Calcutta High Court (Appellete Side)

Kamsco Industries Private ... vs Union Of India And Others on 13 December, 2021

           IN THE HIGH COURT AT CALCUTTA
             Constitutional Writ Jurisdiction
                        APPELLATE SIDE

BEFORE:-

THE HON'BLE JUSTICE RAJASEKHAR MANTHA

                        W.P.A. No. 12067of 2021
                                 With
                             CAN 1 of 2021

            Kamsco Industries Private Limited and Others
                               Versus
                     Union of India and Others


           Mr. Ratnanko Banerjee, Senior Advocate
           Mr. D.K. Sarkar
           Mr. A. Deb
           Ms. A. Daga
                                                       ... For the Petitioners.

           Mr. Y. J. Dastoor, ASG
           Mr. Rudraman Bhattacharyya
           Mr. Rajashree Venket Kundalia
                                                              ... For the UOI.

           Mr. Sudipto Sarkar, Senior Advocate
           Mr. Paritosh Sinha
           Ms. A. Agnihotri
           Mr. Saubhik Chowdhury
           Mr. Vividh Tandon
           Mr. R.V. Goutham
           Mr. Dripto Majumdar
           Ms. Ayusmita Sinha
           Ms. K. Kapadia
           Mr. D. Das
                                                 ... For the Respondent No.4.

           Mr. S.K. Sinha
           Mr. Debashis Saha
           Ms. Dipika Banu
           Ms. Namrata Chatterjee
           Mr. Souvik Dian
                               ... For the applicants for addition of parties.



    Hearing Concluded On :                7th December 2021
 2


     Judgment On                :          13th December 2021




    Rajasekhar Mantha, J.

CAN 1 of 2021

This application has been filed for addition of parties. The

applicant is State Bank of India for itself and as a leader of a

consortium of lenders to, inter alia, M/s. UBL. The applicants are

necessary and proper parties. Hence, CAN 1/2021 is allowed. The

said applicants shall be added as party-respondents to the instant

writ petition.

Learned advocate of record or the applicants shall make necessary

amendments in the cause title of the writ petition in course of the

day.

CAN 1 of 2021 is allowed and disposed of.

W.P.A. No. 12067of 2021

1. By order dated 12th August, 2021, a Co-ordinate Bench,

reserving the point of maintainability to be decided in course of

final hearing, called for affidavits from the parties. This matter

has been listed before this Court as a motion. The principal

Respondents have not filed affidavits.

2. The respondent No. 4 has used affidavit-in-opposition. The

Union as well as the State Bank of India prayed that this Court

should first decide on the maintainability of the writ petition on

the question of territorial jurisdiction. It is submitted that

affidavits are not needed for deciding the preliminary issue. The

parties were duly notified and have made detailed submissions.

3. The facts of the case are, inter alia, that OA 766 of 2013 was

filed by the State Bank of India against, 'Kingfisher Airlines', the

'United Breweries (Holdings) Limited', Dr. Vijay Mallya,

Kingfisher Finvest (India) Ltd. and five others before the Debt

Recovery Tribunal-II at Bengaluru in the State of Karnataka.

The said OA was decreed for a sum of Rs.6203,35,03,879.42/-.

4. A Recovery Certificate being RC No. 11395 of 2017 dated 10 th

April, 2017 came to be issued and subsequently amended.

5. In the mean time, an FIR came to be lodged against defendants

in OA No. 766 of 2014 at the instance of the IDBI. On 11 th June,

2016 and 3rd September, 2016 the Enforcement Directorate (ED)

issued Provisional Orders attaching certain assets of M/s. UBL

and UBHL under the provisions of PMLA Act, inter alia, held by

the writ petitioners. On 7 th January, 2019, the Recovery Officer

of DRT at Bengaluru passed orders of attachment of the shares

held by the petitioners in M/s. UBL, United Spirits Limited and

McDowell Holdings Limited. In the meantime the principal

debtor UBL was directed to be wound up by the Hon'ble

Karnataka High Court on 7th February 2017.

6. The said attached shares of the petitioners were put up sale in

the Recovery Proceedings of the DRT. By a Sale Proclamation

dated 7th June, 2021, the Recovery Officer of the DRT sold

3,96,44,346 equity shares in UBL, USL and MHL to the 4 th

respondent M/s. Heineken N.V. in a block deal on the Bombay

Stock Exchange duly approved by the SEBI and the Central

Government.

7. The petitioners are aggrieved by the order of proclamation and

attachment and sale of the said shares. The writ petition has

been filed in July, 2021. The petitioners have assailed the order

of attachment, proclamation dated 7th January, 2019, the order

of Sale dated 7th June, 2021 and the Recovery Certificate being

RC No. 11395 of 2017 issued by the Recovery Officer of DRT at

Bengaluru.

8. Counsel for the petitioners, Mr. Ratnanko Banerjee, would argue

that the writ petitioners are located at and have their registered

offices at Kolkata. The order of attachment of the shares of the

petitioners was received and its effect felt at Kolkata. The writ

petitioners are neither borrowers nor guarantors to the State

Bank of India or any financial institution. The petitioners are

separate corporate entities and Juristic persons and it,

therefore, cannot be said that the petitioners are proxies for Dr.

Vijay Mallya, the principal promoter of M/s. UBL.

9. In support of the territorial jurisdiction of this Court to entertain

the writ petition, Senior Counsel for the petitioners would rely

upon the judgments of the Supreme Court in the case of M/s.

Kusum Ingots & Alloys Ltd. Vs. Union of India and Anr.

reported in (2004) 6 SCC 254, particularly paragraph 6 and 10

thereof. Nawal Kishore Sharma Vs. Union of India and Others

reported in (2014) 9 SCC 329 particularly paragraphs 10 and

16 thereof. Reliance has also been placed on an unreported

decision of a Co-ordinate Bench dated 20 th May, 2011 in WP No.

388 of 2003 [Hongkong and Shanghai Banking Corporation

Limited Vs. Union of India].

10. Mr. Rudraman Bhattacharya, Learned Counsel appearing for the

Union submits that no part of the cause of action of the

petitioners arose within the jurisdiction of the High Court of

Calcutta and the writ petitioners are in essence aggrieved by the

orders dated 7th January, 2019 and 7 th June, 2021. The said

two orders have been passed by the Recovery Officer of the DRT

No.-II at Bengaluru in the State of Karnataka. The shares in

question belong to M/s. UBL whose registered office is in

Bengaluru. The principal debtors, guarantors and other co-

obligants towards the banks are all located at Bengaluru. No

part of the cause of action, therefore, arose within the

jurisdiction of the High Court at Calcutta.

11. The Union also argues that the principal debtor, UBL and each

of the petitioners are the alter egos of one and another and are

controlled entirely by the said Dr. Vijay Mallya and his family

members. Therefore, even if the statements in the writ petition

are taken to be true and correct, this Court cannot have

territorial jurisdiction to receive, entertain or try the instant writ

application. Reference was made to the decisions of the

Supreme Court in the case of State of Rajasthan & Ors. Vs.

Swaika Properties & Anr. reported in (1985) 3 SCC 217and in

the case of M/s. Ambica Industries Vs. Commissioner of

Central Excise reported in (2007) 6 SCC 769 particularly

paragraph 40 and 41 thereof.

12. Mr. Sudipto Sarkar, Senior Advocate, representing respondent

No. 4 would submit that his client is nowhere connected with or

concerned with the disputes between the writ petitioners and the

other respondents or the Enforcement Directorate at New Delhi

and the Authorities of the PMLA Act or the proceedings before

the DRT. It is submitted that that the 4 th respondent had

purchased enblock 2,01,86,640 number of shares of M/s. UBL

at the Bombay Stock Exchange under the aforesaid Recovery

Certificate.

13. It is also argued that this Court does not have jurisdiction to

receive entertain or try the instant writ petition as the said

shares of M/s. UBL, located at Bengaluru, have been sold at the

Bombay Stock Exchange, with the consent and approval of the

SEBI (Securities and Exchange Board of India) located at

Mumbai.

14. Counsel for the State Bank of India, Mr. Sinha and Mr. Saha,

representing the DRT at Bengaluru, would submit that the

petitioners are the alter ego and benamidars of M/s. UBL and

the family members of Dr. Vijay Mallya. The shares held by the

petitioners in M/s. UBL are in fact, the shares of the said Dr.

Vijay Mallya, certificate debtor. The orders impugned in the writ

petition passed by the Recovery Officer, are appealable before

the DRT at Bengaluru. The writ petition even otherwise cannot

be entertained for availability of efficacious and effective remedy.

The Territorial Jurisdiction of the Court has also been

challenged.

15. This Court has carefully considered the arguments advanced by

the parties. The expression, 'cause of action' would essentially

mean the entire bundle of facts that are required to be proved for

the purpose of availing of a judicial remedy. The expression,

'cause of action' in the context of under Article 226 of the

Constitution of India has been explained in the decision of

Alchemist Limited and Another Vs. State Bank of Sikkim

and Others reported in (2007) 11 SCC 335 at paragraph 16 and

20.

"...16. It may be stated that by the Constitution (Forty-second Amendment) Act, 1976, Clause (1-A) was renumbered as Clause (2). The underlying object of amendment was expressed in the following words:

"Under the existing Article 226 of the Constitution, the only High Court which has jurisdiction with respect to the Central Government is the Punjab High Court. This involves considerable hardship to litigants from distant places. It is, therefore, proposed to amend Article 226 so that when any relief is sought against any Government, authority or person for any action taken, the High Court within whose jurisdiction the cause of action arises may also have jurisdiction to issue appropriate directions, orders or writs."

(emphasis supplied)

The effect of the amendment was that the accrual of cause of action was made an additional ground to confer jurisdiction on a High Court under Article 226 of the Constitution.

20.It may be stated that the expression "cause of action" has neither been defined in the Constitution nor in the Code of Civil Procedure, 1908. It may, however, be described as a bundle of essential facts necessary for the plaintiff to prove before he can succeed. Failure to prove such facts would give the defendant a right to judgment in his favour. Cause of action thus gives occasion for and forms the foundation of the suit."

16. At paragraph 22, 25, 35 and 37 of the decision of Alchemist

(supra), the Hon'ble Supreme Court has held as follows:

"...22. For every action, there has to be a cause of action. If there is no cause of action, the plaint or petition has to be dismissed. For every action, there has to be a cause of action. If there is no cause of action, the plaint or petition has to be dismissed.

25. The learned counsel for the respondents referred to several decisions of this Court and submitted that whether a particular fact constitutes a cause of action or not must be decided on the basis of the facts and circumstances of each case. In our judgment, the test is whether a particular fact(s) is (are) of substance and can be said to be material, integral or essential part of the lis between the parties. If it is, it forms a part of cause of action. If it is not, it does not form a part of cause of action. It is also well settled that in determining the question, the substance of the matter and not the form thereof has to be considered.

35. Negativing the contention and upholding the order passed by the High Court, this Court ruled that passing of a legislation by

itself does not confer any such right to file a writ petition in any court unless a cause of action arises therefor. The Court stated: (Kusum Ingots case [(2004) 6 SCC 254 : JT (2004) Supp 1 SC 475] , SCC p. 261, para 20) "20. A distinction between a legislation and executive action should be borne in mind while determining the said question." Referring to ONGC [(1994) 4 SCC 711 : JT (1994) 6 SC 1] , it was held that all necessary facts must form an "integral part" of the cause of action. The fact which is neither material nor essential nor integral part of the cause of action would not constitute a part of cause of action within the meaning of Clause (2) of Article 226 of the Constitution.

17. After discussing the earlier decision in the case of M/s. Kusum

Ingots & Alloys Ltd. Vs. Union of India and Anr. reported in

(2004) 6 SCC 254, Union of India and Ors. Vs. Adani Exports

Limited and Anr. reported in (2002) 1 SCC 576, ONGC Vs. Utpal

Kumar Basu reported in (1994) 4 SCC 711, A. B. C. Laminart Pvt.

Ltd. & Anr. Vs. A. P. Agencies reported in (1989) 2 SCC 163 and

State of Rajasthan & Ors. Vs. Swaika Properties & Anr. reported

in (1985) 3 SCC 217 the Hon'ble Supreme Court has held at

Paragraph 37 as follows:-

37. From the aforesaid discussion and keeping in view the ratio laid down in a catena of decisions by this Court, it is clear that for the purpose of deciding whether facts averred by the appellant-petitioner would or would not constitute a part of cause of action, one has to consider whether such fact constitutes a material, essential, or integral part of the cause of action. It is no doubt true that even if a small fraction of the cause of action arises within the jurisdiction of the court, the court would have territorial jurisdiction to entertain the suit/petition. Nevertheless it must be a "part of cause of action", nothing less than that."

18. In Nawal Kishore (supra) decision, it has been held that in order

to maintain a writ petition, the petitioner has to establish that a

legal right claimed by him has been infringed by the respondents

within the territorial limits of the Court's jurisdiction. In the

said case, it was held that a letter of rejection of disability

pension received at native place of petitioner where he was

forced to stay due to disability, the cause of action of the

petitioner must be deemed to have a reason of the native place of

the writ petitioner. The said decision is distinguishable and

cannot be applied in the instant case.

19. In Ambica Industries (supra) decision the Hon'ble Supreme

Court has held at paragraph 17 as follows:

"17. There cannot be any doubt whatsoever that in terms of Article 227 of the Constitution of India as also Clause (2) of Article 226 thereof, the High Court would exercise its discretionary jurisdiction as also power to issue writ of certiorari in respect of the orders passed by the subordinate courts within its territorial jurisdiction or if any cause of action has arisen there within but the same tests cannot be applied when the appellate court exercises a jurisdiction over a tribunal situated in more than one State. In such a situation, in our opinion, the High Court situated in the State where the first court is located should be considered to be the appropriate Appellate Authority. The Code of Civil Procedure did not contemplate such a situation. It provides for jurisdiction of each court. Even a District Judge must exercise its jurisdiction only within the territorial limits of a State. It is inconceivable under the Code of Civil Procedure that the jurisdiction of the District Court would be exercisable beyond the territorial jurisdiction of the district, save and except in such matters where the law specifically provides therefor."

20. Applying the tests in the aforesaid cases in the instant case, it is

seen that the petitioner is primarily aggrieved by the orders

passed by the Recovery Officer, in RC Case No. 11295 of 2017

attached to the DRT-II at Bengaluru. The said recovery

proceeding was to execute a decree and certificate passed by the

DRT II at Bengaluru. The shares, sold by the Recovery Officer,

were of M/s. UBL the principal debtor and M/s. USL and

McDowell Holdings Limited located at, inter alia, Bengaluru.

The sale of shares was affected at the Bombay Stock Exchange

and sale approved by the SEBI at Mumbai, outside the

jurisdiction of the Calcutta High Court.

21. Hence, no part of the cause of action of the petitioner, much less