Delhi High Court
Shriram Pistons & Rings Ltd. vs M/S Usha International Ltd. on 9 October, 2009
Author: Shiv Narayan Dhingra
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Reserve: 26.8.2009
Date of Order: 9th October, 2009
OMP No. 264/2009
% 09.10.2009
Shriram Pistons & Rings Ltd. ... Petitioner
Through: Mr. T.K.Ganju, Sr. Advocate with
Mr. A.K.Thakur, Mr. R.K.Mishra &
Mr. Rajiv Arora, Advoctes
Versus
M/s Usha International Ltd. ... Respondents
Through: Mr. Sanjeev Bhandari, Ms. Ekta Kapil,
Mr. Vijay Kundal, Ms. Shweta Bidhuri,
Mr. Sudhanshu Goil and Mr. Gaurav Chauhan,
Advocates
JUSTICE SHIV NARAYAN DHINGRA
1. Whether reporters of local papers may be allowed to see the
judgment? Yes.
2. To be referred to the reporter or not? Yes.
3. Whether judgment should be reported in Digest? Yes.
JUDGMENT
Arbitration proceedings were going on between M/s Usha
International Limited and Shriram Pistons & Rings Limited in respect of dispute
referred to the Arbitrator. During pendency of the arbitration proceedings M/s
Usha International Limited, New Delhi got amalgamated with Jay Engineering
Works Limited. The order of sanction under Section 394 of the Companies Act
passed by this Court on 26.5.2008 provided as under:
2(a) That all the liabilities and duties of the Transferor
Companies be transferred without further act or deed to the
Transferee Company and accordingly the same shall
pursuant to Section 394(2) of the Companies Act, 1956 be
transferred to and become the liabilities and duties of the
Transferee Company; and
3(a) That all the proceedings now pending by or against
the Transferor Companies be continued by or against the
Transferee Company; and
2. The petitioner by filing this application under Section 14 of the
Arbitration & Conciliation Act has contended that the arbitration proceedings
pending between the petitioner and the respondent i.e. M/s Usha International
Limited should stand terminated as there was no arbitration agreement between
the petitioner and the transferee company i.e. Jay Engineering Works Ltd. and
therefore the mandate of the Arbitrator stands exhausted. The argument
pressed is that amalgamation of M/s Usha International Ltd. with Jay Engineering
Works Ltd. had resulted into M/s Usha International Ltd. becoming a non entity
and petitioner was having no arbitration agreement with Jay Engineering Works
Ltd. therefore the mandate of the Arbitrator stands terminated.
3. I consider that the argument advanced by the petitioner is
misconceived. As held in Singer India Limited v. Chander Mohan Chadha & Ors.
2004 (8) SC 396 'amalgamation' is a blending of two or more existing
undertakings into one undertaking. The provisions for facilitating amalgamation
of the companies are made under Section 394 of the Companies Act. By
amalgamation two or more companies get fused into one by merger or by one
taking over another. Re-construction or amalgamation has no precise legal
meaning. The amalgamation takes place strictly in accordance with the order of
the court. No doubt, the transferor company loses its name and identity but all
the respective rights and liabilities of the transferor company are determined
under the scheme of amalgamation and do not stand wiped out.
4. In Singer India Limited (supra) an argument was advanced before
the Supreme Court that in view of amalgamation of the tenant with the sub-tenant
Section 14(2) of the Delhi Rent Control Act 1958 shall cease to operate and
since the sub-tenant had amalgamated into tenant the issue of sub-letting would
not stand. The Supreme Court observed as under:
11. These cases clearly hold that even if there is an order
of a court sanctioning the scheme of amalgamation under
Sections 391 and 394 of the Companies Act whereunder the
leases, rights of tenancy or occupancy of the transferor
company get vested in and become the property of the
transferee company, it would make no difference in so far as
the applicability of Section 14(1)(b) is concerned, as the Act
does not make any exception in favour of a lessee who may
have adopted such a course of action in order to secure
compliance of law.
Despite the amalgamation of Singer company of US with Singer company of
India, the Supreme Court upheld the order of eviction under Section 14(1)(b) and
dismissed the appeal.
5. I consider that the amalgamation does not bring the rights and
obligations of the transferor company to an end. All rights and obligations of the
transferor company stand merged into the transferee company and the
transferee company is equally bound by the contracts entered into by the
transferor company with the third parties. The transferor company no doubt
loses its name when it merges into the transferee company but it acquires a new
name i.e. the name of the transferee company and its rights and obligations to
the third party are carried by the transferee company in terms of the scheme. It
is not a case of wiping out of the identity but it is a case of merger of two
identities into one and when two legal entities merge into one, it only amounts to
change of name of the transferor company to that of a transferee company. This
means that M/s Usha International Limited after merger would be known as Jay
Engineering Works Limited and by a change of name, the contractual obligations
do not come to an end.
I, therefore consider that the plea raised by the petitioner that
because of merger of M/s Usha International Limited with Jay Engineering Works
Limited, the arbitration proceedings should come to an end and the mandate of
the Arbitrator has come to an end is baseless plea. The petition is therefore
dismissed with costs of Rs.50,000/-
October 09, 2009 SHIV NARAYAN DHINGRA, J.
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