Abdul Rauf v. Vintage Hotels Pvt. Ltd (2000) 26 SCL 17

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Introduction

This case deals with the variety of aspects such as doctrine of finality, good faith, while dealing with the issue of winding up of the company. Winding up is an interaction by which the presence of an organization is ended by expecting authority over the reins of the chiefs of the Company from the Board of Directors of the Company, unloading its assets and the money recognized from such arrangement is then used for clearing up its obligations and the flood entirety, expecting to be any, is then circled among the people from the Company.

It is similarly basic to grasp that winding up of the Company doesn’t achieve finishing of “the authentic presence” of the Company for instance despite wrapping up measure began against the association, it continues existing as a “legitimate corporate substance” in whatever amount of its name continues staying in the Register of Companies. This genuine presence arrives at a resolution exactly when the Court orders the disintegration of the Company. A corporation is dissolved when it is determined that it is unable to continue operating. This may be due to a variety of factors, including insolvency (which is generally the primary reason), inability to continue operations, and so on.

Another angle that calls for thought prior to continuing with the article is the doctrine of good faith. Acting in accordance with doctrine of good faith forces a commitment on the gatherings to notice sensible business principles of reasonable commercial standards and identified with the understanding and furthermore expects faithfulness to the concurred common purpose and consistency. Consequently, the tenet of sincere trust suggests acting with good faith and the recognition of commercial standards of principles of fair dealing. In the present case as well, the court questions the act of good faith of the parties while they dispute on the issue of winding up of the company.

Facts of the Case

The present case has been filed by the parties M/s. Vintage Hotels Private Ltd. Who are praying for setting aside of the winding up order. The application has been hotly contested and a large number of documents have been filed by the respective parties. Even before proceeding with the present case, the court has in depth dealt with the issues of procedural irregularities by the parties.

Issues raised

The issue that has arise for the consideration before the High court while dealing with the application of winding up of the company is; 

“whether the company has put forward valid and genuine grounds for non-appearance and for the reasons that have been set out in this order, that question is required to be answered in the negative”

Decision of the Court

The Hon’ble High court of Karnataka held that it is not the stage at which a court can enter into any form of evaluation on the merits with regard to the respective claims of setting aside or the winding up petition. The court precluded from going into that aspect of the matter on the legal ground since the stage for this exercise has already passed.

The court further observed that where the company consciously remains absent from the proceedings it virtually means that the company leaves it to the court to pass whatever orders the court finds necessary and once those orders are passed, it is not open to the applicant to ask for any post mortems.

Further the court also held that in the interest of Justice, the legal consequences are that this court would be doing violence to the law if discretion is wrongly exercised and the order in question is recalled or set aside. It is for this reason that application was dismissed.

Analysis

While dismissing the application for setting aside the order, the hon’ble court has observed that the object of advertising is in order to bring all the creditors before the court in that very proceeding. This is specifically indicated in the notice itself.

The court opined that the respondent-company, against whom the public notice is served, is thus made aware that the High Court has effectively summoned all creditors in the winding-up proceedings, and that it is not limited to the original creditor. This is a vital part of the law that should be considered while giving a public notice or advertisement.

The contention of the patties that the notice was received and that the company negotiated with the creditor and arrived at a complete settlement and on payment of the settled amount the original petitioner being discharged, informed the company that an application would be filed before the court for withdrawal of the petition. This contention was outrightly rejected by the court.

Rejecting the contention, the court further observed that the public notice given by the High Court is addressed directly to the respondent-company against which relief was sought, therefore even if the respondent-company had any legitimate defence, it was legally required to appear before the High Court and plead that defence, and that if the company has discharged the debt and there is nothing outstanding, the company was still legally required to appear before the High Court and plead that defence. This was the mandate provided by the law.

he company must appear before the High Court and shall point out that all debts had been discharged or contested, or that the disputes had been resolved, to the satisfaction of the High Court. If this is not achieved, the company cannot be said to have behaved in good faith or bona fide because the notice published clearly states that all unpaid creditors will be brought before the High Court.

And if the company has reached an agreement with one of them, the company would also have to deal with the others. In this context, the correct legal position is that the organisation cannot be said to have behaved in good faith or that its actions can be excused because it did not appear before the High Court to clarify its position regarding the outstanding debts.

Furthermore, dwelling upon the aspect of notice the court was right in pointing out that the original advertisement makes it abundantly clear that the proceeding is not limited to the original plaintiff, but that the main object of advertising is to put all individuals claiming to be creditors before the court.

In the present case, the respondent company was well aware that all such unpaid creditors, regardless of whether the company acknowledges their claims or not, will come before the court, and if the company wishes to remain silent in such a case, the High Court is not obligated to prolong the proceedings by issuing a new notice because the scheme of the law does not provide for such multiplicity of proceedings.

What needs to be given consideration is that time paucity of the courts which has the duty to deal with millions of cases that is pending. The scheme of the law provides for one and only one opportunity and if the message goes out loud and clear that there will be no second chance, all these games will stop. The court was absolutely right in pointing out the same.

Unfortunately, for far too long, the courts have been overly generous in approving all kinds of flimsy justifications, giving rise to the belief in certain quarters that litigation can be converted into an endless game.

If the system has to be justice oriented, all this will have to be stopped. The doctrine of finality was given due consideration for once. The judge opined that the maxim seems to have been long since forgotten by the legal profession, judging from the casualness with which applications for review and remand are addressed to the court. 

The doctrine of good faith and fair dealing in contractual relations has been reflected in numerous civil law systems. This doctrine shall also embark upon the responsibilities the parties appearing before the court in due time. This case stands as an example for the same.

Doctrine of Finality

The finality of decisions brings the legal process to a close, preventing further lawsuits, fresh hearings, and disputes over clearly known evidence. Section 11 of the Code of Civil Procedure recognises the finality of judicial decisions, also known as the doctrine of res judicata in Indian parlance. Section 11 of the code states that no court shall attempt any suit or issue in which the matter directly or substantially in issue is the same in the previous or former suit between the same parties or between under whom they or any of them claim litigation under the same title of the former suit already decided before any competent court to attempt such subsequent suit. The issues which are contested or possibly disputed in an activity can be at last mediated simply by conclusive judgment on the benefits

Further the regulation of Interest republicae ut sit finis litium meaning it is in light of a legitimate concern for the express that there ought to be a finish to a prosecution and the convention of Re judicata professional veritate occipitur meaning a legal choice should be acknowledged as right was unmistakably featured in the current case. The proverb ‘interest Republicae ut sit finis litium’ says that it is in the public interest for suit to reach a conclusion after a protracted chain of advances. It is essential to put an end at some stage.

In the case of Enviro-Legal Action v. Union of India & Ors (1996 AIR 1446, 1996 SCC (3) 212). The court observed that the parties’ dispute must come to a conclusion at some stage, and the court’s decision must be allowed to become final. Allowing the parties to file application after application indefinitely would not be acceptable. In a country ruled by the rule of law, the finality of a judgement is absolutely necessary, and the finality of a judgement is held in high regard.

Conclusion

In country like India where in excess of three crore cases are forthcoming and the legal executive, with restricted assets, is attempting to decrease the pendency of cases, conclusion of judgment/res judicata assumes an imperative part. The guideline of conclusion of suit depends on a sound firm standard of public policy. The doctrine of finality/res judicata is advanced with an object of forestalling superfluous prosecution under the tone of law. Doctrine of finality/res judicata guarantees end to suit out in the open interest. It is no utilization simply condemning the overabundance of cases in court; remedial activity is required at each level.

Another important aspect is that these types of dismissal shall also stand as ass lesson for the parties. The most important purpose of the role of the judiciary is to protect the innocent. Delays trigger a slew of issues, and the prolonged pendency of cases has significant ramifications for the public. Every person has the right to a trial that is effective, fair, and timely. In recent years, the Supreme Court has attempted to provide some relief to citizens in this regard by invoking Article 21.

When a decision is made too late, it leads to the public’s negative perception of the judiciary. The common people’s trust in the legal system has eroded, and they are finding it difficult to re-instill it, posing a significant threat to the country’s justice system. Despite the fact that the Civil Procedure Code under Order XVII, Rule 1 provides that while it is true that an adjournment cannot be given more than three times, the courts do not seem to obey this law strictly. This ultimately obstructs the timely resolution of civil cases.

Another factor that causes delays in civil litigation is when a date and time for a hearing is set and the parties fail to appear on the date and time. Since the respondent is usually aware of the likelihood of a negative verdict, he attempts to obtain as many adjournments as possible to present his case. This present case gives a classic example for timely disposal of cases for delivering justice to the parties.

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