Calcutta High Court (Appellete Side)

Kamsco Industries Private ... vs Union Of India And Others on 15 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. Anubhav Sinha
           Mr. Dipan Kr. Sarkar

                                                ... For the Respondent No.5.
           Mr. S.K. Sinha
           Mr. Debashis Saha
           Ms. Dipika Banu
           Ms. Namrata Chatterjee
           Mr. Souvik Dian
                               ... For the applicants for addition of parties.
 2


     Hearing Concluded On :               7th December 2021


     Judgment On               :          13th December 2021




    Rajasekhar Mantha, J.

15.12.2021

The judgment dated December 13, 2021 is mentioned for correction.

In view of a large number of typographical errors in the said judgment,

the following judgment shall be read in its place and stead. The

reasoning and conclusion remains unaltered.

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. KAL. 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 on record of 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. An amended Recovery Certificate being RC No. 11395 of 2017 dated

10th April, 2017 came to be issued.

5. In the mean time, FIRs came to be lodged against defendant Nos. 1 to

4 in OA No. 766 of 2013. On 11th 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

corporate debtor UBHL 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 7 th

June, 2021, the Recovery Officer of the DRT sold 3,96,44,346 equity

shares in UBL to the 4 th respondent M/s. Heineken N.V. in a block

deal on the Bombay Stock Exchange duly approved by the SEBI.

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 dated 7th January, 2019, the order of Sale Proclamation

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. KAL.

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

20th 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 7 th

January, 2019 and 7th 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, KAL 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 4th respondent had purchased enblock

3,96,44,346 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, would

submit that the petitioners are the alter ego and benamidars of Dr.

Vijay Mallya and his family members and companies/trusts promoted

by him. 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 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 any

integral part, has arisen within the jurisdiction of the High Court of