Research › Search › Judgment

Calcutta High Court · body

2012 DIGILAW 914 (CAL)

Monoj Lal Seal v. United Spirits Limited

2012-10-03

I.P.MUKERJI

body2012
Judgment : FACTS: The lessors of premises No.6, Gorkey Terrace, Kolkata -16 apply before this Court. They are also the owners of this property. There is a flat on .its ground floor. It was let out as to a company, Shaw Wallace and Company Ltd. Now, it is no longer in-existence. The flat is under lock and key. Throughout the hearing of this application it was not disclosed as to who locked it or who has its keys. The applicants claim possession of this flat. This claim is resisted by United Spirits Ltd. It can only be inferred that they are in possession of the flat. 2. The applicants instituted a suit against Shaw Wallace Company in the Presidency Small Causes Court at Calcutta, being Ejectment Suit No. 22 of 2008-E. The ground for filing the suit was that Shaw Wallace was not paying any rent, keeping the flat under lock and key and that the applicants needed it for accommodation. The claim was for recovery of possession and for a decree for mesne profits. 3. There was a scheme of amalgamation between Shaw Wallace and Company Ltd. and United Spirits Ltd., under Sections 391 to 394 of the Companies Act, 1956. This Court sanctioned the scheme on 16th January, 2009. Under it all the assets and liabilities of Shaw Wallace including its rights in contracts and in legal proceedings became vested in United Spirits Ltd. The schedule of assets appended to the scheme showed that amongst other assets the above property was to vest in this transferee company. 4. The applicants preferred an appeal from the orders sanctioning the scheme. It was heard before a Division Bench of this Court. In the judgment and order of the Division Bench, made on 24th March, 2009, it was recorded that the learned counsel on behalf of the "respondents" (United Spirits Ltd.) conceded that the landlord had a right and that this property should be deleted from the schedule of assets. Hence, the Court ordered that the property be deleted from the schedule of assets. After sanction of the scheme Shaw Wallace and Company Ltd. was dissolved. 5. Now, the applicants seek the aid of this Court under Section 392 of the Companies Act, 1956 to get possession of this flat. 6. Section 392 is about the power of the Court to, inter alia, supervise a compromise or arrangement. After sanction of the scheme Shaw Wallace and Company Ltd. was dissolved. 5. Now, the applicants seek the aid of this Court under Section 392 of the Companies Act, 1956 to get possession of this flat. 6. Section 392 is about the power of the Court to, inter alia, supervise a compromise or arrangement. It is inserted below: "392. Power of Tribunal to enforce compromise and arrangement.- (1) Where the Tribunal makes an order under section 391 sanctioning a compromise or an arrangement in respect of a company, it- (a) shall have power to supervise the carrying out of the compromise or an arrangement; and (b) may, at the time of making such order or at any time thereafter, give such directions in regard to any matter or make such modifications in the compromise or arrangement as it may consider necessary for the proper working of the compromise or arrangement. (2) If the Tribunal aforesaid is satisfied that a compromise or an arrangement sanctioned under section 391 cannot be worked satisfactorily with or without modification, it may, either on its own motion or on the application of any person interested in the affairs of the company, make an order winding up the company, and such an order shall be deemed to be an order made under section 433 of this Act. (3) The provisions of this section shall, so far as may be, also apply to a company in respect of which an order has been made before the commencement of the Companies (Amendment) Act, 2001 sanctioning a compromise or an arrangement." SUBMISSIONS: 7. Mr. Roy, learned Counsel for the applicants submitted that Shaw Wallace and Company Ltd., the tenant was now dead in the eyes of law. 8. All its assets, liabilities, contracts and rights except its interest in the flat were transferred to and vested in United Spirits Ltd. Before the Appeal Court, United Spirits Ltd. expressly submitted that this flat be deleted from the scheme. Accordingly the flat was deleted from the scheme as recorded in its order dated 24th March, 2009. Shaw Wallace stands dissolved. United Spirits Ltd. has got no right to retain the flat. It has to return it to the applicants. The Court can pass such an order under Section 392 of the Companies Act, 1956. Accordingly the flat was deleted from the scheme as recorded in its order dated 24th March, 2009. Shaw Wallace stands dissolved. United Spirits Ltd. has got no right to retain the flat. It has to return it to the applicants. The Court can pass such an order under Section 392 of the Companies Act, 1956. He relied on the following decisions: Hotel Kandath International (P) Ltd. v. Official Liquidator reported in (1997) 4 Company LJ 416 (Ker); Divya Vasundhara Financiers Ltd. v. K.N. Samant And Others reported in 69 Company Cases 646; M/s. General Radio & Appliances Co. Ltd. v. M.A. Khader (dead) reported in AIR 1986 SC 1218 . 9. Mr. Ratnanko Banerjee representing United Spirits Ltd. submitted that Section 392 was not the proper remedy for the applicants. 10. This Court had no power to pass any order, as prayed for, under Section 392. United Spirits Ltd. was in possession of the flat, even if it was in its possession as a trespasser. This Court had no jurisdiction to pass any order for eviction under Section 392 of the Act. 11. The rights of the parties can only be adjudicated in the suit being Ejectment Suit No. 22 of 2008-E, filed by the applicants and pending before the Presidency Small Causes Court. He cited the case of Maddi Lakshmaiah v. Duncan Agro Industries reported in 95 CWN 720; S. K. Gupta v. K.P. Jain reported in 49 Company Cases 342; Deccan Aviation Ltd. v. Ge Commercial Aviation Services Ltd. and Others (No.2) reported in (2009) 150 Company Cases 90 (Karn). 12. He also submitted that the order which the Court could pass in this application would be an interim order in the suit. The order prayed for if granted would amount to decreeing the above suit. It should not be passed. He cited the case of Cotton Corporation of India Limited v. United Industrial Bank Limited and Others reported in (1983) 4 SCC 625 ; Metro Marins and Another v. Bonus Watch Co. (P) Ltd. and Others, reported in (2004) 7 SCC 478 . DISCUSSION & CONCLUSIONS : 13. The Supreme Court in the case of S. K. Gupta v. K. P. Jain reported In 49 Company Cases 342 said that: .. .................. (P) Ltd. and Others, reported in (2004) 7 SCC 478 . DISCUSSION & CONCLUSIONS : 13. The Supreme Court in the case of S. K. Gupta v. K. P. Jain reported In 49 Company Cases 342 said that: .. .................. the only limit on the power of the court being that such directions can be given and modifications can be made for the proper working of the compromise and/or arrangement. The purpose underlying s. 392 is to provide for effective working of the compromise and/or arrangement once sanctioned and over which the court must exercise continuous supervision [see s. 392 (1)), and if over a period there may arise obstacles, difficulties or impediments, to remove them, again, not for any other purpose but for the proper working of the compromise and/or arrangement........ .................. ...... 14. In the case of Maddi Lakshmaiah & Ors. v. Duncan Agro Industries Ltd. & Ors. reported in 95 CWN 720 Prabir Kumar Majumdar; J. of our Court was considering an application under Section 392, by two suppliers of tobacco, of National Tobacco Ltd. asking for a direction from this Court upon Duncan Agro Industries Ltd. to pay them Rs. 60,24,689/-. This Court had earlier sanctioned a scheme of merger between Duncan Agro Industries Limited (DAIL) and National Tobacco Ltd. According to the terms of the scheme the transferee company (DAIL) had taken over the contracts and liabilities of National Tobacco Ltd. Hence, the Court in its supervisory capacity could direct payment, it was submitted. Prabir Kumar Majumdar, J. very rightly opined, following the dictum of the above Supreme Court case, that the Court had the power to supervise the proper working of the compromise or arrangement but could not use this power for any other purposes. His Lordship observed that there was no obstacle or difficulty or impediment in the working of the scheme so as to warrant the order prayed for. But in paragraph 47 of that judgment the learned Judge clearly noted that there were serious disputes regarding the claim of the applicants, which the Court could not entertain, under Section 392, even if it was assumed that it had the power under that section to order payment to the applicants. 15. But in paragraph 47 of that judgment the learned Judge clearly noted that there were serious disputes regarding the claim of the applicants, which the Court could not entertain, under Section 392, even if it was assumed that it had the power under that section to order payment to the applicants. 15. In the case of Deccan Aviation Ltd. v. Ge Commercial Aviation Services Ltd. And Others (No.2) reported in (2009) 150 Company Cases 90 (Karn), a Division Bench of the Karnataka High Court did not think that any rights of consenting parties to a scheme, arising out of a contract for a different purpose, could be taken away by the scheme or that the Court could assume any jurisdiction to resolve such disputes in the garb of implementing the scheme. In that case the Court was concerned with repossession of hired aircrafts of a Company by another party who had signified its consent to the scheme between equity shareholders, secured cre9itors and unsecured creditors of that Company. 16. In the case of Hotel Kandath International (P) Ltd. v. Official Liquidator reported in (1997) 4 Company LJ 416 (Ker) the question of eviction of tenants arose while sanctioning and implementing a revival scheme of the company. Both the landlord and the tenant were before the Court. In the facts of that case, the Court decided to adjudicate the question itself and to order eviction of the tenants and occupants, in exercise of its power under Section 392 (1) of the Act. Almost similar was the question in the case of Divya Vasundhara Financiers Ltd. v. K.N. Samant And Others reported in 69 Company Cases 646 where the Gujarat High Court decided on the right, title and interest of the occupants while supervising a scheme of arrangement or compromise. They were seen as an impediment in the implementation of the scheme. 17. Under the scheme of amalgamation, sanctioned by this Court on 16th January, 2009, the interest of Shaw Wallace in various immovable properties was transferred to and vested in United Spirits Ltd. That provision in the scheme was qualified by the surrounding provisions which said, inter alia, that all rights of the company in contract, over property and so on, became those of United Spirits Ltd. All legal proceedings were to be continued by this transferee company. Shaw Wallace was dissolved. It ceased to be a legal entity. Shaw Wallace was dissolved. It ceased to be a legal entity. This company was dead in the eye of law. [See the case of Shree Choudhary Cold Storage (1972) v. Ruby General Insurance Co. Ltd., reported in (1983) 54 Company Case 639.] I had held in the unreported case of Shaw Wallace & Company Limited & Anr. v. Kishore Rajaram Chhabria & Ors., decided by me on 25th June, 2012 that when upon dissolution, the rights of the dissolved company vested in another company, by amalgamation, they did not become lifeless but could be pursued by the company which acquired the rights. 18. But here the order of the Appeal Court dated 24th March, 2009 deleted this flat from the scheme. Therefore, neither the property in the flat, nor any rights in connection with it were transferred to United Spirits Ltd. Shaw Wallace was dissolved and had no legal existence whatsoever. Therefore, the rights of Shaw Wallace which was a dead entity, in the flat, were not inherited by any other entity. This conclusion can be reached in a summary manner, on the existing papers. It is here that this case is different from the case covered by my judgment in the above unreported case decided on 25th June, 2012. 19. Shaw Wallace could not have any possession because of its dissolution. United Spirits is not entitled to possession, because at its invitation this flat was deleted from the scheme. Yet there is a padlock on the flat which United Spirits is refusing to remove so as to allow its possession to the owner, the applicants. In the circumstances this Court can apply the principles enumerated in the case of S. K. Gupta v. K.P. Jain reported in 49 Company Cases 342. There can be no doubt that an impediment is being created by United Spirits Ltd. by claiming possession of the flat which never went to it on amalgamation of Shaw Wallace with it. There is and there can be no dispute with regard to this. Therefore, the caution sounded by Majumder J. in the case of Maddi Lakshmaiah & Ors. v. Duncan Agro Industries Ltd. & Ors., reported in 95 CWN 720 about the Court not exercising jurisdiction when there was a dispute, does not apply in this case. 20. There is and there can be no dispute with regard to this. Therefore, the caution sounded by Majumder J. in the case of Maddi Lakshmaiah & Ors. v. Duncan Agro Industries Ltd. & Ors., reported in 95 CWN 720 about the Court not exercising jurisdiction when there was a dispute, does not apply in this case. 20. It is intolerable for this Court to see that United Spirits Ltd., which had expressly given up claims to this fiat before the Appeal Court can recoil and claim the flat in another way. 21. Moreover, it is equally intolerable to subject a victim of this kind of an act to avail of the ordinary remedy of obtaining possession in a suit. I think Section 392 arms the Court with enough power, so as to relieve the party of availing of that remedy. It can implement it by giving effect to the deletion of the property from the scheme made at the instance of United Spirits Ltd. before the Appeal Court on 24th March, 2009. The necessary corollary is that if United Spirits Ltd. did not retain this property, of which Shaw Wallace was a tenant, the property had to go back to the landlord because nobody else could take the property. 22. The suit in the Presidency Small Causes Court was against Shaw Wallace. United Spirits, I am told, has applied before that Court on 24th March, 2012 for being substituted as the defendant to defend the suit. I do not make any comment about how the suit in the Presidency Small Causes Court is to proceed after this order. The parties are at liberty to pursue that suit in accordance with law. 23. Therefore, I allow this application (C.A. 35 of 2011) by directing United Spirits Ltd. to forthwith deliver vacant possession of this flat to the applicants by 31st October, 2012 failing which the applicants will be at liberty to enter the said flat after breaking the padlock, with the help of the officer in-charge of the jurisdictional police station. While delivering possession to the applicants. United Spirits Ltd. should remove all their belongings, if any, from the flat. Urgent certified photocopy of this judgment and decree, if applied for, to be provided upon the usual undertaking. Later: Mr. Banerjee prays for stay of operation of this judgment and order. While delivering possession to the applicants. United Spirits Ltd. should remove all their belongings, if any, from the flat. Urgent certified photocopy of this judgment and decree, if applied for, to be provided upon the usual undertaking. Later: Mr. Banerjee prays for stay of operation of this judgment and order. Considering that time has been granted upto 31st October, 2012 to comply with the order, there is adequate time to prefer the appeal and obtain stay of this order. Hence, prayer for stay is refused. Let a signed copy of the operative part of the judgment be issued to the parties.