Calcutta High Court
Jaishree Steels Private Limited & ... vs Shivam Dhatu Udyog Private ... on 11 January, 2023
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ODC-3
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
COMMERCIAL DIVISION
IA No: GA/06/2021
In CS/20/2021
JAISHREE STEELS PRIVATE LIMITED & ORS.
Vs.
SHIVAM DHATU UDYOG PRIVATE LIMITED & ORS.
BEFORE :
The Hon'ble JUSTICE KRISHNA RAO
Heard On : 11.11.2022, 16.11.2022, 30.11.2022, 08.12.2022, 16.12.2022 & 05.01.2023
Order On : 11.01.2023
Appearance:
Mr. Suman Dutt, Adv.
Mr. Rohit Banerjee, Adv.
Mr. Rachit Lakhmani, Adv.
Mr. Vikash Singh, Adv.
... for the plaintiff.
Mr. Ratnanko Bajerjee, Sr. Adv.
Mr. Rishav Banerjee, Adv.
Mr. Sachin Shukla, Adv.
Mr. S. Manot, Adv.
... for the defendant
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ORDER
The defendant no. 1 has filed an instant application for revocation of
leave granted under Clause 12 of Letters Patent, rejection of plaint and
consequently for vacation of ad interim injunction granted on 28.01.2021.
The plaintiffs have filed the suit for Specific Performance and prayed for
following reliefs :
"a) Decree for specific performance against the defendants to act in
terms of the oral contract dated 8 December 2019 as enshrined in
paragraph 11 hereinabove;
b) A decree for perpetual injunction do issue restraining the defendants
and/or their men, agents and servants from dealing with and/or
disposing of and/or creating any third party right, title and interest
in the plant and machinery as well as the assets including the
factory premises at the defendant no. 1;
c) Receiver;
d) Injunction;
e) Attachment;
f) Costs;
g) Such further or other relief and/or reliefs be passed as this Hon'ble
Court may deem fit and proper."
Mr. Ratnanko Banerjee, Learned Senior Counsel along with Mr. Rishav
Banerjee, Learned Advocate representing the defendant no. 1 submits that as
per the averments made in the plaint no cause of action against the petitioner
and the plaint also does not disclose any cause of action.
Mr. Banerjee submits that this Court has no jurisdiction to entertain and
try the suit filed by the plaintiff. Mr. Banerjee further submits that the alleged
oral contract dt. 08.12.2020 which relates to transfer of shares of the
defendant no. 1 and the assets being the immovable property of the company
as factory premises situated at Jamuria Industrial Estate which is outside the
jurisdiction of this Court.
Mr. Banerjee submits that the plaintiff has pleaded his claim in
paragraph 10 of the plaint which are as follows :
"a) that the defendants were ready and willing to make over the
company and the assets to the plaintiffs against the plaintiffs taking
over the liabilities of the defendant no. 1.
b) Upon part payments being made towards such liabilities, the
defendants would put the plaintiff in possession of the factory unit
together with its control and management.
c) Transfer of shares of the defendant no. 1 in favour of the plaintiffs
thereby claiming ownership over the defendant no. 1 company and
its assets."
Mr. Banerjee submits that the plaintiff has prayed for relief directly
affects the rights of the parties in the immovable property being the factory unit
situated outside the jurisdiction of this Court and had wrongly obtained leave
under Clause 12 of the Letters Patent, 1865 to institute the suit before this
Hon'ble Court though this Hon'ble Court has no jurisdiction to entertain and
try the suit.
Mr. Banerjee further submits that the suit filed by the plaintiff is not
coming under the purview of commercial suit and thus the suit is not
maintainable before this Court.
Mr. Banerjee further submits that the plaintiff and the defendants in the
suit are companies and juristic persons with an entity and legal personality
and as such there cannot be any oral agreement between two juristic persons.
He further submits that the oral contract will not have any value in the eyes of
law.
Mr. Banerjee submits that the plaintiff has suppressed the fact by not
disclosing that the plaintiff no. 9 is under insolvency proceedings and the
Resolution Professional appointed by the Tribunal was not made the party to
the instant suit and as such the suit is suffers from misjoinder of the parties.
Mr. Banerjee relied upon the Judgment reported in (2017) 13 SCC 174
(Madanuri Sri Rama Chandra Murthy vs. Syed Jalal) and submits that the
power under Order 7 Rule 11 of CPC can be exercised by the Court at any stage
of the suit. The relevant facts which need to be looked into for deciding the
application are the averments of the plaint only. If on an entire and meaningful
reading of the plaint, it is found that the suit is manifestly vexatious and
meritless in the sense of not disclosing any right to sue, the Court should exercise
the power under Order 7 Rule 11 of the CPC.
Mr. Banerjee relied upon the Judgment reported in (2001) 7 SCC 698
(Adcon Electronics Private Limited vs. Daulat & Anr.) and submits that
"Suit for land" is a suit in which the relief claimed relates to title or delivery of
possession of land or immovable property, whether a suit is a suit for land or not
has to be determined on the averments in the plaint which reference to the reliefs
claimed therein, where the reliefs relate adjudication of title to land of immovable
property or delivery of possession of the land or immovable property, it will be
suit for land.
Mr. Banerjee relied upon the Judgment reported in (2015) 8 SCC 219
(Excel Dealcomm Private Limited vs. Asset Reconstruction Company
(India) Limited and Ors.) and submits that suit for Specific Performance of
agreement to sell being a suit for land, the Supreme Court has laid down a clear
principle in Adcon Electronics Private Limited vs. Daulat (supra) i.e. a suit for
specific performance simplicitor without a prayer for delivery of possession is not
a suit for land as Section 22 of the Specific Relief Act, 1963 categorically bars
any court to grant such relief of possession in a suit for specific performance
unless specifically sought for.
Mr. Banerjee has relied upon the Judgment reported in (2004) 3 SCC
172 (Pearlite Liners (P) Limited vs. Manorama Sirsi) and submits that "none
of the reliefs sought in the plaint can be granted to the plaintiff under the law.
The question arises as to whether such a suit should be allowed to continue and
go for trial. The answer in our view is clear that such a suit should be thrown out
at the threshold. Why a suit which is born to be dismissed for want of
jurisdiction of a Court to grant the relief prayed for be tried at all".
Mr. Banerjee relied upon the judgment reported in AIR 2020 Telengana
39 (Naren Estates Private Limited vs. Gomedha Estates Private Limited)
and submits that as per Section 10 of the Contract Act, if law envisages written
contract, it should be in writing. When two companies wanted to enter into an
agreement for sale and purchase of land, they must enter into a written
agreement but not by way of an oral agreement.
Per contra, Mr. Suman Dutt along with Mr. Rohit Banerjee, Learned
Advocates representing the plaintiffs submits that the claim of the plaintiff is
that the parties have agreed that the shares held in the defendant no. 1
Company by the other defendants were to be transferred to the plaintiffs and
this transfer is to be held as per the agreed consideration.
Mr. Dutt submits that as per the negotiation between the plaintiffs and
the defendants, the plaintiffs should pay the consideration and the defendants
should transfer these shares. Mr. Dutt submits that as per the said agreed
consideration only the accounts of the assets and liabilities of the defendant
no. 1 company are relevant at this juncture.
Mr. Dutt submits that the plaintiffs intend to maintain the suit with
respect of the claim for purchase of shares and only after the first part with
regard to transfer of share is not completed, the transfer of the immovable
property will not affect. Mr. Dutt further submits that he is definitely not for
any particular piece of land. The plaintiffs have only an incidental a piece of
land that belongs to the defendant no. 1.
Mr. Dutt submits that the suit is for specific performance of an oral
contract and the said contract requires transfer of shares held by the
defendant nos. 2 to 17 in favour of the plaintiffs.
Mr. Dutt submits that the defendant no. 1 is a company having separate
juristic persona and the company owns the assets. The shareholders of this
Company do not acquire any interest in the assets and are only entitled to
dividends unto profits as declared by the company. Mr. Dutt submits that the
shareholders do not become the owners of any assets/property of the
defendant no. 1 and thus no question of transfer of title of possession of any
assets in favour of the shareholders arises.
Mr. Dutt submits that transfer of shares of a company does not transfer
the title and no question of consequent delivery of possession at all arises. He
further submits that the suit is not for the land as is apparent from statement
made in the plaint.
Mr. Dutt submits that plaintiffs have prayed for a decree upon the
defendant to execute a contract and if this Court allows the prayer for Specific
Performance, only then a question would arise as to who would competent to
sign such contract on behalf of the party.
Mr. Dutt submits that the plaintiff has already taken steps to cure the
alleged defects of misjoinder of party by filing an application being GA 3 of
2021 and further submits that no suit shall be defeated by reason of
misjoinder or nonjoinder of parties.
Mr. Dutt submits that in para 10 of the plaint, the plaintiff has
categorically pleaded a share holding contract between the parties which the
plaintiff has sought for Specific Performance of C ontract. Mr. Dutt submits that
as per the averments made in the plaint, the dispute between the parties is
covered under Section 2 (1) (c) (XII) of the Commercial Courts Act, 2015.
Mr. Dutt relied upon the judgment reported in (2020) 5 SCC 410
(Ambalal Sarabhai Enterprise Limited vs. KS Infraspace LLP Limited &
Anr.) and submits that in the facts and circumstances of the present case and
the nature of the materials placed before this Court whether there exists a
concluded contract between the parties or not, is itself a matter for trial to be
decided on the basis of the evidence may be laid by the parties.
Mr. Dutt further relied upon the judgment reported in (2009) 2 SCC 582
(Aloka Bose vs. Paramatma Devi & Ors.) and submits that Section 10 of the
Act provides that all agreements are contracts if they are made by a free consent
by the parties competent to contract for a lawful consideration and will a lawful
object, and are not expressly declared to be void under the Provisions of the
Contract Act. He further submits that the proviso of Section 10 of the Act makes it
clear that the Section will not apply to the contracts which are required to be
made in writing or in the presence of witnesses or any law relating to registration
of documents.
Mr. Dutt relied upon the judgment reported in (2010) 8 SCC 1 (Vinod
Seth vs. Devinder Bajaj & Anr.) and submits that if this Court felt that the
prayer in the suit was vexatious or not maintainable, it could have considered
whether it could reject the suit under Order 7 Rule 11 of the Code of CPC holding
that the plaint did not disclose the cause of action for grant of relief sought or
that the prayer was barred by Sections 14 (1) (b) and (d) of the Specific Relief Act
or in the alternative, this Court could have framed issues and heard the issue
relating to maintainability as a preliminary issue and dismissed the suit if it was
of the view that it had no jurisdiction to grant specific performance as sought, in
view of the bar contained in Sections 14 (a) (b) and (d) of the Specific Relief Act.
Mr. Dutt further submits that if this Court is of the prima facie view that
the suit is vexatious, this Court expedited the trial and dismissed the suit by
avoiding appropriate costs under Section 35 of the Code and compensatory
costs under Section 35A of the Code may be imposed.
Mr. Dutt has relied upon the Judgment reported in (2011) SCC OnLine
Cal 2688 (Bimal Kumar Parasramka & Ors. Vs. Rajendra Prasad
Agarwalla & Ors.) and submits that the dispute in the suit is whether by virtue
of the agreement between the parties can be interfere with is a matter of trial
which is required to be adjudicated during the trial.
Mr. Dutt has further relied upon the judgment reported in (2006) SCC
OnLine Cal 355 (Hazra Medical Stores Private Limited vs. Biswanath
Sarkar & Ors.) and submits that while granting relief for perpetual injunction
and mandatory injunction, this Court do not required any adjudication or
declaration of title of the immovable property.
Mr. Dutt has relied upon the judgment reported in (2019) 12 SCC 205
(Isha Distribution House Private Limited vs. Aditya Birla Nuvo Limited &
Anr.) and submits that the territorial jurisdiction is essentially a mixed question
of law and fact and the defendant should be allowed to raise such plea in the
written statement to unable this Court to try it on its merits in accordance with
law in the light of the requirement of Order 14 of the Code of Civil Procedure and
other relevant provisions governing the issues on merit.
Mr. Dutt further relied upon the judgment reported in AIR 1955 SC 74
(Bacha F. Guzdar, Bombay vs. Commissioner of Income Tax, Bombay) and
submits that the company is a juristic person and is distinct from the
shareholders. It is the company which owns the property and not the
shareholders, the dividend is share of the profits declared by the company as
liable to be disputed among the shareholders.
Heard the Learned Counsel for the respective parties, perused the
materials on record and the judgments relied by the Learned Advocates
appearing for the respective parties.
In the instant case, the question is whether the leave granted by this
Court under Clause 12 of the Letters Patent, 1865 is required to be revoked or
not.
The plaintiff has filed the suit for Specific Performance of oral contract dt.
08.12.2019 and the terms and conditions of the oral agreement described by
the plaintiff in para 10 of the plaint which are as follows : -
"a. The defendants were ready and willing to make over the company
and also its assets to the plaintiffs in the event the plaintiffs took
over the entire liabilities of the defendant no. 1 towards Phoenix
ARC Limited. The liability towards Phoenix ARC Limited was Rs.80
crores together with additional interest on a reducing balance till
December, 2022 when the entire debt of Phoenix ARC Limited would
stand repaid back together with interest.
b. The defendant no. 1 had also a statutory liability towards Goods
and Services Tax (GST) of an amount of Rs. 5,09,67,162/- which
could not be paid and due to such non-payment the e-way bill site of
the defendant no. 1 was blocked.
c. The defendant nos. 2 and 3 being the shareholder-cum-director, as
well as the other directors of the defendant no. 1 were also under a
threat of being penally proceeded against under the statute for such
statutory liability.
d. The plaintiffs could take over the said liability of a sum of Rs.
85,09,67,162/- (Rs. 80,00,00,000/- + Rs. 5,09,67,162/-) together
with the interest to be paid to Phoenix ARC Limited till December,
2022, after which the plaintiffs could have full control of the
management of the defendant no. 1. Furthermore, in lieu of the same
the defendants agreed to make over all assets of the defendant no.
1 including its assets which included its plant, machinery contained
in the factory units of the defendant no. 1 at Jamuria.
e. The defendant nos. 2 and 3 are representing all the other
defendants/shareholding and accordingly duly authorized to
transfer the entire shareholding of the company to the plaintiffs
and/or its nominees.
f. The defendants would receive money from the plaintiffs from time to
time and use the same to discharge its liabilities towards Phoenix
ARC Limited from time to time and would remain as shareholder of
the company till such time the entire liabilities as mentioned
hereinabove were not discharged.
g. A new bank account would be opened with regard to the defendant
no. 1 where a representative of the plaintiffs would be made a
signatory for facilitation of making payments and to conduct the
business of the defendant no. 1. The management of the defendant
No. 1 was supposed to be taken by the plaintiffs.
h. The entire consideration mentioned hereinabove would be
consideration for the entire transaction between the plaintiffs and
the defendants and any further liabilities would be of the account of
the defendants.
i. Part payments towards such liabilities were required to be made
over by the plaintiffs and the possession of the unit together with its
control and management of the defendant no. 1 would be made over
to the plaintiffs and/or their representatives.
j. Upon completion of the payments to be made towards GST and
Phoenix ARC Limited, the defendants would immediately take steps
to make over its shareholding in the defendant no. 1 in favour of the
plaintiffs and/or their nominees and take all appropriate steps
including making over signed transfer Form to the plaintiffs of such
shares along with share certificate."
As per oral contract between the parties, the defendants were ready and
willing to makeover the company and its assets to the plaintiff for a total sum
of Rs. 80 crores along with the liability of GST of Rs. 5,09,67,162/- total
amounting to Rs. 85,09,67,162/-. As per the terms and conditions of the oral
agreement, it is also mentioned that the defendants have agreed to makeover
all assets of the defendant no. 1 including its assets which includes its plant,
machineries situated at Jamuria.
As per the terms and conditions of the oral agreement, the possession of
the unit together with its control and management of the defendant no. 1
would be made over to the plaintiff or their representatives. In para 12 of the
plaint, the plaintiff has specifically averred that on 12.12.2019, the plaintiff's
representatives have taken the factory of the defendant no. 1 at West
Bardhaman and formally put in possession of the factory together with all its
plants and machineries to run and management the same.
In prayer (b) of the plaint, the plaintiffs have prayed for a decree for
perpetual injunction by restraining the defendants or their servants from
dealing with or disposing of or creating any third party interest in the plant and
machinery as well as the assets including the factory premises which is
situated at Jamuria admittedly outside the jurisdiction of this Court. After
going through the averments of the entire plaint, this Court finds that the
plaintiff has claimed a Specific Performance of Contract relates to the title and
delivery of possession of the immovable property.
In this connection, it is necessary to refer Section 22 of the Specific Relief
Act, 1963 which reads as follows : -
"22. Power to grant relief for possession, partition, refund of
earnest money, etc.-- (1) Notwithstanding anything to the contrary
contained in the Code of Civil Procedure, 1908 (5 of 1908), any person
suing for the specific performance of a contract for the transfer of
immovable property may, in an appropriate case, ask for--
(a) possession, or partition and separate possession, of the
property, in addition to such performance; or
(b) any other relief to which he may be entitled, including the refund
of any earnest money or deposit paid or [made by] him, in case his
claim for specific performance is refused.
(2) No relief under clause (a) or clause (b) of sub-section (1) shall be
granted by the court unless it has been specifically claimed:
Provided that where the plaintiff has not claimed any such relief in
the plaint, the court shall, at any stage of the proceeding, allow him to
amend the plaint on such terms as may be just for including a claim for
such relief.
(3) The power of the court to grant relief under clause (b) of sub-
section (1) shall be without prejudice to its powers to award compensation
under section 21."
In the present case, the plaintiff has prayed for a decree for Specific
Performance against the defendant in terms of oral contract dt. 08.12.2019 and
as per the terms and conditions as specified in para 10 of the plaint in Clause
(i), the specific condition is mentioned with regard to the handing over the
possession of the unit which situated at Jamuria and as thus it is clear that
the suit is for land and outside the jurisdiction of this Court.
It is admitted that the plaintiff as well as the defendant no. 1 are the
company and the juristic persons with an entity and legal personality and as
such this Court is of the view, there cannot be any oral agreement between two
juristic persons.
As regard to the dispute raised by the defendants that the suit is not of
the commercial nature but after going through the averments and the
contentions of the plaintiff, the plaintiff has made out a case with regard to the
oral agreement with respect of the shares and the factories of the defendant
and as such the alleged agreement as referred by the plaintiff is of the
commercial nature and thus it cannot be said that the suit cannot be treated
as a commercial suit.
As regard misjoinder and nonjoinder of the parties, this Court finds that
the defendants have already taken steps by filing the interlocutory application
and only on the basis of the nonjoinder and misjoinder of party, suit cannot be
dismissed.
In view of the judgments referred by the defendants reported in the case
of Adcon Electronics Private Limited (supra), Excel Dealcomm Private
Limited (supra), Pearlite Liners private Limited (supra) and Madanuri Sri
Rama Chandra Murthy (supra) and as per the averments made by the
plaintiff and as per the terms and conditions of the oral agreement, which
relates to transfer of shares of the defendant no. 1 and the unit of the factory
premises of the defendant's, which situated outside of the jurisdiction of this
Court and thus this Court has no jurisdiction to entertain the suit.
Accordingly, the leave granted to the plaintiff under Clause 12 of the Letters
Patent, 1865 is revoked consequently plaint along with the documents are
returned to the plaintiff and an ad interim injunction passed by this Court dt.
28.01.2021 is vacated.
GA 6 of 2021 is allowed.
(KRISHNA RAO, J.)
p.d/
