Equivalent Citation: [2007]138CompCas172(AP)
IN THE HIGH COURT OF ANDHRA PRADESH
Original Side Appeal No. 47 of 2001
Decided On: 24.10.2006

Appellants: Devi Travels Pvt. Ltd. rep. by its Director
Vs.
Respondent: Inter Globe Air Transport and Anr.

Hon'ble Judges:
Bilal Nazki and M. Venkateswara, JJ.

Counsels:
For Appellant/Petitioner/Plaintiff: Milind G. Gokhale, Adv.

For Respondents/Defendant: Mohan Vinod and Associates

Subject: Company

Acts/Rules/Orders:
Companies Act - Section 434 and 434(1)

Cases Referred:
Vysya Bank Limited v. Randhir Steel and Alloys (P) Ltd. 1993 Company Cases (76) 244; B. Viswanathan v. Seshasayee Paper and Boards Limited (1997) 3 Comp LJ 209 (Mad); Alliance Credit and Investments Ltd. v. Khaitan Hostombe Spinels Ltd. (1997) 3 Comp LJ 200 (All); N.L. Mehta Cinema Enterprises (P.) Ltd. v. Pravinchandra P. Mehta 1991 Company Cases (70) 31

Disposition:
Appeal allowed

JUDGMENT

Bilal Nazki, J.

1. This is an appeal filed against the order passed by the learned Company Judge in Company Petition No. 73 of 1999, on 26-04-2001.

2. For the sake of convenience, the parties shall be hereinafter referred to as arrayed in the Company Petition.

3. The Company Petition was filed by the petitioner, the first respondent herein, claiming that the respondent-Company i.e., appellant herein was indebted to the petitioner to the tune of Rs. 14,47,369/-. The Company Petition was allowed and the respondent--Company was directed to be wound up under the provisions of the Companies Act.

4. 'A statutory notice as required under Section 434 of the Companies Act was issued on 08-12-1998. However, the said notice was returned unserved.' This is the observation of the learned Company Judge in his order dated 26-04-2001.

5. So admittedly, no notice had been served in terms of Section 434 of the Companies Act, when the Company Petition was filed.

After the Company Petition was filed, Notice before Admission was ordered on 08- 06-1999. This notice was also not served. Therefore, on 31-08-1999, the Company Court permitted the petitioner therein to serve the respondent by substituted service. The service was affected and proof was filed before the Court on 29-09-1999. On 29-09-1999, the Court recorded that an Advocate had offered to enter appearance on behalf of the respondent and requested time to file counter. Matter was adjourned to 16-11-1999. On 16-11-1999, it was recorded that the Advocate, who made representation on earlier occasion on behalf of the respondent, had not appeared and had not filed any counter. Then, the Company Petition was admitted and publication was ordered to be made. Proof of publication was filed on 13-12-1999. Even at that stage, there was no appearance on behalf of the respondent. Then, an application being C.A.(SR) No. 95284 of 1999 came to be filed on behalf of the respondent praying that the respondent be permitted to file a counter. This application was dismissed on 16-02-2000. However, the Company Court allowed the respondent therein to participate in further proceedings in the Company Petition. Thereafter, the petitioner adduced evidence. Then, the matter was adjourned to 24-03-2000 for cross-examination of the deponent. The matter was again adjourned to 3-4-2000 in order to enable the respondent to cross-examine the witnesses. Respondent did not take the opportunity to cross-examine the witnesses. Then, the matter was posted for arguments. Again a representation was made by the respondent on 07-11-2000 stating that there was a chance of compromise between the parties. The matter was adjourned on 18 occassions, but no settlement was reached. Thereafter, the learned Company Judge relying on the evidence produced by the petitioner in the Company Petition allowed the petition.

6. In this background, this appeal has been filed on the sole ground that no notice under Section 434 of the Companies Act was served on the registered office, and therefore, even the subsequent knowledge of the respondent/appellant could not cure the defect and the application for winding up could have not been allowed. Section 434 (1) of the Act is reproduced below:

Section 434: Company when deemed unable to pay its debts: (1) A company shall be deemed to be unable to pay its debts ;

(a) if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding five hundred rupees then due, has served on the company, by causing it to be delivered at its registered office, by registered post or otherwise, a demand under his hand requiring the company to pay the sum so due and the company has for three weeks thereafter neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the creditor;

(b) if execution or other process issued on a decree or order of any Court in favour of a creditor of the company is returned unsatisfied in whole or in part; or

(c) if it is proved to the satisfaction of the Court that the company is unable to pay its debts, and, in determining whether a company is unable to pay its debts, the Court shall take into account the contingent and prospective liabilities of the company.'

7. According to the learned Counsel for the respondent/appellant, admittedly, no notice was given to the respondent at its registered office. In this connection, he placed reliance on the Company Petition itself. In paragraph 4 of the Company Petition, it is stated that the registered office of the respondent--Company is situated at No. 1, MCH Commercial Complex, Sardar Patel Road, Secunderabad, Andhra Pradesh, but, copy of the notice, which has been annexed to the Company Petition, shows the address as 'Devi Travels Pvt. Limited, 202, Aggarwal Bhawan, 35-36, Nehru Place, New Delhi --- 110019'. Even the two directors Mr.Gulale Raisinghani and Dr.N.Mohanan, were also shown to be available at New Delhi. Mr.Gulale Raisinghani's address was given as 'Director, Devi Travels Pvt. Limited, C-28, Mayfair Gardens, New Delhi --- 110016', where as the address of Sri N.Mohanan was given as 'Director, Devi Travels Pvt. Limited. 2, Pandit Pant Marg, New Delhi --- 110016'.

8. The learned Counsel for the petitioner/respondent, on the other hand, submits that it is too late in the day to complain that the notice has not been given at the registered office because the respondents in pursuance to the notices of the Court appeared in the Court, sought time to file counter but did not file counter. Then, sought permission to participate in the proceedings, but did not participate. Therefore, the defect, even if any, in service of the notice under Section 434 of the Act would not render any help to the respondent/appellant.

9. The learned Counsel for the respondent/appellant has relied on judgments of the various High Courts. The Bombay High Court in Vysya Bank Limited v. Randhir Steel and Alloys (P) Ltd. 1993 Company Cases (Vol.76) 244 held that the condition for serving notice at registered office was mandatory in terms of Section 434 of the Act. The High Court of Madras in B.Viswanathan v. Seshasayee Paper and Boards Limited (1997) 3 Comp LJ 209 (Mad) also held that notice under Section 434 of the Act was mandatory. In this case, notice was given to the Managing Director and not to the Company. The High Court of Allahabad in Alliance Credit and Investments Ltd. v. Khaitan Hostombe Spinels Ltd. (1997) 3 Comp LJ 200 (All) also held that Section 434(1) was mandatory and had to be strictly complied with. Similarly, Bombay High Court in N.L. Mehta Cinema Enterprises (P.) Ltd. v. Pravinchandra P.Mehta 1991 Company Cases (Vol.70) 31 held that the provision was mandatory, and in the absence of a notice under Section 434 of the Act, the Company Petition is not maintainable. In the present case, we have seen that the learned Company Judge after noting that there was no defence also observed that,

In the circumstances, the averments made in the petition coupled with the evidence of Mr. Ravi Kumar and the documents proved by him, which are marked as Exs.A.1 to A.4, go unrebutted. Therefore, I have no option but to allow the Company Petition as prayed for.

10. In terms of Section 434 of the Act, a presumption would be available, only if the notice had been served at the registered office, which, admittedly, has not been done in this case.

Therefore, the appeal is allowed and the order passed by the learned Company Judge in Company Petition No. 73 of 1999, dated 26-04-2001 is hereby set aside. No costs.