Journals Ltd. Vs. The Mysore Paper Mills Ltd.  Insc 394 (11 July 2006)
& Lokeshwar Singh Panta Dr.Ar.Lakshmanan, J.
appears for the appellant despite service of notice on the appellant.
appears that the previous counsel sought direction from this Court to discharge
him as advocate-on-record. Notice was also sent by speed post A.D./Courier to
M/s Associated Journals Ltd., Lucknow, U.P. and M/s Associated Journals Ltd.,
New Delhi requesting them to contact them otherwise they will not be in a
position to attend to the above matter and will seeks direction from this Court
for discharge as advocate-on-record. When the matter was taken up for hearing
on 12.04.2006, a submission was made by the learned counsel appearing for the
appellant that no reply has been received from the addressee till date and,
therefore, further time may be granted. The matter was adjourned by four weeks.
Even today, there is no representation on behalf of the appellant. The counsel
is also not present in the Court.
have heard Ms.Pragya Singh Baghel, learned counsel appearing on behalf of the
respondent and also perused the original record which has been received from
the High Court.
appeal is directed against the final judgment and order dt.27.10.1997 passed by
the High Court of Judicature at Allahabad, Lucknow Bench in Company Appeal No.1 of 1994. By the said order, the
High Court dismissed the said Company Appeal holding inter alia that the
learned Company Judge did not commit any error of law in allowing the appellant
to file fresh affidavit to remove the defects in verification of the company
petition. The High Court further held that the finding of the learned Company
Judge regarding the sufficiency of the reasons for advertisement were not
said Company Appeal No.1 of 1994 which has been dismissed by the High Court had
been filed by the appellant herein against the order dt.10.01.1994 passed by
the learned Company Judge of the said Court in Company Petition No.3 of 1987
whereby the respondent, namely, the Mysore Paper Mills Ltd. were directed to
file a fresh affidavit to remove the defect in the verification accompanying
the said Company Petition and thereafter for the listing of the petition for
passing orders regarding advertisement.
have perused the grounds of appeal filed in this Court. It is stated in the
grounds that the learned Company Judge had reached a prima facie conclusion
that the debt being claimed by the respondent in the Winding Up Petition was
payable by the appellant and that the defence purported to be raised on behalf
of the respondent company was not a bona fide defence and cannot be validly
considered effective enough to refuse the order of advertisement. The
respondent was allowed to file a fresh affidavit correcting the defect in the
verification of the Winding Up Petition filed by the respondent and further
fixed the Winding Up Petition for passing orders regarding advertisement.
case of the appellant company has been that the sum of money claimed by the
respondent in the Winding Up Petition was not outstanding inasmuch as the said
sum of money had already been paid to M/s General Trading & Sales
Corporation who were the mutual agent of the appellant and the respondent.
Hence no debt was due and payable by the appellant to the respondent. There
was, therefore, no question of the appellant company being unable to pay any
debts to the respondent. The Winding Up Petition filed by the respondent was,
therefore, wholly without any basis or foundation in law and hence not
Appeal No.1 of 1994 was filed against the order dt.10.01.1994 passed by the
Company Judge in Company Petition No.3 of 1987. In the said appeal, the
appellant had challenged the order of Company Judge on several grounds. We are
not now considering the merits of the grounds alleged in this appeal since it
is premature for this Court to deal with the same at this stage.
submitted by the appellant that in view of the mandatory statutory provisions
of Rule 18 and 21 of the Companies (Court) Rules, 1959 governing the
verification of the contents of the Winding Up Petition, the said Winding Up
Petition was not maintainable in the light of the admitted fact that the
petition had not been verified by the respondent in accordance with the
provisions of the said Rule 21. It is further submitted that because the
Winding Up Petition which is not supported with affidavit in accordance with
law and is violative of Rules 18 and 21 of the Companies (Court) Rules, 1959 and
is not in prescribed form is not liable to be admitted at all and is liable to
be dismissed by the company court and also the appellate court.
further urged that the defect in verification of the Winding Up Petition
arising out of non-compliance with Rule 21 of the Companies (Court ) Rules,
1959 was fatal to the Winding Up Petition and the said Petition ought to have
been dismissed on that ground alone. It is also further contended that the
defect in verification of the Winding Up Petition on account of non- compliance
with the provisions of Rule 21 of the Companies Court (Rules) cannot be
corrected by filing fresh affidavit by the respondent after a lapse of over
several years from the date of institution of the Winding Up Petition.
further contended that a defect in the verification of the Winding Up Petition
arising out of non-compliance with the provisions of Rule 21 of the Companies
(Court) Rules, 1959 cannot be cured by filing a fresh affidavit after a lapse
of over 10 years as directed by the High Court in the impugned judgment.
respondent filed counter affidavit to the Civil Appeal. The respondent after
denying averments made in the appeal grounds answered the preliminary objection
raised by the appellant for the first time before the learned Single Judge is
merely an afterthought and an attempt to somehow escape from their liability of
payment of the outstanding dues to the respondent company. Ms.Pragya Singh Baghel,
learned counsel for the respondent further submitted that the technical plea
raised by the respondent regarding defective affidavit was raised after seven
years of filing the petition. Assuming without admitting that the affidavit was
not verified as per the Company Rules, the learned counsel submitted that if
this objection was taken earlier the respondent would have cured the defect.
learned Company Judge after perusing the affidavit filed by the respondent
herein was of the opinion that the contents of paras 1 to 25 of the affidavit
are true to be best of knowledge, information and belief of the deponent who is
the Director (Finance) of the appellant company.
further held :- "Rule 21 of the Companies (Court) Rules require the
petition to be verified by affidavit made by the petitioner and such an
affidavit is to be filed along with the petition and is to be in Form No.3
appended to the Rules.
in paragraph-2 requires the contents of the petition to be true to the
knowledge of the deponent and the contents based on information to be stated
and verified separately. To this extent, the verification is not proper."
The learned Single Judge has also referred to a judgment of the Division Bench
of the said Court in Company Appeal No.1 of 1993 in The Pradeshiya Industrial
& Investment Corporation of Uttar Pradesh Limited vs. North India Petro
Chemicals Limited and another which was decided on 27.08.1993. The Division
Bench considered the aforesaid case and some others and found :-
"Considering the aforesaid decisions the ground which has been canvassed
in favour of treating a defect in verification as fatal is that it may create
confusion about the date of the institution.
21 of the Companies (Courts) Rules requires the verification to be made in a
specific manner. Yet it does not provide that non-compliance of this rule would
render the winding up petition infructuous. As has been pointed out by the Hon'ble
Supreme Court rules of procedure are only to ensure certain ends. Verification
is insisted upon to render the person who verifies, responsible for the statement
contained in the petition so that it can be read as evidence. In case it is not
duly verified, the same result can be achieved by requiring the petitioner to
verify the petition. Going beyond this would render the dispensation of justice
subject to minor technicalities of procedure which can never be the intention
of law. The rules of procedure are meant to advance the cause of justice and
not to frustrate it. We are, therefore, in respectful disagreement with the
decision of Calcutta High Court and Punjab High Court and are of the view that
any defect in verification can be justified. The petitioner can be required to
re-verify the affidavit and once it stands duly verified, the petition would be
in order to be proceeded with in accordance with law.
the petition for not confirming to the prescribed form of verification would be
taking a hypertechnical view of the matter. A person would be penalised for the
inadequacy of his counsel as it can be assumed that such a mistake cannot be
deliberate nor has it been so suggested in this case. Mechanical insistence on
compliance with the rules and dismissal for technical infraction does not subserve
substantial healthy justice but merely multiplies litigation and consequent
harassment because even after the petition is dismissed on the ground, it would
always be open to the petitioner to bring another petition with the same
allegations and for the same relief, only after correcting the form of
verification. This correction can be permitted in this very petition. Such
dismissal is all the more justified when the purpose of the provision would be
amply met by getting the mistake corrected." In view of the aforesaid
discussion, the learned Company Judge found that the objection raised on behalf
of the respondent company (the appellant herein) was not tenable. The learned
Company Judge has further directed that the respondent herein can be required
to file a fresh affidavit complying with the provisions of law.
by the said order passed by the Company Judge, the appellant preferred Company
Appeal No.1 of 1994. We have carefully perused the judgment of the Division
Bench. The learned judges of the Division Bench dismissed the appeal filed by
the appellant herein and directed that after fresh affidavit as required in the
order dt.10.01.1994 has been filed, the Company Petition be listed before the
learned Company Judge for passing fresh orders regarding advertisement of the
Company Petition. It is useful to reproduce the finding recorded by the Division
Bench :- "We are in full agreement with the law laid down by the Division
Bench and the petitioner has been rightly provided opportunity to rectify the
defect of the affidavit by filing fresh affidavit for removal of the defect in
swearing clause of the affidavit. The case of the respondents is not prejudiced
in any manner nor there was any bar of limitation to come in the way. The
winding up petition has already been admitted and any amendment or correction
to rectify the defect of the affidavit by filing fresh affidavit at this stage
would not be so fatal to dismiss the petition. The Court has always discretion
to allow the amendment of pleadings, reswearing or reverification of the
petition. The defects thus could be cured subsequently even after filing of the
petition." In this context, it is beneficial to reproduce Form No.3 of the
Companies (Court) Rules, 1959 :- "FORM NO.3 [See rule 21] [Heading as in
Form No.1] Company Petition No.......of 19....
verifying petition I, A.B., son of .........aged .........residing at
.......do, solemnly affirm and say as follows :-
I am a
director/secretary/........./of ..........Ltd., the petitioner in the above
matter *(and am duly authorised by the said petitioner to make this affidavit
on its behalf).
paragraph is to be included in cases where the petitioner is the company.]
made in paragraphs.......of the petition herein now shown to me and marked with
the letter `A', are true to my knowledge, and the statements made in
paragraphs..........are based on information, and I believe them to be true.
Solemnly affirmed, etc.
To be included when the affidavit is sworn to by any person other than a
director, agent or secretary or other officer of the company." Rule 21 of
the Companies (Court) Rules, 1959 prescribes the procedure for verification of
affidavit. Rule 21 is reproduced as under :- "R.21. Affidavit verifying
petition.- Every petition shall be verified by an affidavit made by the
petitioner or by one of the petitioners, where there are more than one, and in
the case the petition is presented by a body corporate, by a director,
secretary or other principal officer thereof; such affidavit shall be filed
along with the petition and shall be in Form No.3:
that the Judge or Registrar may, for sufficient reason, grant leave to any
other person duly authorised by the petitioner to make and file the
affidavit." The affidavit filed by the respondent herein is available at
page 63 of the paperbook. Para 2 of the
said affidavit is reproduced as under :-
have read the contents of the accompanying Company Petition and have understood
the contents thereof.
deponent abovenamed do hereby swear that the contents of paragraphs nos.1 and 2
of this affidavit, those of paragraph nos.1,2,
3,4,5,6,7,8,9,10,11,12,13,14,15,16,17,18,19,20,21 and 22 of the accompanying
petition are true to the best of my knowledge, information and belief, that no
part of its is false and nothing material has been concealed in it. So help me
God." A careful perusal of the affidavit filed by the respondent and Form
No.3 as prescribed under Rule 21 would show that there is substantial
compliance of the said Rule. A Three-Judge Bench of this Court in an identical
matter in Malhotra Steel Syndicate vs. Punjab Chemi-Plants Ltd., (1993) Suppl.3
SCC 565 has also opined that even if there is some slight defect or
irregularity in the filing of affidavit, the appellant should have been given
an opportunity to rectify the same. In the instant case, the same liberty was
given to the respondent by the Company Judge as also by the Division Bench of
the High Court. We are, therefore, of the opinion that the Division Bench was
right in dismissing the appeal filed by the appellant.
Court has in catena of decisions held that substantial compliance is enough.
Rules are undoubtedly statutory and the forms are to be adopted wherever they
are applicable. The Rules relating to the affidavit and the verification cannot
be ordinarily brushed aside, but then what is required to be seen is whether
the petition substantially complies with the requirements and, secondly, even
when there is some breach or omission, whether it can be fatal to the petition.
In the instant case, both the learned Company Judge and also the Division Bench
were of the opinion that there is substantial compliance of Rule 21. In Khaitan
Overseas & Finance Ltd. vs. Dhandhania Bros.P.Ltd., (2002) 1 Comp LJ 274, a
petition was filed by the Chairman-cum-Director of the company. He annexed with
the petition a resolution of the Board of Directors permitting him to execute
necessary petitions, documents, applications, affidavits and to lodge a suit to
recover dues from the debtor company. This was held to include the authority to
file a Winding Up Petition also. The affidavit accompanying the petition was
signed, sworn and affirmed on oath in the prescribed manner. The court said
that the affidavit conformed with the requirements of law.
of the opinion that the Rules of procedure cannot be a tool to circumvent the
justice. In fact, the Rules are laid to help for speedy disposal of justice.
The learned Judges of the Division Bench has appreciated that the technical
plea raised by the respondent regarding defective affidavit was raised after
seven years of filing the petition. The learned counsel submitted that the
appellant is raising the defence of technical plea to protect himself from the
consequence of his default and this plea cannot be considered effective enough
to review the order of advertisement. Assuming without admitting that the
affidavit was not verified as per the Company Rules, the learned counsel has
correctly submitted that if this objection was taken earlier the respondent
would have cured the defect.
the aforesaid reasons, we are of the opinion that the appeal has no merit and
the order passed by the learned Judges of the Division Bench confirming the
order passed by the Learned Company Judge does not call for any interference by
this Court. The appeal stands dismissed accordingly. No costs.
interim order passed by this Court dt.01.05.1998 granting stay of the order
under challenge shall stand vacated. The Company Court is now at liberty to proceed further in accordance with
Companies (Court) Rules, 1959 and dispose of the Company Petition as
expeditiously as possible.
place on record our appreciation for the able assistance rendered to us by Ms.Pragya
Singh Baghel, learned counsel for the respondent at the time of hearing.