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CASE NO.: Appeal (civil)  183 of 2000

PETITIONER: M/S.ASSOCIATED JOURNALS LTD.

RESPONDENT: THE MYSORE PAPER MILLS LTD.

DATE OF JUDGMENT: 11/07/2006

BENCH: Dr.AR.LAKSHMANAN & LOKESHWAR SINGH PANTA

JUDGMENT: J U D G M E N T

Dr.AR.LAKSHMANAN, J.         None appears for the appellant despite service of notice on the  appellant.           It 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.         We 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.         This 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 final.         The 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.          We 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.           The 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

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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 maintainable.   

       Company 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.          It is 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.         It is 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.         It is 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.           The 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.          The 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.                 It was 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.         Form 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 :-     

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       "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.  

       Rule 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.

       Dismissing 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.         Aggrieved 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   

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                         [See rule 21]                     [Heading as in Form No.1]             Company Petition No.......of 19....        

                    Affidavit verifying petition

       I, A.B., son of .........aged .........residing at .......do, solemnly affirm  and say as follows :-                  1.  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).     

       [Note.-This paragraph is to be included in cases where the petitioner  is the company.]

       2.  The statements 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.          *Note.- 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:                 Provided 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 :-         "2.  That I have read the contents of the accompanying Company  Petition and have understood the contents thereof.         I, the 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.           This 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

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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.

       We are 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.         For 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.         The 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.         We 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.