, practically, the notices issued in such Company Petition pursuant to order dated 14.10.2008, would not bind any party so far as limitation to challenge such Scheme is concerned.
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33.Even if some of such submissions are touching the validity of the main Scheme, which is yet to be decided while determining the issues in main Company Petition no.264 of 2008, the fact remains that while considering the issue regarding granting of leave to such applicant, who brought such information on record, all such submissions are relevant and material and hence, they are recorded herein. When original petitioners of the Scheme are taking a hyper- technical stand to avoid consideration of objections by the applicant on its merits only on the ground of delay, such submissions are certainly relevant when technically, the Scheme has come to an end, unless it is so disclosed by the sponsor that he intends to continue the Scheme beyond 31.3.2009.
34.So far as applicant and application is concerned, learned advocate Mr.Pahwa has submitted that applicant was holding 1859 shares of the Company in liquidation with his mother as an original promoter shareholder of the Company being their predecessor in title and therefore, they are members of the Company and when their shares are wrongfully acquired by the petitioner no.2 sponsor Company, they have a reason to file such application for taking on record their objections while considering the Scheme proposed in Company Petition. It is further submitted that for the purpose, they have filed such Company Application no.34 of 2013 seeking indulgence of the Court. So far as limitation is concerned, it is contended that the petition was though admitted in the year 2008 and notice was issued for hearing of such petition in the year 2008 itself, practically, the hearing of the petition did not commence until this Court has started active hearing of the matter in last Page 25 of 82 HC-NIC Page 25 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT month only and it is evident from the order dated 1.9.2015 by the Hon'ble Supreme Court of India in S.L.P. (Civil) nos.29282 - 29284 of 2008. Therefore, their application in the year 2013 is in substantial compliance of Rule 34 of the Companies (Court) Rules in the form of Judges Summons dated 5.2.2013 and affidavit dated 6/8.2.2013, so also notice dated 23.9.2015 in Form no.9, which is much before commencement of the hearing of the petition by this Court.
35.In support of his submission, learned advocate Mr.Pahwa has submitted that when fraud is pleaded in such application, with a challenge of locus of the original sponsor, the Court should give them an opportunity to submit their objections during the hearing of main Company Petition.
36.So far as provisions of Rule 34 of the Companies (Court) Rules, 1959 are concerned, it is submitted that rules of procedure have to be construed as only directory in nature, and thereby, only substantial compliance is sufficient, but, if at all the Court finds that there is some defect in compliance of such rule, the Court would generally give opportunity to cure the defect. It is further contended that Rule 34 employs the phrase "day of hearing" and not "date of hearing", and thereby, the purpose of rule is to enable the Court to consider the objections raised/support received prior to the "day of hearing" and that it is interpreted in context of provision of Civil Procedure Code. To substantiate such argument, he is relying upon few decisions and emphasizes that "day of hearing" means the day on which the Court applies its mind to the case.
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37.Though as discussed herein above, practically, I am of the clear view that irrespective of the compliance of provisions of Rule 34, so far as time schedule is concerned, as suggested in such Rule, the later part of the Rule in the form of last line specifically confirms that appearance is restricted only if Court refuses to grant the leave to appear at the hearing of the petition, and thereby, practically, if the Court grants leave to appear at the hearing of the petition, then, the procedure of time schedule explained in Rule 34 would not be material. Though a conclusive statement is to be made at the end of the discussion, let me make it clear that the overall scrutiny of the record and appreciation of submissions by both the sides certainly confirms that leave needs to be granted to the present applicant to appear at the hearing of the petition, and thereby, though ultimately this application is to be allowed, I have to discuss rival submissions so also reference to decisions to avoid a submission herein after that this Court is not doing anything as it seems to be done on 1.9.2015 before the Hon'ble Supreme Court of India, when the Hon'ble Supreme Court of India has to record that though there has been a request before the concerned Court for proceeding the matter as per the suggestions given, the same has not yet been done.
38.I have reason to say so in such words because the discussion herein after would show that the matter was not heard for several reasons, including pendency of certain other interim applications before main petition is taken up for hearing.
39. Irrespective of all other arguments against the applicant by the original petitioners, which is purely and mainly based upon the Page 27 of 82 HC-NIC Page 27 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT procedural lacuna and delay in filing such objection, it cannot be ignored that ultimately all the rules of the procedure are the handmaid of justice. The language employed by the draftsman of procedural law may be liberal or stringent, but the fact remains that the object of prescribing procedure is to advance the cause of justice. In an adversarial system, no party should ordinarily be denied the opportunity of participating in the process of justice dispensation. Unless compelled by express and specific language of the statute, the provisions of CPC or any other procedural enactment ought not to be construed in a manner which would leave the court helpless to meet extraordinary situations in the ends of justice (AIR 2008 SC (Supp) 767 between Sambhaji and Ors. Vs. Gangabai & Ors.). The procedural law is always subservient to and is in aid to justice. Any interpretation which eludes or frustrates the recipient of justice is not to be followed (AIR 1998 SC 1827(1) between Shreenath and Anr. Vs. Rajesh and Ors.). Laws of procedure are meant to regulate effectively, assist and aid the object of doing substantial and real justice and not to foreclose even an adjudication on merits of substantial rights of citizen under personal,property and other laws. Procedure has always been viewed as the handmaid of justice and not meant to hamper the cause of justice or sanctify miscarriage of justice ((2003)3 SCC 272 - Sardar Amarjit Singh Kalra (Dead) Vs.Smt.Pramod Gupta (Dead)), the said judgment is recently reconfirmed in Civil Appeal no.6567 of 2015 (Arising out of SLP (C) no.22468 of 2013 between Banwari Lal (D) by Lrs. & Anr. Vs. Balbir Singh.
40.The decisions relied upon by Mr.Pahwa on issues which are discussed herein above are as under:-
Page 28 of 82HC-NIC Page 28 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT A) In Associated Journals Ltd. Vs.Mysore Paper Mills Ltd. reported in (2006)6 SCC 197, while dealing with the practice and procedure to be followed, more particularly in company matters the Hon'ble Supreme Court of India has observed that what needs to be seen and considered in the petition under the Companies Act is (1) whether there is substantial compliance with the requirements and (2) even if there is some breach or omission, whether it can be fatal to the petition, concluding that if there is slight defect or irregularity in filing of affidavit, party concerned should be given an opportunity to rectify the same, the Court has considered the provisions of the Companies (Court) Rules, 1959 and Civil Procedure Code, 1908. Therefore, Mr.Pahwa has submitted even if there is some defect, it would be appropriate to allow the applicant to rectify the defect, but rejection of application on technical grounds would not be proper.
B) In Vidyavati Gupta and Ors. Vs.Bhakti Hari Nayak & Ors.
reported in (2006)2 SCC 777, while dealing with the provisions of Calcutta High Court (Original Side) Rules and provisions of the CPC, the Hon'ble Supreme Court of India has held that the original side rules cannot be interpreted so as to limit the scope of provisions of CPC, reconfirming that the rules of procedure are made to further the cause of justice and not to prove as a hindrance thereto.
C) In Welding Rods Pvt. Ltd. Vs. Indo Borax and Chemicals Ltd.
reported in 2002(108) Company Cases 747, the Division Bench of this High Court has, while dealing with the provisions of the Companies (Court) Rules, held that Court can extend opportunity to rectify the defects though the Court must permit the rectification Page 29 of 82 HC-NIC Page 29 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT of the defects just as a matter of course; but would take into account all the relevant circumstances including the conduct of the parties. Much is argued against the conduct of the applicant herein for not filing such objections at the earliest, but it is also equally relevant to note that if at all fraud is committed in any proceedings or even if there is reason to believe that someone is trying to take disadvantage of judicial process and procedural law, then the Court has ample powers to allow a litigant to cure the defects. D) In State Bank of India Vs. UCO Bank and Anr. reported in 2015(1) GLH 589, wherein the Single Judge of this High Court was dealing with the provisions of the Companies (Court) Rules regarding an application by third party to be joined in a Company Petition, but without following the procedure, the Single Judge has held that not taking out separate notice declaring its intention and referring application after one year of the admission of the petition, would not justify the creditor in insisting to join him as a party, when there is provision under the Rules that such prescribed procedure must be followed and granting such application would circumvent Rule 34. Thereby, application for joining as a party was dismissed. This judgment was relied upon by the other side also. However, as discussed herein above, irrespective of failure to disclose the intention to appear when Court is entitled to grant leave to the litigant and as I have already discussed herein above that facts and circumstances of this case, certainly reflect a cause and reason to grant such leave. Therefore, this judgment is not much relevant for confirm something in favour of the original petitioners. However, reference to paragraph 13 of such reported case is material, which reads as under;
"13. The Court cannot resist to mention that in view of the Scheme Page 30 of 82 HC-NIC Page 30 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT of the Act and the Rules the Court, during the hearing, asked the learned Advocate for the applicant would want to follow the procedure under Rule 34 r.w. Form 9 and take out appropriate notice/summons instead of pursuing the applicant seeking leave to join (as party respondent) in 3rd party's petition, however, learned Counsel informed the Court that the applicant wants to continue to pursue this application and submitted that appropriate order on this application may be passed. Hence, Court has heard learned Counsel at length and has proceeded to make this order."
Bare reading of the above paragraph makes it clear that practically the learned Single Judge has followed the legal proposition, which is discussed herein above with reference to other citations that if some procedure is to be followed and if there is a defect or shortcomings in following such procedure, the Courts can allow the party to cure such defect, but only because of such defect in compliance of the procedure, the party may not be either non-suited or denied to represent his case. The reference of concluding paragraph 21.1 is also material, which reads as under:-
"21.1. Accordingly, in view of the aforesaid observations, present application is not acceptedand the same is disallowed, however, with clarification that it would be open to the applicant to take out appropriate separate Notice declaring its intention, and follow the procedure prescribed by the Rules and seeking appropriate orders.
Thereby, though there is a discussion and reference of Rule 34 of the Company (Court) Rules, 1959, practically, the decision is pertaining to joining of third party as a litigant in pendingcompany petition for winding-up and therefore, when there is a provision under Rule 34 of the Companies (Court) Rules, the Court has decided that pursuant to such provision, which permits the third party to appear in Company Petition, either to object or to support the petition, he cannot be joined as a litigant and needless to say that when Court permits the applicant of such Company Application before it to take out appropriate notice, declaring his Page 31 of 82 HC-NIC Page 31 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT intention and follow the procedure prescribed by the rules and seek appropriate orders, makes it clear that thereby the order of admitting Company Petition and publishing notice does not confer the date or day of hearing as suggested by the petitioner that day declared in the public notice would be only day of hearing and no-one can be allowed to appear in such petition after such date since Rule 34 provides that intention of such appearance is to be disclosed in two days in advance in petition for compromise, whereas five days in advance in petition for winding-up. Therefore, learned advocate Mr.Pahwa is right in submitting that though this judgment is cited by the other side, practically, it does not confer anything in their favour, but above observation on the contrary supports his submission.
E) When above cited decision of Single Judge was challenged in O.J. Appeal no.1 of 2014, the Division Bench of this High Court has though dismissed the appeal, it is submitted by learned advocate Mr.Pahwa that it is mainly because of the above quoted two paragraphs of the judgment by the learned Single Judge and therefore, only because of such decision, it cannot be held that the present petition is not entitled to appear in the Company Petition. F) In Avanindra Kumar Tyagi Vs. Bagai Foods & Beverages Pvt. Ltd.
Reported in 1973(0) AIJ-DL 1350185 (Company Application no.701 of 1972 decided on 22.11.1973), wherein it is observed and held by the learned Single Judge of Delhi High Court that the effectiveness of Rule 34 does not depend on the existence of an advertisement. Such a notice can be given without an advertisement to the advocate of the petitioner and when some of the applicants have filed direct application before the Court, the Court held that such applications are to be treated as an intimation Page 32 of 82 HC-NIC Page 32 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT to the advocate of the original petitioner of the winding-up petition. That such applicants intend to support the winding-up petition. It is further held that thereupon when the winding-up petition is heard and if the original petitioner is held not to be entitled to maintain the petition, or withdraws the petition, or fails to appear, then any of the persons, who have given notice, are entitled to inform the Court that they wish to continue with the winding-up petition. Therefore, what is submitted is to the effect that thereby the provision of Rule 34 is not to be treated as an absolute bar for appearance of any person to oppose the main petition only because there is no service of notice of intention to appear, two days prior to the date of hearing, more particularly when day or date of hearing is not fixed or certain and when Court has yet not started actual and active hearing of main petition.
41.Learned advocate Mr.Pahwa has also relied upon few more decisions, which are discussed herein under emphasizing that Rule 34 employs the phrase "day of hearing" and not "date of hearing". For the purpose, it is submitted that such terminology is interpreted in context of provisions of the CPC in following judgments and therefore, it would make it clear that date of hearing is not the day or date, which is disclosed in the returnable notice or in public notice, but it would be actual date of hearing when Court starts active hearing and thereby, commencement of application of mind by the Court so as to decide the main petition finally. Thereby, if at any stage, when the matter is not heard for final disposal, it cannot be said that hearing of the matter has been started and thereby, day of hearing would be the only day when the matter is taken up for final hearing so as to decide it finally. In response to following Page 33 of 82 HC-NIC Page 33 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT decisions by the learned advocate Mr.Pahwa for the applicant, it is replied and argued by the learned advocate Mr.Soparkar that such decisions are with reference to the provisions of the CPC and therefore, they are not relevant in the present case, since the present case is to be decided in accordance with the provisions of the Companies (Court) Rules, 1959, which are framed by the Hon'ble Supreme Court of India in exercise of powers conferred by Section 643 of the Companies Act and that too after consulting all the High Courts. It is submitted by learned senior advocate Mr.Soparkar that these rules are having more weightage since they are framed by the Hon'ble Supreme Court of India and therefore, it is to be followed strictly. With due respect, even if we have to follow such rules strictly, on the bare reading of Rule 34, it is to be recorded even at the cost of repetition that, it also provides for scope of granting leave in absence of compliance of provision and there is no limitation in the Rules to grant the leave to a person, who appear at the hearing and to object particular petition. Thereby, granting of such leave would certainly be based upon the common Civil Jurisprudence, which simply confirms that no decision can be taken without hearing a person, who would be affected by such order.
42.Therefore, if applicant is able to show even by prima facie evidence that a decision on the subject would affect his rights, he would certainly be required to be afforded an opportunity to represent his case before taking final decision. The discussion herein above,including disclosure of factual details, makes it clear that there is some substance, which confirms that absence of an opportunity extended to the applicant while deciding the main Page 34 of 82 HC-NIC Page 34 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT petition, may result into jeopardizing his (their) rights adversely and even this Scheme of revival is either not in favour of the workmen or is against the interest of the creditors and supporters of the company and atleast in S.L.P. (C) no.29282 of 2008 even the Hon'ble Supreme Court of India has observed that decision in the petition would be subject to result of that S.L.P. and therefore, original petitioners of such S.L.P. certainly deserve an opportunity to represent their case before deciding Company Petition finally.
43.So far as arguments of learned senior counsel Mr.Soparkar regarding different consideration amongst Companies (Court) Rules, 1959 and Civil Procedure Code are concerned, one has to recollect that it is settled legal position that provisions of the CPC also apply to the proceedings under the Companies Act. Section 141 of the CPC also makes it clear that the procedure provided for in the Code is required to be followed as far as it can be made applicable in all proceedings in any Courts of Civil jurisdiction. With such reference, if we refer Sections 397 and 398 of the Companies Act, the provisions of both these sections provides for application to the Tribunal for relief in case of oppression of minority shareholders and in cases where the affairs of the Company are being conducted in a manner prejudicial to the public interest or in a manner oppressive to any member or members. Wide powers are given under these Sections to the Court to pass an order, which will be in the interest of the Company. Similar powers are given when a relief is prayed for in a case of mismanagement. In such a situation, when the original petitioners pray for relief from oppression or mismanagement in compromise, which deal with the manner in which the affairs of the Company will be Page 35 of 82 HC-NIC Page 35 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT conducted in future, must be scrutinized by Court before the Court gives its sanction to the compromise. Therefore, there is no substance in the submission by learned senior advocate Mr.Soparkar that once this Court has admitted the Company Petition and issued public notice, on the returnable date, in absence of objections by anyone, the Court has to simply endorse the Scheme and Court has not to enter into a commercial wisdom of the parties, since the Court is not like a commercial house and businessman. It is further submitted by learned sr.advocate Mr.Soparkar that thereby, the Courts do not have to look into the feasibility of the Scheme,but has to simply look into the procedural part of the case and if everything is as per the procedure, then, the Court has to simply endorse the Scheme without entering into its details and any other issues since it is to be left to the businessman to decide their activities. With due respect, such argument has no substance in any manner whatsoever and if such arguments are to be believed, then, there is no need to refer any such matters to the Courts of law, but it is to be decided and endorsed by the Administrative Officers only. In the case of such petition, the parties to the petition cannot insist on an order being passed simply on the ground that the parties to the litigation have agreed to it. This is so because the Court has to be satisfied before recording a compromise that there is lawful compromise, and it is possible even in absence of those who are not parties to the litigation. With above background, now let us examine the judgments referred by learned advocate Mr.Pahwa with reference to the day of hearing.
44.Relying upon following judgments, learned advocate Mr.Pahwa has submitted that as per these judgments, "day of hearing" means Page 36 of 82 HC-NIC Page 36 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT the day on which the Court applies its mind to the case and that though such judgments are with reference to the provisions of the Code of Civil Procedure, the interpretation of such phrase by Hon'ble Supreme Court of India would also sub-serve the purpose and object of Rule 34. It is further submitted that even by giving plain meaning to the phrase "day of hearing", it becomes clear that day of hearing means the day on which the Court hears the matter, since the phrase used in the Rule is not the date of hearing, which was fixed while issuing the notice.
A) In Kanwar Singh Saini Vs. High Court of Delhi reported in (2012)4 SCC 307 wherein in paragraphs 12 and 13, Hon'ble the Supreme Court of India has considered the meaning of "first hearing of the suit" with reference to the provisions of the CPC and held that the date of "first hearing of a suit" under the CPC is ordinarily understood to be the date on which the Court proposes to apply its mind to the contentions raised by the parties in their respective pleadings and also to the documents filed by them for the purpose of framing the issues which are to be decided. Thereby, the Hon'ble Supreme Court of India has held that thus, the question of having the "first hearing of the suit" prior to determining the points in controversy between the parties i.e. framing of issues does not arise and thereby, the words "first day of hearing" do not mean the day for the return of the summons or the returnable date, but the day on which the Court applies its mind to the case which ordinarily would be at the time when either the issues are determined or evidence is taken. For such decision, Hon'ble Supreme Court of India has relied upon previous several other decisions, which are referred therein and therefore, it cannot be Page 37 of 82 HC-NIC Page 37 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT said that it is a trace decision.
B) In Mangat Singh Trilochan Singh Vs.Satpal reported in (2003)8 SCC 357 wherein the Hon'ble Apex Court has, in paragraph 11, while appreciating the same terminology "first hearing of application" relied upon its previous decision in the case of Sham Lal Vs.Atme Nand Jain Sabha reported in (1987)1 SCC 222 wherein Hon'ble Supreme Court of India has relied upon the decision by this High Court in the case of Shah Ambalal Chhotalal Vs. Shah Babaldas Dayabhai reported in AIR 1964 Guj 9 wherein the Division Bench of this High Court has held that "first date of hearing" is not the day for the return of summons or returnable date, but the day on which the Court applies its mind, which ordinarily would be at the time when either the issues are determined or evidence is taken.
C) In Grasim Industries Ltd. Vs. Collector of Customs, Bombay reported in (2002)4 SCC 297 wherein the Hon'ble Supreme Court of India has held that no words or expressions used in any statute can be said to be redundant or superfluous and one should not concentrate too much on one word and pay too little attention to other words. Thereby, no provision in the statute and no word in any section can be construed in isolation. However, every provision and every word must be looked at generally and in the context in which it is used.
45. As against that learned senior counsel Mr.Soparkar for the original petitioners has submitted that all such judgments are based upon Code of Civil Procedure and therefore, they cannot be relied upon in a company petition, which is being governed by specific procedural Rules enacted by the Hon'ble Supreme Court of India.
Page 38 of 82HC-NIC Page 38 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT However, if we refer few old decisions, it becomes clear that atleast in few such cases, the Hon'ble Supreme Court of India has repeatedly not only followed the provisions of the CPC, but confirmed that opposite conclusion would lead to an astonishing result that any proceeding under the Companies Act, can never be applied, which is not the correct legal position. To support such position, reference to the case of Bastar Transport & Trading Co. Versus Court of Wards, Bastar reported in (1955) 25 Company Cases 108 is relevant wherein it was held that provision of CPC would apply to the company cases. Same principle is reaffirmed in the case of Bhagat Industrial Corporation Ltd. Vs. Ego Metal Works P. Ltd. reported in (1977)47 Company Cases 201, wherein it is held that provisions of the CPC would apply to practice and procedure of the Companies (Court) Rules also. Though it is stated that all the provisions of the CPC may not be applicable to the petitions under the company law, it is also clarified in Official Liquidator, R.S. Motors (P.) Ltd. Vs. Sardar Jagjit Singh Sawhney and Anr. reported in (1977)47 Company Cases 219 that failure of the parties summoned to appear on the date of hearing of the application does not result in having them set ex parte and they can rejoin the proceedings at the later stage. It is further made clear that the reference of the Code in Companies (Court) Rules is the Code of Civil Procedure and therefore, when no procedure is spelt out in the Rules, the procedure to be followed would be as specified in the Code. The Court has gone to the extent of saying that generally applications which are moved by Judges Summons are to be treated exactly like Civil Suit. However, I make it clear that reference of above few judgments is only for the limited purpose of making it clear that it is not correct to say that the provision of Page 39 of 82 HC-NIC Page 39 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT Civil Procedure Code would not apply to the Company Court and thereby, interpretation and reference of judgments based upon such Code, cannot be relied upon if almost similar issue is under consideration. It is not disputed fact that the date of hearing is certainly under consideration before different Courts with reference to the Code and now, same issue has been raised with reference to the Companies (Court) Rules where, on the contrary the term used is not the 'date of hearing', but 'day of hearing', which is by all implications wider in nature and therefore, unless actual day of hearing is not arrived, it cannot be said that no-one is entitled to serve notice as prescribed under Rule 34 or that the disclosure of intention to appear by the applicant is absolutely time barred, belated, delayed and therefore, not tenable.
46. However, there are other reasons also to hold the same against the original petitioners and present applicant so far as issue regarding compliance of Rule 34 in prescribed period is concerned, when the original petitioners are repeatedly submitting that day of hearing is the day as disclosed in the public notice. If it is so, the petition should have been decided well in point of time, but it could not be decided for several reasons including the reason that in fact it allowed on returnable date, since the payment to secured creditors was yet not finalized at such returnable date. Such fact can be reconfirmed from the record itself, wherein it is clear that the State Bank of India has supported the Scheme only on 21.1.2012 after their dues were paid in the year 2012, whereas dues of Employees State Insurance Corporation was paid only on 27.2.2012, and prior to that, dues of State Government was cleared only on 30.5.2011. Whereas, lessor had initially objected, but thereafter supported the Page 40 of 82 HC-NIC Page 40 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT Scheme only on 5.3.2012. All these dates are much later than the returnable date in the year 2008, which is canvassed by the original petitioners urging that no person can object and thereby extend support after the prescribed period under Rule 34 i.e. on or after 25.11.2008 being two days before 27.11.2008, a returnable date as per public notice..
47. Therefore, it is contended by the applicant that when they have filed an application in the year 2013 and issued a notice of intention to appear prior to the actual day of hearing of the main Company Petition, there is compliance of provisions of Rule 34 and therefore, there is no delay of any kind.
48. In addition to what is stated herein above regarding Rule 34 of the Companies (Court) Rules, it cannot be ignored that applicant has pleaded commission of fraud by the respondents being original petitioners in main Company Petition, submitting that in view of commission of fraud by the original petitioners, the issue of limitation would not come in their way because the Hon'ble the Supreme Court of India has observed and held in following cases that where fraud is pleaded, the Court should not refuse to consider the merits of the case.
To substantiate such submission, learned advocate Mr.Pahwa has relied upon following citations:-
A) A.V.Papayya Sastry Vs.Government of Andhra Pradesh reported in (2007)4 SCC 221 wherein it it was observed and held that it is well settled principle of law that "fraud avoids all judicial acts, ecclesiastical or temporal". It is observed in paragraphs 22 and 27 Page 41 of 82 HC-NIC Page 41 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT reads as under:-
"22. .It is thus settled proposition of law that a judgment, decree or order obtained by playing fraud on the Court, Tribunal or Authority is a nullity and non est in the eye of law. Such a judgment, decree or order by the first Court or by the final Court has to be treated as nullity by every Court, superior or inferior. It can be challenged in any Court, at any time, in appeal, revision, writ or even in collateral proceedings. In the leading case of Lazarus Estates Ltd. v. Beasley, (1956) 1 All ER 341 : (1956) 1 QB 702 : (1956) 2 WLR 502, Lord Denning observed:
27. In S.P. Chengalvaraya Naidu (dead) by LRs. V. Jagannath (dead) by LRs. & Ors. (1994) 1 SCC 1 : JT 1994 (6) SC 331, this Court had an occasion to consider the doctrine of fraud and the effect thereof on the judgment obtained by a party. In that case, one A by a registered deed, relinquished all his rights in the suit property in favour of C who sold the property to B. Without disclosing that fact, A filed a suit for possession against B and obtained preliminary decree. During the pendency of an application for final decree, B came to know about the fact of release deed by A in favour of C. He, therefore, contended that the decree was obtained by playing fraud on the court and was a nullity. The trial court upheld the contention and dismissed the application. The High Court, however, set aside the order of the trial court, observing that "there was no legal duty cast upon the plaintiff to come to court with a true case and prove it by true evidence". B approached this Court."
B) In Ganpatbhai Mahijibhai Solanki Vs.State of Gujarat reported in (2008)12 SCC 353, wherein also it is observed in paragraph 14 as under:-
"14. The object and purport of a statute must be given effect to. If there is a conflicting interest, the Court may adjust equities but under no circumstance it should refuse to consider the merit of the matter, when its attention is drawn that suppression of material facts has taken place or commission of fraud on Court has been committed."
With this background, it is submitted that because of such fraud with the applicants, when the applicants have objected the transfer of shares in the name of original petitioner no.2 - Riverfront Properties Pvt. Ltd., atleast the Company Judge has recalled the decision of such transfer where fraud is alleged and though it was reversed by the Division Bench, the judgment of Division Bench categorically shows that it is only on the ground of limitation and as such when ownership of such shares will have direct bearing on the Scheme of proposed sponsor and when the present applicants are claiming their ownership of 1839 shares, Page 42 of 82 HC-NIC Page 42 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT which is subject matter of S.L.P. no.6169 of 2015, and when such S.L.P. is pending with a direction by the Hon'ble Supreme Court of India that outcome of such Company Petition would be subject to outcome of such S.L.P., it cannot be said that applicant does not have any case in their favour and therefore, they should not be thrown out of the litigation only on technical grounds as pleaded by the original petitioners. Even by order dated 18.09.2015 in S.L.P. (Civil) no.6169 of 2015, Hon'ble the Supreme Court of India has considered that S.L.P. (C) nos.29282 - 29284 of 2008 and S.L.P. (C) no.6169 of 2015 are required to be heard together by the same Bench. Therefore, order in S.L.P. (C) no.29282 of 2008 will affect the entire proceeding. Even Textile Labours Association have preferred S.L.P. (C) CC no.18727 of 2015, which is also pending before the Hon'ble Supreme Court of India.
49. Overall reading of several judgments referred herein above also makes it clear that as and when such an application is filed u/s.34, the original petitioners are entitled to file their reply opposing such petition, whereas in the present case, the original petitioners- opponents in Company Application no.34 of 2013 have not filed any reply opposing such application and therefore, when serious allegation of fraud is made by the applicant herein and when it is not opposed or controverted by the opponents herein, the objections, which are purely technical on procedural law and limitation, are not tenable. Even at the cost of repetition I have to say that irrespective of all such objections and defence thereof, the fact remains that Rule 34 also makes it clear that appearance is prohibited on two counts i.e. (1) non-compliance of first part of the rule, which is purely technical in nature and (2) except with the Page 43 of 82 HC-NIC Page 43 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT leave of the Judge and therefore, even if it is believed that applicant has not followed the rules of procedure, by not applying in time, then also, they are entitled to leave to appear by the Court and therefore, relying upon the overall facts and circumstance and what is discussed in this order, I am of the view to extend leave to the applicant of Company Application no.34 of 2013 to file their appearance and to object the Scheme of revival of the Company in Company Petition no.264 of 2008 and for the purpose, their objections are required to be taken on record.
50. However, before final conclusion, I have to deal with the submissions by the opponents herein being original petitioners in Company Petition no.264 of 2008, wherein learned senior counsel Mr.Soparkar assisted by learned advocate Mr.A.S.Vakil has vehemently argued that this Court has to simply follow the procedural aspect and thereby, Court has no option, but to simply throw out the applicant irrespective of pleading of fraud only because he has failed to follow the provision of Rule 34, more particularly, because he was aware about the proceedings and therefore, non-filing of objections in time and filing the same after the gap of five years, is nothing, but a selective tactic of the applicant to delay the Scheme with some ulterior motive and greed of extracting more money from the original petitioners, though original petitioners have helped him to get their properties released from mortgage of the Bank, which are going to auction their properties for non-payment of loan amount in time. It is also vehemently argued that so far delay in application under Rule 34 is concerned, the applicant has though helped the original petitioners to transfer share of other shareholders in favour of original Page 44 of 82 HC-NIC Page 44 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT petitioners, they are now taking u-turn once their properties have been released from attachment by the Bank. On same set of arguments it is also pleaded that therefore, actually there is no fraud committed either with the Court or with the applicant when IDBI Bank has transferred the shares in their favour.
51. In their written notes, to explain the delay on the part of the applicant, they have submitted the list of dates/chronology, which are as under. However, at present, I have reproduced material dates only to avoid bulkiness of such order since other dates/events are not of much material.
September - Prasad Mills Ltd. was incorporated ("Prasad Mills") 1914 August - Prasad Mills was ordered to be wound up.
19881991 IDBI filed a Civil Suit for recovery of money against Prasad Mills, Bhupendra and Girish which was subsequently transferred to Debt Recovery Tribunal (DRT).
27-12-1991 Vipul, son of Girish passed away. Vipul had pledged 295 shares.
19-12-1995 SBI also filed a Suit for recovery of money against Prasad Mills, Bhupendra and Girish, which also was subsequently transferred to the DRT.
1999 Girish passed away. Astik (present Applicant and son of Girish) and Nayna (widow of Girish) came to be impleaded in the proceedings of SBI and IDBI as heirs of Girish. June - 2006 Present respondent no.2 Riverfront Properties Pvt. Ltd.
(RPPL) is incorporated.
17-11-2006 The DRT allowed the Suit/Application of IDBI (Para 4 of the Division Bench Judgment) 26-06-2007 The DRT allowed the Suit/Application of SBI. 25-08-2007 IDBI assigned the debt of Prasad Mills with underlying securities, including the pledged shares, to R-2 RPPL. 18-09-2007 IDBI filed Company Application no.414 of 2007 seeking ratification of the assignment. In the said Company Application no.414 of 2007 R-2 RPPL and the OL of Prasad Mills were impleaded as respondents which is under challenge in S.L.P. Page 45 of 82 HC-NIC Page 45 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT by Astik.
28-07-2008 R-2 RPPL and R-1 Bhupendra filed Company Application no.427 of 2008 (Under Rule 67) for convening / dispensing with the meetings of creditors, shareholders, workman for considering the Scheme of compromise under Section 391. 22-08-2008 Order (under Rule 69) of this Hon'ble Court in Company Application no.427 of 2008, convening meetings of creditors, shareholders and dispensing with the meeting of the workman.
25-08-2008 Company Application no.414 of 2007 filed by IDBI for ratification of assignment, is allowed, which order is under challenge in S.L.P. by Astik.
30-08-2008 Notice (under Rule 73) of the meetings is dispatched to shareholders, including Nayna (mother of Applicant Astik) on the basis of her five unpledged shares. Along with the notice, the Explanatory Statement (under Section 393 read with Rule
73) is also dispatched. The Explanatory Statement gives complete details of the deed of assignment between IDBI and R-2 RPPL, the Order dated 25.08.2008 ratifying the assignment, the Scheme, the acquisition of shares. In the Explanatory Statement, it was recorded as follows. '06-10-2008 The Chairman of the meeting filed his Report (under Rule 78) '06-10-2008 Company Petition (under Rule 79) no.264 of 2008 is filed by Bhupendra and R-2 RPPL seeking sanction of the Court to the Scheme of compromise.
14-10-2008 Company petition is admitted and ordered to be advertised confirming the date of hearing as 27.11.2008.
21-12-2011 R-2 RPPL pays in full the decreetal dues of SBI. As a consequence, the order of attachment dated 02.06.2008 attaching the immovable properties of applicant Astik and Nayna is vacated.
25-01-2012 The Recovery Proceedings of SBI before the Recovery Officer, DRT are closed.
February - The applicant Astik and Nayna claimed knowledge, for the first 2012 time of the assignment by IDBI to R-2 RPPL including of the 3669 pledged shares of ratification order dated 25-08-2008 passed in IDBI's Company Application no.414 of 2007 the Scheme etc. They exchanged correspondence with IDBI and R-2 RPPL.
16-10-2012 Applicant Astik and Nayna filed OJ MCA 187 of 2012 in (disposed) Company Application no.414 of 2007 (of IDBI) and seek multiple reliefs viz.cancellation of the deed of assignment, transfer of shares, review/recall of the order dated 25.08.2008, condonation of delay of more than 1400 days etc. (This OJ MCA 187 of 2012 is referred to para-5 of Page 46 of 82 HC-NIC Page 46 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT the affidavit in support of the present Company Application). '07-01-2013 Affidavit in Reply is filed by R-2 RPPL in OJ MCA no.187 of 2012 in which most of the aforesaid events have been referred to (para-44 of the Division Bench Judgment).
'06-02-2013 Rejoinder is filed by the applicant Astik in OJ MCA no.187 of 2012 (para-45 of the Division Bench Judgment).
'06-02-2013 Present Company Application is filed by only Astik, for taking on record the objections to the Scheme. Though the Applicant is only Astik, the objections are not only by Astik, but also on behalf of Nayna. As aforesaid, para-5 of the Affidavit in support of the Judges Summons/Company Application refers to OJ MCA no.187 of 2012 (which as on 6.2.2013 was pending).
Developments pending the present Company Application 34 of 2013.
28-01-2014 OJ MCA no.187 of 2012 is allowed, ratification order dated 25.08.2008 is recalled, Company Application no.414 of 2007 is restored to file, Astik and Nayna are directed to be arraigned as party respondents in Company Application no.414 of 2007 and the same is ordered to be notified for hearing.
Being aggrieved, R-2 RPPL filed OJ Appeal no.2 of 2014 along with Civil Application for stay. The said OJ Appeal is admitted and the judgment and order dated 28.01.2014 was stayed.
15.12.2014 The Division Bench allowed the OJ Appeal no.2 of 2014 (paragraphs - 52 to 56 thereof are relevant).
Being aggrieved, applicant Astik and Nayna had preferred before the Hon'ble Supreme Court SLP (C) 6169 of 2015, in which notice has been issued and further hearing is fixed on 03.11.2015.
52. Above chronology makes it clear that though it is with reference to show the delay or inaction or selective action on the part of the applicants, but it is the real reason for non-hearing of the Company Petition no.264 of 2008 till date and therefore, when Company Petition is not taken-up for hearing because of several reasons, it cannot be said that there is delay on the part of the applicant to object the Scheme since they have not followed the rules.
53. In addition to above such general proposition and submission to Page 47 of 82 HC-NIC Page 47 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT dismiss the application summarily, and thereby, not to take the objections on record of the Company Petition, learned advocate Mr.A.S.Vakil for the opponents in the Company Application submits several other points as per his written submission.
a) Suppression of material facts and Applicant has not approached with clean hands:-
It is contended that though applicant Girish Bhagwatprasad HUF and his mother Naynaben were present in the meeting of the Company on 25.9.2008 and though Company Petition no.264 of 2008 is filed based upon the outcome of such meeting only on 6.10.2008 and though the Court has admitted such petition by order dated 30.10.2008 and though date of hearing is fixed as 27.11.2008, thereby though applicant is aware about their consent in favour of the Scheme much prior to the filing of petition and advertisement, suppressed such material fact, which was very well within their knowledge while filing such application to object the Scheme and pleaded commission of fraud in proposing such Scheme and filing of such petition by the sponsor. Thereby, it is submitted that the applicant should make a clear and unequivocal disclosure with respect to his date of knowledge of the Scheme of Compromise. Though learned senior counsel Mr.Soparkar has repeatedly and vehemently argued that applicant should not be permitted to plead fraud or to show that how fraud is committed and thereby, requested the Court not to look into the factual details of the alleged fraud pleaded by the applicant, the fact remains that such submission regarding suppression of material fact is with reference to the knowledge of the Scheme i.e. transferring of equity shares in the name of the sponsor even without intimating the Page 48 of 82 HC-NIC Page 48 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT applicant that their shares are being transferred. On the contrary, even if we consider that applicant and his mother were present in the meeting dated 25.9.2008, then what transpires is simple, which is to the effect that pursuant to proposal of a Scheme, the mother of the applicant was provided with bunch of relevant papers, which discloses such transfer of shares from the name of applicant to the name of sponsor by IDBI, but at the same time, it is also clear and certain that such transfer was without the knowledge of the applicant. Therefore, as the disclosure of shares was there atleast on 25.9.2008, the applicant when realized such transaction being fraudulent, initially preferred OJ MCA no.187 of 2012 in Company Application no.414 of 2007. It is to be recollected here that Company Application no.414 of 2007 was filed by IDBI Bank for various reliefs including transfer of shares from the name of the applicant to the sponsors and that it is undisputed fact that IDBI Bank has not joined present applicant as concerned or affected party in such Company Application. Therefore, order dated 25.9.2008 in such Company Application has been challenged by filing OJ MCA no.187 of 2012 by the applicant on 16.10.2012.
This fact is known to original petitioners and therefore, during the pending proceedings, when it has been noticed by the applicant that they have to appear in this petition also, have preferred the present application on 6.2.2013. Therefore, it cannot be said that there is any suppression of material fact by the applicant in any manner whatsoever. The overall submission by the original petitioners goes to show that they are hard pressing such fact for the simple reason that once applicant has knowledge about transfer of shares and proposal of Scheme based upon such transfer atleast on the date of meeting i.e. 25.9.2008, filing of present application on 6.2.2013 Page 49 of 82 HC-NIC Page 49 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT may be considered certainly as belated act. Suffice it to say that practically, there is no prescribed period of limitation for objection in such Rules, but the only restriction is procedural as vouched in Rule 34 of the Companies (Court) Rules and therein also, ultimately, it is stated that non-allowing the person, who has failed to comply with the procedure suggested in such rule, cannot appear at the hearing of the petition except with the leave of the Judge and therefore, if Judge grants leave, then he can appear. Therefore, there is no question of limitation whereas there is no restriction upon the powers of the Judge to grant leave. At the most, such leave is to be granted considering the facts and circumstances of the case and real issue or dispute is to be resolved between the parties i.e. with judicial discretion.
b) Thereby, once there is discretion, though it is to be used judiciously, all other technical issues would not be material to restrict the Court to grant such leave, more particularly, when there is an allegation of fraud. So far as alleged delay in coming to the Court is concerned, it cannot be ignored that applicant has already initiated one proceeding and such objections can be taken as and when there is clarity about fraud. It is well settled that fraud vitiates all solemn acts and it would certainly extend to condone the delay irrespective of number of days. To that extent, reference to the case of Ganpatbhai Mahijibhai Solanki (supra) is material to be referred herein wherein the Hon'ble Supreme Court of India has condoned the delay of 2205 days because of fraud. Therefore, I do not find any substance in such submission that non-disclosing the date of knowledge of fraud is suppression of material fact for the simple reason that there is no question of limitation at all except to Page 50 of 82 HC-NIC Page 50 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT consider that if there was knowledge, the applicant should have preferred such application two days before 27.11.2008, the date of hearing published in the advertisement.
c) Locus Standi of the applicant:
Original petitioners have also submitted that applicant did not have locus standi to prefer such an application since the object and purpose of Rule 34 is not to confer a right on any one to appear at the hearing of the petition, but it merely provides the procedure to be followed by a person, who is otherwise entitled to appear before he can be heard either in support or opposition of the petitioner. Therefore, it is submitted that Rule 34 cannot be relied upon by the applicant Astik as confirming his right to appear at the hearing of the Company Petition, wherein sanction of the Scheme is sought for. It is submitted that when applicant Astik was left with no shares even as Karta of HUF of Girish Bhagwatprasad, since under the assignment of shares by IDBI to the proposer, now they do not have any shares in their ownership and therefore, they have no locus to participate in the Scheme proceeding. It is therefore submitted that Astik is well aware of such situation and therefore, he has not disclosed his capacity in which he wants to file objection i.e. whether as a creditor, workman or equity share holder. It is also submitted that applicant - Astik has never raised a grievance that he was not served with a notice of the meeting dated 25.9.2008 since he was not entitled to attend and participate/vote at the meeting and therefore, he has no locus to appear in the petition.
In support of such submission, the original petitioners are relying upon the judgment and order dated 15.12.2014 in OJ Appeal no.2 of 2014. If we peruse such judgment, the first paragraph of the Page 51 of 82 HC-NIC Page 51 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT judgment itself makes it clear that OJ Appeal no.2 of 2014 is against the judgment and order dated 28.1.2014 in OJ MCA no.187 of 2012. It is undisputed fact that such Company Application no.187 of 2012 is challenging and recalling order dated 25.8.2008 in Company Application no.414 of 2007 preferred by IDBI Bank to transfer the equity shares of the applicant - Astik in favour of the original petitioners/proposers, namely, Riverfront Properties Pvt. Ltd. and therefore, when Astik has already challenged the transfer and when such transfer is subject matter of pending litigation even as on today in the form of S.L.P. (Civil) no.6169 of 2015, it cannot be said that Astik has not objected to such transfer and therefore, he has no locus standi to file objections in the main Company Petition. It is also clear and obvious that even recently, the Hon'ble Supreme Court of India has, while directing this High Court to decide the main petition expeditiously, observed that even the result of this petition would be ultimately subject to the outcome of result of such S.L.P. preferred by Astik. Thereby, it is clear and certain that applicant is certainly an affected party and therefore, he has right to bring it to the notice of the Court if he finds any fraud or even illegality or irregularity in sanctioning any Scheme.
Therefore, there is no substance in the submission by the original petitioners that the applicant has no locus to file such objections. The alternative answer to such issue is the legal provision itself inasmuch as the provision of Companies Act permits all the members and the creditors and in case Company is wound-up, its liquidator to propose Scheme and seek sanction of the Court for such proposed Scheme and therefore, when there is a dispute between the sponsor and the petitioner that sponsor has Page 52 of 82 HC-NIC Page 52 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT become a member by some illegality and irregularity, which is subject matter of S.L.P. (Civil) no.6169 of 2015, it is clear and obvious that if applicant is a member just before such transfer of shares, which is in dispute, then, he is certainly a person who is required to be heard before sanctioning the Scheme.
Similarly, so far as locus of original petitioners are concerned, learned advocate Mr.Pahwa has on the contrary submitted that if at all sponsor is declared as not a member of the Company, then, in fact sponsor would not be entitled to seek sanction of the Scheme and Scheme itself would not be maintainable and that even original petitioners have failed to declare the facts regarding all pending litigation while submitting Scheme and therefore, even original petitioners have suppressed material facts.
Though there is different view, the bare reading of Rule 34 makes it clear that it does not restrict any class of person to file an objection when it says about 'every person' who intends to appear at the hearing of the petition. Though word 'every person' is tried to be restricted amongst members, creditors etc. who are concerned with the Company, it cannot be ignored that it is settled law that before the Court accords sanction to any Scheme, it will require to satisfy itself on following three points viz. (1) whether the statutory requirements have been complied with (2) whether the class/classes affected by the Scheme have been fairly represented and, (3) whether the arrangement is such as a man of business would reasonably approve. Therefore, if any person wants to throw some light and thereby wants to demonstrate before the Court that Page 53 of 82 HC-NIC Page 53 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT any one of such condition is not fulfilled in the proposed Scheme, then, with the leave of the Court, such person can appear at the hearing of the petition and even Court's leave may not be required if any such person discloses his intention as per the procedure laid down in Rule 34 by serving the notice, two days in advance and upon filing Form no.9, in that case, rule prescribes further procedure to be followed even by the original petitioners by disclosing on record in Form no.10 that who wants to appear and amongst them, who supports the Scheme and objects the Scheme. Thereupon, Court will allow them to file their affidavit and consider all such material while granting the Scheme. Whereas in the alternative, if someone has not or could not follow the procedural part as above, he can seek leave of the Court to appear and either object or support the Scheme when it is within the Court's jurisdiction either to grant leave or to reject the leave. Therefore, when applicant has raised a dispute regarding membership of the Company for whose revival Scheme is proposed, he is certainly affected and necessary party, and as discussed herein above, if they are able to assist the Court on any of the three points listed herein above, then, they are necessary party and leave needs to be granted to them to appear and defend the petition. In other words, when applicant is one of the affected class of person, his representation is fairly required. Whereas, in the present case, the disclosure of pleading makes it clear that probably the sponsor is not proposing the Scheme for the benefit of the class of people, who are concerned with the Company and there is an allegation that entire Scheme is only with an aim to grab the valuable land at a throwaway price, it would be appropriate to allow the application, to appear and to submit their grievances Page 54 of 82 HC-NIC Page 54 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT because ultimately allowing the application would not result into denial of sanction to the Scheme if at all it is otherwise in accordance with law. If at all original petitioners are afraid of their presence and appearance, then, only because original petitioners are afraid, it cannot be said that Court should not allow them to appear and represent their case before Court decides the petition to sanction the Scheme as proposed.
However, from such judgment dated 15.12.2014 in OJ Appeal no.2 of 2014, learned senior advocate Mr.Soparkar and learned advocate Mr.A.S.Vakil have repeatedly read out paragraph 4.5 onwards to emphasize that the Division Bench has already considered the action of the applicant as delayed, which cannot be condoned, it is submitted that once Division Bench has refused to condone the delay, this Court should not grant leave by permitting the applicant to file his appearance after couple of years. Though I have made it clear in the discussion till this point that there is no prescribed period of limitation and therefore, there is no question to condone the delay and that irrespective of such delay, when the Court has got inherent powers to grant leave for appearance by any person, if we scrutinize the entire judgment, on the contrary it becomes clear that practically the Division Bench has though observed that there is some illegality or atleast irregularity in transferring the shares from IDBI Bank to the sponsor, the recalling of order dated 25.8.2008 regarding such transfer by the Single Judge is not permissible only because of delay in challenging such order by the applicant - Astik, because Astik was fully aware about the developments concerning the Company and because he has attempted to help the proposer to get several shares from the Page 55 of 82 HC-NIC Page 55 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT market. It is also submitted that Astik has first allowed the proposer to pay off his debts and to get his property free from all attachments and till then he did not object the Scheme, but as soon as he got final benefits, he objected to the Scheme with an ulterior motive. Suffice it to say that if at all proposer has helped the original petitioners to get his properties free from attachment, then any amount paid by the proposer for the purpose can be treated as personal loan by the proposer of the Scheme to the applicant, which can be recovered in accordance with law, but without express consent of the applicant if IDBI Bank has transferred the shares lodged before it as a security by the applicant against loan of meager amount of Rs.15 Lacs only, the act of the IDBI Bank to transfer the equity shares in the name of the proposer against receipt of Rs.17 Lacs is now under challenge and under active consideration of the Hon'ble the Supreme Court of India where it is stated that outcome of this petition would be subject to the result of such S.L.P. (C) no.6169 of 2015. Therefore, practically, when judgment in OJ Appeal no.2 of 2014 is challenged in S.L.P. (Civil) no.6169 of 2015 with above order therein, then, atleast at this stage, this judgment is also an impugned judgment and therefore, care is required before relying upon such judgment.
Original petitioners are relying upon the decision in the case of National Textile Workers Union V/s.P.R. Ramakrishnan and others reported in AIR 1983 SC 75 wherein the Hon'ble Supreme Court of India has held that individual worker has no right either to get impleaded or to appear in winding-up petition or even to intervene, but the union of the workers shall be entitled to appear and be heard in winding-up petition. Though minority view is Page 56 of 82 HC-NIC Page 56 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT against such proposition in defining the words, "every person" in Rule 34, considering that it does not entitle a worker, who is neither a shareholder nor a contributory to support or oppose the winding-up petition under that rule, because they refer only to a person who is otherwise entitled to do so under the Act, but the observations by the minority of Judges in such reported cases cannot be relied upon at this stage when majority Judges have held that Rule does postulate that apart from the creditors and contributories there may be other persons who are entitled to appear at the hearing of the winding up petition because it is not confined in its application to the creditors and contributories but the generic expression "every person" is used. Thus, this judgment would not help the proposer
d) The interpretation of the phrase "day of hearing" referred in Rule 34 against the phrase "date of hearing".
According to the applicant Astik, the phrase "day of hearing" does not mean the date as specified in order dated 14.10.2008 in main petition while fixing the date of hearing as 27.11.2008, but day of hearing means actual day of hearing of the Company Petition by the Court, submitting that such day of hearing has yet not arrived for one or another reasons since main Company Petition no.264 of 2008 could not be taken up for hearing by the Court, because of the fact that even after filing such petition, seeking sanction of the Scheme, when proposer/sponsor have failed to disclose all requisite information like all pending litigation, they continue to dispose of those litigations in the form of recovery proceedings by different banks before the Debt Recovery Tribunal and they have never pressed for hearing of the Page 57 of 82 HC-NIC Page 57 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT main petition which was otherwise also never ripen and called upon for final determination by the Court, further submitting that it was first time only directed by the Hon'ble Supreme Court of India to take up this matter for final disposal by its order dated 18.11.2009. It is further submitted that practically from October, 2008, when Company Petition was filed, till date, the Company Petition has never ripen i.e. ready for hearing and it was never called upon by the Court for final disposal and therefore, practically, 'day of hearing' is yet not approved and hence, provision of Rule 34 does not come in way of the applicant when they have already preferred an application for leave to appear and now even when they have already served a notice of their intention to appear on 25.9.2015, there is some substance in such submission inasmuch as after filing of Company Petition on 6.8.2008, it is only in the month of January, 2012 when all recovery proceedings were completed before the DRT when sponsor has paid-up all such secured loan amount to the concerned banks. Therefore, the petition was never ripen for sanctioning the Scheme atleast till January, 2012 and in February, 2012 the applicant has already challenged the order dated 25.8.2008 in Company Application no.414 of 2007 whereby his shares were wrongfully assigned by the IDBI Bank in favour of the proposer. Such position is already reflected on record when on 2.3.2009, it was recorded by the Court that Mr.Vakil, learned advocate for the petitioner submits that certain litigations in the form of Special Leave Petitions are pending before the Hon'ble Supreme Court of India and hence, it is his submission that the final order by the Apex Court in pending S.L.P. would have bearing on this petition as well. He, therefore, with a view of awaiting result of further proceeding in the S.L.P. Page 58 of 82 HC-NIC Page 58 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT requested for some time and he submits that the matter may be adjourned for atleast three weeks', whereas on 15.3.2010, further time was granted to file affidavit in reply to the Regional Director, may be of Employees State Insurance Corporation and therefore, when time was granted to file affidavit in reply and rejoinder affidavit, it becomes clear that matter was not ready for final hearing. Again on 5.4.2010, it was recorded by the Court that in absence of any reply on behalf of Regional Director, Court was not in a position to proceed further with the hearing. It seems that disclosure of settlement of claims by different creditors has been made on record, probably only on 13.2.2012, which order needs to be referred herein.
"Order dated 13.02.2012 passed in Company Petition no.264/2008 When the petition is called-out and taken-up for hearing, Mr.Vakil, learned advocate for the petitioners, is not present. Mr.Champaneri, learned Asst. Solicitor General for the respondent No.1 is also not present. Mr. Desai, learned advocate, appearing for Mr. Sachin Vasavada, objector, is present M/s.Nanavati Associates, learned advocates, appearing for the lessors is also not present. Mr.Upadhayay, learned advocate, appearing for the workers is present. He submitted that he is supporting the scheme. Ms.Raval, learned advocate for the State Bank of India, is present. She has submitted that the claim of State Bank of India has been paid/settled.
Since Mr. Vakil, learned advocate for the petitioners, is not present, S.O. to 24.2.2012."
Whereas, order dated 27.2.2012 again confirms that learned senior counsel Mr.Soparkar has submitted that his client has made out a cheque in favour of Employees State Insurance Corporation and Court has directed him to forward it directly to the Corporation since advocate of the Corporation does not have instructions to accept any such amount. This shows that atleast till that day, the matter had not ripen for approving the Scheme. Thereafter, unfortunately, matter was rescued by as many as five Judges before it is listed for consideration by this Court for the first time on Page 59 of 82 HC-NIC Page 59 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT 1.10.2015. Even thereafter, while starting hearing submissions of both sides, it has been agreed by both the sides that initially only Company Application is to be decided and therefore, learned senior counsel Mr.Soparkar and learned advocate Mr.A.S.Vakil have repeatedly submitted that factual aspect of fraud pleaded by the applicant is not to be taken into consideration and that he should not be allowed to disclose the details of fraud and that it is permissible only if Court allows the Civil Application regarding appearance of the applicant in main petition. Such stand, though permissible under the personal rights of the litigants, is the real cause for delay in disposing the main petition else, if original petitioners are cocksure that no fraud whatsoever has been committed, either by them or by anyone either with the applicant or with the Court proceedings, then, they should have agreed to decide the main petition also with a submission that Court may consider all aspects of the matter and may pass appropriate orders, both in Company Application as well as in Company Petition, so as to avoid repeated arguments and repeated bulky orders on same facts. Therefore, in fact, practically the Company Petition no.264 of 2008 was practically never taken up for active hearing by the Court at any point of time and to that extent, practically, applicant is right in claiming that they can serve a notice under Rule 34 at any time before two days from the day of such actual hearing. In support of such submission, applicant is relying upon following decisions:-
(1) Kanwar Singh Saini Vs. High Court of Delhi reported in (2012)4 SCC 307; (2) Mangat Singh Trilochan Singh Vs.Satpal reported in (2003)8 SCC 357; and (3) Shah Ambalal Chhotalal Vs. Shah Babaldas Dayabhai reported in AIR 1964 Guj 9.
Such judgments are already discussed herein above in paragraph 44. However, learned advocate for the original Page 60 of 82 HC-NIC Page 60 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT petitioners has submitted that all such judgments are in context of various provisions of the CPC and none of the judgments are in context of the provisions of the Companies (Court) Rules, 1959 and hence, they are not applicable. Even such submission has no substance since it is also settled legal position that provisions of CPC certainly apply to the proceedings before the Company Court and therefore, when similar issues are raised with reference to different rules, it is clear and obvious that if such issues are resolved with reference to such connected statute, then, it can certainly be relied upon.
Reference of Rule 6 of the Companies (Court) Rules, 1959 is also material which reads as under.
6. Practice and procedure of the Court and provisions of the Code to apply.- Save as provided by the Act or by these Rules, the practice and procedure of the Court and the provisions of the Code so far as applicable, shall apply to all proceedings under the Act and these Rules. The Registrar may decline to accept any document which is presentedotherwise than in accordance with these Rules or the practice and procedure of the Court.
Whereas in addition to such submission, the original petitioners have referred certain rules from the Companies (Court) Rules, 1959 viz. Rules 10, 11(a), 11(a)(10), 11(b), 23(c), 24, 25 and 30, submitting that the procedure prescribed in such Rules is to be followed which provides that when Judges Summons is placed for fixing the date of hearing and Court directed to advertise it, then it is to be advertised not less than 14 days before the date fixed for hearing. However, at the same time, it is quite clear and obvious that there is a different terminology used in different rules with reference to the hearing of the petitioner, inasmuch as in Rules 23, 24, 25 and 30, there is a reference of phrase "date fixed for hearing", whereas in Rule 34, the phrase used is "day of hearing" and not the phrase "date of hearing". Such different Page 61 of 82 HC-NIC Page 61 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT phrase "day of hearing" is also found in Rules 25 wherein the phrase "date of hearing" is used. Therefore, atleast in Rules 25, both the phrases i.e. "day of hearing" and "date of hearing" are used. Thereby, if there is no change in situation of these different phrases "date of hearing" and "day of hearing", then, the legislature would have used the same phrase everywhere in the Rules. For the purpose, considering the difference between two phrases, we have to appreciate the provisions of Rules 25 and 30, wherein both the phrases are used. A bare perusal of Rules 23(c), 24, 25 and 30 makes it clear that the phrase "date fixed for hearing" is the date disclosed or fixed for hearing the petition, but it is certainly in future i.e. in advance from the day when such date is fixed like declaration of "date of hearing" in notice published by way of advertisement that particular date is fixed for hearing the matter. Therefore, atleast in Rule 25, both phrases are used, which results into distinct meaning of both the phrases i.e. the date fixed for hearing i.e. date for hearing is the date in future, whereas "day fixed for hearing is a day when the matter is actually taken-up for hearing by the Court". As seen from the record and as already discussed herein above, many a times and practically, in all cases, the actual day of hearing may be different from date of hearing fixed either at the time of issuance of notice or at any time thereafter. Whereas, on the date of hearing i.e. actual hearing of the matter, if Court notices that someone has declared his intention to appear at any time before 2 days or 5 days as the case may be, the Court shall proceed further in accordance with provisions prescribed in Rules 25 and 36 as the case may be. Therefore, there is no substance in the submission that the "day of hearing"
appearing in Rule 34 is the "day fixed under Rule 23(c), which is Page 62 of 82 HC-NIC Page 62 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT practically "date of hearing" and not "day of hearing".
However, in support of their contrary submission, original petitioners are relying upon a decision of Single Judge of Punjab & Haryana High Court in the case of Chemical Enterprises & Anr. Vs.Kalpanalok Ltd. and Ors. reported in (1984)55 Company Cases 552 wherein while dealing with the provisions of Rule 34 of the Companies (Court) Rules, 1959, the High Court has held that Rule 34 provides that a person who serves the notice has to serve it on the petitioner or his advocate at the address given in the advertisement stating his intention to appear at the hearing of the petition advertised and thereby, hearing of the petition means the dates on which the petition comes up before the Court after it has been advertised according to the Rules. Thereby, it becomes clear that even in this judgment, the Court has considered not the first date so advertised in the newspaper, but dates on which the petition comes up before the High Court after it has been advertised. Thereby, this judgment nowhere confirms that day of hearing is the date as per the advertisement only. The bare reading of the judgment makes it clear that it is for the creditors, who have to file the suits for recovery of some amount from the Company and when Company did not pay all the amount inspite of repeated requests and demands and thereafter, when it was prayed that Company be ordered to be wound-up, the Court observed that proceeding of winding-up can be said to be initiated only after issuing advertisement as required under the Act and thereafter, plaintiffs in recovery suit can appear to support such winding-up proceeding as per the Rules and therefore, what is ultimately ordered by the Court is to the effect that the respondent Company shall pay the decreetal Page 63 of 82 HC-NIC Page 63 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT amount with cost of the trial Court as well as cost of such petition to the original petitioners in stipulated time period and if respondent Company fails to pay decreetal amount, this petition shall be advertised for winding-up of the Company. Therefore, this judgment nowhere clarifies or decides the issue which is raised in the present petition. Hence, such judgment is not relevant at all.
Whereas, so far as last line of the Rule 34 is concerned, it is submitted that it shall be rendered nugatory and redundant. I do not agree with such submission because such line that any person who fails to comply with this Rule, shall not except with the leave of the Judge, be allowed to appear at the hearing of the petition, would not result into the Rule becoming nugatory and redundant only because both the sides are trying to interpret both above phrases in their own manner.
e) Duty of the applicant to explain the delay.
Learned advocate Mr.A.S.Vakil for the respondents has submitted that grant of leave as contemplated under Rule 34 is not a mechanical exercise, but should be based on sound judicial discretion and that conduct of the applicant, his bonafides, suppression of facts with respect to date of knowledge of the Scheme, lack of satisfactory explanation, his locus standi are relevant factors, which Court should consider while exercising the power to grant or refuse the leave to appear, who has failed to act within the time limit allowed under Rule 34 and in the present case, there is a gross delay of four years and four months for seeking leave and for submitting objections, whereas, it is almost seven years before serving the notice of intention to appear as required Page 64 of 82 HC-NIC Page 64 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT under Rule 34. Such submission is to be treated as an alternative submission to the contentions which are dealt with in previous paragraphs, wherein it is submitted that the provisions in Rule 34 i.e. "any person, who fails to comply with this Rule, shall not except with the leave of the Judge be allowed to appear at the hearing of the petition", are nugatory and redundant. In fact, if we read Rule 34, in context with all such submission and discussion herein above, practically, it becomes more clear that Rule 34 is not for joining any litigant as a party, which may be either petitioner or respondent in any Company Petition, but it is only for a person, who wants to either support or to object the petition, which may be either for winding-up or for approval of Scheme to submit his view point before the Company Judge, before the Company Judge decides such petition finally. Such provision is obvious since all such persons may not be the necessary party in strict definition of the phrase "necessary party", in whose absence particular lis cannot be decided effectually by the Court. This general proposition of Civil Jurisprudence based upon the provisions of the CPC, is equally applicable to all the cases and therefore, if any person who wants to apprise the Company Judge about his views, either supporting the petition or objecting the petition, the Judge may be required to listen to his views before deciding the petition judiciously and for that purpose when such person is not seeking any relief against anyone and when there would be no judicial order against him, instead of joining him as a party litigant, the Rule 34 provides that he will disclose his intention in prescribed manner. But, the reading of Rule 34 makes it clear that if anyone has disclosed his intention as prescribed in the Rules, then, it is obligatory on the part of the original petitioners to disclose before Page 65 of 82 HC-NIC Page 65 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT the Court in Form 10 that they received a notice disclosing an intention to appear by such persons and that out of them who are supporting the petition and who are objecting the petition and if such notice is served, then, such persons can be heard by the Court in appropriate manner, whereas if such notice is not served, then, such person has to seek a leave of the Court for his intention to appear and to submit his views in main petition.
Therefore, it cannot be said that the Court shall not grant leave considering any of the above points raised by learned advocate Mr.Vakil i.e. bonafide of the applicant etc. though it may be one of the consideration while granting the leave because as discussed herein above, the basic concept of all such proceeding is with a view to see that if someone has any information so as to apprise the Company Judge before disposal of any such petition, then, he should have a chance to appear before the Court and then it is practically between the Court and that person to allow such person to apprise the Court about the relevant fact or information that is available with such person. Even at the cost of repetition, it is to be recollected that it is settled legal position that before the Court accords its sanction to any Scheme, it will need to satisfy itself on three major points viz. (1) whether the statutory requirements have been complied with; (2) whether the class/classes affected by the Scheme have been fairly represented; and (3) whether the agreement is such as a man of business would reasonably approve. Therefore, if any person is able to apprise the Court to ascertain any such point, factually and efficiently, then, it will be prerogative of the Court to grant leave or not to grant leave.
Page 66 of 82HC-NIC Page 66 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT Whereas, the overall discussion would make it clear that in fact there is no lack of bonafides or lack of locus standi on the part of the applicant and so far as suppression with respect of date of knowledge of the Scheme or lack of satisfactory explanation is concerned, when applicant is also of the view that in fact there is no need to disclose such fact and when original petitioners are not allowing him to disclose the details of the fraud, which is practically under active consideration of the Hon'ble Supreme Court of India, it cannot be said that there is suppression of any fact. So far as lack of satisfactory explanation in not filing such application for couple of years is concerned, again, it is clear and obvious that there is a dispute regarding consideration of "day of hearing" and if "day of hearing" is not as per the interpretation by the original petitioner, but only when Court has started to hear the petition for final disposal recently, then, again, there is no question of any delay.
At this juncture, reference to the decision of Hon'ble the Supreme Court of India in the case of Sesa Industries Ltd. Vs.Krishna H.Bajaj & Ors. reported in (2011)3 SCC 218 is relevant wherein Hon'ble the Supreme Court of India has while dealing with similar Scheme held that the Court before whom the Scheme is placed is not expected to put its seal of approval merely because majority of shareholders have voted in favour of the Scheme, since Scheme which gets sanctioned by Court would be binding on dissenting minority shareholders or creditors and therefore, Court is obliged to examine the Scheme in its proper perspective together with its various manifestation and ramifications with a view to finding out that whether such Scheme Page 67 of 82 HC-NIC Page 67 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT is fair, just and reasonable to the concerned members and is not contrary to any law or public policy. In background of such settled legal position, if we consider the submissions by the applicant that fraud has been committed, it may be with the applicant or even with the Court, then, the settled legal position, which emerges from the case of A.V.Papayya Sastry (supra) and Ganpatbhai Mahijibhai Solanki (supra) would certainly make it clear that if there is a possibility of proof of commission of fraud by the sponsor or anyone interested in the Scheme, then, it is certainly within the prerogative of the Court to grant leave to a person who wants to demonstrate that fraud has been committed. Therefore, there is no substance in the submission of Mr.Vakil that conduct of the applicant would restrain the Court in granting leave to the applicant or that it would result into mechanical exercise under Rule 34 and leave would be against sound judicial discretion.
For the same set of reasons, there is no substance in the submission by learned advocate Mr.Vakil that there is no satisfactory explanation regarding delay since the date of hearing is fixed as 27.11.2008, whereas such an application is filed only on 6.2.2013. As already narrated herein above, from the year 2008 till the year 2013, the Company Petition could not be heard not because of any other reason, but mainly because of the fact and reason that the proposer of the Scheme was trying to settle all other litigation against the Company in liquidation and unless all such issues are settled, Company Petition cannot be taken up for hearing or atleast allowed by approving the Scheme and therefore, it cannot said that there is inordinate delay by the applicant.
So far as notice of intention to appear, it seems to be served Page 68 of 82 HC-NIC Page 68 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT and filed on record on 23.9.2015 is concerned, in view of the discussion herein above, I do not see any reason to discuss such issue at this stage except to opine that even if it is not in accordance with law or as alleged by the original petitioners that it was filed surreptitiously in the Company Petition. Such conduct of the filing of affidavit and notice at the fag end of the hearing would not dis-entitle the applicant to have a leave in his favour if otherwise he is so entitled to. Therefore, there is no substance in all such submission by learned advocate Mr.Vakil that there is no case for granting leave to appear. To substantiate such submission, now, it is further contended that in support of Judges Summons by filing a second affidavit, the applicant deals with the merits of the proposed objections without explaining the delay in not filing the objections for couple of years and that application is filed by one person Mr.Girish Bhagwatprasad, objections are filed by two persons, namely, Girish Bhagwatprasad and his mother - Naynaben. However, as discussed herein above, it is the prerogative of the Court that to whom the leave should be granted to appear and to apprise the Court either in favour or against the Scheme.
In support of such submission, learned advocate Mr.A.S.Vakil is relying upon following citations:-
A) Balwant Singh (Dead) Vs. Jagdish Singh and Ors. reported in (2010)8 SCC 685 wherein the issue is with reference to Order 22 Rule 9 of the CPC r/w.Section 5 of the Limitation Act, when the Hon'ble Supreme Court of India has held that liberal approach to the law of limitation does not mean doing injustice to opposite party and thereby, when an application to set-aside abatement is concerned, and when grounds raised for condonation of delay was not sufficient and also unbelievable, the delay was not condoned Page 69 of 82 HC-NIC Page 69 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT observing that provision of Order 22 Rule 9 of the CPC cannot be so construed so as to make it redundant. With due respect to such judgment, it is to be recorded that even after such decision dated 8.7.2010, in Civil Appeal no.6567 of 2015 decided on 25.8.2015, i.e. recently, Hon'ble the Supreme Court of India has, relying upon five Judge Bench of the Hon'ble Supreme Court of India in the case of Sardar Amarjit Singh Kalra (Dead) (supra) held as under:-
10. A brief reference to the history of the lands and the role of the parties concerned with them would be necessary to highlight the nature of the claims and the need for an effective and objective consideration and determination of the same on merits, in accordance with law. The lands in question, in which the various Proprietors in the village held distinct, separate and independent shares, were leased out on 15.11.1939 by the Proprietors under a Registered Lease Deed in favour of Delhi Pottery Works for a period of twenty years for exploiting minerals. The lands were said to be otherwise not fit or capable of any cultivation. The said lessees seem to have sublet the same on 23.5.1942 in favour of a partnership firm of Kota in Rajasthan, known as "Dewan Bahadur Seth Kesari Singh Budh Singh", for the remaining period of seventeen years from 18.4.1942 to 17.4.1959. On 10.5.1951, one Smt. Gulab Sundari claimed to have been inducted as the third partner in the sub-lessee firm and thereafter on 17.10.1951, an alleged dissolution of the partnership was said to have taken place as evidenced by a supplementary deed of dissolution said to have been executed on 27.8.1953 (unregistered) allotting the rights of the partnership firm under the Mining sub-lease dated 23.5.1942, to Smt. Gulab Sundari. Claiming to have secured a Bhumidari Certificate under the Land Reforms Act, she seems to have filed a Civil Suit No.174 of 1959 seeking for cancellation of the proceedings vesting the lands in the Gaon Sabha, on the basis that she continued to be Bhumidar. The said suit seems to have been decreed on 12.12.1966 and the appeals preferred by the Gaon Sabha and the Union of India were also said to have been dismissed, though the question as to whether the proceedings in which she claimed to have been accorded Bhumidar rights is illegal or legal was actually left open undecided and as irrelevant for the said litigation. Taking advantage of the above alone, the said Gulab Sundari seems to have got impleaded as a claimant in the proceedings before the Reference Court, for apportionment of the compensation awarded, among herself and her alienees. She also seems to have initially questioned the alienations made by her as being vitiated due to undue influence and fraud alleged to have been practised on her.
But, subsequently on 27.7.1969, such alienees and Mrs. Gulab Sundari appear to have entered into a compromise and the same was also said to have been filed before the Reference Court on 31.7.1969, resulting in those persons also making their claims before the Court. On 17.10.1969, Gulab Sundari seems to have filed a fresh claim statement claiming 3/16th share of the compensation leaving the remaining 13/16th share in favour of those sixteen persons.
11. It may be stated that the Additional District Judge, Delhi, decided the references on 20.5.1980 and the appeals before the High Court were filed against the said decision. During the pendency of the appeals before the High Court, the following appellants in RFA Nos.309 and 310 of 1980 were said to have died, as noticed below: -
S.No. Name of the appellant & rank Date of death
1. Shri Mukhtiar Singh (A. No.19) 24.06.1982
2. Shri Chandgi Ram (A. No.31) 01.04.1981
3. Shri Amichand (A. No.55) 21.02.1984
4. Shri Chhelu (A. No.56) 28.04.1983
5. Shri Balbir (A. No.57) 14.11.1985
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Applications for impleading their legal representatives were said to have beenfiled on 2.3.1987. These applications were rejected as belated and that no sufficient cause has been shown for condonation of the delay. The plea of partial abatement, if at all, of appeals qua only those deceased appellants was not accepted by the High Court and on the view that the decree was joint based upon common right and interest, the appeals were rejected in toto, as noticed supra."
Therefore, in the case of Balwant Singh (supra), judgment by five Judges Bench in case of Sardar Amraji Singh Kalra (supra) is not referred, practically, the binding decision would be only the case of Banwarilal (D) by Lrs. & Anr. Vs. Balbir Singh in Civil Appeal no.6567 of 2015 decided on 25.8.2015 and not Balwant Singh (supra) since both the judgments are dealing with the said issue wherein Banwarilal's case (supra) is based upon the decision of a decision of Five Judges Bench.
Therefore, with pain I have to record here that now time has come when litigants and their advocates have to be careful while citing random decisions, which are only supporting their case without ascertaining the real, correct and latest position on such subject. One more issue is necessary to recollect here that though it is clerical and not touching the merits of the case, it would be appropriate for the litigant to refer and to submit the same citation, whereas in the present case, though there is a reference of citation from SCC, while referring the case of Balwant Singh (supra), the supporting print-out is from Manupatra. Thereby, when there is a noting in written submission that paragraphs 13 to 16 are material, it is clear and obvious that paragraph numbers in both journals are different and therefore, it would be difficult to ascertain the correct submission by such litigant, though learned advocate has marked few lines in the print-out of the judgment. However, it is also well settled legal position that the judgment is to be read entirely and Page 71 of 82 HC-NIC Page 71 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT few sentences cannot be picked and chosen to determine any issue. In any case, even if we refer this judgment, it is evident that though Court has observed against condonation of delay in such judgment, while listing the numbers which need to be kept in mind while dealing with the applications filed under the provisions of Order 22 of the CPC, with an application u/s.5 of the Limitation Act with reference to the case of Perumon Bhagvathy Devaswom Vs.Bhargavi Amma (D) reported in (2008)8 SCC 321, the Court has to reproduce one of such issue as a decisive factor in condonation of delay, which is not the length of delay, but sufficiency of satisfactory explanation.
B) Prasad Mills Kamdar Samiti Vs. Bhupendra Bhagwatprasad Patel & Ors. in Company Application no.207 of 2014 in the same petition being Company Petition no.264 of 2008 wherein the applicant Prasad Mills Kamdar Samiti has prayed to join them as a litigant - opponent and Single Judge of this High Court has rejected such an application holding that there is inordinate delay by such applicant and that applicant has to follow the procedure laid down in Rule 34. Therefore, it is submitted that once the Co- ordinate Bench of this Court has in the same litigation, but for different application considered the provisions of Rule 34 in particular manner. I fail to realise such submission because it is well settled legal principle that every application has to be decided on its own merits considering the facts and circumstances and evidence for which such application is seeking any particular relief. If we peruse such unreported judgment dated 22.09.2015, it becomes clear that though the Court has considered the delay in filing objections, Court has specifically recorded that as the applicant in that case is not a representative Union or even a recognized one and appears to be loose body of workmen without any legal status, it is not possible to grant the prayer for impleadment and that the interest of the workmen can be protected by the representative Union at the relevant point of time and therefore, for such purpose, the present of applicant (in that application) is not necessary and therefore, ultimately, while rejecting the application in paragraph 28, the Court has stated that Page 72 of 82 HC-NIC Page 72 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT the applicant (in that application) not being a representative Union, has no locus standi to pray for impleadment as a party respondent in the Company Petition especially as a representative Union is already there. Therefore, what is observed in this judgment by the Co-ordinate Bench is with reference to the application for joining as a party and that too by non-recognized Union and hence, only because of some discussion on the point of delay with reference to the provisions of Rule 34, it cannot be said that because Company Application is dismissed, this Company Application was also to dismiss irrespective of any other facts and circumstances.
C) State Bank of India s. UCO Bank reported in 2015(1) GLH 589 in fact, this is the answer to the previous citation inasmuch as details of this case is already referred herein above whereby it is made clear that even if some person has no right to be joined as party litigant in any particular case, in Company matters, such person may take out appropriate separate notice as prescribed under the Rules and practically, this Court has already permitted the applicant before it to do so. It cannot be ignored that both these judgments are dealing with an application for joining as party respondent and only for appearance at the time of hearing so as to apprise the Company Judge about their perspective, which may ultimately affect the Scheme of revival and compromise or winding-up of the sick Company.
Therefore, even if we check the order in OJ Appeal no.1 of 2014 in the case of State Bank of India (supra) dated 21.1.2014, even the Division Bench has recorded the direction by the Single Judge that it would be open for the applicant to take out appropriate separate notice declaring its intention and follow the procedure prescribed by the Rules seeking appropriate orders, while confirming the order of the Single Judge and thereby dismissing the appeal. Therefore, the above observation by the Single Judge has been endorsed by the Division Bench and therefore, all these judgments would not help the original petitioners to conclude in their favour that present application needs to be dismissed summarily on that ground even without Page 73 of 82 HC-NIC Page 73 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT considering the fact that what is to be submitted by the applicant against the proposed Scheme.
At the cost of repetition, I have to recollect few decisions, which confirm that merely because a provision of law is couched in negative language employing mandatory character, same cannot be said to be without exception and entire context in which the provision was enacted may be considered and that in case of procedural provision, which is not of substantial or mandatory character, if no prejudice is caused to the present proceeding, no interference of Court is called for and that rules are laid down to aid for speedy delivery of justice and not as a tool to circumvent justice and that though the Court will not sit in appeal over the commercial wisdom of the shareholders in determining winding-up and revival, the Court will certainly consider whether the Scheme genuinely contemplates revival of a whole or part of the business of the Company and makes provisions for paying to creditors or for satisfying their Scheme as agreed to by them and for meeting the liability of workers. Thereby, the Court has to see bonafides of the Scheme and to ensure that the Scheme that is to be forwarded, is not a ruse to dispose of the assets of the Company in liquidation and whether such a proposal satisfies the elements of public interest and commercial morality. Thereby, if the Court finds the Scheme to be ruse to dispose of the assets by a private arrangement, then, it is its duty to dispose of the properties of the Company in liquidation, realise the assets and distribute the same in accordance with law. It is obvious that such disposal should be by public auction only. In such judgment, the Hon'ble Supreme Court of India has dealt with the words and phrase 'revival of Page 74 of 82 HC-NIC Page 74 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT Company' in detail, but I reserve to consider it in final petition, which is yet to be decided, and that even Company Judge is empowered to grant an opportunity to the original petitioners to cure the defects if circumstances so warrant. For all such observations, I am relying upon:-
(1) Rani Kusum Vs. Smt.Kanchan Devi & Ors. reported in AIR 2005 SC 3304;
(2) Vidyawati Gupta Vs.Bhakti Hari Nayak reported in (2006)2 SCC 777;
(3) State Bank of Patiala & Ors. Vs.S.K.Sharma reported in (1996)3 SCC 364;
(4) Associated Journals Ltd. Vs.Mysore Paper Mills Ltd.
reported in (2006)6 SCC 197;
(5) Meghal Homes (P)Ltd. Vs. Shreeniwas Girni K.K.Samiti & Ors. reported in (2007)7 SCC 753; and (6) Welding Rods Private Ltd. Vs.Indo Borax & Chemicals Ltd.
reported in (2002)108 Company Cases 747
f) With reference to submissions by the applicant regarding procedural aspect of Rule 34, it is submitted that all such decisions, which are relied upon by the applicant, are generally dealing with defective affidavits, verification, forms, result etc. which are curable defects, but a gross delay of 4 to 7 years cannot be treated as procedural or curable defects so as to render the Rule 34 as nugatory and for the purpose, reliance is placed in the case of Balwant Singh (supra). However, as already discussed herein above, the case of Balwant Singh (supra) cannot be considered as the sole decision to decide all such cases in view of the decision in Banwarilal's case.
g) The point no.(VII) in written submissions by the original petitioners, respondents in this application is material when it is submitted that Rule 34 is a complete Code for all persons, who Page 75 of 82 HC-NIC Page 75 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT want to appear at the time of hearing of petition and Rule 34 prescribes the procedure for the same. The procedure also includes obtaining leave of the Court/Judge for those persons, who could not give notice of intention to appear along with grounds of objection, two days before the day of hearing. Therefore, though it is submitted on previous occasion that the provision regarding leave by the Judge rendered nugatory and redundant, if there is inordinate delay etc., now, it has been admitted that the procedure also includes obtaining leave of the Court/Judge for those persons who could not give notice of intention to appear along with the grounds of objection two days before the date of hearing. If Rule 34 includes such procedure, then, it is now quite clear and obvious that if any person follows the time schedule as prescribed in Rule 34, then, the Court has no option, but to extend an opportunity to allow them to represent their objections. For the purpose, even petitioner has to follow the procedure prescribed under the Rules and Form 10, but if someone has failed to follow such time schedule as prescribed under Rule 34, by not giving notice of intention to appear along with grounds of objection before two days of hearing, then, he can apply for obtaining a leave of the Court for the purpose. Therefore, such application is practically for such leave and as discussed herein above, such leave needs to be granted, if fraud is committed either with the applicant or with the Court, then, it is necessary to extend an opportunity to such a person to explain that whether fraud has been committed or not and what is the affect of such fraudulent act, if any. One more reason is there to allow the applicant to be heard before approving the Scheme, when even the Hon'ble Supreme Court of India has confirmed that though Company Petition is to be decided Page 76 of 82 HC-NIC Page 76 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT expeditiously by this Court, its result would be subject to outcome of the S.L.P. preferred by the present applicant.
However, when it is submitted by the applicant that if Court is not inclined to consider the issue of sufficient cause for not filing the application in time, though there is no prescribed period of limitation, but only procedure is prescribed under Rule 34 and even if Court is not inclined to grant leave as per Rule 34, then, even Rule 9 of the Companies (Court) Rules confers inherent powers to the Court to pass appropriate orders and therefore, this Court may exercise such powers to grant such relief. In answer to such submission, learned advocate Mr.Vakil has relied upon the decision in the case of K.K. Velusamy v. N. Palanisamy reported (2011) 11 SCC 275. But, if we peruse such judgment, it becomes clear that Mr.Vakil has relied upon the submissions by the respondent before the Hon'ble Supreme Court of India, whereas, ultimately, Hon'ble Supreme Court of India has allowed the appeal by rejecting such submissions and therefore, such submissions cannot be considered as ratio decidendi, which is cited by the publisher in the print-out of the said judgment as "Court shall have inherent right for re-opening or recalling the witnesses for ends of justice". However, learned advocate Mr.Vakil for the respondents herein has relied upon a submission by the respondent in such cited case, which is to the effect that Court has no power to do that which is prohibited by the Code or the law by purported exercise of its inherent powers and that powers u/s.151, which is pari materia with Rule 9, will have to be used with circumspection and care, only where it is absolutely necessary, when there is no provision in Code governing the matter or when the bonafides of the applicant Page 77 of 82 HC-NIC Page 77 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT cannot be doubted or when such exercise is made to meet the ends of justice and to prevent abuse of process of Court, because the inherent powers of the Court being complimentary to the powers specifically conferred. All such legal discussion in the judgment under reference even after referring several previous decisions has been negatived, when the Court has ultimately held that in this case, the Court was satisfied that in the interest of justice and to prevent the abuse of the Court, the trial Court ought to have considered that whether it was necessary to reopen the evidence with some further observations and ultimately, remanded back the application, which was practically dismissed by the trial Court as well as High Court. Thereby, practically, the Hon'ble Supreme Court of India has simply recorded the submissions by the respondents, but held against such submission. Therefore, such judgment would not help the original petitioners, since each case is to be considered in light of its peculiar facts and circumstances only.
54. Therefore, the overall discussion herein above makes it clear that :-
A) Rule 34 provides two procedures (1) serving a notice regarding intention to appear two days before the date of hearing with copy of objections; and (2) if such notice was not issued and served in advance, then, seeking leave of the Court to appear. B) Therefore, there is no question of prescribed period of limitation for serving of notice and thereby, there is no question of condoning the delay because if there is no prescribed period of limitation, then, there is no question of condoning delay, though, procedure is prescribed, which provides that such notice is to be served two days before the date of hearing. Therefore, what is material is not Page 78 of 82 HC-NIC Page 78 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT the period of limitation and the delay, but what is material for consideration is actual day of hearing. Even at the cost of repetition, it is to be recollected that the second part of Rule 34 permits the Court to grant leave irrespective of any limitation and to that extend, such powers are considered to be inherent powers irrespective of Rule 9 though it is to be utilised judiciously. C) When there is no question of limitation, there is no question of condoning the delay.
D) The 'day of hearing' is certainly different from the 'date of hearing' fixed on a prior date, but 'day of hearing' is the day when Court has taken up the matter for final hearing.
E) While granting the leave, the Court has to consider that whether Scheme can be approved or not and for such consideration, the grounds in support of the Scheme or objections against the Scheme, decide that whether particular person should be allowed to file objections or not. Therefore, even if Court is not to decide merits of those objections, atleast bare minimum facts of such objections need to be examined while deciding the application seeking leave to appear.
F) Therefore, the stand of the original petitioners- respondents herein is not correct to say that the Court should not look into the factual details of the grounds of objections.
G) There is difference between leave to appear and join as respondent in main petition. Therefore, decisions relied upon by the original petitioners- respondents herein with reference to application for joining as respondent, even if disclosing and touching the dispute raised in this application, it would not restrict and bind the Courts to grant leave if otherwise there is substance in such application seeking leave.Page 79 of 82
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55. In view of above facts and circumstances, it is held that irrespective of day or date of hearing when Company Judge has got inherent powers as per Second part of Rule 34 to grant leave to appear in such application, to such person who wants to object the Scheme, leave is granted to the present applicants to appear and to object the proposed scheme, since they will certainly be able to assist the Court in deciding the genuineness of the Scheme and more particularly, when they have alleged that fraud has been committed against them, either by the proposer or by the IDBI Bank and more so when on such issue even the Hon'ble Supreme Court of India has observed that outcome of such Company Petition will be subject to decision rendered in S.L.P. before the Hon'ble Supreme Court of India, which is based upon such fraudulent transfer of shares of applicant in the name of proposer/sponsor of the Scheme, which is to be approved by this Court in main petition. Though leave is granted on such ground itself, discussion herein above also makes it clear that there is no substance in the other issues raised by the original original petitioners- respondents herein.
56. Therefore, the present Company Application no.34 of 2013 is allowed. Thereby, the applicant is permitted to appear and to submit his objections in the main Company Petition.
57. In view of the order passed in Company Application no.34 of 2013, the Company Application no.449 of 2011 preferred by Textile Labour Association, praying similar reliefs as prayed in Company Application no.34 of 2013, same is also allowed.
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58.Since the Hon'ble Supreme Court of India has directed to decided such petition before the month of November, 2015, the objections filed by the applicant is ordered to be taken on record of Company Petition no.264 of 2008. The original petitioners therein may, if they so desire, file their reply to such objections and if any detailed reply is already filed in record of this application, then, record of this application is to be kept and tagged with the record of Company Petition no..264 of 2008, which is to be listed for final hearing on 23.11.2015 before appropriate Company Court along with all other connected matters. For the purpose, if necessary, Registry may take necessary orders from the Hon'ble the Acting Chief Justice, since the matter has been specifically assigned to this Court by administrative order dated 29.09.2015.
(S.G.SHAH, J.) binoy Further order dated 06.11.2015 Learned senior advocate Mr.S.N.Soparkar appearing with learned advocate Mr.A.S.Vakil for the respondents is requesting to stay operation of this judgement for four weeks'; whereas learned advocate Mr.Navin Pahwa appearing with Mr.Pratik Jasani for the applicant objects to grant the stay of this judgment on different grounds viz. (1) Hon'ble the Supreme Court of India has directed this Court to decide the Company Petition before November, 2015. Pursuant to such direction by the Hon'ble Supreme Court of India, at the request of the respondents, now, their prayer to stay this judgment, is not proper; (2) respondents have two weeks' time to file reply and to challenge this order, if they so desire.
However, since every litigant has an absolute right to challenge any order if law so permits, I do not find any substance in the objection raised by learned advocate Mr.Pahwa, except to record, for which respondents agree that pursuant to staying such judgment, this Court would not be in a position to decide the main Company Petition no.264/2008 and to that extent, none of the party will complain to the Hon'ble Supreme Court of India that the matter is not decided as directed by the Hon'ble Page 81 of 82 HC-NIC Page 81 of 82 Created On Sat Nov 07 03:27:15 IST 2015 O/COMA/34/2013 CAV JUDGMENT Supreme Court of India before 30.11.2015. It is also clear and obvious that there is two weeks' holidays in this High Court and one week holiday in the Hon'ble Supreme Court of India. Therefore, it would be appropriate to stay the judgment for four weeks' as requested, with a clarity that in view of such order, now, Company Petition no.264/2008 could not be decided on or before 30.11.2015. Therefore, in absence of order by appropriate superior Court, main Company Petition be listed on 07.12.2015.
(S.G.SHAH, J.) binoy Page 82 of 82 HC-NIC Page 82 of 82 Created On Sat Nov 07 03:27:15 IST 2015