Case Law Details

Case Name : Rajeev S Mardia and Rasik S Mardia Vs Official Liquidator of Mardia Steel Ltd. (In Liquidation) (Gujarat High Court)
Appeal Number : Civil Application No. 138 OF 2009
Date of Judgement/Order : 07/09/2012
Related Assessment Year :
Courts : All High Courts (3629) Gujarat High Court (305)

HIGH COURT OF GUJARAT

Rajeev S Mardia and Rasik S Mardia

Versus

Official Liquidator of Mardia Steel Ltd. (In Liquidation)

MISC. CIVIL APPLICATION Nos. 181 & 184 OF 2011

CIVIL APPLICATION NO. 138 OF 2009

O.J. APPEAL NO. 8 OF 2009

NOVEMBER 7, 2012

JUDGMENT

Jayant Patel, J.

As both the matters are inter-connected and inter-linked, they are being considered together.

2. MCA No. 181 of 2011 has been preferred for the relief, inter alia, to review the decision of this Court dated 7.10.2011 passed in OJ Civil Application No.138 of 2011, whereby this Court disposed of Civil Application No.138 of 2011 in view of the order passed in OJ Appeal No. 8 of 2009 .

3. MCA No 184 of 2011 has been preferred with the prayer to review the judgement and order dated 7.10.2011 passed by this Court in OJ Appeal No. 8 of 2009, whereby the appeal came to be dismissed as stated in the order. However, prayer in the present application has further been made by the applicant-original appellant to approve revival scheme moved by the applicant-appellant before the learned Company Judge.

4. It appears that the main judgement passed in OJ Appeal No. 8 of 2009 is also prayed to be reviewed. It would be proper to consider MCA No. 184 of 2011 and thereafter to consider MCA No.181 of 2011. Further, in order to appreciate the grounds for review, some factual background of the case may also be required and the same are as under:-

4.1 Two Directors (hereinafter referred to as the ‘original petitioners – applicant herein’) of Maradia Steel Limited (hereinafter referred to as ‘the Company in liquidation’) submitted the Scheme of Revival and compromise. The learned Single Judge, for the reasons recorded in the judgement dated 2.2.2009 passed in Company Petition No.275 of 2008, declined to sanction the Scheme of Compromise and dismissed the petition. The applicant herein preferred appeal before the Division Bench of this Court being OJ Appeal No.8 of 2009. The said appeal was admitted and interim order was passed by the Division Bench of this Court below Civil Application No.54 of 2009, whereby the direction was issued to implement the revival scheme pending OJ Appeal and further order was passed on 13.3.2009 in Civil Application No.85 of 2009, whereby the Official Liquidator (OL) was directed to handover the possession within the prescribed time limit. On 19.3.2009, the possession of the property at Vatva, Ahmedabad, whereas on 20.3.2009, the possession of the property at Ratlam, M.P., and Sayla were handed over by the OL pursuant to the interim order. It deserves to be recorded that in the order dated 13.3.2009 passed by the Division Bench of this Court in Civil Application No. 85 of 2009, the applicant – appellant agreed to deposit the amount of Rs. 25,00,000/- towards cost, since it was so demanded by the OL at the relevant point of time. The matter was carried in SLP by the OL before the Apex Court and the Apex Court, vide order dated 7.12.2009 directed the Division Bench for de novo consideration of the scheme in accordance with law. The appeal was thereafter considered by the Division Bench of this Court and after hearing both the sides, the judgement and order dated 7.10.2011 came to be passed. Since the judgement is already a part of the present proceedings, copy whereof is produced at Annexure-A, we find that we need not reproduce the contents of the facts and/or the reasons recorded therein in the said judgement elaborately, so as not to burden the proceedings of the present matter. It is against the said judgement and order in OJ Appeal No. 8 of 2009, the present review being MCA No.184 of 2011 before this Court.

5. We have heard Mr. Rasiklal Maradia, appearing as Party-in-Person. We have also heard Ms. Amee Yajnik, learned Counsel for the OL and Mr. Shalin Mehta, learned Counsel for ARCIL.

6. It may be recorded that if the grounds stated by way of submission in the present application are considered, more particularly Ground No.1 (i), (j) , (k) , and (l) and Ground No. 2 (a) , (b) and Ground No.3, after taking into consideration the language used, the same was prima facie appearing to be contemptuous and undermining the dignity and authority of this Court. Therefore, during the course of hearing, it was prima facie so found, and this Court had passed the following order on 27.7.2012:-

1. Mr. Rasiklal Mardia, Party-in-person, during the course of hearing of the review application, seeks permission to delete the statement made in paragraph (J) of the application, which is as under:-

“(j) … this Court is repeatedly singing only one song in different rags that there is no provision in the revival scheme for the statutory creditors. …”

2. Mr. Mardia further seeks permission to delete the sentence from the very paragraph, which is as under:-

” … This Hon’ble Court has failed to appreciate … … ….. the statutory creditors for their consideration.”

3. Mr. Mardia also seeks permission to delete paragraph (k) of the review application.

4.  Permission granted. Aforesaid shall stand deleted from the review application.

5. It prima facie appears from the perusal of further grounds stated in the application that the language used by the applicant is contemptuous and it lowers down, the authority and dignity of this Court . At this stage, Mr. Mardia, Party-in-person appearing in the matter, states that he tenders unconditional apology and seeks leavel to delete the statements made in the grounds from (g) (Page 11) to the page No. 23, up to the prayer clause.

6. Before we further consider the matter on the aspect as to whether such unconditional apology should be accepted or not or that the proceedings under the Contempt of Courts Act should be initiated against the party-in-person, one opportunity may be given to the party-in-person to submit written apology for such language used in connection with the order passed by this Court in the above referred grounds (g) (page 11) up to page 23. The written apology, if any, by the party-in-person, shall be filed on or before 20.8.2012.

7. On the aspect of the amount of Rs. 25 lac deposited pending the appeal, the O.L., shall submit the details by serving the copy to the party-in-person and Mr. Hemang Shah, learned Counsel for ARCIL, Mr. Punit Juneja, learned Counsel for the other private party, about the utilization of the amount of Rs. 25 lac and the further cost of security, i.e., if any bills for the cost of security are pending and such details shall also be given with the reasons as to why such bills are pending, since the amount of Rs.25 lac was deposited towards the cost demanded by the O.L., at the interim stage as per the order passed in Civil Application No.85 of 2009 in O.J. Appeal No.8 of 2009 dated 13.3.2009.

8. We may also record that as the above referred are the factual aspects to be considered, the matter is kept on 24.8.2012. On all remaining aspects the hearing of Mr. Rasiklal Mardia, Party-in-person for the applicants, Ms. Amee Yagnik, learned Counsel for the O.L., Mr. Shalin Mehta, learned Sr. Counsel appearing with Mr. Hemang Shah, learned Counsel for ARCIL and Mr .Punit Juneja are concluded.

9.  S. O. to 24.8.2012 for further orders.”

7. Thereafter, the affidavit tendering unconditional apology has been filed by the applicant herein in OJ MCA No.181 of 2011 with OJ MCA No. 184 of 2011, the relevant of which reads from paragraph 2 to 5 as under:-

“2. We say that while making written submissions on the grounds raised by us in the OJMCA 184 of 2011, we lost the track of the language at some of the paras and while reading those paras before this Hon’ble Court during the hearing on 27.7.2012, we realized that certain words which are used by us in the said written submissions are discourteous, and we ought not have used such words.

3. We submit that such words are used inadvertently and we had no intentions to hurt the feeling of this Hon’ble Court or the Hon’ble Judges. On realizing this mistake, we sincerely apologized this Hon’ble Court and also unconditionally withdrawn our submissions from page nos.11 [paga-(g) of submissions on Ground No.1] to page no.23, up to the prayer clause, with a prayer to pardon us for the language used in the submissions made in support of the Grounds raised in this application. We pray that this Hon’ble Court be pleased to permit us to withdraw the said paragraphs of the said submissions and be pleased to order that the same may be deleted.

4. We deeply regret for the language we used in our Review Application. Should have made out submissions in a much better and polite way. We most humbly and respectfully submit that we had no intention to disrespect or undermine the judiciary or the Hon’ble Judges in any manner, and what happened was just an unintentional mistake from our end due to lack of our legal drafting knowledge. We deeply regret to this Hon’ble High Court. We are truly and sincerely sorry for having used undignified and indecent words in the averments in the said paragraphs of the said submissions for which we most humbly and respectfully tender our unreserved, unqualified and unconditional apology to this Hon’ble Court and to the Hon’ble Judges with folded hands. We most respectfully pray that this Hon’ble Court may be graciously pleased to accept the same.

5. We are appearing before the Hon’ble Gujarat High Court representing our various legal cases in the capacity of Party-in-person, and on account of lack of our professional legal knowledge and drafting knowledge, we could have made similar types of inadvertent mistakes in our pleadings or written submissions/affidavits etc., in other cases and for all these we sincerely unconditionally apologize the Hon’ble Gujarat High Court and Hon’ble Judges of Hon’ble Gujarat High Court.”

8. The matter was thereafter further heard on 24.8.2012, since the OL was directed to produce relevant extract of the accounts maintained by him under the Companies Act read with the Rules of winding up of the company in liquidation and Mr. Maradia, Party-in-Person was also given opportunity to submit his comments to the report, which may be filed by the OL. It appears that the OL thereafter has submitted the report dated 29.8.2012, whereby at paragraph 3, it has been stated by the OL that out of the amount of Rs. 25,00,000/- made available by the applicant to the company, the amount of Rs. 12,66,724/- has been transferred to Company Paid Staff Salary Reserve Fund Account (CPSSRF Account), which was earlier borrowed from CPSSRF Account, comprising of Rs.7,50,000/- for payment of security expenses and Rs. 5,16,724/- for payment of bills of advertising agency, total Rs. 12,66,724/-. So far as the bills of receipt and payment from 1.4.2003 to 30.10.2008 are concerned, it appears from the statement – Annexure-A that as per OL, there is surplus balance of Rs. 57,44,215/-. Further, OL has transferred Rs. 9,11,702/- to CPSSRF Account. Therefore, the total amount comes to Rs. 66,55, 917/-. The OL has also stated at paragraph 8 in the said report that the OL is having fund of Rs. 80,17,996.13. If it is considered as either balance with the OL as of Rs. 66,55,917/- or of Rs. 80,17,996.13, it does appear that out of the balance available with the OL, the amount of Rs. 12,33,276/- (Rs. 25,00,000/-minus Rs. 12,66,724/- already transferred) is a clear balance with the OL. Further the transfer of the amount of Rs. 7,50,000/-, which was earlier borrowed from CPSSRF Account in normal course could not have been accepted as the cost, but as the amount is utilized towards the security bills, it can be said as the cost borne by the OL towards maintaining the property of the company in liquidation. If we go by strict arithmetical figure it can be said that out of the amount of Rs. 25,00,000/- the amount of Rs. 12,43,960/- as stated by the OL is the expense already borne by the OL and, therefore, the remaining balance available to the OL would come to Rs. 12,56,040/-. Under these circumstances, it appears from the report of the OL that the amount of Rs. 12,56,040/- is the clear balance available with the OL from the amount of Rs. 25,00,000/-, which was deposited by the applicant towards cost borne by the OL. However, from the details given at paragraph 5 of the said OL Report, it does appear that if the security expenses are to be considered till March 20, 2009 i.e. the period up to which the possession of the property was with the OL, the security agencies have raised the bill of Rs . 87,06,302/- , out of which the amount of Rs.12,43,960/- is already paid and, therefore, the amount of Rs. 74,64,342/- is yet to be finalized towards payment of security bills. Since that question is yet not finalized, it cannot be decided at this stage as to whether there will be net clear surplus balance available with the OL or not, as the balance, as observed earlier, with the OL out of the amount of Rs. 25,00,000/ – is Rs. 12,56,040 , whereas unpaid security bills, which are yet to be finalized amounts to Rs. 74,64,342/- At this stage, we may also record that as stated by the OL at paragraph 7 of the said report, one of the security agencies i.e. M/s. United Security Organization Pvt. Limited – Security Agency has preferred Company Application No.242 of 2012 for directing the OL to disburse the amount of Rs. 55,84,402/- with interest and the said application is pending before this Court, since the dispute regarding theft of assets of company while the security agency was deployed are yet to be finalized.

9. The applicant herein has offered his comments by the affidavit dated 4th September, 2012 contending, inter alia, that the OL has to recover the shortfall from the assets of the company in liquidation, since this Court has rejected the revival scheme and the OL is not entitled to keep the balance of Rs. 25,00,000/-. However, the said aspect shall be considered at the later stage.

10. It is in light of the aforesaid factual background, we have now further considered the grounds of review.

11. Before we proceed to examine the other aspects of the merits, we need to record that the jurisdiction of this Court is discretionary and if this Court finds that any party to the proceedings has used any contemptuous language in review application, that itself is a sufficient ground to dismiss the review application, declining the party to invoke jurisdiction and it may also call for further proceedings under the Contempt of Courts Act. At so many places in the submissions, the language used by the applicant is contemptuous and the applicant also, having realized the same, has filed the written apology by way affidavit dated 6.8.2012, which has been referred to herein above. But keeping magnanimity, we find that at this stage, since unconditional apology has been tendered, no further proceedings be initiated against the party-in-person under the Contempt of Courts Act, but with a word of caution that if he again makes use of similar language in the Court proceedings against the order of the Court or in connection with the order of the Court either by written submissions or oral, he may be required to face the proceedings under the Contempt of Courts Act for which serious view may also be taken by the Court. We leave the matter at that stage and find it proper to examine the merits further.

12. The merits may be required to be considered in a two-fold manner; one is for the ground stated against the judgement and order passed in O.J. Appeal on the aspects of alleged apparent error as sought to be canvassed by the party-in-person on the question of law or on appreciation of facts. The another is that the appropriation and/or refund amount of Rs. 25,00,000/-, since it was deposited pending the appeal pursuant to the interim order passed by this Court. On the former aspects, for the so-called error of appreciation of the facts and law as sought to be canvassed by the party-in-person, we find that all such grounds, even if considered, none is valid to recall and review the order or thereby to grant approval to the scheme of revival.

13. However, so far as latter aspect is concerned, since the amount of Rs. 25,00,000/- came to be deposited by the applicant pending the appeal pursuant to the observations made in the interim order, when this Court has finally decided the appeal, it would be required for the Court to issue suitable directions for the appropriation and/or refund or utilization of the amount of Rs. 25,00,000/-. Therefore, such could be said as valid ground for review to that extent.

14. As observed earlier, the factual figure and the record shows that out of the amount of Rs. 25,00,000/-, since the OL has already borne the expenses of Rs. 12,43,960/- towards security expenses for preservation of property and amount of security expenses are already paid by the OL, the OL cannot be directed to refund the said amount. Further, after excluding the amount of security expenses already paid, as observed earlier, net balance comes to Rs. 12,56,040/-. As against the same, the bills of security agencies deployed from 23.6.2003 to 20.3.2009 of Rs. 74,64,342/- are pending, for which the matters are also pending before the Company Court in Company Application No. 242 of 2012 and allied matters, and hence, the order for refund of the amount of Rs. 12,56,040/- does not deserve to be passed at this stage. But it is directed that the OL shall separately mark and maintain the fund of Rs. 12,56,040/- and after the dispute with the security agencies towards the bill of Rs. 74,64,342/- is finalized, the OL shall make use of the amount of Rs. 12,56,040/-, if required, and thereafter if any surplus balance remains, the same shall be refunded to the applicant. Hence, ordered accordingly.

15. The party-in-person did make an attempt to contend that in the OJ Appeal, when was heard finally, Mr. Roshan Desai, learned Counsel was appearing for the OL, but his engagement has been subsequently not approved by the Company Court and in furtherance to his submission, he relied upon the order passed by the learned Company Judge of this Court dated 18.7.2012/19.7.2012 passed in OLR No.294 of 2011 and it was sought to be contended that if the learned Advocate had no authority to represent the OL at the relevant point of time, since it is not subsequently permitted by the Company Court, all submissions on behalf of the OL would go away and the matter would call for review. It was also submitted that the allegation has been made by the Party-in-person that the appearance of Mr. Roshan Desai was with ulterior motive and in collusion with the OL and, therefore also, this Court may review and recall the order.

16. In our view, we do not find any substance for the alleged ulterior motive or collusion by Mr. Desai with the OL, since no material is produced to show that any undue benefits was to be derived by the OL. Be it noted that the appeal is not preferred by the OL, but is preferred by the applicant herein in capacity as Party-in-person against the order of the learned Company Judge. If any proceedings are initiated against the OL or the company in liquidation, it is bounden duty of the OL to defend the proceedings against the company in liquidation and also to safeguard the interest of the creditors, including the secured creditors, shareholders of the company in liquidation. Therefore, if any proceedings are initiated against the OL, the OL has to defend the proceedings. The proceedings can be defended in two ways; one would be that the OL himself may appear for the company in liquidation and may defend the proceedings of his own; or in alternative, he may engage any Advocate for defending the proceedings. If he wishes to defend the proceedings by engaging any Advocate, the expenses may be required to be incurred for payment of remuneration of the Advocate and, therefore, the permission of the Company Court may be required. In the present case, the OL had engaged Mr. Roshan Desai, may be in view of the facts and circumstances that engagement of an advocate was required. If the Company Court has declined to ratify the action of the OL, the consequence may arise that the Advocate may not get his fees for his engagement, but thereby, per se, it cannot be said that all his action, including that of defending the proceedings on behalf of the OL would be vitiated. It is a different matter, if proper material has come on record before the Court that the said Advocate, who was engaged by the OL, has acted against the interest of the company, subject to the power, as may be available with the Advocate under the Advocate Act. But if the Court finds that the Advocate, in any manner, has not acted against the interest of the company in liquidation, even if the action of the OL of engaging the Advocate is not subsequently ratified by the Company Court, it cannot be said that all actions of the OL for defending the proceedings, per se, would be nullified. We are not concerned with the question of entitlement of the fees and expenses to be incurred by the OL for engaging of the Advocate in the present matter, but we are only concerned with the aspects as to whether under such circumstances, all submissions made on behalf of the OL would be rendered otiose or it would result into the situation of no defence at all taken on behalf of the OL, calling for the review of the proceedings and rehearing of the matter afresh. Considering the submissions on behalf of the OL, which were made before us and to which, we have also incorporated in our judgement, it cannot be said that any contentions of the OL on behalf of the Company in liquidation, may be through Mr. Roshan Desai were against the interest of the company in liquidation. Further, merely because the Advocate was lacking authority, per se, is no ground to review and recall the order, more particularly when we have not found that any action is taken by the OL or by the Advocate engaged by the OL against the interest of the company in liquidation for opposing the appeal preferred by the applicant.

17. Under these circumstances, we find that we need not review and recall the judgement and order passed in the OJ Appeal on the aforesaid grounds canvassed by the applicant.

18. Before parting with, we may record that it has come to out notice that there is typographical error in record the number of ‘Civil Application No.54′ is of ’06’, but it should have been ‘Civil Application No.54/09’, since, in any case, the appeal was of the year 2009 and, therefore, interim application could not be of an earlier period in the said OJ Appeal. Hence, correction deserves to be made at paragraph 7 and the number of Civil Application would be ‘Civil Application No.54/09’, in place of ‘Civil Application No.54/06’. Hence, ordered accordingly.

19. Hence, Misc. Civil Application No.184 of 2011 deserves to be partly allowed to the aforesaid extent only.

20. We shall now consider OJ MCA No. 181 of 2011. Civil Application No.138 of 2009 was preferred by the applicant to recreate all assets and to fix the responsibilities of the responsible officer and to direct them to compensate the loss incurred to the Company in Liquidation during which the possession was held by the OL. It was also prayed to order and investigate by CBI or any other Agency or by a Retired Judge of this Court. The pertinent aspect is that the said Civil Application came to be preferred by the applicant- original appellant in capacity as the Appellant i.e. Ex-Director, who submitted the scheme of revival, which was not granted by the learned Company Judge. It is true that pending the OJ Appeal, as recorded herein above, the possession was handed over by the OL to the appellant – applicant pursuant to the interim order passed by this Court and the applicant-appellant may have the grievance about non-availability of certain properties of the company in liquidation. But all such are in capacity as the Former Directors who have submitted the scheme of revival, which was not granted by the learned Company Judge and they were not in capacity as the shareholders of the company for protecting the interest of the company in liquidation.

21. When the Appeal itself is dismissed by this Court having found that the appeal is meritless, the rights of the appellant, if any, in capacity as the Ex-Director, who submitted the scheme of revival would automatically come to an end. Therefore, the Court passed the order that as the final order is passed in OJ Appeal, the present Civil Application shall also stand disposed of.

22. Considering the facts and circumstances, we find that no valid ground is made out to recall and review the order dated 7.10.2011 passed in Civil Application No.138 of 2009, but it is observed that the present order shall not operate as a bar to the applicant in resorting to appropriate proceedings for protecting the interest of the Company in liquidation, as a shareholder of the Company, if otherwise permissible in law. Misc. Civil Application No. 181 of 2011 deserves to be disposed of accordingly.

23. OJ Misc. Civil Application No.184 of 2011 and OJ Misc. Civil Application No.181 of 2011, both, shall stand disposed of accordingly. Considering the facts and circumstances, no order as to costs.

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