Kotak Mahindra Bank Ltd vs Hermonite Associates Ltd & ...
2010 Latest Caselaw 5821 Del

REPORTABLE

*         IN THE HIGH COURT OF DELHI AT NEW DELHI


+         COMPANY APPLICATION NO.893 OF 2008 IN
            COMPANY PETITION NO. 71 OF 2007


                                 Reserved on : 15th November, 2010.
%                          Date of Decision: 22ND December, 2010.


      KOTAK MAHINDRA BANK LTD.                 .... Petitioner
               Through Mr. Rishi Kapoor, Mr.Paras, advocates.

                                 VERSUS


      HERMONITE ASSOCIATES LTD.
      AND ANOTHER                         .....Respondents

Through Mr.Madan Gera, advocate for applicant in C.A.893/2008.

CORAM:

HON'BLE MR. JUSTICE SANJIV KHANNA

1. Whether Reporters of local papers may be allowed to see the judgment?

2. To be referred to the Reporter or not ? YES

3. Whether the judgment should be reported in the Digest ? YES

SANJIV KHANNA, J.:

This application, under Section 466 r/w Section 518(1)(b) of the

Companies Act, 1956 (hereinafter referred to as the Act) on behalf of

Hermonite Associates Ltd (hereinafter referred to as the respondent-

Company) by its Director Shri Krishan Goenka (hereinafter referred to as

the respondent-2), was filed on 11th August 2008.

2. The applicants seek to recall/set aside the ex-parte Order dated 5th

December, 2007 by which the winding up petition under Sections 433(e),

434 (1)(a) and 439 of the Act filed by Kotak Mahindra Bank-the petitioner

was admitted and the Official Liquidator attached to this Court was

Co.Appln. No.893/2008 Page 1 appointed as a provisional liquidator with the direction to take possession

of assets and books of accounts of the respondent-Company and proceed

thereafter in accordance with the provisions of the Act.

3. The application raises two contentions. Firstly, the statutory notice

under Section 434(1)(a) of the Act was not served at the registered office of

the respondent-Company and was returned back with the remark "closed

office" and therefore presumption under the said Section does not arise.

Secondly the respondent company was not served with the notice of

hearing in the winding up petition. It was the duty of the petitioner to

serve the respondent-Company. It is stated that consortium of banks have

filed O.A. No. 186/1999 before the Debt Recovery Tribunal-II and the

petitioner herein has filed an application under Order XXII, Rule 10 and

Order VI, Rule 17 of the Code of Civil Procedure, 1908 and Section 19 (25)

of Recovery of Debts Due to Banks and Financial Institutions Act, 1993 for

being substituted in place of ICICI on the basis of Deed of Assignment

which is pending. It is contended that notice on the winding-up petition

could have been served on the counsel who were appearing on behalf of the

respondent-Company before the Debt Recovery Tribunal-II. It is further

alleged/contended that the respondent no.2 was not available at the two

addresses mentioned in the petition.

4. In support of the two contentions, the applicants have relied upon

Kalra Iron Stores versus Faridabad Fabricators Pvt Ltd 1992

(73) CompCases 337 Del, Vysya Bank Ltd versus Randhir Steel and

Alloys Pvt Ltd (1995) 5 Co.Law Journal 381 (Bom), Alliance Credit

and Investments Ltd versus Khaitan Hostombe Spinels Ltd

(1999) 95 CompCas 436 (Allh.) and Nuchem Ltd versus C.S. Modi &

Company Pvt Ltd (2002) 109 CompCas 715.

Co.Appln. No.893/2008 Page 2

5. Brief facts, as averred in the winding-up petition may be noted :

A. In 1987 and thereafter the respondent-Company through respondent no.-2 had approached ICICI and other financial institutions and was granted/sanctioned loans under three separate agreements to set up a project for manufacture of disposable syringes at Ponta Sahib, Distt. Sirmour, Himachal Pradesh. The said three agreements (hereinafter referred to as the agreements, for short) are :

i) Vide agreement dated January 8, 1988, a Rupee Term Loan of Rs.197 lacs was granted under Project Finance Participation Scheme (PFPS) (herein after referred to as "First Loan Agreement") including subsidy of Rs. 25 lacs subject to the terms and conditions set out therein. Out of the above ICICI Bank Ltd. advanced money to the extent of sum of Rs.43 lacs.

ii) Vide agreement dated April 15, 1988, another Foreign Currency Loan for US $ 931702 (hereinafter referred to as "Foreign Currency Loan") was granted. Out of this ICICI Bank Ltd. advanced money to the extent of US $ 315188.

iii) Vide agreement dated April 15, 1988, Second Rupee Term Loan of Rs.109.75 (hereinafter referred to as "Second Term Loan") lacs was granted. Out of this ICICI Bank Ltd. advanced money to the extent of Rs. 36 lacs.

B. There were defaults and the respondent-Company failed to adhere to repayment schedule under the agreements and ICICI Bank initiated proceedings before the Debt Recovery Tribunal, Delhi.

C. On 31st March, 2005, ICICI Bank assigned their debts with underlying securities to the petitioner. The petitioner has the sole right of enforcing payment of all debts and dues in relation to the loans vide Deed of Confirmation for the said assignment dated 20th April, 2005.

D. The petitioner issued notice dated 27th September, 2006 under Section 433/434 of the Act calling upon the respondent-

Company to make payment of outstanding amount of Rs.2.10 crores

Co.Appln. No.893/2008 Page 3 along with interest and legal expenses. The notices were sent by registered post as well as UPC at the registered office of the respondent-Company and respondent no. 2. However the respondents did not make the payments. Along with the petition, copies of the receipts issued by the post office for having posted the notice dated 27th September, 2006 have been enclosed. The postal receipts show that notices were issued by registered post at the registered office of the respondent-Company at Karampura, Delhi and to respondent no.2 at 12, Vaishali, Pitampura, Delhi-88 and at 9/83, Punjabi Bagh (West), New Delhi-110026.

6. After filing of the petition, objection was raised by the Registry as

the petitioner had failed to file proof of service of demand notice under

Section 434(1)(a) of the Act. The matter was listed before the Court

subject to office objections on 23rd March, 2007. On the said date, the

matter was adjourned at the request of the counsel for the petitioner to

23rd April, 2007. The petitioner thereafter filed the original envelope by

which notice dated 27th September, 2006 was sent to the registered office

of the respondent-Company. The original envelope has a report/remark

dated 28th September, 2006 of the postal authorities "closed office". On

23rd April, 2007, the court issued notice to the respondent-Company

returnable on 27th July, 2007. The notices sent by registered post and

courier to respondent company, were received back with the remark "left

without address". Notices sent to respondent no.2 at the Pitampura

address and the Punjabi Bagh addresses were returned with the remarks

"left" and "Add. left R/S" respectively. In the order dated 27th July, 2007 it

was observed that the court clerk attached to the advocate of the petitioner

had filed a wrong affidavit that notice was served on the respondent-

Company though infact notice had not been served. The case was

Co.Appln. No.893/2008 Page 4 adjourned to 12th October, 2007 with a direction to issue fresh notice to the

respondent-Company on the petitioner furnishing new address.

7. Co. Appln. No. 1093/2007 seeking substituted service on the

respondent-Company was filed by the petitioner stating that the petitioner

does not have any other address of the respondent-Company except the

address at which notice had already been issued but was received back

with the remark "left without address". By the Order dated 12th October,

2007, the application for substituted service was allowed and the

respondent-Company was directed to be served by publication in the

newspapers "Hindustan Times" (English) and "Veer Arjun" (Hindi) and

the matter was fixed for hearing on 5th December, 2007. The said

publication was effected on 21st November, 2007. As there was no

response/appearance on behalf of the respondent-Company on 5th

December, 2007 and after noticing the facts of the case, the winding up

pettion was admitted and the Official Liquidator attached to this Court was

appointed as the provisional liquidator.

8. The respondent company has submitted that since they were not

served with the statutory notice contemplated under Section 434(1)(a), the

said petition is not maintainable.

9. Section 434(1)(a) of the Act reads :

"434. Company when deemed unable to pay its debts.- (1) A company shall be deemed to be unable to pay its debts-

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

(emphasis supplied)

Co.Appln. No.893/2008 Page 5

10. Section 434(1)(a) has to be read along with Section 51 of the Act

which reads :

"51. Service of documents on company.--A document may be served on a company or an officer thereof by sending it to the company or officer at the registered office of the company by post under a certificate of posting or by registered post, or by leaving it at its registered office: Provided that where the securities are held in a depository, the records of the beneficial ownership may be served by such depository on the company by means of electronic mode or by delivery of floppies or discs."

(emphasis supplied)

11. The contention of the respondent company is that there is non-

compliance of Section 434(1)(a) of the Act as the statutory notice was not

delivered, in the sense that they could not be actually or physically served

at the registered office address, and therefore the deeming effect of the

said provision is not applicable. A similar contention is raised about

service of notice issued for the court hearing at the registered office.

12. As stated above, the original envelope by which the statutory notice

dated 27th September, 2006 under Sections 433(e)/434(1)(a) of the Act

was sent by registered post has been placed on record. The postal authority

had returned the said notice with the remark "closed office". The

respondent-company and respondent no.2 have not disputed that the

registered office was/is located at 307-308, Magnum House-II, Karampura

Community Centre, New Delhi-110015, i.e. address at which the statutory

notice was sent by registered post. The stand of the respondent-Company

in Co.Appln. No. 893/2008 is :

Co.Appln. No.893/2008 Page 6 "11. That the respondents were never served with the summons as sent by this Hon‟ble Court at the addresses as mentioned in the petition. Office of the Company in Karampura, New Delhi was lying closed as the operation of the company at Poonta Sahib, District : Sirmour, Himachal Pradesh had been shut down on account of suffering heavy financial losses."

13. This amounts to an admission on part of the applicants that their

registered office at New Delhi was lying closed and there was no one to

receive the notice. With the above factual background, the case law on the

subject and Sections 434(1)(a) and 51 of the Act have been examined

below.

14. In Alliance Credit and Investments Ltd. (supra), the

Allahabad High Court has held that the object of Section 434(1)(a) is to

create a fiction as to when a company is deemed to be unable to pay its

dues/debts. The legal fiction has to be strictly construed and therefore the

statutory notice of demand must be sent to the registered office and not to

any other office including administrative office of the respondent-

Company. Statutory presumption only arises when notice is addressed to

the registered office. In Kalra Iron Stores (supra), the company therein

had disputed the service of statutory notice under Section 434(1)(a) of the

Act. It was noticed that the petitioner therein had not filed proof of service

of notice though service of notice was itself seriously disputed. It was

observed that, assuming the Company was avoiding delivery of registered

envelopes, other modes of delivery/service could have been adopted. The

petitioner therein had placed on record a postal envelope but it was

noticed that the address mentioned on the postal envelope was not the

registered office address of the Company but another address.

15. In Nuchem Ltd (supra) it has been observed that the creditor

must cause notice to be served on the company from whom the creditor is

Co.Appln. No.893/2008 Page 7 claiming and the service must be affected by delivering notice at the

registered office through registered post or some other means requiring

the company to discharge the debt. In the said case, finding was that the

statutory notice sent by the petitioner therein did not reach the

respondent-company. Decision in the case of K. Bhaskaran versus

Shankaran Vaidhyan Balan (1999) 7 SCC 510 referring to Section 27

of the General Clauses Act, 1897 and provisions of Section 138 of the

Negotiable Instruments Act, 1881, relating to proof of service was

distinguished as the requirement under the Negotiable Instruments Act

was/is only giving of notice, whereas the Act (i.e. the Companies Act, 1956)

requires delivery of notice. In the case of Nuchem Ltd (supra), the

Punjab & Haryana High Court did not examine the effect of Section 51 of

the Act i.e. regarding service of a document on a company. The last para of

the said judgment shows that the petitioner therein had approached the

Registrar of Companies and had been informed about the latest registered

office address of the Company therein. Notice was not served at the said

address. Bombay High Court has taken a different view in Re. Deepak

Machineries Pvt Ltd and Re Ispat Industries Ltd., 2005 (2) Bom.

law Report 94. In these cases, it was held that the decision by the Supreme

Court in K. Bhaskaran (supra) is equally applicable to the provisions of

Section 434(1)(a) of the Act. In K.Bhaskaran (supra) it has been

observed as under:

"18. On the part of the payee he has to make a demand by "giving a notice" in writing.

If that was the only requirement to complete the offence on the failure of the drawer to pay the cheque amount within 15 days from the date of such "giving", the travails of the prosecution would have been very much lessened. But the legislature says that failure on the part of the drawer to pay the amount

Co.Appln. No.893/2008 Page 8 should be within 15 days "of the receipt" of the said notice. It is, therefore, clear that "giving notice" in the context is not the same as receipt of notice. Giving is a process of which receipt is the accomplishment. It is for the payee to perform the former process by sending the notice to the drawer at the correct address.

"19. In Black's Law Dictionary "giving of notice" is distinguished from "receiving of the notice" (vide p. 621): "A person notifies or gives notice to another by taking such steps as may be reasonably required to inform the other in the ordinary course, whether or not such other actually comes to know of it." A person "receives" a notice when it is duly delivered to him or at the place of his business.

20. If a strict interpretation is given that the drawer should have actually received the notice for the period of 15 days to start running no matter that the payee sent the notice on the correct address, a trickster cheque drawer would get the premium to avoid receiving the notice by different strategies and he could escape from the legal consequences of Section 138 of the Act. It must be borne in mind that the court should not adopt an interpretation which helps a dishonest evader and clips an honest payee as that would defeat the very legislative measure.

21. In Maxwell's Interpretation of Statutes, the learned author has emphasised that "provisions relating to giving of notice often receive liberal interpretation" (vide p. 99 of the 12th Edn.). The context envisaged in Section 138 of the Act invites a liberal interpretation for the person who has the statutory obligation to give notice because he is presumed to be the loser in the transaction and it is for his interest the very provision is made by the legislature. The words in clause (b) of the proviso to Section 138 of the Act show that the payee has the statutory obligation to "make a demand" by giving notice. The thrust in the clause is on the need to "make a demand". It is only the mode for making such demand which the legislature has prescribed. A payee can send the notice for doing his part for giving the notice. Once it is despatched his part is over and the next depends on what the sendee does.

Co.Appln. No.893/2008 Page 9

22. It is well settled that a notice refused to be accepted by the addressee can be presumed to have been served on him (vide Harcharan Singh v. Shivrani and Jagdish Singh v. Natthu Singh)

23. Here the notice is returned as unclaimed and not as refused. Will there be any significant difference between the two so far as the presumption of service is concerned? In this connection a reference to Section 27 of the General Clauses Act will be useful. The section reads thus:

"27. Meaning of service by post.--

Where any Central Act or Regulation made after the commencement of this Act authorises or requires any document to be served by post, whether the expression „serve‟ or either of the expressions „give‟ or „send‟ or any other expression is used, then, unless a different intention appears, the service shall be deemed to be effected by properly addressing, pre- paying and posting by registered post, a letter containing the document, and unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post."

24. No doubt Section 138 of the Act does not require that the notice should be given only by "post". Nonetheless the principle incorporated in Section 27 (quoted above) can profitably be imported in a case where the sender has despatched the notice by post with the correct address written on it. Then it can be deemed to have been served on the sendee unless he proves that it was not really served and that he was not responsible for such non-

service. Any other interpretation can lead to a very tenuous position as the drawer of the cheque who is liable to pay the amount would resort to the strategy of subterfuge by successfully avoiding the notice.

25. Thus, when a notice is returned by the sendee as unclaimed such date would be the commencing date in reckoning the period of 15 days contemplated in clause (c) to the proviso of Section 138 of the Act. Of course such reckoning would be without prejudice to the

Co.Appln. No.893/2008 Page 10 right of the drawer of the cheque to show that he had no knowledge that the notice was brought to his address. In the present case the accused did not even attempt to discharge the burden to rebut the aforesaid presumption."

16. In Vysya Bank (supra) the notice of demand was returned

unserved from the registered office. Thereafter it was sent to another

address. The core question raised therein was whether there was any

waiver as notice under Section 434(1)(a) of the Act, which was served at

the correspondence address. This contention was rejected after noticing

that the company therein had a registered office, which was existing and

there was no reason for the Court to believe that delivery could not be

affected at the registered address. Referring to the language used in

Section 434(1)(a) of the Act it was observed that it does not use the words

"delivered to" but speaks of "delivered at". In a subsequent decision, the

Bombay High court in Cavendish Shipping Ltd versus Polaris

Marine Management Pvt Ltd and others [2010] 156 Comp.Cases

108 Bom has been observed as under:-

"That apart, in the present case, it has been averred in the company petition that the statutory notice was addressed to the registered office of the company as stated in the records of the Registrar of Companies, Maharashtra (Registrar of Companies). The petitioner obtained a certified copy from the record of the Registrar of Companies with regard to the registered office address of the company.

However, the notices having been remitted on the address of the registered office as shown in the record of the Registrar of Companies, all notices came back with the remark "not known". The affidavit in reply does not proceed on the basis that the address mentioned in the statutory notice is not the registered office of the company. In a judgment of the Delhi High Court in Hotline Teletubes and Components Ltd. v. A. S. Impex Ltd. [2004] 119 Comp Cas

Co.Appln. No.893/2008 Page 11 98 ; [2004] 49 SCL 590, Dr.Justice Mukundakam Sharma (as he then was) dealt with a case where a statutory notice addressed to the registered office of the company was returned with the remark that the addressee had left the premises. The Delhi High Court held that the documents which were placed on the record indicated that he petitioner had sent the statutory notices to the company at the address at which the registered office was located. In the meantime, the company changed the address of its registered office as a result of which the statutory notices were not served. The court held that sending of the notices by the petitioner at the registered office of the company in terms of the official records had to be regarded as legal and valid and the proceedings could not be held to be not aintainable because the company had, in the meantime, changed its office. There is, therefore, no merit in the submission in regard to the maintainability of the petition for want of a statutory notice under section 434(1)(a)."

17. It may be appropriate to refer to the findings/ratio of the Delhi High

Court in Hotline Teletubes and Components Ltd versus A.S.

Impex Ltd 105 (2003) DLT 762 which was quoted with approval by the

Bombay High Court in Cavendish Shipping Ltd. (supra). In Hotline

Teletubes and Components Ltd.(supra) it has been observed:-

6. I have considered the rival submissions of the Counsel appearing for the parties in support of the aforesaid contentions which are raised in their pleadings. The following facts, however, emerge and are proved from the pleadings of the parties and submissions of their Counsel. It is not disputed that the petitioner made supplies for the aforesaid amount as stated in the petition. That the respondent issued a balance confirmation note dated 17.3.2000 and again on 24.10.2001 which is not disputed and cannot be so done in view of the fact that the said balance confirmation is duly signed and stamped by the respondent. The registered office of the respondent company was situated at B-3/31, Azad Apartments, Aurobindo Marg, New Delhi

- 110 016. The registered notices were sent by

Co.Appln. No.893/2008 Page 12 the petitioner to the aforesaid address on 30.10.2001 and on 6.11.2001 as indicated from the records placed on record. The case of the respondent is, however, that the same is not the registered office of the respondent company as the respondent shifted its office to 57, Kalu Sarai, Hauz Khas, New Delhi with effect from 11.10.2001. The said fact of change of the address of the registered office of the respondent was, however, brought to the notice and filed with the Registrar of Companies by the respondent only on 7.11.2001 when it submitted the statutory form No. 18. It is also apparent on the face of the records that the cheques were issued by the respondent as against the outstanding balance which were dishonoured by the bank on their presentation.

7. The first objection that is raised is with regard to the maintainability of the company petition on the ground that the statutory notice as required under the provisions of the Companies Act was not served on the respondent company. The documents placed on record, however indicate that the petitioner sent the statutory notices to the respondent at the address at which the registered office of the respondent was located. But in the meantime the respondent changed the address of its registered office. Therefore, the statutory notices sent by the petitioner were not served on the respondent company. It is stated by the Counsel appearing for the respondent that the respondent gets 30 days‟ time to take steps for intimating the change of address of its registered office to the Registrar of Companies. Section 146(2) of the Companies Act provides for 30 days‟ time to a company to inform the Registrar of the Companies to submit the statutory form intimating change of the address of the registered office of the company.

The registered office of the respondent company was changed with effect from 11.10.2001 and on 7.11.2001, i.e. within 30 days, the respondent company filed form No. 18 with the Registrar of Companies. There is no doubt that the respondent company fully complied with the legal requirements having submitted form No. 18 within 30 days as prescribed by Section 146(2) of Act as permissible period for intimation from the date of the change of the address of the registered office of the registered company. However, it is also proved that the petitioner could not have

Co.Appln. No.893/2008 Page 13 known about the change of the address as the address of the respondent even after the change continued to be at Aurobindo Marg in the records maintained by the Registrar when the aforesaid two statutory notices were issued by the petitioner. The intimation about change of address by the respondent company was filed with the Registrar of Companies only on 7.11.2001 and before the said date the registered notices were sent by the petitioner. The petitioner could not, therefore, had any knowledge about change of the registered office of the respondent company as in the official records the same address continued to exist.

Therefore, sending of the notices by the petitioner at the registered office of the respondent in terms of the official records has to be held to be legal and valid and the present proceeding cannot be held to be not maintainable because the same could not be served on the respondent company as it in the meantime changed its office. There is full compliance by the petitioner as required by the provisions of Sections 433 and 434 and the petition cannot be dismissed on the aforesaid ground as alleged by the respondent."

18. While examining/interpreting the words "has served on the

company, by causing it to be delivered at the registered office, by registered

post or otherwise" in Section 434(1)(a) of the Act reference must be made

to Section 51 of the Act. The word "served" in Section 434(1)(a) is followed

by the words "by causing it to be delivered at its registered office." The

later words have to be given due effect and are not redundant. They refer

to the steps which a creditor has to take if the creditor wants to rely on

Section 434(1)(a) of the Act. Notice under Section 434(1)(a) of the Act can

be sent by registered post or otherwise (subject of course to the

reservation/doubt about certificate of posting as expressed in several

cases). The Section 51 prescribes the mode and manner of service of a

document. The document which includes notice under Section 434(1)(a) of

the Act may be treated as served if it is „sent‟ in the manner specified under

Co.Appln. No.893/2008 Page 14 Section 51 of the Act. As per Section 51, leaving a document at the

registered office of a company is sufficient service. Registered office of a

company is to be designated and informed to the Registrar of Companies

as per the requirements of the Act. The Act has specific purpose and object

behind the said designation which is to ensure delivery of/service of

documents of the company. A company being a juristic person and a

corporate body and not a natural person, cannot be served personally.

Section 434(1)(a) of the Act therefore has to be interpreted keeping in view

Section 51 of the Act as well as presumption raised under Section 27 of the

General Clauses Act and Section 114 of the Evidence Act. It has to be given

a pragmatic and practical interpretation. Otherwise, by keeping the

registered office closed and locked, service of notice under Section

434(1)(a) or documents under Section 51 of the Act cannot be effected and

can be avoided. If the registered office is closed/locked and no one is there

to receive letters/notices, fault is that of the company. They cannot take

advantage of their fault. The petitioner cannot be blamed for the fault of

the respondent company, when they have done what they are required to

do by law. Section 51 of the Act has been enacted to ensure and protect the

creditors, third parties or members who want to communicate and

correspond or send notices/documents to a company. It is this underlying

objective which has been taken notice of and applied in the case of

Cavendish Shipping Ltd (supra) and Hotline Teletubes and

Components Ltd (supra). Any other interpretation would make the

provisions of the Act unworkable and will be detrimental to third parties,

creditors or the members. This aspect has been highlighted by the Bombay

High Court in Re. Deepak Machineries Pvt Ltd (supra) and Re.

Ispat Industries (supra) wherein decision/judgment of K. Bhaskaran

Co.Appln. No.893/2008 Page 15 (supra) has been applied. It may be appropriate here to also refer to a

Division Bench judgment of Guwahati High Court in Nasha Toys Pvt

Ltd versus Harshad Corporation [2002] 110 CompCas 324 Gauhati.

In this judgment, it was held that if notice under Section 434(1)(a) of the

Act is received back with the unserved remarks "addressee left", it amounts

to sufficient service if the notice was sent to the registered office. In State

of Madhya Pradesh versus Hiralal and others (1996) 7 SCC 523,

the Supreme Court has observed that when notices/letters are sent and

are received back with the remarks "not available in the house", "house

locked" or "shop closed" respectively, the notices should be deemed and

treated to be served on the addressee.

19. In Madan & Company versus Waziri Jaivir Chand (1989) 1

SCC 264, the Supreme Court expounded and explained the word "served"

in Section 11 of the Jammu & Kashmir Houses and Shops Rent Control

Act, 1966. In the said case, the landlord had initiated proceedings for

eviction under the said section on the ground of arrears of rent. One of the

prerequisites was service of notice in writing through post office under

registered cover to the tenant to pay arrears within the specified period. In

the said case, notice was sent by registered post but returned back with the

endorsement "left without address, returned to the sender". The

contention raised by the tenant was that the word "served" postulates

actual service and therefore eviction order was not sustainable. The

Supreme Court felt that this interpretation should not be adopted, as too

strict and literal interpretation would make the Section impracticable and

unworkable. All that the landlord is required, in compliance with the

provisions of the Act, is to send a prepaid registered letter to the tenant‟s

correct address. Once he has posted a letter, he has no control over it.

Co.Appln. No.893/2008 Page 16 Similarly, the postman is required to deliver the letter and in case he is

unable to contact the addressee or the person authorized to receive is not

available, he has to return the letter. The postman neither has power nor

time to make enquiries regarding the whereabouts of the addressee nor is

he expected to retain the letter until the addressee chooses to refuse or

accept it. Postman is not authorized to affix the letter on the premises

because addressee is absent. The addressee can easily avoid receiving the

letter addressed to him without specifically stating that he had refused to

receive the same. Accordingly, it was observed in Madan & Company

(supra) as under:-

"6. ........It is suggested that a landlord, knowing that the tenant is away from station for some reasons, could go through the motions of posting a letter to him which he knows will not be served. Such a possibility cannot be excluded. But, as against this, if a registered letter addressed to a person at his residential address does not get served in the normal course and is returned, it can only be attributed to the addressee‟s own conduct. If he is staying in the premises, there is no reason why it should not be served on him. If he is compelled to be away for some time, all that he has to do is to leave necessary instructions with the postal authorities either to detain the letters addressed to him for some time until he returns or to forward them to the address where he has gone, or to deliver them to some other person authorized by him. In this situation, we have to chose the more reasonable, effective, equitable and practical interpretation and that would be to read the word "served" as "sent by post", correctly and properly addressed to the tenant, and the word "receipt" as the tender of the letter by the postal peon at the address mentioned in the letter. No other interpretation, we think, will fit the situation as it is simply not possible for a landlord to ensure that a registered letter sent by him gets served on, or is received by, the tenant."

Co.Appln. No.893/2008 Page 17

20. Accordingly, it was held that dispatch of letter by registered post is

sufficient compliance and the word "served" must be interpreted

accordingly. The above ratio is apposite, pertinent and relevant for

interpretation of section 434(1)(a) and 51 of the Act. What is material and

relevant is the bonafides and conduct of the petitioner and the respondent

company. Of course, if the report of the postal authorities is shown by the

respondent company to be false, wrong or procured, a different conclusion

may follow. Once the factum of due posting is proved, onus shifts on the

respondent company. Service of notice under Section 434(1)(a) of the Act

entitles the petitioner to raise a presumption and file a petition for the debt

due and payable. The respondent company has the right to defend the

proceeding and show that the debt is not due or is bonafidely disputed.

21. In view of the above, the first contention of the respondent-

Company is rejected. It is held that notice under Section 434(1)(a) of the

Act was duly delivered and served on the respondent-Company.

22. The second contention of the respondent-Company and the

respondent no.2 relates to service of notices after filing of the petition.

Affidavit of service filed on 3rd May, 2007 states that notices sent to the

respondent-Company by courier as well as by registered post at their

registered office were received back with the report "left without address".

It is after this service report that notices were directed to be published in

the newspapers "Hindustan Times" (English) and "Veer Arjun" (Hindi).

These were published and thereafter Order dated 5th December, 2007 was

passed. Interestingly, in the application filed by respondent no.2, he has

not denied/disputed that 12, Vaishali, Pitampura, Delhi-110088 and 9/83,

Punjabi Bagh (West), New Delhi-110026, are his addresses. He has stated

that he was not available at the said addresses and has given a third

Co.Appln. No.893/2008 Page 18 address : D-810, Thumps Up Apartments, Sector 4, Dwarka, Delhi. He has

further stated that Commissioner of Customs and Central Excise,

Chandigarh had raised an "illegal demand" for recovery and auctioned

some of the plants, machineries and movables of the respondent-Company

on 15th October, 2004. Thereafter, the Banks filed an application in O.A.

No. 186/89 and stay was obtained from the Debt Recovery Tribunal.

Whether possession should remain with the Official Liquidator acting as

the Provisional Liquidator or in view of the restraint order passed by the

Debt Recovery Tribunal, no action is required is a separate aspect, which

need not be gone into and examined while deciding the present

application.

23. I do not agree with the contention of the applicants i.e. respondent-

company and respondent no.2, that failure to serve notice on the advocates

of the respondent-Company appearing before the Debt Recovery Tribunal

amounts to fraud. It may have been advisable and prudent to try and serve

the respondent-company and respondent no.2 through the advocates who

were appearing/representing them before the Debt Recovery Tribunal.

However, the concerned advocates had entered appearance on behalf of

the respondent-company and respondent no.2 before the said Tribunal

and were not authorized to represent the respondent-Company before the

Delhi High Court where the winding-up proceedings were/are pending. In

view of the facts of the present case, I am not inclined to recall the Order

passed admitting the Company Petition and appointing the Official

Liquidator attached to this Court as the Provisional Liquidator on this

ground alone ex debito justitiae, without examining defence of the

respondent company on merits on the question of debt due. The

respondent company has not averred or disputed the facts stated in the

Co.Appln. No.893/2008 Page 19 winding up petition on merits. Since 2004, the factory of the respondent-

Company is lying closed. There are huge claims of the creditors and

Commissioner of Customs and Central Excise. As per the Official

Liquidator, the respondent no.2 and their directors are not cooperating,

statutory records have not been made available, and notice issued under

Section 130 of the Company (Court) Rules, 1959 have remained

unanswered. In view of the above, Co. Application no. 893/2008 is

dismissed. Respondent no.2-applicant will appear in person in the Court

on the next date of hearing as he has failed to handover the statutory

records, books of accounts of the respondent-Company which is under

Provisional Liquidation.

Co. Appln. No. 334/2007 for appointment of Provisional Liquidator is also disposed of.

Company Petition No. 71 of 2007 & Co.Appln. Nos. 1289/2010 & Crl.O.(Co.) 8/2010

Relist on 14th January, 2011.

                                                  (SANJIV KHANNA)
                                                    JUDGE
DECEMBER         22, 2010.
P




Co.Appln. No.893/2008                                             Page 20