Registrar Of Companies vs Cyber Space Ltd.
2014 Latest Caselaw 372 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

                                               Reserved on: 25th November, 2013
%                                          Date of Decision:21st January, 2014

+      CO. APPL. 1261/2007 IN CO. PET. 354/2001

       REGISTRAR OF COMPANIES                  ..... Petitioner
                     Through: Ms. Anjana Gosain, Advocate.

                       versus

       CYBER SPACE LTD.                                         ..... Respondent
                    Through:                 Mr. P. Nagesh and Mr. Anand,
                                             Advocates.
                                             Mr. Kanwal Chaudhary, Advocate
                                             for OL.
                                             Mr. Nitin Kumar and Mr. Hem
                                             Singh on behalf of applicant.

CORAM:
HON'BLE MR. JUSTICE R.V.EASWAR

                                    JUDGMENT

R.V. EASWAR, J.:

CO. APPL. No.1261/2007

1. This is an application filed by one Anand Krishna Johari ("the

applicant") under Rule 6 read with Rule 9 of the Companies (Court) Rules,

1995 seeking setting aside of the order dated 14.09.2005 passed by this

Court directing the final winding-up of the company, M/s. Cyber Space

Ltd. ("the company").

2. The application came to be filed in these circumstances. A winding-

up petition in CP 354/2001 was filed by the Registrar of Companies (ROC)

under Section 433 (f) and (e) of the Companies Act, 1956 seeking

winding-up of the aforesaid company. It is not necessary to delve in detail

into the circumstances which prompted the ROC to file the winding-up

petition; suffice to note that it was based on the report of the Central

Bureau of Investigation which carried out searches and investigation into

the affairs of the company and came to the conclusion that the company

had misappropriated monies belonging to several investors aggregating to

Rs.11.46 crores. The winding-up petition was admitted by this Court by

order dated 12.10.2004; this Court found from the averments made in the

petition that it was prima facie satisfied that the petitioner had made out a

case. By the same order this Court directed publication of the citation in

two newspapers and also appointed the official liquidator attached to this

Court as the provisional liquidator and authorised him to seize and take

into his charge the assets, books of accounts and other records of the

company. The citation in the Statesman (English) was published as

recorded by this Court in its order passed on 12.10.2004; however there

seems to have been some delay in the publication of the citation in

"Jansatta" (Hindi). Be that as it may, after taking note of the fact that the

citations were published in both the newspapers, this Court passed an order

on 14.09.2005 directing final winding-up of the company, observing

therein that nobody appeared on behalf of the company even after the

publications. This Court held that in these circumstances it would be just

and equitable to wind-up the company. Intimation of the final winding-up

order was directed to be sent to the ROC for deletion of the name of the

company.

3. It would appear thereafter that the process of winding-up was set in

motion and the liquidator took the usual steps contemplated by the

Companies Act in this behalf. In the month of November, 2007, however,

an application in C.A. No.1261/2007 was filed by the ex-directors seeking

recall of the winding-up order as well as the dismissal of the company

petition. On 27.04.2004 this Court disposed it of holding that the winding-

up order cannot be recalled but gave liberty to the ex-director to file a

scheme for the revival of the company in liquidation. An appeal was taken

against the aforesaid order to the Division Bench of this Court which by

order dated 04.09.2012, appears to have set-aside the order, as a

consequence of which this Court on 15.10.2012 restored C.A.

No.1261/2007 to its original number and directed the filing of

supplementary affidavits from the applicant in support of the reasons for

the delay in seeking recall of the final winding-up order.

4. In the affidavit filed on 27.11.2007 the applicant described himself

as the single largest equity holder and as a founding director of M/s. Cyber

Space Ltd. which statements were questioned by the ROC in his reply

dated 20.04.2010, on the ground that there was no evidence to show that

the aforesaid description of the applicant is correct. This Court directed

the ROC to examine the records relating to the company and file an

affidavit stating whether the applicant was the single largest equity holder.

This order was passed by this Court on 08.04.2013. On 08.07.2013,

finding that there was no progress in the matter this Court issued notice to

the counsel for the CBI and also directed the applicant to file an affidavit

in support of his stand that he was a director of the company at the relevant

time and the largest equity holder on the date of filing of the winding-up

petition. Thereafter, on 25.11.2013, the application was heard finally.

5. The main points put forth on behalf of the applicant are: -

(a) In the Company Petition No.354/2001, the applicant was not

made a respondent;

(b) The applicant was, therefore, not aware of the winding-up

proceedings in this Court;

(c) The applicant was taken into custody and was in jail in

Lucknow from March, 2005 to 15.07.2007 and did not have access

to newspapers published in Delhi;

(d) That later he was transferred to the jail in Bombay, and that in

the aforesaid circumstances he was not aware of the winding-up

proceedings or of the final winding-up order passed on 14.09.2005

and is, therefore, entitled to file an application for recall of the same.

It is further pointed out that as soon as the applicant obtained

bail and was released on 15.07.2007, he came to know of the final

winding-up order and in November, 2007, took steps to have the

same recalled by filing the present application. It is submitted that

in similar circumstances the Gujarat High Court, in the case of

Sinha Watches (India) P. Ltd. vs. Gujarat State Financial

Corporation : (1985) 58 Comp. Cas. 489, has held that the order of

winding-up which was passed ex-parte was liable to be set-aside on

the application of the managing director of the company who was

incarcerated during the material period and was, therefore, unaware

of the winding-up proceedings and the orders passed therein.

6. The learned counsel for the ROC, controverting the submissions

made on behalf of the applicant, contended that even while in jail, the

applicant could have known about the proceedings for the winding-up of

the company and the orders passed by this Court and that the claim that the

applicant was unaware of the proceedings or the order passed by this Court

on 14.09.2005 was against probabilities and the normal course of human

conduct. It was further submitted that the applicant was not diligent in the

matter and has not made out any positive case in support of the application,

despite the claim that he was the single largest shareholder of the

company. It is further pointed out that the other shareholders and directors

of the company were relatives of the applicant and it is improbable that the

applicant did not hear from them about the winding-up proceedings and

the orders passed by this Court. It is accordingly submitted that there is no

sufficient cause for the delay in making the application for recall nor is

there any case on merits to recall the final winding-up order.

7. Counsel appearing on behalf of the OL drew my attention to the fact

that the orders/ notices issued by this Court were duly served on the

registered office of the company and that besides the applicant, there were

7 other directors of the company who also did not take any step to file a

timely application to have the final winding-up order set-aside nor did they

participate in the proceedings prior thereto. He also pointed out that when

orders were passed by this Court on 12.10.2004 appointing the provisional

liquidator and directing citations, the counsel for the company was present.

He further pointed out that pursuant to the final winding-up order, the

registered office of the company was sealed on 05.10.2005 and notices

under Section 454 of the Companies Act were issued on 17.11.2005. It is

further pointed out that when the winding-up petition was heard on

02.08.2004 by this Court, counsel for the company was present, but

thereafter nobody represented the company in the winding-up proceedings.

Counsel for the OL points out that the company did not choose to

effectively and fully avail of the opportunity given to it to resist the

winding-up petition and it is not now open to one of the directors, who also

claims to be the single largest shareholder, to seek to recall the final

winding-up order at this late stage.

8. On a careful consideration of the matter in the light of the

submissions made before me, I am afraid that no case has been made out

by the applicant for setting aside or recalling the final winding-up order

passed by this Court on 14.09.2005. The applicant claims himself to be

one of the founder directors of the company and its single largest

shareholder. If these claims are correct, it was expected of the applicant to

be more diligent than what he has been. He was no doubt not made a

respondent in the company petition. But there were 7 other directors who

were made respondents and they also did not take part in the winding-up

proceedings after 02.08.2004. It is difficult to believe that there was lack

of communication between the other directors and the applicant and that

the applicant was not made aware of the winding-up proceedings. It would

have been quite natural for the directors who were respondents in the

company petition to have informed the founder director/ single largest

shareholder of the company that winding-up proceedings have been

instituted against the company. The applicant himself - if he was the

founder director or the largest shareholder of the company - ought to have

exhibited more diligence in matters regarding the company. It cannot be

denied that the notices/ orders of this Court were served on the company

against which winding-up proceedings were taken. The order of this Court

appointing the provisional liquidator was passed on 12.10.2004 at which

time the applicant was a free man and was not incarcerated. As submitted

by the learned counsel for the applicant, the applicant was sent to custody

in March, 2005. This Court is asked to believe that the founder-director of

the company and it is largest shareholder was not aware of the winding-up

of the proceedings or of the order passed by this Court appointing the

provisional liquidator for a period of nearly 5 months i.e. from November,

2004 to March, 2005. It is also contrary to the probabilities and opposed to

the normal course of human conduct that the diligence which the applicant

claims to have displayed after he was enlarged on bail in July, 2007 could

not be displayed by him prior to his being taken into custody. There

appears to have been no impediment in the way of the applicant in those 4-

5 months. The applicant, in my view, could not have been unaware of the

company petition or the proceedings in connection therewith before this

Court prior to his being taken into custody in March, 2005; he could have,

therefore, taken steps, to oppose the winding-up proceedings. In any case

the publication of the citation in the English newspaper "The Statesman"

was made before 12.10.2004 as recorded by this Court in its order passed

on 22.03.2005. At that time the applicant was not in custody and,

therefore, his claim that he could not have access to newspapers published

in Delhi while he was in custody in Lucknow does not hold water.

Moreover, there is no scheme for revival filed by the applicant.

9. I have also carefully gone through the judgment of the Gujarat High

Court (supra) cited by the learned counsel for the applicant. The facts of

that case were different. There were only two directors, who were husband

and wife. The husband who was the managing director was in jail in Tihar

at the relevant time and was not in the know of the winding-up

proceedings taken up by the petitioning creditors before the Court. He was

in custody from 04.12.1980 to 17.11.1981 and during this period his wife

who was a Swiss national was not in India and was away in Switzerland;

she was not served on behalf of the company in the company petition, nor

was the managing director served. The order of winding-up and

appointing provisional liquidator was passed by the High Court on

30.06.1981, when the managing director was in custody and his wife, the

only other director of the company, was away in Switzerland. It was in

these circumstances that the Gujarat High Court held that the company,

though being a legal entity, could not have appeared by itself and could

appear only through its officers who were well-versed in the affairs of the

company, and that since both the directors in the company were not served

and were not in the know of the winding-up proceedings, the managing

director was entitled to challenge the winding-up order when he came to

know of the said order after being released from jail. The facts of the

present case are crucially different. The company was represented before

this Court in the winding-up proceedings and up to 02.08.2004 counsel had

appeared for the company. It was only thereafter that there was no

representation on behalf of the company. The order of provisional

winding-up and appointment of provisional liquidator was passed in the

present case on 12.10.2004 on which date the applicant was a free person.

The publication in the English newspaper i.e. the Statesman was made and

a copy of the citation published in the said newspaper was filed in the

Court by the OL, as noted by this Court in its order dated 22.03.2005. The

applicant thus had ample opportunity to resist the winding-up proceedings.

He could not have been unaware of the citation published in the English

newspaper or of the order of provisional winging-up and appointment of

the provisional liquidator. He was not in custody when these

developments took place.

10. In the above circumstances, the diligence shown by the applicant

after he was released on bail on 15.07.2007 cannot avail him. The

application is without merit and is accordingly rejected with no order as to

costs.

(R.V. EASWAR) JUDGE JANUARY 21, 2014 hs