Maytas Properties Limited vs Mr. Krishna Kilaru and Mrs. Sreelatha Kilaru

Ramesh Ranganathan, J.—The applicants herein have not preferred an appeal, u/s 483 of the Companies Act (hereinafter called the "Act", against the order of this Court in C.P. No. 70 of 2010 and batch dated 21.08.2012. They neither seek review of the said order nor is it their case that it suffers from an error apparent on the face of the record. It is not even their case that the said order is in violation of principles of natural justice or that it is vitiated by fraud. They do not also contend that the said order has resulted in substantial injustice. Yet they seek "recall" of the order of this Court dated 21.08.2012 citing subsequent events as a justification for filing the applications. Company Application Nos. 680 of 2013 and batch, in C.P. No. 70 of 2010 and batch, are filed to recall and set aside the order in C.P. No. 70 of 2010 and batch dated 21.08.2012, and to dismiss the Company Petitions. The Applicant, in C.A. No. 680 of 2013 and batch, is the respondent in C.P. No. 70 of 2010 and batch; and the respondents, in C.A. No. 680 of 2013 and batch, are the petitioners in C.P. No. 70 of 2010 and batch. Parties shall, hereinafter, be referred to as they are arrayed in C.P. No. 70 of 2010 and batch.

The petitioners filed C.P. No. 70 of 2010 and batch seeking winding up of the respondent-company under the provisions of the Act and for appointment of the Official Liquidator, attached to the High Court of A.P, as the liquidator of the company with all powers u/s 50 of the Act. The petitioners are individuals who were allotted flats in the "Hill County" apartment complex located at Bachupally village, Quthbullapur Mandal, Ranga Reddy District. Agreements of sale were entered into between the petitioners and the respondent, during the years 2006 to 2008. All the petitioners have, admittedly, paid a substantial part of the sale consideration running into several lakhs each. On the ground that the respondent-company did not complete construction of the apartments, within the agreed period, the petitioners terminated the agreements of sale. Construction of the "Hill County" apartment complex came to a halt in December, 2008. The erstwhile directors of the respondent-company are the sons of Sri B. Ramalinga Raju, Chairman of Satyam Computer Services Limited, who, in the first week of January, 2009, confessed that he had committed a huge corporate fraud of around Rs. 7,000 crores.

In C.P. No. 70 of 2010 and batch, the petitioners contended that the respondent-company had collected Rs. 654 crores from prospective apartment owners, and had diverted a major portion thereof for other purposes including for purchase of land in the name of other front and surrogate companies; all the petitioners had issued legal notices, on different dates, terminating the agreements of sale in terms of clause 9(e) thereof; they had requested the respondent to return the sale consideration paid by them, after deducting Rs. 5,000/- towards documentation charges; in reply thereto the respondent issued a legal notice dated 13.07.2010 contending that the project could not be completed on account of force majeure events; they sent legal notice dated 16.07.2010 pointing out the discrepancies in the respondent''s legal notice dated 13.07.2010; thereafter a statutory notice, u/s 434(1)(a) of the Act, was issued and was delivered at the registered office of the respondent-company; and in reply thereto the respondent, vide legal notice dated 16.08.2010, admitted receipt of the sale consideration but, however, contended that the delay in completion was because of several private investors and financial institutions withdrawing from the Hill County project.

This Court ordered notice before admission, in C.P. No. 70 of 2010 & batch, on the respondent company on 12.04.2010. Counsel entered appearance and filed a counter-affidavit on behalf of the respondent-company. Several affidavits and counter-affidavits were filed thereafter. The implead applications, filed by M/s. IL & FS Group Engineering Company Limited, the Hill County Owners welfare association, and MAYTAS Hill County buyers association, were allowed. The Company Petitions were elaborately Heard for their "admission". In its order, in C.P. No. 70 of 2010 & batch dated 21.08.2012, this Court rejected the preliminary objections of the respondent-company to the maintainability of the winding up petitions, i.e., (1) the agreements of sale, and the clauses therein, could not be examined as the said documents were not adequately stamped or registered, and (2) since arbitration proceedings had already been instituted, the remedy of the petitioners was to submit their claims before the arbitrator, and not to file winding up petitions. Thereafter the contentions urged, both on behalf of the petitioners and the respondents, were examined on their merits. This Court held that none of the contentions, urged on behalf of the respondent-company, constituted a bona fide dispute necessitating dismissal of the company petition at the stage of admission; neither was the defence of the respondent in good faith and of substance nor was it likely to succeed in point of law; the respondent had also not adduced prima facie proof of the facts on which their defence depended; the amount due was a "debt"; the petitioners were creditors, and the respondent their debtor; the defence of the respondent was not valid and was a mere moonshine; and the presumption, u/s 434(1)(a) the Act, was satisfied necessitating exercise of discretion by the Court to admit the Company Petitions.

This Court also examined whether the respondent company was commercially insolvent. It noted the contents of the audit report of S.R. Batliboi & Associates (auditors of the respondent), annexed to the Balance Sheet as at 31.3.2009, including that the respondent-company''s accumulated losses as on that date was Rs. 518,04,82,387/- resulting in complete erosion of its net worth. This Court held that the net-worth of the respondent Company was calculated to determine its creditworthiness; the excess of liabilities over the assets and capital stock, resulting from operating losses, was also called negative net-worth; erosion of net-worth of a company meant that the accumulated losses of a company, at the end of a financial year, was more than its entire net-worth (total assets minus total liabilities); and complete erosion of net worth meant "that the accumulated losses of a company, coupled with the liabilities of the company, far exceed its assets". This Court observed that the total debts of the respondent, as reflected in its Balance Sheet as at 31.03.2010, had increased to nearly 3 1/2 times its available assets; reliance placed by the respondent on the valuation report of M/s. Cushman & Wakefield dated 12.4.2010, to contend that the respondent-company had large properties of high value and the Balance Sheet reflecting the historical cost of land should not be taken as the basis for determining its value, did not merit acceptance; the phrase "plainly and commercially insolvent'', as required to attract Section 434(1)(c) of the Act, meant that the assets of the company and its existing liabilities were such as to satisfy the Court that the existing and probable assets were insufficient to meet the existing liabilities; the Balance Sheets of the respondent company, as at 31.3.2009 and 31.3.2010, showed that its total existing assets were wholly insufficient to meet its total existing liabilities, both short term and long term; Section 433(e) read with Section 434(1)(c) enabled the Court to wind up the company if its existing and probable assets were insufficient to meet its liabilities taking into account not only its existing liabilities but also those which were contingent and prospective; even in cases where the company was unable to pay its debts when they became due, although its assets including its capital exceeded its liabilities, such a company must also be held to be "commercially insolvent" and as being unable to pay its debts; in the case on hand, the Balance Sheet of the respondent company reflected that, even without taking into account its contingent and prospective liabilities, the total assets of the respondent-company was less than 1/3rd its total existing liabilities; its net worth had completely eroded, and it was commercially insolvent; and the respondent company must, therefore, be deemed to be "unable to pay its debts" on a conjoint reading of Section 433(e) and Section 434(1)(c) of the Companies Act.

On the question whether the Company Petition should be admitted this Court held that, in the light of the order of the Company Law Board ("CLB" for short) and M/s. IL & FS being inducted into the management of the respondent-company, as M/s. IL&FS held 80% of the share capital, and had invested more than Rs. 150 Crores in the respondent-company, it would not be appropriate to exercise discretion, at this stage, to admit the company petitions filed for winding up of the respondent company; on the other hand this Court could also not ignore that the net worth of the respondent company had completely eroded, and its exercise of discretion not to entertain the company petitions may well result in further increase of the total debt due to banks and financial institutions, and their inability later to recover the debt, even in part.

In conclusion this Court observed:--

.........In this context it is necessary to refer to the order of the CLB in C.P. No. 4 of 2009 dated 13.1.2011 wherein, at para 7(v), the IL&FS group was directed to complete the Maytas Hill County Residential Project Phase I within 18 months of its induction as a promoter in Maytas Properties Limited, and to arrange the required finances to complete the project. Under Para 7(vii) of its order, the CLB directed IL&FS to settle all disputes, tax liability and the contractual dues of other creditors of Maytas Properties Limited. Consequent to the order of the CLB dated 13.1.2011, the respondent addressed letter dated 8.9.2011 to its customers wherein, while furnishing details of the progress of the project, they furnished a complete plan for completion of all the apartments in the form of a tabular statement extracted herein below. While, for certain apartments and towers, the handover date has been stated to be December, 2012, for certain others it has been stipulated as March, 2013.

As a case for admission of the Company Petitions have been made out by the petitioners, I consider it appropriate to exercise discretion u/s 433 read with Section 443(1) of the Companies Act to defer further hearing of the Company Petition beyond the promised date of handing over the apartments to the buyers i.e., till 21st June, 2013 subject to the following conditions. The respondent company shall file half yearly financial statements certified by a Chartered accountant, for the financial year 2012-13, within one month of completion of the half year, along with an application to this Court to receive the said report. For the half year period from April to September, 2012, the financial statements certified by a Chartered Accountant, based on an examination of the books of accounts of the respondent, shall be filed before this Court on or before 31.10.2012. Since audit of the respondent''s books of accounts, for financial year 2011-12, would have been completed by then, the audited financial statements, including its Balance Sheet and profit and loss account for the year 2011-12 along with the audit report, shall also be filed before this Court along with an application to receive the said documents. Likewise, for the half year period from 1" October 2012 to 31st March, 2013, the half-yearly financial statements of the respondent company, certified by a Chartered Accountant, shall be filed before April, 30th 2013, and the audited financial statements for the year ending 31.3.2013, along with a copy of the auditors report shall be placed before this Court by June, 21st, 2013 on which date these company petitions shall be listed for hearing.

As a case of admission has already been made out by the petitioners u/s 433(e) read with both 434(1)(a) and 434(1)(c) of the Companies Act, there shall be no further hearing on merits including on the maintainability of these company petitions and whether there exists a bona fide dispute. It is only if the respondent company''s audited financial statements for the year ending 2011-12 and 2012-13 reflect that its net worth has become positive, and it has completed construction of all the apartments as promised in its letter dated 08.09.2011, (the schedule date for completion of all the apartments is February, 2013), would this Court examine whether it should exercise its discretion not to admit the company petitions. In case the respondent company''s audited financial statements show that the net worth of the respondent, for the year ending 2012-13, continues to be negative these Company Petitions shall stand admitted automatically, and the order of admission shall be advertisement in Indian Express (English Daily) and Andhra Prabha (Telugu Daily) State Editions before 26th July, 2013 subject, of course, to the condition that the petitioners, in these batch of company petitions, do not file applications, under Rule 100 of the Company Court Rules, seeking permission to withdraw the Company petitions..............

In compliance with the order of this Court, in C.P. No. 70 of 2010 and batch dated 21.08.2012, the respondent-Company filed C.A. No. 1026 of 2012 requesting this Court to receive their financial statements for the half-year ended September, 2012 (from April, 2012 to September, 2012) certified by M/s. Leela Sundaram & Co., Chartered Accountants. They also filed their audited financial statements, for the year 2011-2012, as audited by M/s. S.R.B.C. & Co., Chartered Accountants. Along with C.A. No. 680 of 2013 is enclosed a copy of the order of the Company Law Board Principal Bench, New Delhi in C.A. No. 123 of 2013 dated 12.03.2013 whereby the period of completion of the Hill County project was extended till 30.06.2013. C.A. No. 693 of 2013 was filed by the respondent-Company requesting this Court to receive the audited financial statements for the year 2012-2013 audited by S.R.B.C. & Co. LLP, Chartered Accountants. C.A. No. 831 of 2013 was filed by the petitioners enclosing thereto a copy of the order passed by the National Consumer Disputes Redressal Commission, New Delhi in First Appeal No. 327 of 2012 and batch dated 08.07.2013 confirming the order passed by the A.P. State Consumer Disputes Redressal Commission in C.C. No. 13 of 2010 and batch dated 27.04.2012. C.A. No. 978 of 2013 was filed by the respondent-company requesting this Court to receive the valuation report of M/s. Servel Krishna Pvt. Ltd, and the certificate issued by M/s. Leela Sundaram & Co.

C.A. No. 1007 of 2013 was filed by the respondent-company placing on record the audited financial statements for the financial year 2010-2011. Enclosed to CA (SR). No. 6197 of 2013, filed by the respondent-Company on 20.09.2013, are copies of the application made by them before the C.L.B. dated 26.06.2013 seeking extension of time for completion of the project; and a copy of order passed by the C.L.B. in C.A. No. 4/1/2013 in C.P. No. 4 of 2009 dated 10.07.2013, extending the date of completion of construction till 30.09.2013. The respondent-company filed yet another application, in CA (SR) No. 6198 of 2013, on 20.09.2013 wherein the latest updates, on the progress of permissions and construction of the various facilities, were detailed. The applications filed, both on behalf of the petitioners and the respondent-company, requesting this Court to receive the documents, including the audited balance sheets etc., are ordered and are taken on record.

Sri S. Ravi and Sri L. Ravichander, Learned Senior Counsel and Sri S. Niranjan Reddy, Learned Counsel made elaborate submissions on behalf of the respondent-company (the applicants in C.A. No. 680 of 2013 & batch). Sri S. Prabhakar, Learned Counsel, put forth detailed arguments on behalf of the petitioners (respondents in C.A. No. 680 of 2013 & batch). Written submissions were also presented by Sri S. Niranjan Reddy and Sri S. Prabhakar, Learned Counsel for the respondent-company and the petitioners respectively. It is convenient to examine the rival submissions, urged by Counsel on either side, under different heads. It is necessary at the outset to examine the contentions, urged on behalf of the respondent-company, that the twin conditions imposed by this Court, in its order in C.P. No. 70 of 2013 and batch dated 21.08.2012 for it to consider whether it should exercise its discretion not to admit the Company Petitions, have been substantially, if not totally, complied with.

I. HAVE THE CONDITIONS IMPOSED BY THIS COURT, IN ITS ORDER DATED 21.08.2012, BEEN COMPLIED WITH?

As noted hereinabove this Court, in its order in C.P. No. 70 of 2010 and batch dated 21.08.2012, concluded that, as a case of admission had already been made out by the petitioners u/s 433(e) read with both Sections 434(1)(a) and 434(1)(c) of the Act, there would be no further hearing on merits, including on the maintainability of the company petitions and whether there existed a bona fide dispute. While observing that it is only if the respondent company''s audited financial statements for the year ending 2011-12 and 2012-13 reflected that its net worth had become positive, and it had completed construction of all the apartments as promised by it in its letter dated 08.09.2011, (the schedule date for completion of all apartments was February, 2013), would this Court examine whether it should exercise its discretion not to admit the company petitions. It was also made clear that, in case the respondent company''s audited financial statements showed that its net worth for the year 2012-13 continued to be negative, the company petitions would stand admitted automatically, and the order of admission shall be advertised, provided the petitioners, in this batch of company petitions, did not file applications, under Rule 100 of the Companies Court Rules, 1959 (hereinafter called the "Rules") seeking permission to withdraw the Company petitions.

The first of the twin conditions, imposed by this Court in its order dated 21.08.2012, was that construction of all the apartments should be completed by February, 2013. The affidavit, filed in C.A. No. 680 of 2013, details the progress made by the respondent-company in construction of the apartments. It is admitted therein that the timelines, stated in the letter dated 08.09.2011, could not be met and their customers were duly informed of the reasons therefor; these reasons had persuaded the C.L.B. to extend the time for completion; from out of the total 840 apartments, 312 were ready for delivery of which 60 were already delivered to the customers; the process of handing over the remaining apartments was continuing; in so far as the petitioners in the company Petitions are concerned, some of the apartments purchased by them were ready to be handed over; and the others would be completed by 30.06.2013.

After referring to the various affidavits filed on behalf of the respondent-company, including C.A. (SR) No. 6198 of 2013 dated 20.09.2013, both Sri L. Ravichander, Learned Senior Counsel and Sri S. Niranjan Reddy, Learned Counsel, would submit that the respondent-company has completed construction of the towers originally proposed; it has also completed construction of all villas in the project by 30.09.2013; the process of handing over possession, for finishing and furnishing activities, has already begun for a majority of the apartments; the final Fire NOC, on completion of all installation of fire safety equipment and all essential inspections, has been granted; applications for grant of occupancy certificate for the apartments have been submitted, after all due pre-requisites were complied with, and is awaited from the relevant authorities; the township has received Manjeera water connection and can accommodate immediate augmentation of residents; however the application submitted to Manjeera Water Board, for additional water supply to the Hill County township, is still under process; the overhead distribution lines have been completed and energized; the sub-station has been tested by various departments; the main electrical connection to the township has been established; application for meters, for the villas and apartments, was submitted on 20.09.2013; preparatory works are being completed by the respective teams in close coordination with the electrical consultants; documentation formalities, for transfer of 40% common areas to the Panchayat/HMDA, are being complied with; the Maytas Hill County Project is near completion in all respects, and is ready for occupation; and the time granted by this Court for completion of construction has been efficiently utilized.

Sri S. Prabhakar, Learned Counsel for the petitioners, would submit that the averments in the ''recall'' petitions'', in C.A. No. 680 of 2013 & batch, is an obfuscation of the truth; on the one hand, in the affidavit in C.A. No. 680 of 2013 dated 21.06.2013, an impression was sought to be given that the project had been completed, though the applicant Company itself admitted later that they had approached the C.L.B. and had obtained an order dated 19.07.2013 extending time, for the completion of the project, upto 30.09.2013; on completion of construction of a building, the builder is required to submit a certificate of completion of construction, duly certified by an Architect, to the Municipal authorities who would, in turn, be required to inspect the building and give a fit for occupancy certificate; only after this certificate is issued, can a building be deemed to be completed in the eye of law; in the absence of compliance with these statutory requirements, it cannot be said that construction of the apartments have been completed; the applicant-company has not produced any occupancy certificate till date evidencing completion of the apartments; the National Consumer Disputes Redressal Commission, in its order dated 08.07.2013, had observed that the apartments had not been completed and basic amenities such as water, electricity, drainage, elevator, gas pipe line etc., had not yet been provided; and, in the absence of the occupancy certificate, the contention, that construction of the apartments has been completed, does not merit acceptance.

The very fact that the respondent-company had requested the C.L.B. in C.A. No. 123 of 2013, for extension of the schedule date of completion initially upto 30.06.2013, and thereafter, by C.A. No. 4/1/2013, upto 30.09.2013, (which was granted by the C.L.B. by its orders dated 12.03.2013 and 10.07.2013 respectively), itself shows that respondent-company failed to complete construction of all the apartments by February, 2013 as promised by them in their letter dated 08.09.2011. In the application filed before the CLB, in C.A. No. 4/1/2013, no reference is made by the respondent-company either to C.P. No. 70 of 2010 or to the order passed by this Court on 21.08.2012. This Court hears appeals, against the orders of the C.L.B. u/s 10-F of the Act. It has not been, nor can it be, contended that the order of the C.L.B. is binding on this Court or that this Court should recall its earlier order dated 21.08.2012 because the CLB has extended time, for completion of construction, upto 30.09.2013.

In its order dated 08.07.2013, the National Consumer Redressal Commission recorded its satisfaction that the Hill County project could not be completed by 30.06.2013; even as per their affidavit, the developer (respondent-company) had sought further time upto 31.07.2013 to complete the project as basic amenities such as water, electricity, drainage, elevator, gas pipeline etc., were yet to be provided; the affidavit filed by the developer on 20.05.2013 revealed that a substantial part of the work, even according to them, was still going on; the said affidavit, on the face of it, did not inspire confidence; it was clear that the apartments were not habitable; and the claim of the developer, that the flats were ready and would be handed over to the purchasers by June, 2013, was factually incorrect.

In their letter dated 08.09.2011, (which weighed with this Court in deferring admission of the company petition and its advertisement), the respondent-company had assured their customers that construction of the subject apartments would be completed by February, 2013, and the apartments handed over by March, 2013. It is evident, both from the affidavit filed by the respondent-company in C.A.(SR) No. 6198 of 2013 dated 20.09.2013, and the written submissions filed on its behalf on the conclusion of the hearing of these applications, that an occupancy certificate has not yet been obtained from the concerned authorities; transfer of .40% common areas, to the grampanchayat/HMDA, has not yet taken place; their application for additional water supply is still under consideration by the Manjeera Water Board; and approvals for electricity meter connections, for each of the apartments, is yet to be obtained. The first requirement of completion of construction of all apartments, as promised by the respondent in its letter dated 08.09.2011 (whereunder the promised date of completion of construction of all apartments was stated as February, 2013), has not been satisfied.

II. THE "NET WORTH" OF THE RESPONDENT-COMPANY DID NOT TURN POSITIVE EVEN BY THE FINANCIAL YEAR ENDING 31.03.2013:

The second of the twin requirements as stipulated in the order dated 21.08.2012, for this Court to examine whether it should exercise its discretion not to admit the Company Petitions, was that the net worth of the respondent- company, as reflected in its audited financial statements for the years 2011-2012 and 2012-13, should be positive. In its affidavit, in C.A. No. 680 of 2013, the respondent-company claims that it is a solvent company; financial statements are based on historical cost, because of which the current and actual net worth of the company is not fully seen; any company''s net worth, from a valuation point of view, would be a balancing of its assets with that of its liabilities; on such an exercise being undertaken, the net worth of the respondent-company is positive as its assets exceed its liabilities as on date; the "net worth" would be inaccurate to the extent of items in the Balance Sheet which do not express its true (market) value; the Balance-Sheet and Profit and Loss account, for the year ending 31.03.2009, show accumulated losses in view of provisions made on doubtful advances, provisions for finance cost on borrowings and on estimated future loss on the Hill County Project; the losses were due to such provisions, and were not actual losses; and the net worth of the respondent-company needs to be evaluated not in terms of its accumulated losses but in terms of infusion of Rs. 425 Crores by its new promoter, and the debt restructuring settlements arrived at with banks and PE Investors.

In the affidavit, filed in support of C.A. No. 979 of 2013, the respondent-company submits that, on a realistic but very conservative estimate of the assets, as reflected in the Balance-Sheet, the unsold inventory of Villas and Apartments of Rs. 292 Crores, along with the receivables from the already sold units of Rs. 72 crores, constitute the total value of current assets of Rs. 364 crores; it has invested Rs. 45.32 crores in the equity shares and debentures of Jubilee Hills Landmark Projects Limited; along with its subsidiaries, it has land development rights and other assets in the form of loans and advances of around Rs. 261.70 crores; the market value of the balance land of 12.50 acres of the Hill Country Project is Rs. 43.75 crores; one of its subsidiaries owns 45.90 acres of land at Malkapur, the market value of which is Rs. 25.25 Crores; another fully owned subsidiary owns 25.60 acres of land at Visakhapatnam, the market value of which is Rs. 217.60 crores; and a third wholly owned subsidiary owned 25.47 acres of land at Isnapur, the market value of which was Rs. 25.48 crores. It is, however, admitted that the land of 12.50 acres of the Hill County Project is partly under Income Tax and partly under Civil Court attachment, and the lands at Visakhapatnam and Isnapur are under Civil Court attachment. It is further submitted that, after deducting the provisions, (made in the books of accounts on a conservative principle), from the accumulated losses, the negative net worth would come down to Rs. 313.91 crores; as per Income Tax Laws, the accumulated losses as at 31.03.2013 is Rs. 265.30 crores; the accumulated losses of Rs. 768.11 crores, in the audited financial statements, is a notional and book loss; and "net worth" should be examined on a different footing to assess solvency.

Sri S. Ravi, Learned Senior Counsel appearing on behalf of the respondent-company, would submit that the test of determining the viability of a company should be of "commercial insolvency" which would indicate the future viability and progress of the company; the test of "commercial insolvency" goes beyond traditional examination of the books of accounts and looks into the actual assets or worth of the company, and contrasts them with the liabilities of the company; the value of the assets, reflected in the Balance Sheet, is at cost; and, for a realistic picture to determine ''net worth'', it is essential to look at the net realizable value of the assets. After referring in detail to what the respondent-Company claims to be a realistic but very conservative estimate of the current market value of the assets reflected in the Balance Sheet, Sri S. Ravi, Learned Senior Counsel, would contend that "net worth", as per the financial statements of the respondent-company, does not consider many of these factors, and the term "net worth" should, therefore, not be viewed in its strict financial sense; the term "net worth", as defined in Section 2(29A) of the Companies Act, should be interpreted taking into account business practices; the condition of the net worth turning positive, as per the audited financial statements for year ending 2011-12 and 2012-13, need not be taken as a criteria'' in winding up proceedings; in business practice, net worth (sometimes called net assets) is taken to be the total assets minus total outside liabilities of an individual or a company; on a reading of the Balance Sheet, if the accumulated losses exceed the shareholder''s equity, it is a negative value for "net worth"; however, to the extent items in the Balance Sheet do not express their true (market) value, the net worth will also be inaccurate; "net worth", in this formulation, is not an expression of the market value of the firm, and the firm may be worth more (or less) if sold as a going concern; financial statements are basically estimates prepared in conformity with Indian GAAP, which requires Companies to make judgments, estimates and assumptions which may or may not change in future; accounting concepts, conservatively, require estimation of all losses and contingent liabilities; it does not, however, allow accounting of unrealized profits and contingent assets; the negative net worth as at 31.03.2011 of Rs. 626.24 Crores, and Rs. 767.86 Crores as at 31.03.2013, is because the financial statements of the respondent-company were prepared on a historical cost basis; and, as a result thereof, the current and actual net worth of the Company is not fully reflected therein.

On the other hand the petitioners, in their affidavit filed in support of C.A. No. 831 of 2013, state that several of the units in the Hill County Project were still mortgaged with the Hyderabad Urban Development Authority; and the order of the National Consumer Disputes Redressal Commission also imposed a fresh liability, as the respondent Company has to return back the amounts received by it from 66 purchasers. In their counter-affidavit, filed to C.A. No. 979 of 2013, the petitioners submit that the assets of the respondent-company cannot be valued at a figure higher than what is contained in its Balance-Sheet; the valuation method suggested by the respondent-company is fanciful and contrary to established legal principles; the Balance-Sheet of the respondent company dated 31.03.2013 shows its dues to the income tax department, for the years 2005-2006 to 2007-2008, to be Rs. 219.28 crores; the properties are stated, by the respondent-company itself, to be under attachment by the income tax department and the Civil Court; no details are forthcoming regarding the stage of attachment; in the Balance Sheet dated 31.03.2013, it is stated that IL& FS group had extended loans of Rs. 306.18 crores and the said loan, along with accrued interest, would be adjusted against all unsold Villas and apartments; if that is so, the project cannot be valued at Rs. 364 crores, as there is already a loan of Rs. 306 crores; the Balance Sheet dated 31.03.2013 also notes that a term loan of Rs. 146.13 crores was secured by a pari-pasu charge by way of hypothecation of its entire current assets, receivables, first mortgage and charge on all its immovable and movable properties present and past, and the personal guarantee of Sri B. Rama Raju (the erstwhile director); as all their immovable properties were already mortgaged, the respondent could not contend that their assets are worth Rs. 312.08 crores; the admission of the respondent, that they had advanced Rs. 261.70 crores to Satyam Computers Services Limited, substantiated the petitioner''s plea, in the company petitions, that the respondent- company had diverted funds, meant for construction of apartments, for other purposes; while the respondent-company denied this plea, in its counter affidavit to the company petitions, they were now, for the first time, admitting that funds meant for construction had been used as advances and loans to Satyam Computer Services Ltd.; the subsidiaries of the respondent-company had filed C.A. No. 862 of 2012, in C.P. Nos. 123 and 192 of 2012, contending that they had advanced Rs. 261.70 crores to Satyam Computer Services Limited; they had opposed the scheme of amalgamation and arrangement; this Court, in its order dated 11.06.2013, held that the claim of the objecting creditors was not bonafide, and did not bind the company so as to oppose the claim of amalgamation; and the respondent-company cannot be allowed to blow hot and cold and continue to claim this sum of Rs. 261.7p crores as debts due to them. The petitioners highlight certain discrepancies, which they claim exist, in the auditors report. They refer to note No. 25(D), of the notes of the audited financial statements for the year ending 31.03.2013, that the Ministry of Corporate Affairs Serious Fraud Investigating Office had directed investigation of the books and other records of the respondent-company, u/s 209-A of the Companies Act, vide its letter dated 23.06.2011; the respondent had sent their replies to the Serious Fraud Investigating Office; and, as their replies did not lend themselves to any meaningful conclusion, a de-novo enquiry is in progress.

Sri S. Prabhakar, Learned Counsel for the petitioners, would submit that the aspect of historical cost, to determine net worth, was agitated at the time of admission, and is being re-agitated in the ''recall'' petition; the valuation report of Cushman and Wakefield was pressed into service, at the time of the hearing of the Company Petition for its admission; in the present case, a valuation report of M/s. Servel Krishna Valuers Private Limited is sought to be relied upon; no attempt has been made to demonstrate that the properties mentioned in the report actually belong to the respondent-company, or that they are free from encumbrances or attachments of either the Income Tax Department or the Enforcement Directorate; the aspect of IL & FS infusing new funds was also agitated earlier; funds, which were collected from prospective apartment purchasers, were diverted to other companies resulting in abandonment of the project in 2009; the applicant-company has filed a misleading affidavit, on the aspect of commercial insolvency, trying to project an incorrect picture; in the Balance Sheet dated 31.03.2013 the statutory auditors of the applicant-company have deliberately avoided using the phrase ''complete erosion of net worth'' even though the figures in the Balance Sheet clearly indicated the same; this phrase was used in all the audit reports prior to 31.03.2013; even according to the incoherent figures, now sought to be projected by the applicant-company, its net worth is still negative; during the course of hearing of these applications, the Senior Counsel for the applicant-company admitted that the net worth of the Company had completely eroded; there is no need for this Court, therefore, to go into the garbled explanation of the applicant-company of its own financial statements; the applicant has been consistently making losses for the last several years, and is staying afloat by huge long term borrowings; to service the debt of Rs. 1187 Crores, at the rate of even 10% per annum, the applicant would have to pay atleast Rs. 118 Crores per year towards interest; all its landed assets i.e. Apartments, Villas etc., are already mortgaged; there is no prospect of any income being generated from out of these assets; the applicant is deep in debt; the inescapable conclusion, despite all window dressing, is that the net worth of the respondent-company continues to be negative; and the company petition must be deemed to have been automatically admitted in terms of the order of this Court in C.P. No. 70 of 2010 and batch dated 21.08.2012.

In its order in C.P. No. 70 of 2010 and batch dated 28.11.2012, this Court noted the contents of the audit report, annexed to the Balance Sheet as at 31.03.2009, that the accumulated losses of the respondent were Rs. 518,04,82,387/- resulting in complete erosion of its net worth; in their audit report, annexed to the Balance Sheet as at 31.3.2010, the auditors had stated that the respondent-company had incurred a loss of Rs. 41,35,16,269/- during the financial year 2009-2010; and its accumulated losses were Rs. 559,39,98,656/- resulting in complete erosion of its net worth. This Court, thereafter, examined the contents of the Balance Sheet as at 31.03.2009 and observed that, as against its liabilities (secured loans plus unsecured loans) of Rs. 777,51,67,157/-, the assets of the respondent-company (fixed assets plus investments plus net current assets) was merely Rs. 259,51,84,770/- i.e., the total outstanding dues were nearly three times its available assets; the Balance sheet as at 31.3.2010 reflected an even more dismal financial picture of the respondent-company; and, while the liabilities of the respondent-company, (secured and unsecured loans) as at 31.03.2010, was Rs. 798,08,08,090/-, its assets (fixed assets plus investments plus net current assets) was merely Rs. 238,73,09,434/- i.e., the total debt due by the respondent had increased to nearly 3 1/2 times its available assets.

This Court, thereafter, held that the Balance Sheet of the respondent company, as at 31.3.2009 and 31.3.2010, showed that its total existing assets were wholly insufficient to meet its total existing liabilities, both short term and long term; Section 433(e) read with Section 434(1)(c) enabled the Court to wind up the company if its existing and probable assets were insufficient to meet its liabilities taking into account not only its existing liabilities but also those which are contingent and prospective; even in cases where the company is unable to pay its debts when they become due, although its assets including its capital exceed its liabilities, it must be held to be "commercially insolvent", and as being unable to pay its debts; in the case on hand, the Balance Sheet of the respondent-company reflected that, even without taking into account its contingent and prospective liabilities, its total assets were less than 1/3rd its total existing liabilities, i.e., its net worth had completely eroded, and it was commercially insolvent; and, on a conjoint reading of Section 433(e) and Section 434(1)(c) of the Act, the respondent-company must be deemed to be "unable to pay its debts".

Note-3 of Schedule 18, of the audited financial statements for the financial year 2010-11, records that the respondent-company had suffered a net loss of Rs. 67,09,03,578/- for the year 2010-2011; its accumulated losses, as at 31.03.2011, was Rs. 626,49,02,234/- as against its share capital of Rs. 25,00,000/-, resulting in complete erosion of its net worth; the company had insignificant sales; there had been no significant progress of the project, and a number of customers had cancelled their bookings which were under various stages of litigation; and there had been a restriction on registration of units in favour of customers by the Income Tax department. While reiterating the contents of Note-3 of Schedule 18, the statutory auditors further state, in their audit report, that these contentions indicated the existence of material uncertainty that may cast significant doubt about the company''s ability to continue as a going concern; and the financial statements have been prepared based on a going concern assumption and did not include adjustments, if any, that may have been required had the company ceased to be a going concern. From the audited Balance Sheet, as at 31.03.2011, it is evident that, while the liabilities (secured and unsecured loans) of the respondent company were Rs. 852,87,17,498, its assets (fixed assets plus investments plus net current assets) was merely Rs. 226,63,15,264/- i.e., the total debt due by the respondent increased to more than 3.75 times its available assets.

In their audit report, for the financial year 2011-12, it is stated that the respondent-company had incurred a loss of Rs. 77,41,61,858 during the year; and the accumulated losses were Rs. 703,90,64,092/- resulting in complete erosion of its net worth. The auditors reiterate what they had stated in their earlier audit report for the financial year 2010-11. The Balance Sheet and Profit and Loss account of the respondent-company was prepared in a different form, for the financial year 2011-12. While the non-current liabilities as at 31.03.2012 is shown as Rs. 848,10,12,849/-, its assets (non-current assets plus current assets minus current liabilities) is stated to be Rs. 144,44,48,757/- i.e., the total debt due by the respondent-company increased to nearly six times its available assets. The audited financial statements of the respondent-company, for the year ending 31.03.2013, show that it again incurred a loss of Rs. 64,20,63,312/- during the year; and its accumulated losses increased further to Rs. 768,11,27,404/-. The form in which the Balance Sheet as at 31.03.2013 was prepared again underwent a charge and the trade payable, which was shown as a non-current liability as at 31.03.2012, was shown as a current liability as at 31.03.2013. It is wholly unnecessary for this Court to undertake the task of recomputing the figures reflected in the Balance Sheet as at 31.03.2013, for its comparison with the figures reflected in the Balance Sheet as at 31.03.2012, as the very fact that the respondent suffered a loss of Rs. 64,20,63,212/- for the year ending 31.03.2013 can only mean that its net worth not only continues to be negative but has eroded even further.

III. THE VALIDITY OR OTHERWISE OF THE METHOD OF DETERMINING NET WORTH, AS SUGGESTED ON BEHALF OF THE RESPONDENT-COMPANY, CANNOT BE EXAMINED IN "RECALL" PROCEEDINGS:

The method of determining net worth, as suggested by Sri S. Ravi, Learned Senior Counsel appearing on behalf of the respondent-company, based on its current market value, is, admittedly, at variance with the figures reflected in its audited financial statements. In its order dated 21.08.2012, this Court made it amply clear that the requirement, of the net worth of the respondent-company becoming positive, must be in accordance with its audited financial statements. The audited Profit and Loss account of the respondent-company, for the years ending 2011-12 and 2012-13, show that it had incurred a loss of around Rs. 77.42 crores and Rs. 64.21 cores respectively. The audited Balance sheets as at 31.03.2012 and 31.03.2013 show that the net worth of the respondent company continues to remain negative and has completely eroded even further.

In its order dated 21.08.2012 this Court rejected, as not meriting acceptance, the distinction sought to be made between financial and commercial insolvency placing reliance on the valuation report of M/s. Cushman & Wakefield dated 12.4.2010, as also the contention urged on behalf of the respondent-company that the audited Balance Sheet, which reflected the historical cost, should not be taken as the basis for determining the value of land. The submission of Sri S. Ravi, Learned Senior Counsel appearing on behalf of the respondent-company, that the assets should be valued at its net current value, and the liabilities determined after excluding certain provisions therefrom, is but an attempt to have the order of this Court dated 21.08.2012 reviewed in the guise of a "recall petition". It would be wholly inappropriate for this Court to examine these contentions in a recall petition when the respondent-company is, admittedly, not seeking review of the earlier order of this Court dated 21.08.2012.

As the twin requirements, of (1) the respondent completing construction of the apartments as promised in its letter dated 08.09.2011 (i.e., by February, 2013) and (2) its net worth as reflected in its audited financial statements turning positive by the end of the financial year 2012-13, have not been complied with, the Company Petitions stand automatically admitted and the order of admission should have been advertised as the petitioners have not filed any application under Rule 100 seeking permission to withdraw the Company Petitions.

The petitioners were prevented from advertising, admission of the Company Petitions, mainly because the respondent-company invoked the jurisdiction of this Court seeking to have the order, in C.P. No. 70 of 2010 and batch dated 21.08.2012, recalled. The question which necessitates examination is whether these recall petitions should be entertained and the earlier order of this Court dated 21.08.2012 recalled?

IV. RECALL PETITION: ITS SCOPE:

In the affidavit, filed in support of C.A. No. 680 of 2013, the respondent-company submits that the applicant has completed the Hill County Project, and has deferred payment of its liabilities in a structured manner; the unsold inventory, relating to the apartments and independent houses, is around Rs. 292 crores; the receivables, on already sold units, was Rs. 76 crores; the total estimated future receivables was Rs. 368 crores; the project expenditure was around Rs. 355 crores i.e., the liability to repay to the lenders, in a restructured manner, is around Rs. 180 crores; and the estimated additional construction and overhead costs and other expenditure would be in the region of Rs. 170-175 crores; the total expenditure of Rs. 355 crores is less than the receivables of Rs. 368 crores; their liabilities have been restructured by the institutional lenders, and the payment obligations have been deferred over a period of five years; the settlement between the respondent Company and SRS Orion Investments Limited, Mauritius and J.M. Financial Trustees Company Private Limited is awaiting regulatory approvals; IL&FS group has invested Rs. 425 crores in order to complete the Hill County Project; the ban on registration of properties has been lifted by the Income Tax Department; as the petitioners have not filed suits, for recovery of the debt allegedly due to them, till date they are no longer contingent creditors; no useful purpose would be served in admitting the Company Petitions at their behest as they would not even be the unsecured creditors of the respondent-company, even if an order of winding up were to be passed later; and these changed circumstances would require this Court to reconsider and recall its earlier order dated 21.08.2012, and stay its operation until the Company Petition is dismissed.

Sri S. Niranjan Reddy, Learned Counsel for the respondent-company, would submit that the respondent''s endeavour is not to seek review of the order of this Court dated 21.08.2012, but for its recall on the basis of the subsequent developments in the progress of the company; this Court has the power to recall its order under Rules 9 and 6; and its inherent powers empower this Court to recall its own order in the interests of justice.

Sri S. Prabhakar, Learned Counsel for the petitioners, would submit that the order in C.P. No. 70 of 2010 and batch dated 21.08.2012 is not an ex parte order, but was passed after hearing all the parties at length; a "Recall Petition" is, therefore, misconceived; the contention that this Court should "revisit" its order dated 21.08.2012 is also misconceived; the order of this Court, in C.P. No. 70 of 2010 and batch dated 21.08.2012, is appealable u/s 483 of the Act; the so called "Recall Petition" is a review petition in disguise; the earlier order of this Court dated 21.08.2012 does not suffer from an error apparent on the face of the record necessitating its being reviewed; in the absence of a plea of fraud, the recall petition is devoid of substance; the so called ''recall'' petition is only an attempt to delay further proceedings; it is a filibustering tactic; by filing this petition the applicant-company has succeeded in postponing publication of the advertisement which should have been published either in the last week of June or early July, 2013.

u/s 483 of the Companies Act, a person aggrieved by "any order made, or decision given" has a right to file an appeal. The expression "any order or decision" is very wide. It takes within its ambit every order. The only condition is that the order or decision must be "in the matter of winding up of a Company". An order, directing advertisement of a winding-up application, is an appealable order u/s 483 of Act. Western India Theatres Ltd. Vs. Ishwarbhai Somabhai Patel, ; Shankarlal Aggarwal and Others Vs. Shankarlal Poddar and Others, ; Golcha Investment (P) Ltd. Vs. Shanti Chandra Barna, . The expression, "in the matter of winding up", in Section 483 of the Act is wide enough to include all orders, which are even incidental to the winding up. The right to file an appeal under a statute has to be liberally construed. The right to the remedy has to be sustained, and a restricted interpretation, which results in denial of the right of appeal, has to be avoided. George Philip Vs. Official Liquidator, . The moment a winding up petition is instituted, it becomes "the matter of winding up of a company." Any order made or decision given, after institution of a petition for winding up of a company, is an order made or decision given in the matter of a winding up of a company. Horst Kurves GmbH Vs. Essar Oils Ltd., .

The words "order or decision" in Section 483 of the Companies Act are wider than the expression "judgment" in clause 15 of the letters patent. The second part of Section 483, which refers to ''the manner and ''the conditions subject to which appeals may be had'', merely regulates the procedure to be followed in the presentation of appeals and of hearing them, the period of limitation within which the appeal is to be presented and the forum to which appeal would lie. It does not restrict or impair the substantive right of appeal which has been conferred by the opening words of that Section. The words ''order or decision'' occurring in the first part of the Section, though wide, would exclude merely procedural orders or those which do not affect the rights or liabilities of parties. Shankarlal Aggarwal and Others Vs. Shankarlal Poddar and Others, ; Central Bank of India Vs. Shri Gokal Chand, ; Bachharaj Factories Ltd. Vs. Hirjee Mills Ltd., ; Horst Kurves GmbH Vs. Essar Oils Ltd., . As an appeal, u/s 483 of the Act, is not against a judgment, the test to be applied is not whether the order determines the rights and liabilities of the parties, but whether the order affects any rights or liabilities of the parties. If the order or decision affects the rights or liabilities of the parties, it would be an order other than a mere procedural order and would, therefore, constitute an order or decision against which an appeal would lie u/s 483 of the Act. (Horst Kurves GMBH ( 2003) Vol. 115 Comp Cas 801 (Guj) ; Shankarlal Aggarwal and Others Vs. Shankarlal Poddar and Others, . The order of this Court dated 21.08.2012 affected the rights of the respondent-company as it determined, for the purpose of admission of the Company Petitions, the question of maintainability, that the company was unable to pay its debts attracting the ingredients of Section 434(1)(a), and that the company was commercially insolvent attracting Section 434(1)(c) of the Act. Though an appeal lay, u/s 483 of the Act, against the order of this court dated 21.08.2012, the respondent-company chose not to prefer an appeal.

The Companies Act, 1956 does not expressly provide for the review of an order admitting a winding up petition or of an order such as the one passed by this court on 21.08.2012. Where a Court, having jurisdiction to adjudicate on merits, proceeds to do so, its judgment or order can be reviewed on merits only if the court is vested with the power of review by express provision or by necessary implication. Grindlays Bank Ltd. Vs. Central Government Industrial Tribunal and Others, ; Kapra Mazdoor Ekta Union Vs. Management of Birla Cotton Spinning and Weaving Mills Ltd. and Another, . In the absence of any provision in the Act or the Rules granting an express power of review, an order cannot be reviewed as conferring jurisdiction upon a court/tribunal is a legislative function, and cannot be conferred either by the court or by the consent of the parties. (Patel Chunibhai Dajibha v. Narayanrao Khanderao Jambeka AIR 1965 SC 145 ; Harbhajan Singh Vs. Karam Singh and Others, ; Kalabharati Advertising Vs. Hemant Vimalnath Narichania and Others, . The power to review is not an inherent power. It must be conferred by law either expressly/specifically or by necessary implication and, in the absence of any provision in the Act/Rules, review of an earlier order is impermissible as review is a creation of a statute. Kalabharati Advertising Vs. Hemant Vimalnath Narichania and Others, ; Patel Narshi Thakershi and Others Vs. Shri Pradyumansinghji Arjunsinghji, ; Major Chandra Bhan Singh Vs. Latafat Ullah Khan and Others, ; Dr (Smt.) Kuntesh Gupta Vs. Management of Hindu Kanya Mahavidyalaya, Sitapur (U.P.) and Others, ; State of Orissa and Others Vs. Commissioner of Land Records and Statement, Cuttack and Others, ; State of Orissa and Others Vs. Commissioner of Land Records and Statement, Cuttack and Others, . In the absence of any statutory provision, the exercise of power of review under the garb of clarification/modification/correction is not permissible. Kalabharati Advertising Vs. Hemant Vimalnath Narichania and Others, ; CTO v. Makkad Plastic Agencies (2011) 4 SCC 750; Delhi Administration Vs. Gurdip Singh Uban and Others, . In whatever way a modification or alteration or interference, with the order passed earlier by this Court, is sought for, it would amount to reviewing the said order. The relief sought for cannot be granted, u/s 151 CPC or under analogous provisions contained under Rule 9 of the Rules. O.P. Jalan and Another Vs. Deccan Enterprises Pvt. Ltd. and Another, .

Even if a power of review is said to be available, as Rule 6 makes the provisions of the CPC applicable to these proceedings, its exercise is permissible only under very limited circumstances including that the order suffers from an error apparent on the face of the record. There is a real distinction between a mere erroneous decision and a decision which can be characterised as vitiated by "error apparent". A "review" is by no means an "appeal" in disguise. Delhi Administration Vs. Gurdip Singh Uban and Others, ; Thungabhadra Industries Ltd. Vs. The Government of Andhra Pradesh, . It is wholly unnecessary for this Court to dwell on this aspect any further as the respondent-company is, admittedly, not seeking review of the order of this Court dated 21.08.2012 but its "recall". There is a distinction between a review petition and a recall petition. While in a review petition the Court considers on merits whether there is an error apparent on the face of the record, in a recall petition the Court does not go into the merits but simply recalls an order passed without giving an opportunity of hearing to an affected parry. Asit Kumar Kar Vs. State of West Bengal and Others, . The court cannot make use of the special provisions of Rule 9 where a party had his remedy provided elsewhere in the Act or the Rules and has neglected to avail himself of the same. The power under Rule 9 cannot be exercised as an appellate power. By way of an application under Rule 9, the provision of review cannot also be circumvented and the applicants cannot circuitously achieve that which is expressly prohibited by Order 47 Rule 1 CPC. In Re: Shri Ambica Mills Ltd., Ex Parte Jaykrishna Harivallabhdas and Others, ; Nain Singh Vs. Koonwarjee and Others, . The proper remedy is not an application under Rule 9, but to follow one of the three known methods of rectifying orders passed by competent courts, either by way of appeal, or by way of review, or by resort to Section 152 CPC, when clerical or arithmetical mistakes in judgments need to be rectified. H.J. Dorairaj Vs. Viswanatha Rupa and Co. and Others, .

A combined reading of Rules 6 and 9 indicate that the inherent power of the court can be exercised in the manner provided u/s 151 CPC except in cases where the Act and the Rules provide otherwise. The line of enquiry which the Company Court should adopt, for discerning the limits of its powers under Rule 9, is to examine whether there is anything in the provisions of the Act or in the Rules which takes away the power of the court to recall an order of winding up. G.T. Swamy and Another Vs. Goodluck Agencies and Another, . Rule 9 of the Rules is a replica of Section 151 CPC excepting that for the word "rules" the word "Code" has to be substituted. Every Court must, in the absence of an express provision in the Code for that purpose, be deemed to possess, as inherent in its very constitution, all such powers as are necessary to do the right and to undo a wrong in the course of the administration of justice. Rule 9 does not confer any new power on the Court but only saves their inherent powers. The inherent powers of the Court being very wide and indefinable, the limits of such jurisdiction should be carefully guarded and its exercise in an arbitrary and capricious manner effectively prevented. These inherent powers cannot be extended to make a new law on the subject. P.R.M. Abdul Huq Vs. Katpadi Industries Ltd. and Another, ; Narsingh Das v. Mangal Dubey ILR 5 All 163 ; Official Liquidator, Khosla Fans (India) P. Ltd. (In Liquidation) Vs. Ramesh Khosla and Others, . As the existence of the inherent power of the Court is recognised under Rule 9, there is no question of implying any powers outside the limits of the Rules. Padam Sen and Another Vs. The State of Uttar Pradesh, ; Manohar Lal Chopra Vs. Rai Bahadur Rao Raja Seth Hiralal, . The inherent power has its roots in necessity and its breadth is co-extensive with the necessity. Smt. Usha R. Shetty and others Vs. Radeesh Rubber Pvt. Ltd. and another, ; The Newabganj Sugar Mills Co. Ltd. and Others Vs. The Union of India (UOI) and Others, . Exercise of inherent jurisdiction is within the discretion of the Court, and exercise of discretionary power demands a high degree of care, caution and circumspection. Dilip B. Sheth Vs. Official Liquidator of Alang Industrial Gases LTD. and Another, . No party has a right to insist on the Court''s exercising its inherent jurisdiction and the Court would exercise it only when it considers it absolutely necessary, for the ends of justice, to do so. Manohar Lal Chopra Vs. Rai Bahadur Rao Raja Seth Hiralal, ; G.T. Swamy and Another Vs. Goodluck Agencies and Another, .

The scheme of the Companies Act does not contain any specific and direct provision expressly conferring power on the court to recall the order of winding up Dilip B. Sheth Vs. Official Liquidator of Alang Industrial Gases LTD. and Another, . In the absence of a specific provision, for the filing an application to "recall" an order, the provisions of Rule 9 can be resorted to in the interest of justice. When the Rules are silent regarding a procedural aspect, the inherent power of the court can come to its aid to act ex debito justitiae for doing real and substantial justice between the parties. Jet Ply Wood Private Ltd. and Another Vs. Madhukar Nowlakha and Others, ; Rameswar Sarkar Vs. State of West Bengal and Others, ; Manohar Lal Chopra Vs. Rai Bahadur Rao Raja Seth Hiralal, .

The power under Rule 9, Rule 6 and Section 151 CPC would empower the Court to pass appropriate order including an order recalling its own (earlier) order as may be necessary for the ends of justice. Dilip B. Sheth Vs. Official Liquidator of Alang Industrial Gases LTD. and Another, . The exercise of that power depends on the facts and circumstances of each case. G.T. Swamy and Another Vs. Goodluck Agencies and Another, . The inherent power cannot be invoked where express provision is made. Rule 9 of the Rules cannot be applied to override the express provisions of the Companies Act, Nungambakkam Dhanarakshaka Saswatha Nidhi Ltd. Vs. Registrar of Companies, , or the Rules made thereunder. The inherent power of the Court is not a substantive power but is merely a procedural power and cannot be exercised if it conflicts with what is expressly provided by the Rules. Padam Sen and Another Vs. The State of Uttar Pradesh, ; Manohar Lal Chopra Vs. Rai Bahadur Rao Raja Seth Hiralal, ; In Re: Shri Ambica Mills Ltd., Ex Parte Jaykrishna Harivallabhdas and Others, . In other words, if there are specific provisions of the Rules dealing with a particular topic and they expressly or by necessary implication exhaust the scope of the powers of the Court or the jurisdiction that may be exercised in relation to a matter, the inherent power of the Court cannot be invoked in order to cut across the powers conferred by the Rules. The prohibition contained in the Rules need not be express, but may be implied or be implicit from the very nature of the provisions that it makes for covering the contingencies to which it relates. Arjun Singh Vs. Mohindra Kumar and Others, ; O.P. Jalan and Another Vs. Deccan Enterprises Pvt. Ltd. and Another, . The inherent powers saved by Rule 9 are not powers over the substantive rights which any litigant possesses. Specific powers have to be conferred on the Courts for passing such orders which would affect such rights of a party. Such powers cannot come within the scope of inherent powers of the Court in matters of procedure, which powers have their source in the Court possessing all the essential powers to regulate its practice and procedure. Padam Sen and Another Vs. The State of Uttar Pradesh, ; Manohar Lal Chopra Vs. Rai Bahadur Rao Raja Seth Hiralal, .

A party, seeking recall of the order, has to establish that the procedure followed by the Court suffered from such illegality that it vitiated the proceeding and invalidated the order made therein, in as much as the opposite party concerned was not heard for no fault of his, or that the matter was heard and decided on a date other than the one fixed for hearing of the matter which he could not attend for no fault of his. In such cases, therefore, the matter has to be re-heard in accordance with law without going into the merits of the order parsed. The order passed is liable to be recalled not because it is found to be erroneous, but because it was passed in a proceeding which was itself vitiated by an error of procedure or mistake which went to the root of the matter and invalidated the entire proceeding. When a recall is sought due to a procedural defect, the inadvertent error committed by the Court must be corrected ex debito justitiae to prevent the abuse of its process, and such power inheres in every Court. (Grindlays Bank Ltd. 1080 Supp SCC 420 ; Kapra Mazdoor Ekta Union : (2000) 10 SCC 345). It is customary to file applications for "recall" when the case is dismissed for default. A request for review cannot be made by describing the application as one for "recall". Otherwise, in every case parties will start filing applications for "recall" in addition to "review" and raise the same grounds. Delhi Administration Vs. Gurdip Singh Uban and Others, . In Lajwanti v. Union of India : (2000) 10 SCC 345 the Supreme Court held that the name of the appellant''s advocate not having been shown in the cause-list for the relevant day against the writ petition concerned, was sufficient cause to recall the order and hear the appellant''s counsel on the writ petition.

Once it is established that the order was obtained by practising or playing fraud, it is vitiated. Such order cannot be held legal, valid or in consonance with law. It is non-existent and non est and cannot be allowed to stand. Such an order can be recalled. A.V. Papayya Sastry and Others Vs. Government of A.P. and Others, . The remedy to move for recalling the order, on the basis of newly discovered facts amounting to fraud, cannot be foreclosed. No Court can be regarded as powerless to recall its own order if it is convinced, that the order was wangled through fraud or misrepresentation of such a dimension as would affect the very basis of the claim. Bhaurao Dagdu Paralkar Vs. State of Maharashtra and Others, ; United India Insurance Co. Ltd. Vs. Rajendra Singh and Others, ; The Divisional Forest Officer Vs. The District Judge and Others, . The expression "revisit" is, ordinarily, used in relation to a principle, Mrs. Saradamani Kandappan Vs. Mrs. S. Rajalakshmi and Others, or a provision. Vinod Seth Vs. Devinder Bajaj and Another, . Relevant considerations must be borne in mind whenever the Court is called upon to exercise its jurisdiction to revisit its earlier decision/order. Jindal Stainless Ltd. and Another Vs. State of Haryana and Others, ; The Keshav Mills Co. Ltd. Vs. Commissioner of Income Tax, Bombay North, . The provisions of Part VII of the Act confer certain powers on the court to deal with matters pertaining to the winding up of companies. There is no provision in Part VII of the Act, including Section 443, which expressly or impliedly impinges on the court''s inherent power that is conferred under Rule 9 of the Rules. G.T. Swamy and Another Vs. Goodluck Agencies and Another, .

Let us now examine whether the Rules, either expressly or by necessary implication, prohibit exercise of the inherent power under Rule 9 to "recall" an order such as the one passed by this Court dated 21.08.20J2. Section 443(1)(c) of the Act enables the Court, on the hearing of a winding up petition, to make any interim order that it thinks fit. Section 443(1)(d) enables the Court to make an order for winding up the company with or without costs. Part III of the Rules relates to winding up. Rule 95 requires the petition, for winding up a company, to be in Form No. 45, 46 or 47, as the case may be, with such variations as the circumstances may require. Rule 96 relates to admission of a petition and directions as to advertisement and, thereunder, upon the filing of the petition, it shall be posted before the Judge in chambers for admission of the petition and fixing a date for the hearing thereof and for directions as to the advertisements to be published and the persons, if any, upon whom copies of the petition are to be served. Rule 96 confers power on the judge, before whom the petition comes-up for admission, to issue a pre-admission notice to the company so that the company is not taken unawares and may appear. Cotton Corporation of India Limited Vs. United Industrial Bank Limited and Others, ; George Vs. The Athimattam Rubber Co. Ltd., Thodupuzha, ; Nepc Micon Limited, 36, Wallajah Road, Chennai-2 and another Vs. Hindustan Thompson Associates Ltd., Chennai-105, . The cause shown by the company will have to be carefully analysed along with the materials available and the allegations in the petition before deciding on the question of admission and issuing the advertisement. National Conduits (P) Ltd. Vs. S.S. Arora, ; George Vs. The Athimattam Rubber Co. Ltd., Thodupuzha, ; Hind Overseas Private Limited Vs. Raghunath Prasad Jhunjhunwalla and Another, ; Kerala State Industrial Development Corporation Ltd. Vs. Poonmudi Tea Pack Ltd., . The steps required by Rule 96 of the Rules are vital and its compliance is mandatory. The purpose of advertisement, contemplated by Rule 96, is wholesome and is meant for the benefit of all the creditors and shareholders. Falcon Gulf Ceramics Ltd. Vs. Industrial Designs Bureau, . An order for the winding up of a company operates in favour of all the creditors and all the contributories of the company as if made on the joint petition of a creditor and of a contributory. Non-compliance with Rule 96 is a ground on which the court shall reject the petition. Falcon Gulf Ceramics Ltd. Vs. Industrial Designs Bureau, ; Halsbury''s Laws of England (Fourth Edition) at paragraph 1463).

When a petition is filed, for winding up of a company under the order of the Court, the High Court (i) may issue notice to the Company to show cause why the petition should not be admitted; (ii) may admit the petition and fix a date for hearing, and issue a notice to the Company before giving directions about advertisement of the petition; or (iii) may admit the petition, fix the date of hearing of the petition, and order that the petition be advertised and direct that the petition be served upon persons specified in the order, it is clear from Rule 24(2) that a petition for winding up cannot be placed for hearing before the Court, unless the petition is advertised. But that is not to say that as soon as the petition is admitted, it must be advertised. In answer to a notice to show cause why a petition for winding up be not admitted, the Company may show cause and contend that the filing of the petition amounts to an abuse of the process of the Court. If the petition is admitted, it is still open to the Company to move the Court that, in the interest of justice or to prevent abuse of the process of Court, the petition be not advertised. Such an application may be made even where the Court has issued notice under the last clause of Rule 96, and even when there is an unconditional admission of the petition for winding up. The power to entertain such an application of the Company is inherent in the Court under Rule 9. National Conduits (P) Ltd. Vs. S.S. Arora, ; U.P. Twiga Fiberglass Ltd. Vs. Parekh Marketing P. Ltd., ; Cotton Corporation of India Limited Vs. United Industrial Bank Limited and Others, . The closing sentence of Rule 96 permits notice to be given to the company ''before giving directions as to the advertisement of the petition, and not before ''admission''. It defines the latest point of" time at which notice may be given to the company when a petition is posted before a Judge in accordance with the earlier sentence. It does not limit the earliest point. In those cases, in which for some reason the order of advertisement is not made immediately after that of admission, notice may be given to the company before or after the admission. In normal circumstances, under Rule 96, the notice ''before giving directions as to the advertisement of the petition'', would be given before the order of admission. Bipla Chemicals Industries Vs. Shree Keshariya Investment Ltd., . Even where a prima facie case is made out, the Court should normally adopt the first course. Only in very clear and strong cases should the second course be adopted. The third course should be adopted in very exceptional circumstances as advertisement of a winding up petition may, many a time, sound the death knell of the company. Synopsys (Singapore) Private Limited, Singapore Vs. GPS Usha Private Limited, Bangalore, .

A discretion is conferred on the company court to issue notice before either admitting the company petition, or after admission and before directing advertisement of the admission of the company petition. The power conferred on the company court, to direct advertisement of the admission of the company petition simultaneously with the admission of the company petition, should not be exercised as a matter of course. Ordinarily a notice, "before giving directions as to the advertisement of the petition", is given before the order of admission. In exceptional cases, the court may admit the petition and postpone giving directions as to the advertisement. Soujanya Hotels Private Ltd. Vs. Nalla Satyanarayana Murthy and Others, Bipla Chemicals Industries Vs. Shree Keshariya Investment Ltd., .

Even at the stage of admitting the winding up petition, or entertaining the winding up petition, the court has also an inherent power to do that which is necessary to prevent the abuse of the process of the court or to advance the cause of justice or make such orders which are necessary to meet the ends of justice. The inherent power of the court is not taken away or in any way restricted by Section 443(1) of the Act. Smt. Usha R. Shetty and others Vs. Radeesh Rubber Pvt. Ltd. and another, ; Ramakrishna Industries (P.) Ltd. and Others Vs. P.R. Ramakrishnan and Others, ; Hind Overseas Private Limited Vs. Raghunath Prasad Jhunjhunwalla and Another, . The inherent jurisdiction, u/s 151 CPC (Rule 9 of the Rules) includes a power to review an interlocutory order, to recall and cancel previous orders or orders which cause injustice. It also possesses a power to stay the proceedings or prevent abuse of the process of the court. Manohar Lal Chopra Vs. Rai Bahadur Rao Raja Seth Hiralal, Dasari Venkatacharyulu Vs. Manchala Yesobu and Another, ; Sita Ram Sahu and Others Vs. Kedarnath Sahu, ; Anuradha @ Chanchal Kumari Vs. Santosh Nath Khanna, .

When an ex-parte order of admission of a Company Petition is passed, and notice is issued thereafter to the Company before giving directions as to the advertisement of the petition, the Company is entitled to seek recall of the "admission of the company petition" as they were not afforded an opportunity of being heard on whether the petitioning creditor has made out a prima facie case, for winding up the company, necessitating its admission. The question as to whether the "admission", once made under Rule 96, should be revoked is a matter of "discretion " vested in the court. Demach Engineers Private Ltd. Vs. Mrs. Winny Xavier, . Even in those exceptional cases, where a Company Petition is admitted, the date of its hearing is fixed, the petition is directed to be advertised and a copy thereof served on the company sought to be wound up, a "recall petition" can be filed by the company as it was neither heard on the "admission of the company petition" or "its advertisement". The Court, in such cases, has the power to suspend advertisement of a petition for winding up, pending disposal of an application for revoking the order of admission of the petition. National Conduits (P) Ltd. Vs. S.S. Arora, ; Lord Krishna Sugar Mills Ltd. and Another Vs. Smt. Abnash Kaur and Others, . The hearing to be given to the company, under Rule 96 of the Rules, is not for the purpose of deciding the manner of the advertisement but for deciding whether the advertisement should be made at all and the petition proceeded with. Even after the Court has admitted a petition it can, on being moved for the purpose by the company or some other interested person, stay proceedings and revoke the admission. George Vs. The Athimattam Rubber Co. Ltd., Thodupuzha, Demach Engineers Private Ltd. Vs. Mrs. Winny Xavier, ; Cotton Corporation of India Limited Vs. United Industrial Bank Limited and Others, . While an ex parte order of admission of a company petition, or an ex parte order directing its advertisement, can be recalled as the Company has not been afforded an opportunity of being heard, a recall petition, (save in cases of violation of principles of natural justice or where the order is vitiated by fraud), would not lie where a pre-admission notice, like in the present case, was issued; the company filed its reply thereto; several affidavits and counter-affidavits were filed thereafter; and the petitioner, the respondent company, and parties which had impleaded themselves, were elaborately heard.

In its order dated 21.08.2012 this Court recorded its prima facie satisfaction of the inability of the respondent company to pay its debts u/s 433(e) read with both Sections 434(1)(a) and Section 434(1)(c) of the Act. It is only because a promoter was newly inducted, at the behest of the Central Government and pursuant to the order of the CLB, was admission of the Company Petition and its advertisement deferred on condition that the respondent-company fulfilled the prescribed stipulations within the specified time frame. It was made clear that failure to comply with the stipulated conditions would result in automatic admission of the company petition and its advertisement. Rule 24(2) enables the Judge, if he thinks fit, to dispense with any advertisement of the petition required by the Rules except in the case of a petition to wind-up a company. In view of Sub-rule (2) of Rule 24, the publication of the advertisement of a petition to wind up a company cannot be dispensed with. As these twin conditions have not been satisfied, the Company Petition stands admitted automatically, and the petition is required to be listed for hearing to enable this Court to finally decide whether or not an order of winding up should be passed. In view of Rule 24(2), read with Rule 99 of the Rules, such a hearing can takes place only after the winding up petition is advertised. In the absence of an advertisement, as required by Rule 96 read with Rules 99 and 24 and Form No. 48 being published, no order of winding up of the company can be passed. (MVI. Mvi. Ahmadur Rahman and Others Vs. Registrar of Companies, and National Conduits (P) Ltd. Vs. S.S. Arora, . While the Court has the power to postpone advertisement of the petition, the petition for winding up cannot be placed for hearing before the Court unless the petition is advertised. Lt. Col. R.K. Saxena Vs. Imperial Forestry Corporation Ltd., Official Liquidator, ; National Conduits (P) Ltd. Vs. S.S. Arora, . There is no scope for the exercise of the inherent jurisdiction to dispense with the requirement of an advertisement under Rule 24 of the Rules. Lt. Col. R.K. Saxena Vs. Imperial Forestry Corporation Ltd., Official Liquidator, .

Where a winding up petition is advertised any person, whose interests are likely to be affected adversely by the winding up order, may wish to oppose the petition. And, likewise, any person whose interests are likely to be affected favourably may seek to support it. The framers of Rule 99 specified creditors and contributories as those who would usually be interested in supporting or opposing the petition, but there may be others whose interests are likely to be affected by a winding up order. Therefore they employed the general words "other persons" to enable all those who can satisfy the Court that their interests are likely to be affected one way or the other by a winding up order, to support or oppose the petition. A person, if he so chooses, has the right to enter appearance in and oppose a proceeding the result of which may be prejudicial to his interests. Gwalior Sugar Co. Ltd., Dabra Vs. Shyam Saran Gupta and Co., Kanpur, .

At the stage of summary enquiry, which may be held prior to admission and advertisement of the Company petition, the Court is called upon to satisfy itself that it is a case for admission and advertisement and nothing more. The exercise of arriving at a prima facie finding by the Court, at the preliminary stage before admitting and advertising the petition, is purely tentative and can be re-examined, if need be, in greater detail at the stage of trial of the Company petition before passing the final order of winding up, if any, after hearing the rival parties including parties that may appear at the stage of trial pursuant to the advertisement. The prima-facie finding reached by the Court, at the pre-admission and advertisement stage of hearing, would not bind the petitioning creditor and the Company for all times to come at the subsequent stages of the winding-up petition. By their very nature, these findings are reached in a summary manner. At that stage other creditors and contributors would be absent. But even that apart, these finding are reached to find out a prima facie case for admission and advertisement. They are not reached with a view to decide whether ultimately the petition should be allowed or dismissed. These prima facie findings will only open the door for a detailed enquiry at a later stage. Though these findings may also be on jurisdictional aspects, they remain prima facie, and are not final and conclusive between the parties. Airwings Private Limited Vs. Viktoria Air Cargo Gmbh Langer Kornweg,

After advertisement, other creditors or even the company itself can show at the stage of trial that,'' despite the prima facie finding which has resulted in admission and advertisement of the petition, there is no case for winding up of the company or that there are relevant circumstances which would entitle the Court to dismiss the winding up petition at the stage of trial, even after admission and advertisement, in the exercise of its powers u/s 443 of the Act. An order of admission and advertisement, which throws open a debate in presence of all concerned, does not foreclose the very same debate between the main contesting parties namely, the petitioning-creditor and the respondent Company. These proceedings are representative in nature and are in the nature of a class litigation. Any finding reached prima facie, for taking further action in such class litigation, cannot be held to be binding to such an extent on the main contestants as would foreclose them, at the stage of trial of such a class litigation, from putting forward their respective cases finally on all these aspects. Airwings Private Limited Vs. Viktoria Air Cargo Gmbh Langer Kornweg, .

Rule 103 of the Rules relates to an affidavit in opposition and requires copies of the affidavit to be given to any creditor or contributory, appearing in support of the petition, who may require the same. Rule 104 relates to an affidavit in reply and also requires a copy thereof to be served on the person by whom the affidavit in opposition was filed or his advocate. While the matters contained in Section 433(a) to (f) can, conveniently, be decided by means of affidavits, and oral evidence is not mandatory, The Aluminium Corporation of India Ltd. and Another Vs. Lakshmi Ratan Cotton Mills Co. Ltd. and Others, , it has been the practise of this Court to permit oral evidence to be adduced.

An elaborate procedure is statutorily prescribed for admission of the Company Petition, its advertisement, for affidavits to be filed in opposition to the winding up petition and in reply thereto not only by the petitioning creditor, or the Company sought to be wound up, but any other person who either seeks to support or oppose the winding up petition. The "hearing" of the petition, after its admission and advertisement, is required to be afforded not only to the petitioning creditor and the Company sought to be wound up, but also to those who may choose to appear before the Court, after the winding up petition is advertised, to either support or oppose an order of winding up being passed by the Court. While the respondent Company can still satisfy this Court, during the hearing of the Company Petition, that it should not exercise its discretion, u/s 433(e) of the Act, to pass an order of winding up, neither the Act nor the Rules enable an application, for recall of the earlier order, to be entertained in the interregnum. On a conjoint reading of Section 443(1) of the Act with Rules 96, 99 and 24(2) of the Rules, it is evident that the hearing of a winding up petition is provided only at two stages the first preadmission, and the second - after the winding up petition is admitted and advertised. While a pre-admission hearing, being afforded to the respondent-company, is in the discretion of the Court, it is mandatory for the Court to afford the respondent-company an opportunity of being heard after admission of the Company Petition and before an order for winding up is passed.

Section 444 of the Act requires the court, making an order of winding up and within a period not exceeding two weeks from the date of passing the order, to cause intimation thereof to the Official Liquidator and the Registrar of Companies. Section 445(1) obligates the petitioner in the winding up proceedings, and the Company, to file with the Registrar of Companies a certified copy of the order of winding up within thirty days from the date of the making of the order. u/s 445(2), on the filing of a certified copy of the winding up order, the Registrar shall make a minute thereof in his books relating to the company, and shall notify in the Official Gazette that such an order has been made. u/s 447 of the Act an order, for winding up a company, shall operate in favour of all the creditors and of all the contributories of the company as if it had been made on the joint petition of a creditor and of a contributory. Section 449 stipulates that, on a winding up order being made in respect of a company, the Official Liquidator shall, by virtue of his office, become the liquidator of the company. Rule 115 of the Rules prescribes that, after a winding up order is made, every subsequent proceeding in the winding up shall bear the original number of the winding up petition besides its own distinctive number, but against the name of the company in the cause title, the words "in liquidation" shall appear in brackets. Even if, and after, an order of winding up is passed u/s 443(1)(d) of the Act, and is communicated to the Official Liquidator and the Registrar of Companies u/s 444 of the Act, an application can still be made thereafter, u/s 466 of the Act, requesting that the winding up order be stayed either altogether or for a limited duration. Section 466(1) of the Act enables the Court at any time after the making a winding up order, on the application either of the Official Liquidator or of any creditor or contributory, and on proof to the satisfaction of the Court, that all proceedings in relation to the winding up ought to be stayed, make an order staying the proceedings, either altogether or for a limited time, on such terms and conditions as the Court thinks fit. Section 466(2) enables the Court, on any application made u/s 466, before making an order, to require the Official Liquidator to furnish a report with respect to any facts or matters which are in his opinion relevant to the application. Rule 116 of the Rules relates to the application for stay of winding up proceedings and, thereunder, an application u/s 466 for stay of proceedings in the winding up shall be made upon notice to the parties to the winding up petition and to such other persons as the Court may direct, and where the application is made by any person other than the Official Liquidator, notice shall be given to the Official Liquidator. The said Rule stipulates that, where an order is made staying proceedings, the order shall direct that the applicant shall forthwith file a certified copy thereof with the Registrar of Companies.

Even in cases where a winding up is admitted and advertised, and is later ordered to be wound up, an application can still be made u/s 466 of the Act to stay the winding up proceedings. To make an application, u/s 466 of the Act, the company must be in liquidation and the validity of the order of the winding-up has to be accepted. Sonajuli Tea and Industries Ltd. Vs. Ashkaran Chatter Singh and Others, . The validity of the winding up order cannot be questioned on such an application. The order to stay may reserve liberty to any dissentient creditor or the official receiver to apply within a limited time to remove the stay. Frequently, a stay is applied for in pursuance of a scheme of arrangement sanctioned by the court. (Halsbury''s Laws of England, Volume 7, para 1375).

The judgments relied on behalf of the respondent-company, in support of the contention that a "recall petition" can be entertained by the Court under its inherent jurisdiction, are all cases where an order of winding up had already been passed. In Sudarsan Chits (I) Ltd. Vs. O. Sukumaran Pillai and Others, , the question which arose for consideration was whether the winding up proceedings were pending or had come to an end when the Appellate Bench of the High Court froze the winding up order by keeping it in abeyance. The winding up order, made by the learned Company Judge in respect of the appellant Company, had neither been quashed, set aside, cancelled, revoked or recalled. On the contrary, after directing that the winding up order shall be held in abeyance, the Appellate Bench of the High Court had directed that the official Liquidator shall continue to act as the provisional Liquidator as provided by Sec. 450 and that itself is a stage in the winding up proceedings. It is in this context that the Supreme Court observed:--

.....When winding-up order is kept in abeyance it is in a state of suspended animation. The fact that the Appellate Bench directed that pending the implementation of the scheme as sanctioned by the High Court, the winding-up order will be kept in abeyance itself without anything more shows that the order was neither cancelled nor recalled nor revoked nor set aside. It continued to exist but was inoperative. Any default on the part of the Company in carrying out its obligation under the scheme by itself without anything more would revive the winding-up order. Therefore, the winding-up order was effectively subsisting but inoperative for the time being. Having all the potentiality of being rejuvenated or being brought back to life.

Now if the winding-up order was merely held in abeyance i.e. it was not operative for the time being, but it had not ceased to exist, the winding-up proceedings are in fact pending and the court which made the winding-up order would be the court which is winding up the Company. It is now well-settled that a winding-up order once made can be revoked or recalled but till it is revoked or recalled it continues to subsist. That is the situation in this case. If the winding-up order is subsisting the court which made that order or the court which kept it in abeyance will have jurisdiction to give necessary directions to the Provisional Liquidator to take recourse to Section 446(2).....

(emphasis supplied)

In G.T. Swamy and Another Vs. Goodluck Agencies and Another, the petitioners, who had filed the applications to recall the order of winding up, were the directors of the company and its only two share-holders. The company had earlier been ordered to be wound up by the Court. Pursuant to the order of winding up, the official liquidator complied with the necessary formalities of winding up but, before he could take possession of the assets of the company (in liquidation), the petitioners had filed the recall application contending that, subsequent to the order of winding up, they had paid a part of the sum due to the respondent-company, (the Petitioner in the company petition); the balance was paid after filing the application; the company (in liquidation) was, therefore, not due any sum to the petitioning-creditor company; the only two creditors of the company had no objection to receive the amounts due to them after the company (in liquidation) started making profits; they had not even entered appearance before the court when advertisement of the company petition was ordered; the company had great potential to run its business profitably; about 23 persons had come forward to invest in the equity capital of the company; and the order of winding up would cause them considerable prejudice. It is in this factual matrix that the Karnataka High Court held that the exercise of the power of the Court, under Rules 6 and 9 of the Rules, can be sought for in cases where the applicants are not aggrieved by the order of the winding up in the sense that the same is bad in law; their prayer was that the winding-up order should not be given effect to as they hade settled all claims against the company; the company was now in a position to carry on business within the framework of the Act; if the winding-up order was to be given effect to, great prejudice would be caused to the interests of the company; the claims of company, which filed the petition for winding up, was satisfied; and they were not interested in the company remaining under the constraints of winding-up proceedings.

In Dilip B. Sheth Vs. Official Liquidator of Alang Industrial Gases LTD. and Another, , the applicant was an ex-Director and share holder of the Company under liquidation. On a petition filed earlier, alleging that the Company was unable to pay its debts, the Company Court had passed an order of winding-up. The applicant filed his statement of affairs thereafter. An application for recall of the order of winding up, and for its being permanently stayed, was made by the applicant on the ground that, except the claim of one creditor, the claims of all the other creditors, including the creditor who filed the winding up petition, had been paid or settled by the Company. The applicant expressed his readiness and willingness to pay the dues of the sole creditor or deposit their claim amount with the Court. The applicant claimed that, after the winding up order was passed, he and other major shareholders of the Company had negotiated with the creditors, and had been able to settle the dues of all but one of the creditors and the claims of the Income Tax Department. A list of creditors showing that, except one creditor, the claims of all the other creditors had been settled, and they had issued their respective no due certificates, was enclosed. It is in this context that the Gujarat High Court held that, on a conjoint reading of Section 466 of the Act, Rules 6 and 9, of the Rules and Section 151 CPC, it cannot be said that the court is completely powerless to pass an order in the nature of, or an order having the effect of, recalling the order of winding up; the said provisions conjointly empower the court to pass, after being satisfied on all relevant aspects, an appropriate order including an order recalling its own order if the facts so demand and justify; and the power to recall "an order" would include the order of winding up.

Reliance placed, on behalf of the respondent-company, on the judgment of the Supreme Court in Sudarshan Chits (I) Ltd. 71, on the judgment of the Karnataka High Court in G.T. Swamy and Another Vs. Goodluck Agencies and Another, , and the Gujarat High Court in Dilip B. Sheth Vs. Official Liquidator of Alang Industrial Gases LTD. and Another, , to contend that an application to recall the pre-admission order of this Court dated 21.08.2012 is maintainable, though it is an order on merits after hearing the respondent-company and was not passed ex-parte, is therefore misplaced.

V. CAN THE DEBT DUE TO THE PETITIONERS, WHICH WAS WITHIN LIMITATION WHEN THE WINDING UP PETITIONS WERE FILED, BE SAID TO BE NOW BARRED BY LIMITATION, AND THE PETITIONERS AS NO LONGER BEING THE CREDITORS OF THE RESPONDENT-COMPANY?

Sri S. Niranjan Reddy, Learned Counsel for the respondent-company, would submit that the cumulative claims of all the company petitioners is Rs. 7.73 Crores; the petitioners, who had sought winding up of the applicant-company, are no longer ''creditors'' of the company by reason of their failing to assert their rights within the period of limitation prescribed in law; as the petitioners are no longer entitled to the relief consequent to the winding up of the company, and have cease to be the creditors of the respondent-company, the present petitions for winding up cannot continue; the petitioners are now not even ''contingent creditors'', and are not entitled for the relief of winding up; the cause of action for filing the Company Petitions arose when the alleged debt became due which, for the purposes of reckoning limitation, should be a claim within limitation on the date of the order of winding up; the only manner in which the petitioners could have asserted that their claim was within limitation was if they had initiated suits, for recovery of money, during the pendency of winding up proceedings; their claims stand extinguished as on date; the petitioners cannot take undue advantage of a procedure wherein they no longer have any rights as creditors; a petition for winding up is only an information brought to the Court''s notice regarding the viability and functioning of a company; the petitioners do not stand to get anything, even as unsecured creditors, in the event an order of winding up is passed; the present company petitions are neither in their interest nor in public interest; Section 28(7) of the Provincial Insolvency Act, 1920 is an express provision with respect to limitation which relates back to the date of presentation of the suit; there is no such analogous provision in the Companies Act; the benefit of Section 28(7) of the Provincial Insolvency Act would, therefore, not be applicable to the petitioners; Section 14 of the Limitation Act is only applicable to a ''Civil Proceeding'' and relates only to the ''same matter in issue''; action for winding up is distinct from a suit for recovery and is, therefore, neither a ''civil proceeding'' nor does it relate to the ''same matter in issue''; the petitioners cannot derive any benefit from Section 14 of the Limitation Act; the benefit of Section 458-A of the Act is available only to the Liquidator acting on behalf of the Company; the legislature has deliberately chosen not to extend any such benefit in favour of any person claiming against the company; the petitioners cannot enforce their claim, which has become time barred, as on the date of the passing of the winding up order; and these factors should weigh with the Court while exercising its discretion.

On the other hand Sri S. Prabhakar, Learned Counsel for the petitioners, would submit that this Court, in its order dated 21.08.2012, had observed that there would be no further hearing on the merits of the case or as regards maintainability of the Company Petitions; limitation is an important facet of litigation; the applicant''s submission that the claim of the petitioners is barred by limitation, consequent upon efflux of time between the filing of a Company Petition and its adjudication almost three years thereafter, cannot be allowed to be raised at this stage in view of the embargo placed by this Court in its order dated 21.08.2012; in its affidavit, filed in support of the ''recall'' petition, the respondent-company agreed to furnish security of Rs. 7.73 crores (rupees seven crores and seventy three lakhs only) as deemed appropriate by this Court to establish its bonafides; within a few weeks thereafter, the applicant has now taken a ''U turn'' suggesting that the claims of the petitioners herein are barred by limitation; and, in any event, this submission is ill founded in view of the law declared in several judgments of High Courts.

Filing of a winding up petition is not analogous to the filing of a suit. Section 14 of the Limitation Act is of no assistance as petitions for winding up, and the eventual suit for which cause of action may be claimed, do not "relate to the same matter in issue." The object of a winding up petition is to have the company wound up, and is not an ordinary mode for recovery of money. Anil Partap Singh Chauhan Vs. Onida Savak Ltd. etc., ; Jai Parkash v. Satnarain Singh : 1994 Suppl; (1) SCC 153 : ( : 1993 AIR SCW 2946; Diwan Chand Kapoor Vs. The New Rialto Cinema Pvt. Ltd., ; Yeswant Deorao Deshmukh Vs. Walchand Ramchand Kothari, ; Zafar Khan and Others Vs. Board of Revenue, U.P. and Others, ; Deena (Dead) through LRs. Vs. Bharat Singh (Dead) thr. LRs. and Others, . The law of limitation is addressed to the commencement of a proceeding and not to its disposal or to the consideration of the subject matter. If the petitioner-applicant did all that he was required to do in order to bring the matter before the Court and set it in motion, he instituted the suit or made the application within time irrespective of whether any consideration of the merits of the case took place. Sohonlal Nagarmull Vs. Manick Lal Seal, . A suit, which is within time when filed, cannot be barred subsequently. Thayammal Vs. Rangaswami Reddy and Seventeen Ors., ; Reliance Infocomm Ltd. and Another Vs. Sheetal Refineries Pvt. Ltd., . The provision in Section 3(2)(a)(iii) of the Limitation Act does not apply to a claim against an insolvent company in liquidation in which case time will run from the date of application for winding up and not of adjudication. Chalisgaon Shri Laxmi Narayan Mills Co. Ltd. Vs. Armitlal Kalidas Kanji, ; Reliance Infocomm Ltd. and Another Vs. Sheetal Refineries Pvt. Ltd., .

The period prescribed for an application or petition for recovery of the amounts due is three years. If the petition for winding up is filed within three years, from the date on which the debt is due, it must be held to have been made within limitation. Where the petitioning creditor has brought an action within the period of limitation, as on the date of presentation of a petition for winding up, time would stop running against him thereafter in computing the period of limitation. Reliance Infocomm Ltd. and Another Vs. Sheetal Refineries Pvt. Ltd., . u/s 441(2) of the Act, the winding up of a company is deemed to commence at the time of the presentation of the petition for the winding up. For the purposes of limitation the date when the application for winding up is made is to be considered the date when the order for winding up is made. Under the Provisional Insolvency Act and the Companies Act the final order dates back to the filing of the original petition. The specific provision of law, extending the period of limitation, u/s 28(7) the Provincial Insolvency Act and Section 441(2) of the Companies Act, must be given effect to. Ram Chand Puri Vs. Lahore Enamelling and Stamping Co. Ltd., .

The creditor may well take the risk to pursue his remedy in a civil court or wait for the decision of the winding up proceedings. He may well say to himself that, if the order of winding up is going to be made, it would be a waste of time and money on his part to pursue a remedy in a civil court. The financial state of the company may be such that it may be inadvisable to pursue the ordinary remedy in a court of law and he may well decide to await the decision of the company court and take his chance on receiving a portion of the dividends which would be paid out to the creditors. Simply because there is no specific embargo on the filing of the civil suit, after the winding up petition is presented, does not mean that he is compelled to pursue that remedy. Section 446(1) of the Act provides that, once the winding up order is made, no further proceedings or suits can be filed without the leave of the Court, and because the winding up order dates back to the day when the winding up petition was filed, it can be argued quite logically that a creditor is entitled to await the final issue in the matter instead of hurrying to a Court and risking his money and time in pursuing an elusive remedy. The remedy is, no doubt, elusive because if the order is made, he cannot proceed further with that remedy, and if during the pendency of the winding up petition he obtains a decree, he cannot stand in any better circumstance. His position is no better than it was before, and that being so, there is nothing anomalous in the limitation being extended in such a way that the creditor can prove his claim if he can show that his debt was not barred on the day the application for winding up was made. (Ram Chand Puri (1960) Vol. XXX CC 515).

There is no reason why, in a case where the winding up order is made, the creditor should not be allowed to wait and should be forced to file a suit wasting money. In fact it may happen that, even if he files and obtains a decree, he may not be able to execute it in view of Section 446 of the Act. A creditor cannot file any claim, on the winding up proceedings, till after the winding up order is made. If retrospective effect is not given to the claim, the usefulness of the winding up proceedings would be considerably lost. S. Abdul Muthalibu Vs. K.M. Mohammed Abdul Khader, . If it were to be held that the debt of the company, not barred by limitation on the date of presentation of a winding up petition, but which gets barred on the date of the winding up order, cannot be entertained, the result would be that the petitioner can get a winding up order but cannot prove his debt in the winding up. It would, indeed, be an odd result to say that the company can be wound up at the instance of a creditor who will not be able to get anything out of the winding up. Indian Turpentine and Prsin Company Limited Vs. Pioneer Consolidated Company of India Limited, ; Diwan Chand Kapoor Vs. The New Rialto Cinema Pvt. Ltd., .

In Ajab Enterprises Vs. Jayant Vegoiles and Chemicals Pvt. Ltd., ; Anil Partap Singh Chauhan Vs. Onida Savak Ltd. etc., and Rajan Products Vs. Jayant Vegoiles and Chemicals Pvt. Ltd., , it has been held that the time spent in prosecuting the Company Petition cannot be excluded while computing the period of limitation; and, even if the petitioners were pursuing the remedy of winding up under the Company Law, they ought to have filed a suit for recovery of the amount due to them within the period of limitation. In J.A. Dixit Vs. Official Liquidator, ; Benares Cotton and Silk Mills Ltd. (In Liquidation) Vs. Sulbha Devi Gupta, ; In Re: Chanbali Steamer Service Co., Ltd. (In Liquidation), and General Rolling Stock Co., in re (1972) 7 Ch App 646 the view taken is that the debt of the company, not barred by limitation on the date of presentation of a winding-up but which gets barred by the date of the winding-up order, cannot be entertained or allowed by the official liquidator. On the other hand the opinion expressed, in Indian Turpentine and Prsin Company Limited Vs. Pioneer Consolidated Company of India Limited, ; S. Abdul Muthalibu Vs. K.M. Mohammed Abdul Khader, and Ram Chand Puri Vs. Lahore Enamelling and Stamping Co. Ltd., , is that a debt, not barred at the time of presentation of the winding-up petition, is provable in liquidation though it gets time barred when the winding-up order is passed.

As noted hereinabove this Court, in its order dated 21.08.2012, made it clear that, as a case for admission of the Company Petitions had already been made out by the petitioners u/s 433(e) read with Sections 434(1)(a) and (c) of the Act, there would be no further hearing on merits including on the maintainability of the Company Petitions and whether there exists a bona fide dispute. The matter was listed for hearing on 21.06.2013 to enable this Court to ascertain whether the twin conditions stipulated in the order dated 21.08.2012, for it to consider whether it should exercise discretion not to admit the Company Petitions, were satisfied by the respondent-company. While it does appear, prima facie, that a creditor, whose "debt" is within limitation at the time of filing of the winding up petition, would continue to remain a creditor thereafter and is entitled to lodge a claim before the Official Liquidator, if an order of winding up is passed, it is wholly unnecessary for this Court to delve on this aspect any further, as these issues cannot be examined in a "Recall Petition" but can be examined later, during the hearing of the winding-up petition, by this Court to decide whether or not an order of winding up should be passed.

The contention that the order dated 21.08.2012 should be recalled as petitioners would not stand to benefit, if a winding up order is passed, as their dues as unsecured creditors would be payable in liquidation only after the dues of the secured creditors are settled; and, as the assets of the respondent-Company are mortgaged with the secured creditors, it is they who would receive payment of their dues in priority, and not the unsecured creditors including the petitioners herein; does not merit acceptance. The proviso to Section 443(1) of the Act prohibits the Court from refusing to make a winding up order on the ground only that the assets of the Company have been mortgaged to an amount equal to or in excess of its assets. This Court would, therefore, not be justified in not admitting the Company Petition only on this score.

VI. IS THE ORDER OF THIS COURT DATED 21.08.2012 AN INTERLOCUTORY ORDER WHICH CAN BE VARIED AT ANY STAGE?

It is contended, on behalf of the respondent-company, that the order passed in the company petitions, seeking winding up of the applicant-company, is of a special nature that was the result of this Court considering the peculiar financial situation of the applicant-company and the progress shown over the past three years as a result of the efforts of lending and accommodation of various financial institutions and the promoters of the applicant-company; and the impugned order, of which recall is sought in the present applications, is not a final order, but an interlocutory order passed by this Court which can be altered, modified or varied at any time.

Interlocutory orders are of various kinds. Some like orders of stay, injunction or receiver are designed to preserve the status quo pending the litigation and to ensure that the parties might not be prejudiced by the normal delay which proceedings, before the court, usually take. They do not, in that sense, decide in any manner the merits of the controversy in issue in the suit and do not, of course, put an end to it even in part. Such orders are capable of being altered or varied by subsequent applications for the same relief, though normally only on proof of new facts or new situation which subsequently emerge. If applications are made for a relief on the same basis, after the same has once been disposed of, the court would be justified in rejecting it as an abuse of the process of court. There are other orders which are also interlocutory but would fall into a different category. The difference lies in the fact that they are not directed to maintaining the status quo, or to preserve the property pending the final adjudication, but are designed to ensure the just, smooth, orderly and expeditious disposal of the suit. They are interlocutory in the sense that they do not decide any matter in issue arising in the suit, nor put an end to the litigation. It is not permissible that, on every subsequent day which the suit stands adjourned for further hearing, a petition can be repeated and fresh orders sought on the basis of identical facts. Arjun Singh Vs. Mohindra Kumar and Others, . The question of "undue hardship", under the second proviso to Order 39 Rule 4 CPC, involves consideration of only such factors, causing undue hardship, as have come in existence after the order has been passed by the Court or which factors would be a consequence of the order of the Court itself. So is the case with the change in the circumstances. Exercising its jurisdiction under Order 39 Rule 4 CPC, the Court may ask itself whether the pleas raised in the application might and ought to have been raised prior to the passing of the order? If the answer be ''yes'', the Court may reject the application. If the answer be in the negative, the Court may entertain the application and dispose of the same on merits. Ravishankar and Another Vs. VIIth Additional District Judge and Others, .

The Court would not be justified in tampering with, or taking up for reconsideration, orders of injunction, passed after affording an opportunity of hearing to both the parties, merely because another application is filed unless and until there are new facts or new situations have subsequently emerged. Ravishankar and Another Vs. VIIth Additional District Judge and Others, . Order 39 Rule 4 CPC is not intended to set at naught the ordinary curus curiae that, once a Court has decided a matter after giving each side an opportunity of being heard, its order is final and binding on itself as much as on the parties, and cannot be reopened except on the presentation of some new matter not available when the original order was passed. (Sri) Govinda Ramanuja Das Goswami Vs. (Appala) Vijiaramaraju and Another, ; Ravishankar and Another Vs. VIIth Additional District Judge and Others, . Order 39 Rule 4 CPC can be invoked only when an urgent order ex parte has been passed under Rule 3, or when an injunction already in force has, owing to fresh circumstances, become inappropriate. Sitaram Madan Ahir Vs. Rajkunwarbai and Others, ; Ravishankar and Another Vs. VIIth Additional District Judge and Others, .

Section 481 of the Act relates to dissolution of the Company and, under sub-section (1) thereof, when the affairs of a company have been completely wound up or when the Court is of the opinion that the liquidator cannot proceed with the winding up of a company and it is just and reasonable, in the circumstances of the case, that an order of dissolution of the company should be made, the Court shall make an order that the company be dissolved from the date of the order, and the company shall be dissolved accordingly. Section 481(2) requires a copy of the order to be forwarded by the liquidator to the Registrar of Companies, within thirty days, who is required to make in his books a minute of the dissolution of the company. Rule 281 of the Rules stipulates that, as soon as the affairs of the company have been fully wound-up, the Official Liquidator, in a winding-up by the Court, shall apply for orders as to the dissolution of the company. Rule 282 enables the Court, after hearing the application, to make such orders as it may think fit as to the dissolution of the company. Rule 283 requires every order of dissolution to direct the Official Liquidator to forward a certified copy, of the order of dissolution, to the Registrar of Companies within fourteen days of the order. Once the company is dissolved it ceases to exist. Narendra Bahadur Tandon Vs. Shankar Lal (since deceased) by Lrs, .

It is only on an order of dissolution being passed, in accordance with Section 481 of the Act and Rules 281 to 283 of the Rules, can the winding up proceedings be said to have come to an end. It is in that limited sense that all proceedings prior thereto, including an order of admission of the winding up petition and its advertisement, an order of winding up, appointment of an Official Liquidator etc. can be said not to have attained finality. That does not, however, mean that such orders can be varied or modified or set aside at any stage of the winding up proceedings since a specific and detailed procedure is prescribed by the Rules in this regard.

Accepting the submission of Sri Niranjan Reddy, Learned Counsel for the respondent-company, that the order of admission of a Company Petition is interlocutory in nature and can be varied at any time, would mean that the Company and/or the petitioning-creditor can make repeated applications for recall of an earlier order, passed on merits and after affording them an opportunity of being heard, on the specious plea of subsequent events. Reading any such requirement in the Act or the Rules would render the statutory provisions, of a pre-admission hearing and a hearing before an order of winding up is passed, redundant as parties can, in the guise of a recall petition based on subsequent events, seek a hearing of the winding up petition whenever they choose. Except in cases of an ex parte order of admission of the winding up petition or an ex parte order of advertisement of the said petition or both or for violation of principles of natural justice or if the order is vitiated by fraud, a "recall petition" would not be entertained for the mere asking or on the specious plea that the subsequent events necessitate its "recall".

In any event, the subsequent events, which the respondent company claims is a justification for their seeking recall of the earlier order of this Court dated 21.08.2012, relate to the progress made by them in the construction of the apartments of the "Hill County Project"; deferment, of repayment of loans, by institutional investors; and the settlements, arrived at with some of other creditors, which are said to be awaiting regulatory approvals. None of these have any bearing on the question whether or not the respondent-company continues to be unable to pay its debts on a conjoint reading of Section 433(e) with Section 434(1)(a) and (c) of the Act. These "subsequent events" have neither any bearing on, nor do they alter the factual situation in which this Court had recorded its, prima-facie, finding of the inability of the respondent-company to pay its debts either u/s 434(1)(a) or 434(1)(c) of the Act as the dues payable to the petitioners still remain, and the audited Balance Sheets of the respondent-company as at 31.03.2012 and 31.03.2013 continue to show that it is still suffering huge losses and its "net-worth" has completely eroded.

VII. THE ACTION OF THE RESPONDENTS IS NOT BONAFIDE:

In the affidavit, filed in support of C.A. No. 680 of 2013, it is stated that the respondent-company had filed an application before the National Consumer Disputes Redressal Commission, New Delhi, agreeing to extend payment of compensation at Rs. 5/- per square feet per month, as stated in the agreement of sale, for the entire period of delay till the date of handing over the apartments excluding the 18 month period granted by the C.L.B. for completing the project; and the respondent-company would furnish any security, as deemed appropriate by this Court, to establish its bonafides in so far as the petitioner''s claims for refund of amounts are concerned.

In their counter-affidavit, filed to C.A. No. 680 of 2013, the petitioners would state that, on account of the refusal of the applicant to refund their dues,'' the petitioners were unable to repay their loan which resulted in expensive arbitration proceedings at New Delhi; the arbitrators had directed the petitioners to repay the loan with 18% interest; the case is now pending before the Delhi High Court; the respondent wants to browbeat the petitioners, and force them to take the apartments even though they have cancelled their booking long ago; and the respondent-company has exhibited complete indifference to its obligation of refunding the amounts due to the petitioners.

Sri S. Prabhakar, Learned Counsel for the petitioners, would submit that the petitioners had availed loans from banks for purchase of the subject apartments; the entire loan amount was released by the banks in a lump sum, and not progressively in tune with the construction; the applicant-company now wants the petitioners to take the apartments after a delay of several years offering a pittance of compensation of Rs. 5/- per square feet; each apartment is, on an average, about 1500 square feet; the maximum compensation per month offered by the respondent-company is around Rs. 7500/-, whereas each EMI, in respect of a loan of Rs. 50,00,000/-, would be in the region of Rs. 40,000/- per month; even the rent of a modern apartment, which is built to "world class standards", would fetch Rs. 30,000/- per month; as the offer of the respondent-Company was unrealistic, the petitioners had spurned the offer; the respondent-company has been driving the petitioners from pillar to post and was forcing them to contest cases before various forums like arbitration, Debt Recovery Tribunal etc; and the recall petition should therefore be dismissed, and the law allowed to take its course.

The submission urged on behalf of the petitioners, that these applications are not bona fide and are instituted to drag on proceedings only to avoid advertisement of admission of the Company Petition, cannot be said to be without merit. While I was initially inclined to impose exemplary costs on the respondent-company, I refrain from doing so as it would only further add to the huge and insurmountable debt with which it is already burdened with. These applications in C.A. No. 680 of 2013 and batch in C.P. No. 70 of 2010 and batch, seeking recall of the order of this Court dated 21.08.2012, are devoid of merits and are, accordingly, dismissed.