T. Narayanan Vs The Official Liquidator High Court, Madras as the liquidator of Sri Visalakshi Mills Private Limited (in liquidation) and K.R. Palaniappan, Proprietor K.R.S.A. Karuppan Chettiar and Co., No. 443, K.K. Nagar, Madurai - 625 020

R. Banumathi, J.@mdashCan the appellant - son of the Managing Director of the Company in liquidation seek to set aside the winding up order dated 3.12.2008 made in C.P. No. 78 of 2008 invoking inherent powers of the Company Court under Rule 9 of the Companies Court Rules on the technical plea of irregularity in the advertisement of publication of the Company Petition for winding up is the question falling for consideration in this appeal, which arises out of the Order of dismissal of the application - C.A. No. 1286 of 2010 (30.03.2011) preferred by the appellant.

2. The Company - Sri Visalakshi Mills Private Limited owes an amount of Rs. 79.35 Crores to the secured creditors - Indian Bank, ARM, Madurai, Dena Bank, Madurai, workmen and other claims payable to E.S.I. Corporation and E.P.F. Organisation. For recovery of the amount of Rs. 13,18,88,090/-, Indian Bank has initiated SARFAESI proceedings in 2004. After long drawn litigation, unit ''C'' was sold in 2007. In respect of ''A'' and ''B'' units, the SARFAESI proceedings are pending. Earlier, the Company challenged the order of appointment of the Official Liquidator to take possession of the properties and to give police protection and the Company failed to comply with the Order of the Court made in O.S.A. No. 312 of 2008. In the second round of litigation, the Company also challenged the sale of assets of the Company. In these circumstances, can the appellant claiming to be the Contributory invoke the inherent jurisdiction of the Company Court to re-agitate the matter on the ground of irregularity in the initial advertisement in the two newspapers dated 3.7.2008 and that the said irregularity in the publication in the news papers would vitiate the order of winding up (3.12.2008) are the questions to be resolved in this appeal.

3. We have heard Senior Counsel Mr. T.R. Rajagopalan appearing along with Mr. Anand for the appellant. We have also heard Mr. V. Prakash, learned Senior Counsel appearing for the Official Liquidator along with Mr. S.R. Sundar and Mr. Vijay Narayan, learned Senior Counsel appearing for the 2nd respondent/petitioning creditor along with Mr. R. Parthiban. We have also heard Mr. N.G.R. Prasad, learned counsel appearing for the workmen along with Mr. Srinvasa Murthy, who filed impleading petition. We have also heard Mr. Jayesh B. Dolia, learned counsel appearing for Indian Bank and Mr. G.R. Lakshmanan, learned counsel appearing for Dena Bank.

4. Sri Visalakshi Mills private limited - Company in liquidation availed loan from Indian Bank in consortium with Dena Bank in the ratio of 52:48 in the year 1995. In 2000, Indian Bank filed original Application in O.A. No. 1040 of 2000 before DRT for recovery including the claim of Dena Bank - consortium member. Notice u/s 13(2) of the SARFAESI Act was also issued in March 2004. After several rounds of litigation before DRT and in the High Court, Madurai Bench and fighting out the litigation upto the level of Supreme Court, Unit ''C'' was sold and in respect of ''C'' unit, Bank issued sale certificate to the auction purchaser. In November 2007, for sale of units ''B'' and ''C'', proceedings continues to be pending before DRT and DRAT. In these circumstances, Company Petition - C.P. No. 78 of 2008 came to be filed by the 2nd respondent.

5. Factual background in brief:

C.P. No. 78 of 2008:-Alleging that the Company is not in a position to pay off its debts, the 2nd respondent filed Company Petition - C.P. No. 78 of 2008. On 24.6.2008, an order was passed appointing Official Liquidator as the provisional liquidator and also to take charge of the assets of the Company and advertisement was directed to be listed in the English Daily and Tamil daily and also in Tamil Nadu Government Gazette fixing the date of hearing as 22.07.2008 with 14 days clear advance notice. Publication in news papers as well as Gazette notification was effected, which was produced before the Court by Petitioning Creditor. On 22.7.2008, the Official Liquidator, who had been appointed as a provisional liquidator, had convened a meeting of the secured creditors, Ex. Directors and petitioning creditor for the purpose of taking charge of the assets. In pursuance of the Order of the Court, the provisional liquidator effected publication calling for claims against the Company. The Official Liquidator was directed to value the assets in ''A'' and ''B'' Units through ITCOT.

6. Direction to Official Liquidator to take possession of the properties and O.S.A. No. 312 of 2008:-By the Order dated 24.9.2008, the Court directed the Official Liquidator to take possession of the properties of the Company and also directed the Directors to hand over the keys of the Company and permission was granted to the Official Liquidator to break open and take possession in case of non-co-operation. As against the Order dated 24.9.2008, Company filed O.S.A. No. 312 of 2008. In the appeal, the Company handed over a Cheque (dated 19.11.2008) for Rs. 5,00,000/-in favour of the Petitioning Creditor and the counsel appearing for the Company took time for getting instructions for repayment of the balance amount to the Petitioning Creditor. The Cheque for Rs. 5,00,000/-issued to the 2nd respondent/petitioning creditor was dishonoured for the reason "Account Closed". Since the Order of the Court was not complied with, observing that the Company had falsely represented to the Court and issued Cheque for Rs. 5,00,000/-without current account and that it is not a fit case to show indulgence in favour of the Company, the Bench has dismissed the O.S.A. No. 312 of 2008 (1.12.2008).

7. Order of winding up and direction to auction:-After dismissal of the appeal, the matter came up before the single Judge and on 3.12.2008, the Court passed an order winding up the Company and appointing the Official Liquidator, who was appointed as a provisional liquidator, as Official Liquidator of the Company in liquidation. By separate order, on the same day (3.12.2008) in A. No. 2107 of 2008, direction was given for sale of certain assets fixing upset price of the property at Rs. 48.44 Crores. On the basis of the winding up order as well as further directions, advertisement was effected by the Official Liquidator on 17.12.2008. Thereafter a memo (19.02.2009) was filed by the counsel for the Company in liquidation that a sum of Rs. 9,93,000/-was paid to the 2nd respondent/ Petitioning creditor and assured to pay the balance amount of Rs. 45,015.50ps to the Petitioning Creditor. On 19.2.2009, Order was passed directing the Company to pay Rs. 25,08,395/-before 4.3.2009 to the Official Liquidator towards advertisement, valuation charges and other incidental charges. On 13.4.2009, an application was filed to implead the workers through its Union. The direction of the Court to pay the amount to the Official Liquidator was not complied with. On 29.06.2009, Court passed an order directing the Official Liquidator to proceed with the sale and auction was fixed on 30.07.2009. In the meanwhile on 27.08.2009, a joint memorandum was filed by the Company in liquidation and the 2nd respondent stating that the entire amount to the 2nd respondent was settled and that the Company Petition is not being pressed.

8. A. Nos. 1238 and 1239 of 2008 and O.S.A. Nos. 370 and 372 of 2008:-The two applications - A. Nos. 1238 and 1239 of 2008 were filed by the Company to stay all further proceedings and also to set aside the auction proceedings. Both the applications came to be dismissed on 7.9.2009 and the date of auction was fixed on 10.09.2009. On 15.09.2009, sale was confirmed by the Court and consequential order was passed on 14.10.2009 allowing the Official Liquidator to hand over the properties.

9. Being aggrieved by dismissal of the applications - C.A. Nos. 1238 and 1239 of 2009, the appellant preferred appeals in O.S.A. Nos. 370 and 372 of 2009. Both in the applications as well as in the appeal, the appellant challenged the auction and auction proceedings mainly on the grounds that the properties are in the border of Madurai Corporation limit very near to schools and colleges and the properties are very valuable properties and that the valuation was not properly done and that the auction is vitiated on account of the error apparent on the face of the records in fixing the upset price. It was further averred that a Syndicate had been formed to knock away the property at a very low price. Yet another objection raised was that many Indian Companies, textile industries all over India and even the foreign companies have the proposal to start their Companies at Madurai and therefore global tenders should have been sought before proceeding with the auction. The grievance was that the publication made in the local dailies suffers grave irregularity.

10. Observing that there was no proper publication for the sale and that sufficient number of bidders were not present and only two bidders were present, by the Order dated 12.1.2010 in O.S.A. No. 370 of 2009, Division Bench has set aside the auction sale and directed the matter to be posted before the single Judge to proceed with the sale process afresh after making necessary action. The S.L.P.Civil (C.C.7452-7454/2010) filed by the auction purchaser - True Value Homes India Private Limited came to be dismissed by Order dated 19.7.2010.

11. A. No. 1286 of 2010:-In the above factual backdrop of earlier two rounds of litigations, the appellant, who is none other than the son of Managing Director of the Company in liquidation, has filed this petition seeking leave to file the application and also to set aside the order of winding up dated 3.12.2008 on the ground that he is a substantial shareholder in the Company in liquidation and that he is holding around 10 percent of total paid up capital of the Company in liquidation and is competent to maintain the petition. The appellant alleged that he is a substantial shareholder in the Company and since he was working in Bangalore he was not aware of the proceedings in relation to the winding up of the Company and that only recently he came to know that a winding up order had been passed in December 2008. The appellant further alleged that upon inspecting the records he found there was material irregularities in non-compliance of the provisions of law and that the publication in Deccan Chronicle and Dina Thanthi was without cause title of the Company Petition and that the advertisement was not in the prescribed form. The appellant alleged that the advertisement is a mandatory requirement and the failure to advertise the Company Petition in a statutory form vitiates the order of winding up and that winding up order was passed without adequate opportunity to the persons interested to represent their case before the Company Court. Stating that the amount due to the 2nd respondent has also been paid, the appellant sought for setting aside the order of winding up dated 3.12.2008 made in C.P. No. 78 of 2008.

12. Before the single Judge, referring to the various proceedings, the Official Liquidator has filed the report and also statement of expenses incurred by the Official Liqudiator stating that the Official Liquidator has incurred expenses to the tune of Rs. 91,32,559/-towards valuation charges, professional charges and the payment to the security and other incidental expenses. The 2nd respondent - Petitioning creditor also filed an elaborate counter affidavit stating that the appellant very well knew about the pendency of the proceedings all along since his own father was defending the proceedings and that the appellant was residing at Madurai and knew that possession had been taken over by the Official Liquidator and that the appellant cannot take advantage of the trivial irregularity in the advertisement. The workmen, who filed impleading petition, also strongly opposed the application by contending that the appellant is residing along with his father - N. Thiagarajan, who was defending the Company Petition all these years and that the application has been filed only to drag on the proceedings and to evade the workmen''s claim.

13. Even though the appellant claimed that he is a shareholder before the single Judge, the appellant did not produce any share certificates, but only relied upon entry in the dividend register regarding payment of dividend of Rs. 33,000/-. The learned single Judge held that the appellant failed to satisfy the official liquidator that he holds 10 percent shares in the Company as claimed by him in the affidavit and inspite of the time granted by the Official Liquidator, appellant has failed to produce the primary evidence showing holding of shares by the appellant in the Company. In so far as the alleged irregularity in the publication, the learned single Judge held that the winding up order could be set aside only in the appeal by the appellate Court and not an application filed before the Company Court. The learned single Judge held that when specific remedy is available the inherent jurisdiction under Rule 9 of the Companies Court Rules cannot be invoked. The learned single Judge further observed that in any event, the appellant has no proposal to revive the Company nor anything is produced as to how the appellant proposed to meet the mounting liabilities of the Company in liquidation and on those findings dismissed the application.

14. Challenging the impugned order, the learned Senior Counsel for appellant Mr. T.R. Rajagopalan has submitted that Rule 113 of Companies Court Rules in relation to the advertisement to be published in Form No. 53, is one of the most important requisite of a Company Petition prior to the passing of order of winding up of the Company and the failure of advertisement of the Company Petition in compliance with the statutory form vitiates the order of winding up. It was further submitted that having noted the defect in the application, Court ought to have directed fresh publication fixing the fresh date of hearing. It was further submitted that since the order of winding up dated 3.12.2008 is in violation of the provision of the law, the appellant is entitled to invoke inherent jurisdiction of the Company Court in praying to set aside the winding up order dated 3.12.2008. Placing reliance upon a decision of the Supreme Court in National Textile Workers'' Union and Others Vs. P.R. Ramakrishnan and Others, , it was contended that "no order involving adverse civil consequences can be passed against any person without giving him an opportunity to be heard against the passing of such order and this rule of natural justice applicable to quasi-judicial and administrative proceedings would also apply to judicial proceedings such as a petition for winding up of a Company.

15. Per contra, Mr. V. Prakash, learned Senior Counsel for the official liquidator has raised strong objection as to the locus standi of the appellant as the ''contributory'' in terms of Section 428 of the Companies Act. The learned Senior counsel has submitted that in terms of Section 439(1), only those persons mentioned therein are entitled to present a Petition for winding up of a Company and a person as a ''contributory'' is entitled to file an application only if he satisfies the requisites of Section 439(4)(b). Learned Senior Counsel would mainly contend that only a person as a ''contributory'' in terms of Section 439(4)(b), is entitled to file application relating to the winding up petition including a petition to set aside/recall the order of winding up and the appellant was not a shareholder as on date of winding up and therefore he has no locus standi to file any petition for setting aside the order of winding up.

16. Locus standi:-The appellant claims that he holds 30,000 shares in the Company and that "he is substantial shareholder in the Company in liquidation and therefore he is a ''contributory'' within the meaning of the Companies Act and being a ''contributory'' entitled to file Petition to set aside the winding up order on the ground of defective publication.

17. It is seen from the impugned order, that when matter was pending before the single Judge, inspite of assurance to produce the share certificate before the Official Liquidator by 18.2.2011, the appellant did not produce any share certificate. Paragraph No. 14 of the impugned order refers to the statement of the Official Liquidator that inspite of the time taken the appellant failed to prove by primary evidence showing his holding of shares in the Company. At the time when the matter was argued before the single Judge, the learned counsel for appellant only relied upon the entry in the dividend register regarding the payment of dividend of Rs. 33,000/-to the appellant. The learned single judge held that the entry regarding payment of dividend in the dividend register is not sufficient to accept the contention of the appellant that he is the contributory.

18. When this O.S.A came up for admission, on behalf of the appellant, learned Senior Counsel Mr. T.K. Seshadri made a request that the appellant may be permitted to inspect the Record Room to know about the availability of the share certificates. By Order dated 27.6.2011, this Court directed the Official Liquidator to permit the appellant to inspect the Record Room on 29.6.2011 in the presence of Official Liquidator as well as representatives/counsel for the secured creditors and Mr. P. Muthuraja, representative of the workmen. The Official Liquidator filed a report after the inspection of the Record Room that no share certificate was available in the name of appellant and the same was recorded in our subsequent Order dated 30.06.2011. Subsequently, when the matter was taken up for hearing on 12.7.2011, the appellant has produced two share certificates bearing Numbers from 26290 to 31289 (Share Certificate No. 69) and 63410 to 67409 (Share Certificate No. 71) standing in the name of L. Narayanan Chettiar and we have directed the appellant to produce the Original Certificates before the Official Liquidator and the Official Liquidator was directed to verify the same and report to the Court. After verifying the share certificates with reference to the records of the company, on 12.8.2011, Official Liquidator has filed a detailed report stating that the contention of the appellant that he held 9,000 shares of the Company in liquidation is not correct.

19. We may briefly refer to the report of the Official Liquidator refuting the contention of the appellant that he is the shareholder of the Company in liquidation. Share certificate No. 69 for 5000 shares with distinctive numbers 26290 to 31289 was shown to have been transferred thrice as detailed below:

Share Certificate No. 71 for 4000 shares with distinctive Nos. 63410 to 67409 was issued to Sri L. Narayanan Chettiar and the shares were shown to have been transferred thrice as detailed below:

20. Upon verification of share certificates, the Official Liquidator filed the report dated 12.8.2011 stating that there was no transfer of 9000 shares from N. Palaniappan to N. Thiagarajan. In support of the report, the Official Liquidator has produced xerox copy of the relevant pages of the Share Transfer Register. Share Certificate is the prima facie evidence of title of the member. When there was no transfer of 9,000 shares from N. Palaniappan to N. Thiagarajan on 10.09.1980, the question of transfer of these 9000 shares to the appellant does not arise.

21. Refuting the report of the Official Liquidator and contending that the appellant holds 30,000 shares in the Company, appellant has produced the following documents:

Partition Deed dated 26.03.90 evidencing allotment of 30000 shares;

Letter dated 20.09.90 addressed by the "Company";

Two Proceedings of the Income Tax Officer, Madurai dated 04.06.1993;

Name of the Share holders list as on 31.04.02 given by the "Company" for renewal of factory licence;

Dividend Register from 1970 onwards;

Application dated 26.02.03 filed before BIFR wherein appellant was shown as a shareholder.

22. The appellant also placed reliance upon following two orders:

(i) Order dated 22.07.2010 passed in C.A. No. 1254 of 2010 granting leave to the appellant to file application as a ''contributory'' of the Company;

(ii) Order of the Court dated 9.11.2009 in M.P. No. 1 of 2009 in O.S.A. Nos. 370 to 372 of 2009 in which the appellant was granted leave by the Division Bench to challenge the auction proceedings as a ''contributory'' of the company.

23. In so far as the above Court orders are concerned, the Court did not go into the merits of the contentions of the appellant whether he was ''contributory'' or not. Merely accepting the averments in the Petition, the Court has granted permission to the appellant to file application/appeals. While so, the appellant cannot take advantage of the orders passed in the applications.

24. In so far as the documents produced by the appellant, the documents relate to the period from 1990-2003. In terms of Section 439(1) of Companies Act, only those persons mentioned therein are entitled to present a petition for winding up of a Company. Only a person as a contributory in terms of Section 439(4)(b) is entitled to file application as petitioner relating to winding up of the Petition. In terms of Section 439(4)(b), a contributory can maintain a petition only if he has held the shares for at least six months during the eighteen months immediately before the commencement of the winding up proceedings.

25. In order to file a Petition for winding up, a contributory has to satisfy the requirements of Section 439(4)(b). As per Section 439(4)(b), the name should have been registered as a shareholder for atleast six months during the 18 months immediately before the commencement of the winding up. Section 439(4)(b) reads as under:

439. Provisions as to applications for winding up.

(1) to (3)....

(4) A contributory shall not be entitled to present a petition for winding up a company unless

(a)....

(b) the shares in respect of which he is a contributory, or some of them, either were originally allotted to him or have been held by him, and registered in his name, for at least six months during the eighteen months immediately before the commencement of the winding up, or have devolved on him through the death of a former holder.

26. By a reading of Section 439(4)(b), it is clear that a person has to satisfy the requirements of Section 439(4)(b) in order to be able to file a petition for winding up subject to the satisfaction of sub section (4)(b). That is to say that he must have been a member in the Register for any six months during the eighteen months immediately preceding the winding up. As pointed out earlier, all the documents filed by the appellant relate to 1990-2003. The Company Petition was filed on 13.2.2008 and winding up order came to be passed on 3.12.2008. From December 2006, i.e., eighteen months prior to the filing of Company Petition for winding up, the appellant must have held the shares atleast for a period of six months. Absolutely no materials are forthcoming to show that the appellant held shares for six months within a period of eighteen months prior to the filing of winding up petition.

27. Mr. T.R. Rajagopalan, learned Senior Counsel appearing for the appellant has contended that the ''durational requirement'' requisite u/s 439(4)(b) is only for filing winding up petition by contributory and the said ''durational requirement'' is not for filing petition for setting aside the winding up order. It was further submitted that in the absence of any such statutory requirement, the Court cannot presume any such ''durational requirement'' for filing a petition to set aside the winding up order.

28. Per contra, Mr. Prakash, the learned Senior Counsel for the Official Liquidator has submitted that the Act stipulates certain class of persons satisfying the requirements of Section 439(4)(b) to file a petition for winding up; lest, there may be speculative transfers and the persons recently held the shares also might come forward to file a petition for winding up. The learned Senior Counsel would further submit that if we dilute the rigour of Section 439(4)(b), anybody claiming to be the contributory can come to the Court and try to file the winding up petition, thereby jeopardising the functioning of the Company. It was further argued that when such is the statutory inbuilt for filing of winding up petition, the same inbuilt safeguard would vice-versa apply to the contributories for filing the petition to set aside the winding up order.

29. We find much force in the submission of the learned Senior Counsel for Official Liquidator. Emphasising on the "durational requirement", when a statute prescribes that only a certain class of contributories can seek relief of filing winding up petition, the same stipulation applies vice versa for filing petition to set aside the winding up order. When the Act emphasises the "durational requirement" of holding shares by the contributory for filing winding up petition, only those persons are empowered to undo the same. If we dilute the rigour of Section 439(4)(b) either for filing winding up or for setting aside the order of winding up, it would affect the stabilised functioning of the Company. In the absence of necessary proof that the appellant held the share certificates for atleast six months during the eighteen months immediately before the commencement of winding up proceedings, the appellant, who has not satisfied the requirement of Section 439(4)(b), could not have filed the petition to set aside the winding up order dated 3.12.2008.

30. Alleged defect in compliance of the mandatory requirements of advertisement (Form 48):-Be that as it may, assuming that the appellant is ''any person whose interest was likely to be affected by the winding up petition and is entitled to oppose the winding up petition, let us consider the merits of the arguments advanced on behalf of the appellant. The learned Senior Counsel for the appellant contended that winding up order is a drastic order operating against creditors/debtors/contributories affecting their rights vis-a-vis the Company and therefore the advertisements are to be effected as mandated under Rule 99 in terms of Form No. 49 so that all concerned are put on notice regarding the winding up proceedings against the Company and none can complain of violation of principles of natural justice of not being heard before the order of affecting their rights is being passed. The grievance of the appellant is that in the case on hand, the advertisement was not effected as mandated under Rule 99 and the advertisement effected did not contain the "number of the Company Petition" and "name of the Company" and thus not in terms of Form 48 of the Companies (Court) Rules. In support of his contention, the learned Senior Counsel placed reliance upon a decision of the Supreme Court in the case of National Conduits (P) Ltd. Vs. S.S. Arora, . Placing reliance upon a decision of Division Bench of this Court in Nepc Micon Ltd. vs. Hindustan Thompson Associates Ltd., (1998(II) CTC 709), the learned Senior Counsel further contended that winding up petition has certain consequences on the status, standard, financial viability and stability and the Order of winding up has serious repercussions on the stability of the Company. It was further argued that when a statute prescribes certain things to be done in a certain manner, such mandatory requirements have to be strictly followed and any violation of the mandatory requirements would vitiate the winding up order.

31. Countering the submissions, the learned Senior Counsel for Official Liquidator has submitted that the non-mentioning of the "number of the Company Petition" and "name of the Company" in the advertisement could only be an irregularity in the initial advertisement and such procedural irregularity in compliance with the mandatory requirements would not vitiate the order of winding up. It was further submitted that even though the cause title and the Company Petition number were not given in the advertisement made in the news papers, the Gazette publication was totally in accordance with law. Placing reliance upon decisions of Supreme Court in Syndicate Bank and Others Vs. Venkatesh Gururao Kurati, and Union of India (UOI) and Others Vs. Bishamber Das Dogra, , the learned Senior Counsel would further submit that to sustain the allegations of violation of principles of natural justice, one must establish prejudice and no such prejudice was shown to have been caused to the appellant.

32. Mr. Vijay Narayan, the learned Senior Counsel for the petitioning creditor/2nd respondent would submit that the agent, who has been entrusted the job of giving advertisement by the petitioning creditor misunderstood the scope of publication and he published the matter, which appeared after the title "advertisement of publication" and the non-mentioning of the cause title and the company petition number was only an inadvertent mistake done by the agent on account of ignorance of the legal provisions.

33. Reiterating the submissions made by Mr. Vijay Narayan, learned Senior counsel appearing for the petitioning creditor and Mr. V. Prakash, learned Senior Counsel appearing for the Official Liqudiator, learned Counsel appearing for the workmen Mr. Srinivasa Murthy would submit that the appellant was aware of the happenings in the Company and taking possession by the Official Liquidator and the appellant, being son of the Director -Thiagarajan, who was defending the Company Petition all these years, cannot complain of any irregularity in the advertisement and prejudice being caused to him.

34. The Companies (Court) Rules envisage:-(i) the presentation of an application for winding up in the manner prescribed in Rule 95; (ii) the admission of the winding up petition after such presentation under Rule 96 and (iii) the duration as to advertisement under Rule 96. Rule 96 envisages a fourth step - namely the hearing. Rule 99 specifically deals with advertisement of petition for winding up. As per Rule 99, subject to any directions of the Court, the petition shall be advertised within the time and in the manner prescribed by Rule 24. The form of advertisement is set out in Form No. 48 to the Rules. That is the heading as in Form No. 1 containing "Company Petition Number", "name of the petitioner", and "presentation of the Petition for winding up", etc.,

35. Considering the scope of Rules 96 and 24 of the Company Court Rules and the steps to be taken, in National Conduits (P) Ltd. Vs. S.S. Arora, , the Supreme Court has held as under:

(2) Except in the case of a petition to wind up a company, the Judge may, if he thinks fit, dispense with any advertisement required by these Rules.

When a petition is filed before the High Court for winding up of a company under the order of the Court, the High Court (i) may issue notice to the Company to show cause why the petition should not be admitted; (ii) may admit the petition and fix a date for hearing, and issue a notice to the Company before giving directions about advertisement of the petition; or (iii) may admit the petition, fix the date of hearing of the petition, and order that the petition be advertised and direct that the petition be served upon persons specified in the order. A petition for winding up cannot be placed for hearing before the Court, unless the petition is advertised: that is clear from the terms of Rule 24(2). But that is not to say that as soon as the petition is admitted, it must be advertised. In answer to a notice to show cause why a petition for winding up be not admitted, the Company may show cause and contend that the filing of the petition amounts to an abuse of the process of the Court. If the petition is admitted, it is still open to the Company to move the Court that in the interest of justice or to prevent abuse of the process of Court, the petition be not advertised....

36. C.P. No. 78 of 2008 was filed on 13.2.2008 and on 7.3.2008, notice regarding admission was directed to be served on the Company. On 13.6.2008, after the notice was duly served on the Company, the matter was listed for hearing; but there was no representation on behalf of the Company and the matter was adjourned to 24.06.2008. On 24.06.2008, order was passed that the Official Liquidator be appointed as the provisional liquidator and to take charge of the assets of the Company. Advertisement was directed to be published in English daily - Deccan Chronicle and Tamil Daily - Dina Thanthi and Tamil Nadu Government Gazette fixing the date of hearing as 22.07.2008 with the 14 days of clear advance notice. The advertisement was published in English daily and Tamil daily on 3.7.2008. In the advertisement so effected, the cause title and the company petition number were not given in the publication. In Paragraph No. 7 of the counter affidavit filed in C.A. No. 1286 of 2010, the petitioning creditor has clearly stated that while publishing the notice, the agent, who had been entrusted the job misunderstood the scope of the publication and published the matter, which appeared after the title "Advertisement of Petition" and the inadvertent mistake was done by the agent on account of ignorance of the legal provisions. Even though the Company Petition number and cause title was not given in the advertisement, the Gazette publication effected on 9.7.2008 contained the full cause title and other details in Form No. 48, which is in accordance with the Rules. Even though the Gazette notification was short of two days notice, we find that the Gazette notification was in accordance with the rules.

37. The appellant alleges two procedural irregularities in effecting the advertisement:

(i) omission to mention the Company Petition Number and cause title; and

(ii) short of two days in effecting Gazette publication. Rules 24 and 96 are mandatory.

38. Assuming that the mandatory requirement was not complied with, the question falling for consideration is, "can the non-compliance of procedural mandatory requirement would ipso facto vitiate the winding up order and stall further proceedings?". The next question falling for consideration is. "can the non-compliance of a procedural mandatory requirement be a ground to set aside the winding up order after three years, especially when the appellant had the opportunity of fighting out the litigation in the earlier round?."

39. The purpose of advertisement is to give an opportunity to the creditors/debtors/Company to put forth their case before the Court. Assuming that the procedural mandatory requirement was not complied with, in our considered view, it cannot be a ground to set aside the winding up order after three yeaRs. As rightly contended by the learned Senior Counsel for the Official Liquidator, to sustain the allegations of violation of principles of natural justice, one must establish prejudice. When fairness is shown and if the facts and circumstances indicate that the Company/contributory were put on notice and that no prejudice was caused to them, the Company/contributory cannot complain of any procedural irregularity. The facts and circumstances clearly show that the appellant was not put to any prejudice by the procedural irregularity in the advertisement - non-mentioning of the Company Petition number and cause title in the paper publication. The appellant, being son of the Director of the Company, knew about the pendency of the proceedings all along since his father was defending the same. It is stated that the appellant was aware that the possession of the properties had been taken over by the Official Liquidator. Earlier, by the Order dated 24.9.2008, the Court directed the Official Liquidator to take possession of the properties of the Company. As against the said order dated 24.09.2008, the Company preferred appeal in O.S.A. No. 312 of 2008. Because of non-compliance of the direction of the Court to pay Rs. 5 lakhs to the petitioning creditor, by the order dated 1.12.2008, the said O.S.A. No. 312 of 2008 came to be dismissed. Subsequently, when the matter came before the single Judge, the appellant paid a sum of Rs. 9,93,000/-to the petitioning creditor and assured to pay the balance amount of Rs. 45,015.50ps and subsequently the entire amount was settled to the petitioning creditor. On 19.2.2009, the Court directed the Company to pay Rs. 25,08,395/-to the Official Liquidator. Inspite of direction from the Court the amount due to the Official Liquidator was not paid and the Court directed the Official Liquidator to proceed with the sale. The property was sold in the public auction and on 15.09.2009, the sale was confirmed by the Court and consequent order was passed on 14.10.2009 allowing the Official Liquidator to hand over the properties. Challenging the sale, appellant filed appeals - O.S.A. Nos. 370 and 372 of 2009. Having challenged auction sale, in the earlier round of appeals - O.S.A. Nos. 370 and 372 of 2009, it is not open to the appellant to contend that he was not aware of the proceedings and that the defect in the advertisement has caused prejudice to him.

40. It is pertinent to note that while setting aside the auction sale, the Division bench ordered that the Company Court has to proceed with the sale process afresh after making necessary publication. In the earlier O.S.As, the contention of the alleged irregularity in the advertisement in Form 48 was not at all raised. The appellant challenged the auction sale mainly on the grounds that (i) the properties are in the border of Madurai corporation limit and are very valuable properties and upset prices fixed are very much less; (ii) property was brought to auction in undue haste and in the open court parties were permitted to bid up to the upset price. At the time when the earlier O.S.A. Nos. 370 and 372 of 2009 were filed, the appellant was well aware of the winding up order dated 3.12.2008. But the appellant has not challenged the winding up order dated 3.12.2008 on the ground of procedural irregularity.

41. In the affidavit filed along with the impleading petition filed by the workmen, it is clearly averred that the appellant resides along with his father -Thiagarajan, who was defending the Company Petition all these years and that the appellant was well aware of the proceedings. It is further averred that when the representatives of the Official Liquidator came to take possession of the mill in September 2009 and the Time Keeper handed over the keys only after getting permission from the appellant. In the earlier appeals, the alleged procedural irregularity in the advertisement was not raised. The omission to raise the same in the earlier appeals would certainly be a deliberate waiver of those objections. Having omitted to raise the objections, the appellant is now precluded from challenging the winding up order.

42. Re. Contention - Petitioning creditor''s dues settled:

As pointed out earlier, the amount was paid to petitioning creditor and on 27.8.2009, a joint memorandum was filed by the Company and 2nd respondent stating that the entire amount was settled and the Company Petition is not being pressed. Laying emphasis upon the same, the learned Senior Counsel for the appellant has submitted that when the amount due to the 2nd respondent has been fully settled, the claim of the Bank is being contested before D.R.T., and the claim of the workmen is only to the extent of 3.12 crores as per Section 12(3) settlement. It was further argued that the assets of the company are worth nearly Rs. 400 Crores and that the Company has been in business for about sixty years, and while so it would not be in the interest of any person to wind up the company. The learned Senior Counsel would further submit that for the sake of few lakhs payable to the Official Liquidator, assets of the Company cannot be brought for sale and the winding up order is totally unjustifiable.

43. The above contention cannot be countenanced. It is not as if the Company owes only a few crores payable to the workmen and to the statutory authorities. As seen from the report of the Official Liquidator, in June, 2011, the amount due from the bank is around Rs. 80 Crores as under:

That apart, it is stated that a sum of Rs. 1,72,92,509/-is stated to be due to the Tamil Nadu Electricity Board.

44. In the proceedings initiated by the Indian Bank before D.R.T, the matter was hotly contested up to the level of Supreme court and Unit ''C'' was sold. In so far as the other two Units, SARFAESI proceedings are pending before DRAT. Before the DRAT, the conditional order to deposit Rs. 3 Crores was not complied with. It is stated that still an amount of Rs. 15 Crores is due to Indian bank. The Company owes more than Rs. 20 Crores to Dena Bank, the other secured creditor. As rightly pointed out by the learned single Judge, the appellant has not spelt out any proposal for settling the above dues and also for revival of the Company in liquidation.

45. Even though the Company has paid the entire dues to the 2nd respondent/petitioning creditor, in pursuance of the order of the Court dated 19.2.2009, the company has not paid the amount of Rs. 25,08,395/-to the Official Liquidator. In pursuance of the direction of the Court, the Official Liquidator has effected advertisement atleast eleven times for bringing the property to sale. As per the direction of the Court, the Official Liquidator had also taken possession of the assets of the Company and has also taken possession of the properties from Indian Bank in respect of ''A'' and ''B'' units and the Official Liquidator has appointed security and incurred expenditure towards security services. As per the report, upto 31.7.2011, the Official Liquidator has incurred a sum of Rs. 1,04,63,659/-towards security services, valuation charges, advertisement charges and other expenses in winding up proceedings of the Company in liquidation. The Official Liquidator has spent the said amount from out of common establishment charges account of the Official Liquidator. Even though the appellant seeks to set aside the winding up order, neither the company nor the appellant has come forward to settle the dues to the Official Liquidator, which he has spent from out of the common establishment charges account.

46. As pointed out earlier, in O.S.A. Nos. 370 and 372 of 2009, while setting aside the auction sale, Court remitted the matter back to the company Court to proceed with the sale process afresh after making necessary publication. It was thereafter the appellant has filed the application - A. No. 1286 of 2010 under Rule 9 of the Companies (Court) Rules invoking the inherent jurisdiction of the Court.

47. Claims of the Workmen:-In the report of the official Liquidator filed in August, 2010, the claims of the workmen is stated as Rs. 28.02 Crores. The statutory dues to E.S.I.Corporation and E.P.F. Organisation are Rs. 2.91 Crores and Rs. 8.43 Crores respectively. On behalf of the appellant, it was contended that as per Section 12(3) settlement, only an amount of Rs. 3.25 Crores is due and while so the claim of the workmen is very much exaggerated. Mr. K. Srinivasamurthy, the learned counsel for the workmen would submit that as per Section 12(3) Settlement dated 22.4.2008, the amount of Rs. 3.25 crores represents the wage, lay-off salary, Society''s dues, L.I.C. Premium, dues payable to the deceased employees from out of the death benefit fund, gratuity for the employees retired prior to that date and bonus due. According to the workmen, the said Rs. 3.25 Crores does not refer to the wages to the workers working after the said date and the terminal benefits and other statutory dues payable to the workers working after that date. In so far as the workmen''s claim, the issue is to be gone into only at the time when the workmen''s claim is considered u/s 529-A of the Companies Act.

48. Can the appellant invoke Rule 9 -Inherent Powers of Court:-The inherent powers under Rule 9 of the Companies (Court) Rules is analogous to Section 151 of the Civil Procedure Code. The inherent power of the Court under Rule 9 cannot be invoked where express provision has been made for the relief by conferring the power upon the authorities. The inherent powers cannot be used to upset or distort the scheme of things under the Act and Rules. As pointed out by the learned single Judge, the winding up order passed on 3.12.2008 ought to have been challenged only by way of appeal. The appellant, being son of the Director, was well aware of the proceedings and having challenged the same in the earlier round of litigation, cannot invoke the inherent jurisdiction of this Court to set aside the winding up order passed on 3.12.2008. The inherent power cannot be exercised to upset the scheme of the things under the Act and the claim of the workmen.

49. If the winding up order is set aside, then the Banks would proceed under the SARFAESI Act and would appropriate the amount and in that event the workers will not have any protection u/s 529-A of the Companies Act and the 850 workers will be in the streets. The inherent power cannot be exercised to upset the claim of the workmen.

50. SARFAESI Proceedings and Directions for further proceeding:-As pointed out earlier, the Official Liquidator has incurred huge expenses for safeguarding the property by engaging the security guards and the Official Liquidator is not in a position to pay the remuneration to the security guards. In the supporting affidavit filed by the Indian Bank in the impleading petition - M.P. No. 3 of 2011, Indian Bank has expressed its readiness to tender the Official Liquidator''s expenses and stated that the Indian Bank may be allowed to continue the sale process under SARFAESI Act. Mr. Jayesh B Dolia, learned counsel for Indian Bank has submitted that as held by the Supreme Court in Rajasthan Financial Corporation and Another Vs. The Official Liquidator and Another, , while dealing with the similar provisions under DRT Act, the sale of securities of a Company in liquidation could be resorted to and all that is required is that the official liquidator should be involved in each and every stage of sale. In its affidavit, Indian Bank has undertaken to associate the Official Liquidator in the sale of assets of both movables and immovables by issuing the sale notice under the SARFAESI Act.

51. Following the decision of the Supreme Court in Rajasthan State Financial Corporation case, and considering the question whether the Asset Reconstruction Company formed under the SARFAESI Act is entitled to be associated in the process of the sale of the assets of a Company under liquidation along with the Official Liquidator, the First Bench of this Court in Asset Reconstruction Company (India) Limited Vs. The Official Liquidator, High Court as the liquidator of SIV Industries Ltd. (in liquidation), , has held as under:

13. In the light of the law laid down by the Rajasthan Financial Corporation and Another Vs. The Official Liquidator and Another, it is clear that where the bank or the financial institution has initiated proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, the Debts Recovery Tribunal would be entitled to order sale even if a company is under liquidation through its Recovery Officer, but only after notice to the Official Liquidator or the Liquidator appointed by the Company Court and after hearing him. Where, however, no proceedings have been initiated under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 the case would fall under paragraph 18 (iii) of the judgment of the Supreme Court in Rajasthan Financial Corporation and Another Vs. The Official Liquidator and Another, . In that event if the securitisation company acting u/s 13 of the Securitisation Act seeks to sell or otherwise transfer the assets of a debtor company in liquidation, the said power could be exercised by it only after obtaining the appropriate permission from the Company Court and acting in terms of the directions issued by that Court as regards associating the Official Liquidator with the sale, the fixing of the upset price or the reserve price, confirmation of the sale, holding of the sale proceeds and distribution thereof among the creditors in terms of Section 529-A and 529 of the Companies Act.

52. In the instant case, the Official Liquidator had taken possession of the assets in September 2008. The Official Liquidator has also got valuation of the assets by ITCOT Consultancy & Services Limited, Chennai. The Official Liquidator has brought the property for sale and issued advertisement atleast 11 times and incurred huge expenditure of Rs. 1,04,63,659/-as on 31.7.2011 towards valuation charges, advertisement charges, security salary payment, etc.,

53. We are of the view that the ends of justice would be served if Indian Bank is permitted to bring the properties to sale and associate the Official Liquidator in the proceedings before DRT. In pursuance to the readiness expressed by the Indian Bank, the Indian Bank is to be directed to pay to the Official Liquidator a sum of Rs. 1,04,63,659/-being the expenditure incurred by the Official Liquidator as on 31.7.2011 from out of the common establishment charges of the Official Liquidator (vide report of the Official Liquidator dated 12.8.2011) and the subsequent expenses incurred by the Official Liquidator from out of the common establishment charges of official liquidator as on date. The said amount of Rs. 1,04,63,659/-shall be the first preferential claim from out of the sale proceeds of the assets.

54. In the result, the Appeal is dismissed with the following directions and observations:

� The Indian Bank, Asset Recovery Management Branch, Madurai is directed to deposit Rs. 1,04,63,659/ with the Official Liquidator, High Court, Madras towards the expenses incurred by the Official Liquidator from out of the common establishment charges of the Official liquidator. On such deposit, the Official Liquidator shall hand over the possession of the assets of the company in liquidation to the Indian Bank. The Indian Bank shall associate the Official Liquidator in the SARFAESI proceedings before DRT by impleading the Official liquidator in the proceedings pending before DRT.

� The Indian Bank, being the lead Bank, is permitted to bring the properties to sale in the SARFAESI proceedings pending before DRT.

� The sale proceeds shall remain with the Indian Bank and the Indian Bank shall file the report before the Single Judge in C.P. No. 78 of 2008.

� Upon filing of such report, the learned single Judge shall pass appropriate orders for apportionment of the sale proceeds. Indian Bank shall file a report before the single Judge as well as the Official Liquidator.

� The Company Court shall pass appropriate orders for working out the legitimate dues of the workers pari passu with the secured creditors and other dues payable to the electricity Board, E.S.I. Corporation, E.P.F. Organisation and other claims.

However, there is no order as to costs. Consequently, the connected miscellaneous petition in M.P. No. 1 of 2011 is closed.

M.P. No. 2 of 2011 filed by the Workers Union and M.P. No. 3 of 2011 filed by the Indian Bank, Asset Recovery Management Branch, Madurai are disposed of directing the Indian Bank and the workmen to file impleading applications before the single Judge in C.P. No. 78 of 2008 to implead themselves. On such applications being filed, the learned single Judge is required to implead the Indian Bank and the workmen in the C.P.