Holding

A winding‑up petition need not be dismissed for a minor defect in the verification affidavit; substantial compliance with Rule 21 is sufficient and the defect can be cured by filing a fresh affidavit.

Summary

Mis Associated Journals Ltd filed a winding‑up petition against Mysore Paper Mills Ltd, but the petition’s verification affidavit did not conform to Rule 21 of the Companies (Court) Rules, 1959. The Company Judge allowed the respondent to file a fresh affidavit to cure the defect, and the High Court upheld that order. The appellant argued that the defect was fatal and could not be remedied after several years, seeking dismissal of the petition. The Supreme Court held that the Rules require substantial compliance and that a minor defect in the affidavit can be cured by a fresh affidavit without prejudice to the petition. Consequently, the appeal was dismissed and the petition proceeded.

Issues considered

Whether non‑compliance with Rule 21 of the Companies (Court) Rules, 1959 renders a winding‑up petition fatal.
Whether a fresh affidavit can cure a verification defect after a lapse of several years.
Whether substantial compliance with the procedural rules is sufficient to sustain the petition.

Legislation cited

Companies (Court) Rules, 1959s. Rule 18, s. Rule 21

Subjects

winding‑up petitionaffidavit verificationCompanies (Court) Rulessubstantial complianceprocedural defectcorporate lawrule 21rule 18amendment of pleadings

Judgment

MIS ASSOCIATED JOURNALS A
v.
THE MYSORE PAPER MILLS LTD .
..
JULY 11, 2006

[DR. AR. LAKSHMANAN AND LOKESHWAR SINGH PANTA, JJ.] B

Company Law:

Companies (Court) Rules, 1959-Rules 21 and 18-Form No.3-
Affidavit verifying the Winding-up petition-Not as per Rule 2 I-Held: Defect C
is curable by filing fresh affidavit.

The affidavit filed by Respondent verifying the Winding-Up petition was
not in accordance with Rule 21 of the Companies (Court) Rules, 1959. The
Company Judge allowed the Respondent to correct the defect by filing a fresh D
affidavit. High Court upheld the judgment of Company Judge. Hence the
present appeal.

Dismissing the appeal, the Court

HELD: I.I. Rules are undoubtedly statutory and the forms are to be E
adopted wherever they are applicable. But the Rules of procedure cannot be a
tool to circumvent the justice. In fact, the Rules are laid to help for speedy
disposal of justice. This Court has in catena of decisions held that substantial
compliance is enough. The Rules relating to the affidavit and the verification
cannot be ordinarily brushed aside, but then what is required to be seen is
whether the petition substantially complies with the requirements and, F
secondly, even when there is some breach or omission, whether it can be fatal
to the petition. A careful perusal of the affidavit filed by the respondent and
Form No.3 as prescribed under Rule 21 would show that there is substantial
compliance of the said Rule. [446-E, G, H; 447-CJ

1.2. A Three-Judge Bench of this Court in an identical matter has also G
opined that even if there is some slight defect or irregularity in the filing of
affidavit, the appellant should have been given an opportunity to rectify the
same. In the instant case, the same liberty was given to the respondent by the
Company Judge as also by the High Court. [446-E, F)
~9 H
440 SUPREME COURT REPORTS (2006] SUPP. 3 S.C.R.

A Malhotra Steel Syndicate v. Punjab Chemi-Plants Ltd., (1993] Suppl. 3
sec 565, relied on.
Khaitan Overseas & Finance Ltd. v. Dhandhania Bros. P. Ltd., (2002) 1 ..
Comp LJ 274, referred to.

B CIVIL APPELLATE JURISDICTION: Civil Appeal No. 183 of2000.

From the Judgment and Order of the High Court of Judicature at
Allahabad, Lucknow Bench, Lucknow, dated 27.I0.1997 in Company Appeal
No. 1 (CIA) of 1994.

c J.B. Dadachanji & Co. (N.P.) for the Appellant.

Pragya Singh Baghel, Debmalya Benerjee, R.N. Karanjawala and Manik
Karanjawala for the Respondent

The Judgment of the Court was delivered by
D
DR. AR. LAKSHMANAN, J. None appears for the appellant despite
service of notice on the appellant.

It appears that the previous counsel sought direction from this Court
to discharge him as advocate-on-record. Notice was also sent by speed post
E A.D./Courier to Mis Associated Journals Ltd., Lucknow, U.P. and Mis
Associated Journals Ltd., New Delhi requesting them to contact them otherwise
they will not be in a position to attend to the above matter and will seek
direction from this Court for discharge as advocate-on-record. When the
matter was taken up for hearing on 12.04.2006, a submission was made by the
learned counsel appearing for the appellant that no reply has been received
F from the addressee till date and, therefore, further time may be granted. The
matter was adjourned by four weeks. Even today, there is no representation
on behalf of the appellant. The counsel is also not present in the Court.

We have heard Ms. Pragya Singh Baghel, learned counsel appearing on
behalf of the respondent and also perused the original record which has been
G
received from the High Court. ....,_
This appeal is directed against the final judgment and order dt.27.10.1997
passed by the High Court of Judicature at Allahabad, Lucknow Bench in
Company Appeal No.I of 1994. By the said order, the High Court dismissed
H the said Company Appeal holding inter alia that the learned Company Judge
ASSOCIATED JOURNALS r. MYSORE PAPER MILLS LTD. [LAKSHMANAN, J.] 44 J

did not commit any error of law in allowing the respondent to file fresh A
affidavit to remove the defects in verification of the company petition. The
High Court further held that the finding of the learned. Company Judge
regarding the sufficiency of the reasons for advertisement were not final.

The said Company Appeal No. I of 1994 which has been dismissed by
the High Court had been filed by the appellant herein against the order B
dt.10.01.1994 passed by the learned Company Judge of the said Court in
Company Petition No.3 of 1987 whereby the respondent, namely, the Mysore
Paper Mills Ltd. were directed to file a fresh affidavit to remove the defect in
the verification accompanying the said Company Petition and thereafter for
the listing of the petition for passing orders regarding advertisement. C
We have perused the grounds of appeal filed in this Court. It is stated
in the grounds that the learned Company Judge had reached a prima facie
conclusion that the debt being claimed by the respondent in the Winding Up
Petition was payable by the appellant and that the defence purported to be
raised on behalf of the respondent company was not a bolJa fide defence and D
cannot be validly considered effective enough to refuse the order of
advertisement. The respondent was allowed to file a fresh affidavit correcting
the defect in the verification of the Winding Up Petition filed by the respondent
and fm1her fixed the Winding Up Petition for passing orders regarding
advertisement.
E
The case of the appellant company has been that the sum of money
claimed by the respondent in the Winding Up Petition was not outstanding
inasmuch as the said sum of money had already been paid to Mis General
Trading & Sales Corporation who were the mutual agent of the appellant and
the respondent. Hence no debt was due and payable by the appellant to the F
respondent. There was, therefore, no question of the appellant company
being unable to pay any debts to the respondent. The Winding Up Petition
filed by the respondent was, therefore, wholly without any basis or foundation
in law and hence not maintainable.

Company Appeal No. I of 1994 was filed against the order dt.10.01.1994 G
passed by the Company Judge in Company Petition No.3of1987. In the said
appeal, the appellant had challenged the order of Company Judge on several
grounds. We are not now considering the merits of the grounds alleged in
this appeal since it is premature for this Court to deal with the same at this
stage.
H
442 SUPREME COURT REPORTS (2006] SUPP. 3 S.C.R.

A It is submitted by the appellant that in view of the mandatory statutory
provisions of Rule 18 and 21 of the Companies (Court) Rules, 1959 governing
the verification of the contents of the Winding Up Petition, the said Winding
Up Petition was not maintainable in the light of the admitted fact that the
petition had not been verified by the respondent in accordance with the
provisions of the said Rule 21. lt is further submitted that because the
B Winding Up Petition which is not supported with affidavit in accordance with
law and is violative of Rules 18 and 21 of the Companies (Court) Rules, 1959
and is not in prescribed form is not liable to be admitted at all and is liable
to be dismissed by the company court and also the appellate court.

C lt is further urged that the defect in verification of the Winding Up
Petition arising out of non-compliance with Rule 21 of the Companies (Court)
Rules, 1959 was fatal to the Winding Up Petition and the said Petition ought
to have been dismissed on that ground alone. It is also further contended that
the defect in verification of the Winding Up Petition on account of non-
compliance with the provisions of Rule 21 of the Companies Court (Rules)
D cannot be corrected by filing fresh affidavit by the respondent after a lapse
of over several years from the date of institution of the Winding Up Petition.

It is further contended that a defect in the verification of the Winding
Up Petition arising out of non-compliance with tne provisions of Rule 21 of
E the Companies (Court) Rules, 1959 cannot be cured by filing a fresh affidavit
after a lapse of over 10 years as directed by the High Court in the impugned
judgment.

The respondent filed counter affidavit to the Civil Appeal. The
respondent after denying averments made in the appeal grounds answered
F the preliminary objection raised by the appellant for the first time before the
learned Single Judge is merely an afterthought and an attempt to somehow
escape from their liability of payment of the outstanding dues to the respondent
company. Ms.Pragya Singh Baghel, learned counsel for the respondent further
submitted that the technical plea raised by the appellant regarding defective
affidavit was raised after seven years of filing the petition. Assuming without
G admitting that the affidavit was not verified as per the Company Rules, the
learned counsel submitted that if this objection was taken earlier the respondent
would have cured the defect.

The learned Company Judge after perusing the affidavit filed by the
respondent herein was of the opinion that the contents of paras 1 to 25 of
H
ASSOCIATED JOURNALS 1·. MYSORE PAPER MILLS LTD. [LAKSHMANAN, J.] 443

the affidavit are true to be best of knowledge, infom1ation and belief of the A
deponent who is the Director (Finance) of the appellant company.

It was further held :-

"Rule 21 of the Companies (Court) Rules require the petition to
be verified by affidavit made by the petitioner and such an affidavit B
is to be filed along with the petition and is to be in Form No.3
appended to the Rules.

Form in paragraph-2 requires the contents of the petition to be
true to the knowledge of the deponent and the contents based on
information to be stated and verified separately. To this extent, the C
verification is not proper."

The learned Single Judge has also referred to a judgment of the Division
Bench of the said Court in Company Appeal No. I of 1993 in The Pradeshiya
Industrial & Investment Corporation of Uttar Pradesh Limited v. North
India Petro Chemicals Limited and Anr., which was decided on 27.08.1993. D
The Division Bench considered the aforesaid case and some others and
found :-

"Considering the aforesaid decisions the ground which has been
canvassed in favour of treating a defect in verification as fatal is that
it may create confusion about the date of the institution. E
Rule 21 of the Companies (Courts) Rules requires the verification
to be made in a specific manner. Yet it does not provide that non-
compliance of this rule would render the winding up petition
infructuous. As has been pointed out by the Hon'ble Supreme Court
rules of procedure are only to ensure certain ends. Verification is F
insisted upon to render the person who verifies, responsible for the
statement contained in the petition so that it can be read as evidence.
Jn case it is not duly verified, the same result can be achieved by
requiring the petitioner to verify the petition. Going beyond this
would render the dispensation of justice subject to minor technicalities G
of procedure which can never be the intention of law. The rules of
procedure are meant to advance the cause of justice and not to
frustrate it. We are, therefore, in respectful disagreement with the
decision of Calcutta High Court and Punjab High Court and are of the
view that any defect in verification can be justified. The petitioner can
be required to re-verify the affidavit and once it stands duly verified, H
444 SUPREME COURT REPORTS [2006] SUPP. 3 S.C.R.

A the petition would be in order to be proceeded with in accordance
with law.

Dismissing the petition for not confirming to the prescribed form
of verification would be taking a hypertechnical view of the matter. A-
person would be penalised for the inadequacy of his counsel as it can
B be assumed that such a mistake cannot be deliberate nor has it been
so suggested in this case. Mechanical insistence on compliance with
the rules and dismissal for technical infraction does not subserve
substantial healthy justice but merely multiplies litigation and
consequent harassment because even after the petition is dismissed
on the ground, it would always be open to the petitioner to bring
c another petition with the same allegations and for the same relief, only
after correcting the form of verification. This correction can be permitted
in this very petition. Such dismissal is all the more justified when the
purpose of the provision would be amply met by getting the mistake
corrected."
D
In view of the aforesaid discussion, the learned Company Judge found
that the objection raised on behalf of the respondent company (the appellant
herein) was not tenable. The learned Company Judge has further directed that
the respondent herein can be required to file a fresh affidavit complying with
the provisions of law.
E
Aggrieved by the said order passed by the Company Judge, the appellant
preferred Company Appeal No. I of I994. We have carefully perused the
judgment of the Division Bench. The learned judges of the Division Bench
dismissed the appeal filed by the appellant herein and directed that after fresh
affidavit as required in the order dt.10.01.1994 has been filed, the Company
F Petition be listed before the learned Company Judge for passing fresh orders
regarding advertisement of the Company Petition. It is useful to reproduce the
finding recorded by the Division Bench :-

"We are in full agreement with the law laid down by the Division
Bench and the petitioner has been rightly provided opportunity to
G rectify the defect of the affidavit by filing fresh affidavit for removal
of the defect in swearing clause of the affidavit. The case of the
respondents is not prejudiced in any manner nor there was any bar
of limitation to come in the way. The winding up petition has already
been admitted and any amendment or correction to rectify the defect
1-1 of the affidavit by filing fresh affidavit at this stage would not be so
ASSOCIATED JOURNALS r. MYSORE PAPER MILLS LTD. [LAKSHMANAN, J.] 445

fatal to dismiss the petition. The Court has always discretion to allow A
the amendment of pleadings, reswearing or reverification of the
petition. The defects thus could be cured subsequently even after
filing of the petition."

In this context, it is beneficial to reproduce Form No.3 of the Companies
(Court) Rules, I959 :- B
"FORM NO. 3

[See rule 2 I]
(Heading as in Form No. I]
c
Company Petition No ....... of 19 ... .

Affidavit verifying petition

I, A.B., son of ......... aged ......... residing at .......do, solemnly affirm
and say as follows :- D
· I. I am a director/secretary/ ........ ./of .......... Ltd., the petitioner in the
above matter *(and am duly authorised by the said petitioner to make this
affidavit on its behalf).

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

2. The statements made in paragraphs ....... of the petition herein now
shown to me and marked with the letter 'A', are true to my knowledge, and
the statements made in paragraphs .......... are based on information, and I F
believe them to be true.

Solemnly affmned, etc.

*Note.- To be included when the affidavit is sworn to by any person
other than a director, agent or secretary or other officer of the company."
G
~·
Rule 21 of the Companies (Court) Rules, 1959 prescribes the procedure
for verification of affidavit. Rule 21 is reproduced as under :-

"R.21. Affidavit verifying petition.- Every petition shall be verified
by an affidavit made by the petitioner or by one of the petitioners, H
446 SUPREME COURT REPORTS [2006] SUPP. 3 S.C.R.

A where there are more than one, and in the case the petition is presented
by a body corporate, by a director, secretary or other principal officer
thereof; such affidavit shall be filed along with the petition and shall
be in Form No.3:

Provided that the Judge or Registrar may, for sufficient reason,
B grant leave to any other person duly authorised by the petitioner to
make and file the affidavit."

The affidavit filed by the respondent herein is available at page 63 of
the paperbook. Para 2 of the said affidavit is reproduced as under :-

C "2. That I have read the contents of the accompanying Company
Petition and have understood the contents thereof.

I, the deponent abovenamed do hereby swear that the contents
of paragraphs nos. I and 2 of this affidavit, those of paragraph nos.1,2,
3,4,5,6,7,8,9,10,11,12,13,14,15,16,17,18,19,20,21 and 22 of the
D accompanying petition are true to the best of my knowledge, information
and belief, that no part of its is false and nothing material has been
concealed in it. So help me God."

A careful perusal of the affidavit tiled by the respondent and Form No.3
as prescribed under Rule 21 would show that there is substantial compliance
E of the said Rule. A Three-Judge Bench of this Court in an identical matter in
Malhotra Steel Syndicate v. Punjab Chemi-P/ants Ltd, [ 1993] Suppl.3 SCC
565 has also opined that even if there is some slight defect or irregularity in
the filing of affidavit, the appellant should have been given an opportunity
to rectify the same. In the instant case, the same liberty was given to the
F respondent by the Company Judge as also by the Division Bench of the High
Court. We are, therefore, of the opinion that the Division Bench was right in
dismissing the appeal filed by the appellant.

This Court has in catena of decisions held that substantial compliance
is enough. Rules are undoubtedly statutory and the forms are to be adopted
G wherever they are applicable. The Rules relating to the affidavit and the
verification cannot be ordinarily brushed aside, but then what is required to
be seen is whether the petition substantially complies with the requirements
and, secondly, even when there is some breach or omission, whether it can
be fatal to the petition. In the instant case, both the learned Company Judge
and also the Division Bench were of the opinion that there is substantial
H compliance of Rule 21. In Khaitan Overseas & Finance Ltd v. Dhandhania
ASSOCIATED JOURNALS v. MYSORE PAPER MILLS LTD. [LAKSHMANAN, l] 44 7

Bros.P.Ltd., (2002) 1 Comp LJ 274, a petition was filed by the Chainnan-cum- A
Director of the company. He annexed with the petition a resolution of the
Board of Directors permitting him to execute necessary petitions, documents,
applications, affidavits and to lodge a suit to recover dues from the debtor
company. This was held to include the authority to file a Winding Up Petition
also. The affidavit accompanying the petition was signed, sworn and affinned B
on oath in the prescribed manner. The court said that the affidavit confonned
with the requirements of law.

We are of the opinion that the Rules of procedure cannot be a tool to
circumvent the justice. In fact, the Rules are laid to help for speedy disposal
of justice. The learned Judges of the Division Bench has appreciated that the C
technical plea raised by the appellant regarding defective affidavit was raised
after seven years of filing the petition. The learned counsel submitted that the
appellant is raising the defence of technical plea to protect himself from the
consequence of his default and this plea cannot be considered effective
enough to review the order of advertisement. Assuming without admitting
that the affidavit was not verified as per the Company Rules, the learned D
counsel has correctly submitted that if this objection was taken earlier the
respondent would have cured the defect.

For the aforesaid reasons, we are of the opinion that the appeal has no
merit and the order passed by the learned Judges of the Division Bench
confinning the order passed by the Learned Company Judge does not call for E
any interference by this Court. The appeal stands dismissed accordingly. No
costs.

The interim order passed by this Court dt. 01.05 .1998 granting stay ;if
the order under challenge shall stand vacated. The Company Court is now F
at liberty to proceed further in accordance with Companies (Court) Rules, 1959
and dispose of the Company Petition as expeditiously as possible. We place
on record our appreciation for the able assistance rendered to us by Ms.Pragya
Singh Baghel, learned counsel for the respondent at the time of hearing.

B.B.B. Appeal dismissed. G