ORDER
S.K. Desai, A.C.J.
1. The appellants before us are N. L. Mehta Cinema Enterprises Pvt. Ltd., a company which was ordered to be would up by the company judge by an order passed on August 25, 1988, in Company Petition No. 204 of 1987. Aggrieved by that order, the company has preferred the present appeal.
2. In order to appreciate the controversy which lies within a narrow compass, a few facts may be stated.
3. The respondent claims to be a creditor of the company, the principal amount of the debt being Rs.6,00,000. According to the responded, in addition to the said principle amount, the company was liable to pay him interest of 1.70% per mensem and on account of such interest,an amount of Rs. 2,29,850 was claimed till the time the winding-up petition was filed.
4. If the petition is perused, the same proceeds upon the allegation that the company is unable to pay its debts and the said allegation is based upon the fiction contained in section 434 of the Companies Act. According to the petitioner, by his advocate's letter dated January 29,1987, the company was called upon to pay the said principle amount together with the accrued interest. The company was informed that it had three weeks' time for the purpose and that, in default, a petition for winding up would be preferred in the High Court. It is obvious, therefore, by reading the said letter and the averments in paragraph 8 of the petition, that non-compliance with the said notice is the foundation of the petitioner's contention that the company is deemed to be unable to pay its debts.
5. According to the appellants, the said notice was sent to the company's administrative office at D Block, Office Premises, Wankhede Stadium, Churchgate, Bombay-20, whereas the registered office of the company is situated, as the petitioner himself admits, at 161, Taikalwadi Road, Mahim, Bombay-400 016 (see paragraph 2 of the petition).
6. It was accordingly submitted that there was non-compliance with the mandatory provisions of section 434 which required that the demand notice should be delivered at the registered office of the company. It was further submitted that since the demand notice was not sent to the registered office of the company, the legal fiction envisaged by section 434 was not available to the petitioner and since the averments in the petition was a limited one entirely based on the aforesaid fiction, there was no warrant for holding that the company was unable to pay its debts. As a matter of fact, we are fold that the company has very large assets. It is clear from a perusal of the petition that the petitioner must swim or sink on the basis of the said legal fiction.
7. The relevant portion of section 434 of the Companies Act reads as under :-
'434 (1). A company shall be deemed to be unable to pay its debts - (a) if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding five hundred rupees then due , has served on the company, by causing it to be delivered at its registered office, by registered post or otherwise, a demand under his hand requiring the company to pay the sum so due and the company has for three weeks thereafter neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the creditor,...'
8. We may mention that a plea was taken before the learned company judge who did not accept the same as in his view the said plea was not available to the company inasmuch as it had not challenged the validity of service of notice till the filing of its affidavit-in- reply to the petition for winding up. Alternatively, the learned company judge, placing reliance on rule 33 of the Companies (Court) Rules, 1959, held that no substantial injustice has been caused to the company by the alleged defect or irregularity. Accordingly, he was of the opinion that there was no substance in the plea and if the plea wan negatived, there was no answer to the petition.
9. It has been submitted that, on both the points, the view of the learned company judge is erroneous and that the ultimate conclusion, therefor, requires correction by the appeal court.
10. As regards the first plea, viz., that the company had not challenged th validity of the service of the demand notice till the filling of its affidavit-in-reply to the petition, we may, with respect, observe that we are unable to appreciate how the failure to point out an irregularity till that stage would disentitle the company from relying on the plea of illegality at the stage of the hearing of the petition. The failure to indicate the plea earlier may affect the order for costs, but surely cannot affect the merits, if any, of the affect the if any of the defence. In other words, such conduct cannot prejudice the defence and thereby there cannot be any estoppels against the company disentitling it from raising such defence merely because it had failed to indicate the defence earlier. The plea will have to be considered on merits and the important point to be considered, therefrom is whether th learned judge was right in the view that he took that rule 33 of the Companies (Court) Rules was applicable to the present case. Rule 33 reads as under :
'33. Validity of service and of proceedings - No service under these rules shall be deemed invalid by reason of any defect in the name or description of a person in the list of contributories or in the petition, summons,notice or other proceedings, provided, that the court is satisfied that such service is in other respects sufficient ; and no proceedings under the Act or these rules shall be invalidated by reason of any formal defect or irregularity and that the injustice cannot be remedied by an order of the court.'
11. If rule 33 is properly understood, it will be seen immediately that it is available only as regards service under the Companies(Court) Rules. The clear language of the said rule will preclude its applicability to a legal fiction contained in an envisaged by other statutory provisions such as the one under section 434 of the Companies Act. Section 434 contains a legal fiction. It would be available against a company otherwise solvent which may not respond to a notice of demand made by the creditors. The section, however, requires that such notice of demand must be sent to the registered office of the company. If that section is again pursued, it will be seen that as regards the mode of service, i.e., whether the notice of demand is to be sent by registered post, an option has been given by adding the words 'or otherwise ' after the words 'by registered post', but not such option has been provided after the words 'registered office'. The clear wording of the section 434. Similarly, the clear words of rule 33 would preclude the application of that rule to any notice of demand made on the company under section 434. The matter is abundantly clear and requires no authority to justify our view.
12. Even then, reference may be made to a decision of the Calcutta High Court in Bukhtiarpur Bihar Light Rly. Co. Ltd. v. Union of India [1954] 24 Com Cas 507, where the Division Bench of the Calcutta High Court had occasion to consider the corresponding provisions of the Indian Companies Act, 1913. Facts of that case are briefly set out hereunder :
The Union of India representing the East Indian Railway claimed a sum of Rs. 5,22,313 from the appellant company before the Calcutta High Court, but the said notice of demand was sent to the Patna office of the company and not to the registered office. Another notice was subsequently sent on June 30, 1950, addressed to the registered office, but the company petition for winding up was filed on July 18,1950. In other words, there was a period of less than three weeks between the notice sent to the registered office and the filling of the winding up petition. Accordingly, the court was required to consider only the previous notice of June 6, 1950, which was addressed, as indicated earlier, to the Patna office and not to the registered office. The plea that such notice would not raise the fiction under section 163 of the Indian Companies Act, 1913, was considered by the Divisions Bench at pages 511 and 512 of the report. According to the Division Bench of the Calcutta High Court, the point was one to which there was no answer possible and the appellant was held entitled to succeed on that plea. The Division Bench of the Calcutta High Court considered the averments in the petition and found that the petitioners could obtain the winding up order only on the basis of the said legal fiction and the said legal fiction being not available to them, since the notice had not been sent to the registered office of the company, the petition was ordered to be dismissed.
13. It is undoubtedly true that a rule similar to rule 33 of the Companies (Court) Rules was not under consideration by the Calcutta High Court. In out opinion, the said rule is of no assistance to the petitioner as it has no application to a notice of demand to be served under section 434. The requirement contained in section 434 has to be strictly complied with in order to raise the legal fiction. It was certainly open to the petitioner to make an alternative claim, viz., that the company is not only deemed to be unable to pay its debts but that, in fact, also it is unable to pay its debts. For the latter allegation, however, sufficient particulars must be given in the petition for winding up. These are not found in the present petition and, in our view, the petitioner has rested his case only on the deemed fiction under section 434. As, in our opinion, the said fiction was not available to the petitioner since he did not address the notice of demand to the registered office of the company, the petition is liable to be dismissed.
14. In the result, the appeal is allowed. The order for winding up of the appellant company is set aside and the company petition is directed to stand dismissed. In the unusual circumstances of the case, the parties are directed to bear their own costs throughout.
15. We may make it clear that our order is based on the technical plea and there can be no objection if the petitioner addresses a fresh notice of demand in compliance with out decision to be sent to the registered office of the company and, thereafter, if so advised, prefers a winding up petition.
16. It is pointed out on behalf of the appellants that the appellants have deposited a sum of Rs. 1,20,000 in pursuance of the order of the Appellate Division Bench. Since the appeal has been allowed and the company petition dismissed, the amount is refundable to the appellants. The prothonotary is directed to do the needful. The prothonotary to act on the copy of the minutes of order. the amount of Rs. 500 deposited by the petitioner for advertisement is also directed to bar refunded to the petitioner.