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2019 DIGILAW 1791 (RAJ)

Hardeep Singh Dhawan v. Ispat Industries Ltd

2019-06-12

MOHAMMAD RAFIQ, NARENDRA SINGH DHADDHA

body2019
JUDGMENT 1. This appeal under Section 483 of the Companies Act, 1956 read with Rule 134 of the High Court Rules, 1952, has been preferred by applicant/appellant Hardeep Singh Dhawan, challenging the order dated 30.08.2018, by which his application for recall of the order dated 18.07.2003 has been dismissed by learned Company Judge on the premise that no reasons have come forward for delay in filing such application. 2. Mr. Anuroop Singhi, learned counsel for the applicant/appellant, submitted that petitioner/respondent M/s. Ispat Industries Limited, a company registered under the Companies Act, 1956, filed a petition on 17.03.1998 under Sections 433(E), 434 and 439 of the Companies Act, 1956, for winding up of M/s. Team Metals Private Limited. The said petition was admitted on 05.04.2002. The date of hearing of the windingup petition was published in a daily newspaper 'Hindustan Times' (Jaipur Edition). Since no one appeared to oppose or support the petition, the winding-up order was passed by this Court on 18.07.2003. According to the applicant/appellant, the Directors of the Company learnt about the proceedings of the winding-up much after in the year 2007. Neither there are any dues of the secured creditors nor are there any dues against any unsecured creditors. The claim of the unsecured creditor M/s. Ispat Industries Limited, subsequently known as Jindal Steel and Power Limited, was settled long back. The unsecured creditors vide letter dated 21.11.2007 informed the Bank of Baroda that it has settled its dues with the Teem Metals Private Limited and stated that they would instruct their lawyer to withdraw the matter from the court. 3. Mr. Anuroop Singhi, learned counsel for the applicant/appellant, submitted that when the dues of the unsecured creditors and those of the Bank of Baroda, were fully settled by the Management of the Company in 2007, there was no occasion for the appellant to believe that the proceedings for (Downloaded on 02/07/2019 at 03:47:37 PM) (3 of 10) [SAC-23/2018] winding-up would remain pending before this Court. However, despite settlement, the winding-up proceedings before this Court continued and this Court in S.B. Company Petition No.20/1998 vide order dated 22.03.2018, accepted the bid of one M/s. ECR Buildtech Pvt. Ltd., New Delhi, subject to the terms and conditions of the NIT. It was in these facts that the applicant/appellant preferred an application seeking recall of the order dated 22.03.2018 as also the winding-up order dated 18.07.2003. 4. It was in these facts that the applicant/appellant preferred an application seeking recall of the order dated 22.03.2018 as also the winding-up order dated 18.07.2003. 4. It is argued that the learned Company Judge, without considering the reasons and the grounds taken in the recall application has summarily rejected the same as there was no delay in filing the application. Learned counsel argued that the learned Company Judge has not assigned any reason whatsoever for rejecting the recall application and rejected the same in a cursory manner. He submitted that the learned Single Judge was not justified in observing that no reasons were mentioned in the recall application by the applicant/appellant. Reference is made to grounds A to I of the recall application to substantiate the submissions. One of the reasons was that dues of Ispat Metals Limited (now known as Jindal Steel & Power Limited), who filed the petition, were fully settled, which was acknowledged by him in his letter dated 21.11.2007. Thereafter, there was no reason for the applicant/appellant to believe that the winding-up petition is still pending before the Company Court. 5. Mr. Anuroop Singhi, learned counsel, in support of his arguments, cited the judgments of the Gujarat High Court in Niranjan B. Shah Vs. Suresh Steel Corporation and Others , (2011) 162 CompCas 100 , Bombay High Court in Shekhar Electricals Vs. Falcon Retreat Pvt. Ltd.,2018 93 Taxmann.com 344 and Om Prakash J. Mehra Vs. O.L. of M/s. Surlex Diagnostic Ltd.,2012 27 Taxmann.com 153, and that of Karnataka High Court in M.R. Khan Vs. Maldini Yarn Pvt. Ltd.,2014 48 Taxmann.com 81, and argued that various High Courts have allowed recall applications and recalled the winding-up order even as many as 33 years after winding-up order, holding that a winding-up order once made, can be revoked or recalled. The learned Company Judge ought to have allowed recall application. The delay, if at all, stands duly explained as the winding-up order dated 18.07.2003 was ex-parte and the dues of the unsecured creditor were duly settled. The appellant is the original promoter and thus cannot be deprived of its effort and property. No prejudice would be caused to the subsequent buyer as the amount of bid submitted by the subsequent buyer has been kept by the Official Liquidator in the fixed deposit which would be duly reimbursed to it along-with interest. The appellant is the original promoter and thus cannot be deprived of its effort and property. No prejudice would be caused to the subsequent buyer as the amount of bid submitted by the subsequent buyer has been kept by the Official Liquidator in the fixed deposit which would be duly reimbursed to it along-with interest. Otherwise also, no claim as a matter of right can be made by the subsequent buyer. As regards the argument of the Official Liquidator that there are statutory dues of the Commercial Tax Department etc., it is submitted that they are all arising out of ex-parte proceedings, wherefor the applicant/appellant has taken separate remedy. It is therefore prayed that the appeal be allowed. 6. Mr. Gaurav Sharma Saraswat, learned counsel for the respondent no.2 Official Liquidator, submitted that the applicant/appellant has relied on the letter dated 21.11.2007 written by Jindal Steel and Power Limited, Raigarh to the Bank of Baroda stating in the subject the full and final settlement in the legal matter of Jindal Steel and Power Limited for Rs.11,00,000/-, and therefore they have instructed their lawyer to withdraw the matter from the Court. This cannot be a justified reason to assume that the winding-up proceedings were terminated by withdrawal. The applicant/appellant has failed to produce any document with regard to the actual settlement deed or terms, any NOC letter, accounts of discharge by the creditor and any document to show that the Jindal Steel is Ispat Industries, who was the petitioner in the winding-up petition or any affidavit on behalf of the Jindal Steel to prove the letter being genuine. 7. It is argued that the Official Liquidator, after following due process of law and conducting of public auction under the directions of the Company Court, sold the assets of the company to one M/s. ECR Buildtech Pvt. Ltd., New Delhi, for an amount of Rs.one crore eight-one lakh and the matter came before the learned Company Judge for confirmation of the sale on 22.03.2018 and on the same date, the Company Judge confirmed the sale. The possession of the assets were handed over to the auction purchaser, however, the registry of the sold assets could not be executed due to the stay order dated 11.09.2018 operating in the present appeal. 8. The possession of the assets were handed over to the auction purchaser, however, the registry of the sold assets could not be executed due to the stay order dated 11.09.2018 operating in the present appeal. 8. It is argued that even if the applicant/appellant has settled the matter with the original applicant M/s. Ispat Industries Limited (subsequently known as Jindal Steel and Power Limited), the order of liquidation cannot be recalled because the Official Liquidator has to settle the claims of (a) Assistant Commissioner, Central Goods and Service Tax Division of Rs.1,44,82,019/- (b) Assistant Commercial Tax Officer, Bhiwadi of Rs.26,59,072/-, and (c) Jaipur Vidyut Vitran Nigam Limited, Bhiwadi of Rs.2,06,08,728/-. Since the consent of the aforesaid creditors of the company have not been produced and only empty assurance has been given by the applicant/appellant that he will clear all their dues in future, the order cannot be recalled. Learned counsel in support of his argument has cited a judgment of the Bombay High Court in SP Capital Financing Ltd., Vs. Bagade (India) Engineering Ltd. , (2002) 109 CompCas 657 (Bombay), that of Karnataka High Court in Kirtivan D. Kotian Flat BG Vs. Mohan Singh Proprietor M/s. Mohan Engineering,2015 Supreme(Kar) 53, that of Delhi High Court in Registrar of Companies Vs. Cyber Space,2014 Supreme(Del) 193. 9. Mr. Nishant Vyas, learned counsel for respondent no.3, has opposed the appeal and submitted after passing of the winding-up order on 18.07.2003, the Official Liquidator took possession of the assets of the company in liquidation and after getting the due valuation of the assets done, the notice for sale of the assets of the company by public auction was published. In the public auction, the highest bid of Rs.1,81,00,000/- (In words rupees one crore eighty-one lakh) of the respondent no.3 M/s. ECR Buildtech Pvt. Ltd., was accepted by the learned Company Judge. The sale was affirmed by the learned Company Judge by the impugned order dated 22.03.2018. The respondent no.3 paid the amount of Rupees One Crore and Forty Lakh in addition to already paid amount of Rupees Thirty Five Lakh through demand draft. The respondent no.3 took the possession of the property through the possession memo dated 11.09.2018 on the "As is where is and whatsoever there is basis" from the office of the Official Liquidator. The respondent no.3 paid the amount of Rupees One Crore and Forty Lakh in addition to already paid amount of Rupees Thirty Five Lakh through demand draft. The respondent no.3 took the possession of the property through the possession memo dated 11.09.2018 on the "As is where is and whatsoever there is basis" from the office of the Official Liquidator. The respondent no.3 has spent a substantial amount on purchase of the land of the company in liquidation and has incurred various liabilities and obligations in the market for the same and thus the finance, business and future of the respondent no.3 depends on the earliest finalization of the sale so that the same may be utilized and the respondent no.3 could recover the cost incurred by it in purchase of the same. At this stage, there can be no recall of the winding-up order after such enormous delay. 10. We have gone through the impugned order passed by the learned Company Judge, which is in two parts. The learned Company Judge in para 1 of the impugned order has dismissed the application for recall filed by the applicant/appellant in only one para of five lines, and in later part, which is fairly detailed one, he has confirmed the sale of the properties of the company in liquidation in favour of the respondent no.3. Learned Company Judge in the first para of the impugned order, while rejecting the recall application of the applicant/appellant, has passed the following order: "Application has been moved for recalling the order passed by this court for winding up dated 18th July, 2003. No reasons have come forward for delay in filing such an application. Application is highly belated the same is accordingly dismissed." 11. We have gone through the recall application filed by the applicant/appellant before the learned Company Judge. We are not inclined to agree with the view taken by the learned Company Judge that no reasons have been given in the aforesaid application, although it may be a matter for consideration by the learned Company Judge whether or not, the reasons were sufficient and justified to recall the order. Those very reasons have been reiterated by the applicant/appellant before us in the present appeal. The reasons are heart and soul of any judicial determination, in absence of which the order cannot survive. Those very reasons have been reiterated by the applicant/appellant before us in the present appeal. The reasons are heart and soul of any judicial determination, in absence of which the order cannot survive. A Judge, who decides an issue in one or the other way, is required to disclose his mind and give the reasons to enable not only the superior court but also the litigating parties as what weighed with him in deciding the matter the way he did, otherwise they would remain unaware of the premise on which decision of the Court is founded. Therefore, it is always necessary for the learned Presiding Judge to disclose his mind, even if not in details, at least briefly. 12. The Supreme Court in Sant Lal Gupta & Others Vs. Modern Cooperative Group Housing Society Ltd. & Others , (2010) 13 SCC 336 , while quoting its earlier judgment in State of Rajasthan Vs. Sohan Lal , (2004) 5 SCC 573 , in para 27 of the report, held as under:- "27. It is a settled legal proposition that not only administrative but also judicial order must be supported by reasons, recorded in it. Thus, while deciding an issue, the Court is bound to give reasons for its conclusion. It is the duty and obligation on the part of the Court to record reasons while disposing of the case. The hallmark of order and exercise of judicial power by a judicial forum is for the forum to disclose its reasons by itself and giving of reasons has always been insisted upon as one of the fundamentals of sound administration of the justice - delivery system, to make it known that there had been proper and due application of mind to the issue before the Court and also as an essential requisite of the principles of natural justice. "The giving of reasons for a decision is an essential attribute of judicial and judicious disposal of a matter before Courts, and which is the only indication to know about the manner and quality of exercise undertaken, as also the fact that the Court concerned had really applied its mind." The reason is the heartbeat of every conclusion. It introduces clarity in an order and without the same, the order becomes lifeless. Reasons substitute subjectivity with objectivity. It introduces clarity in an order and without the same, the order becomes lifeless. Reasons substitute subjectivity with objectivity. The absence of reasons renders an order indefensible/unsustainable particularly when the order is subject to further challenge before a higher forum. Recording of reasons is principle of natural justice and every judicial order must be supported by reasons recorded in writing. It ensures transparency and fairness in decision making. The person who is adversely affected must know why his application has been rejected. 13. The Supreme Court in P. Seshadri v. S. Mangati Gopal Reddy , (2011) 5 SCC 484 , emphasizing the importance of recording reasons by the High Court in support of the orders passed by it in exercise of its extra ordinary jurisdiction under Article 226 of the Constitution of India, held that necessity for recording reasons is the fundamental to the administration of justice. The recorded reasons would enable the parties to the litigation to know the factors which weighed with the court in determining the lis between the parties. 14. The Supreme Court in Vasudeo Vishwanath Saraf Vs. New Education Institute & Ors. , (1986) 4 SCC 31 , clearly indicated the bare essentials of an order passed by the High Court while disposing of a writ petition under Article 226 of the Constitution of India. In paragraph 14 of the report, the Supreme Court observed as follows:- "14. It is a cardinal principle of rule of law which governs our policy that the court including Writ Court is required to record reasons while disposing of a writ petition in order to enable the litigants more particularly the aggrieved party to know the reasons which weighed with the mind of the court in determining the questions of facts and law raised in the writ petition or in the action brought. This is imperative for the fair and equitable administration of justice. More so when there is a statutory provision for appeal to the higher court in the hierarchy of courts in order to enable the superior court or the appellate court to know or to be apprised of the reasons which impelled the court to pass 7 1986 (4) SCC 31 the order in question. This recording of reasons in deciding cases or applications affecting rights of parties is also a mandatory requirement to be fulfilled in consonance with the principles of natural justice. This recording of reasons in deciding cases or applications affecting rights of parties is also a mandatory requirement to be fulfilled in consonance with the principles of natural justice. It is no answer at all to this legal position that for the purpose of expeditious disposal of cases a laconic order like "dismissed" or 'rejected' will be made without passing a reasoned order or a speaking order. It is not, however, necessary that the order disposing of a writ petition or of a cause must be a lengthy one recording in detail all the reasons that played in the mind of the court in coming to the decision. What is imperative is that the order must in a nutshell record the relevant reasons which were taken into consideration by the court in coming to its final conclusions and in disposing of the petition or the cause by making the order, thereby enabling both the party seeking justice as well as the superior court where an appeal lies to know the mind of the court as well as the reasons for its finding on questions of law and facts in deciding the said petition or cause. In other words fair play and justice demands that justice must not only be done but must seem to have been done." 15. In view of the above discussion, while not going into merits of the case, we are inclined to set aside the impugned order passed by the learned Company Judge for the reason of its being a non-speaking one. Ordered accordingly. The appeal is accordingly allowed. We make it clear that we have not expressed any opinion on other arguments advanced by both the sides as it shall be open for the learned Company Judge to decide the recall application filed by the applicant/appellant by a reasoned and speaking order, dealing with all such arguments. The application is accordingly revived. 16. The Registry to list the application before the learned Company Judge on 19.07.2019.