Delhi High Court
International Tractors Ltd. vs Punjab Tractors Ltd. on 8 September, 2015
Author: Valmiki J. Mehta
$~24 & 25
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CS(OS) 301/2003
INTERNATIONAL TRACTORS LTD. ..... Plaintiff
Through Mr. Amit Sibal, Sr. Advocate with
Mr. Jagdish Sagar, Mr. Munish
Mehra and Ms. Geetanjali
Visvanathan, Advocates
versus
PUNJAB TRACTORS LTD. B+ ..... Defendant
Through Mr. T.K. Ganju, Sr. Advocate with
Mr. Atishi Dipankar, Advocate
+ CS(OS) 470/2004
PUNJAB TRACTORS LTD. ..... Plaintiff
Through Mr. T.K. Ganju, Sr. Advocate with
Mr. Atishi Dipankar, Advocate
versus
M/S INTERNATIONAL TRACTORS LTD. AND ORS. ..... Defendants
Through Mr. Amit Sibal, Sr. Advocate with
Mr. Jagdish Sagar, Mr. Munish
Mehra and Ms. Geetanjali
Visvanathan, Adv. for D-1 to D-3
CORAM:
HON'BLE MR. JUSTICE VALMIKI J. MEHTA
ORDER
% 08.09.2015
I.A. No.6720/2011 in CS(OS) 301/2003 (filed by plaintiff-
International Tractors Ltd. u/O 22 R 4 CPC) & I.A. No.6721/2011 in
CS(OS) 301/2003 (for condonation of delay)
1. Defendant in the suit was a company-Punjab Tractors Limited.
CS(OS) 301/2003 & CS(OS) 470/2004 1 of 25
Defendant-company ceased to exist as it was amalgamated with
Mahindra and Mahindra Limited in terms of the orders dated 9.1.2009
and 16.1.2009 passed by the High Courts of Bombay and Punjab &
Haryana.
2. By I.A. No.6720/2011, the successor entity Mahindra and
Mahindra Limited is therefore sought to be substituted with the
defendant-Punjab Tractors Ltd. There is no opposition to this application
because indeed Punjab Tractors Ltd has now merged into Mahindra and
Mahindra Limited. Application is therefore allowed and Mahindra and
Mahindra Limited is substituted in place of defendant-Punjab Tractors
Ltd including by condoning the delay of nine days in filing the
application for substitution.
Both the applications stand disposed of accordingly.
I.A. No. 6733/2011 in CS(OS) 470/2004 (filed by plaintiff-Punjab
Tractors Ltd. u/O 1 R 10, O 6 R 17, O 22 R 9, O 22 R 10 CPC and
151 CPC)
I.A. No.6206/2011 in CS(OS) 470/2004 (filed by defendant-M/s
International Tractors Ltd. u/S 151 CPC for direction that suit has
abated)
3. These two applications are being disposed of together because
issue in both the applications is the same as to whether M/s Punjab
Tractors Limited should be substituted by M/s Mahindra and
CS(OS) 301/2003 & CS(OS) 470/2004 2 of 25
Mahindra Limited. The application filed on behalf of M/s Punjab
Tractors Limited and now M/s Mahindra and Mahindra Limited states
that M/s Mahindra and Mahindra Limited has to be substituted in place of
M/s Punjab Tractors Limited because of the amalgamation orders dated
09.01.2009 and 16.01.2009 passed by the High Courts of Bombay and
Punjab & Haryana sanctioning the scheme of amalgamation.
4. M/s International Tractors Limited argues that M/s Mahindra and
Mahindra Limited cannot be substituted in place of M/s Punjab Tractors
Limited, and in fact, CS(OS) No.470/2004 has abated and consequently
I.A. No.6206/2011 be allowed by holding that CS(OS) No.470/2004 has
abated.
5. These suits were consolidated for the purposes of trial by the order
dated 15.02.2005 passed by a learned Single Judge of this Court.
Common issues for both the suits were thereafter framed by a learned
Single Judge of this Court on 09.01.2006 and which issues are 18 in
number. The disputes between the parties essentially pertain to which
party to the suits has the Copyrights in the drawings with respect to
manufacture of components and parts of tractors.
CS(OS) 301/2003 & CS(OS) 470/2004 3 of 25
6. I need not reinvent the wheel so as to say by allowing long
winding arguments as to whether Order 22 Rules 3 and 4 CPC applies or
Order 22 Rule 10 CPC applies, inasmuch as, this issue is no longer res
integra and is covered by a Division Bench judgment of this Court in the
case of Yapi Kredi Bank (Deutschland) AG Vs. Mr. Ashok K. Chauhan
and Ors., 198 (2013) DLT 697. The Division Bench by its judgment set
aside the judgment passed by a learned Single Judge of this Court by
which the learned Single Judge had held that where there is an
amalgamation of a company there is death of the company and
consequently Order 22 Rule 10 CPC does not apply but what apply are
the provisions of Order 22 Rules 3 and 4 CPC. The Division Bench by
its judgment dated 17.01.2013 held that the provisions of Order 22 Rules
3 and 4 CPC do not apply in the scenario and situation of amalgamation
of a company with another company pursuant to a scheme of
amalgamation sanctioned by the Courts, and that actually the provision of
Order 22 Rule 10 applies. The relevant conclusions of the Division
Bench are contained in paras 16 to 27 of the judgment and these paras
read as under:-
"16. The conclusion of the learned Single Judge that the
amalgamation of one company with another, results in the
CS(OS) 301/2003 & CS(OS) 470/2004 4 of 25
death of the former (i.e. the transferee company) cannot be
faulted. Yet, that factor alone cannot, in the opinion of this
Court, be dispositive of the question thrown up in these
proceedings. While extinguishment of the corporate
personality, or "corporate death" as it were, in the event of a
final winding up of a company or amalgamation of one
company with another, may be a reality, that alone cannot
afford an answer to what happens to a litigation to which the
amalgamating company is a party. It is here that the analogy
with either a company finally wound up, in dissolution
proceedings, or the death of an individual, ends. In the case
of winding up of a company, the final order directing
dissolution, after all steps to settle its affairs are taken, and
the Court is satisfied that such order as necessitated, is in
fact made. The process of "winding up the affairs" includes
settlement of claims against the company, in satisfaction of
the creditor's rights; it also includes the right of the Official
Liquidator to be impleaded in a pending suit, or other
litigation, to which the company is party as a defendant, or
which is instituted by it, and press the claim, or defend them.
Thus, the "death" unlike in the case of an individual is not
sudden; it is preceded by a series of steps - some of which
include issuance of orders adjudicating rights of the
company, and third parties- mandated by law, under the
overall supervision of a judicial forum, i.e. the Company
Court. In the case of amalgamation, however, such a
detailed inquiry is not mandated by law; the company has to
be satisfied that the terms of amalgamation or merger, as it
were, provide adequately for the protection of interests of
shareholders, creditors and other such parties. The terms in
the most part are a result of negotiation, and the merger is
itself in the nature of an arrangement whereby the two
corporate entities - for reasons best determined by each of
them, decide to amalgamate into one. In the case of
amalgamation, the question of rights and liabilities and the
right to succession in pending proceedings instituted or
pending against the merging company need not necessarily
CS(OS) 301/2003 & CS(OS) 470/2004 5 of 25
be a matter engaging attention of the company court. It
might well depend on the terms of the amalgamation
scheme, or operation of law, as the case may be. In India,
Sections 390 to 396A of the Companies Act govern the
subject matter.
17. The distinction noticed by this Court between a
corporate death, as a consequence of final winding up order,
under Section 481 of the Companies Act, on the one hand,
and the extinguishment of the corporate personality of the
transferee (or amalgamating/merging) company cannot be
lost sight of, because the element of voluntariness inherent
in the latter circumstance together with the willingness of
the transferee company to "take over" the property,
liabilities and functioning of the transferee company is
lacking in the case of a company which is dissolved after all
steps to wind it up are completed. In the latter eventuality,
the question of any loose threads in the form of liabilities or
assets for which no provision is made would not arise; the
Liquidator who takes charge of its assets and affairs would
have, in the course of the winding up process, provided for,
or sought orders in respect of each eventuality. The Court is
also mindful of Section 394 (2) which provides for the
transfer of liabilities or property of the transferee company
to the transferor company. In Saraswati Industrial Syndicate,
this was precisely noticed, when the Supreme Court held
that the "..true effect and character of the amalgamation
largely depends on the terms of the scheme of merger. But
there can be any doubt that when two companies
amalgamate and merge into one the transferor company
loses its entity as it ceases to have its business. However,
their respective rights or liabilities are determined under the
scheme of amalgamation." This position was again
underscored in Singer (supra).
18. The question identical to the one posed to this Court in
this case arose for consideration before the Bombay High
Court. A learned Single Judge of that Court in Re. Delta
CS(OS) 301/2003 & CS(OS) 470/2004 6 of 25
Distilleries Limited, Mumbai v. (1) Shaw Wallace and
Company Limited, Calcutta; (2) Shaw Wallace Distilleries
Limited; (3) United Spirits Limited, 2008 [1] Mah.LJ 899)
held that:
"The effect of a Scheme of Amalgamation, as held by
the Supreme Court in Singer India Ltd. vs. Chander
Mohan Chadha, (2004) 7 SCC 1 is that as a result of
amalgamation of two Companies into one, "the
Transferor Company loses its entity as it ceases to
have its business". The respective rights or liabilities
are determined under the Scheme of Amalgamation
but the corporate entity of the Transferor Company
ceases to exist with effect from the date the
amalgamation is made effective. The concept of
abatement is inapposite where a merger takes place in
the course of a Scheme of Amalgamation in
pursuance of a sanction received from the Company
Court. The transferor in such a case merges with the
transferee who becomes the successor in interest of
the assets, liabilities and business to the extent
contemplated in the Scheme. There is in other words a
devolution of interest. In law, what takes place in the
course of a Scheme of Amalgamation is the
devolution of the interest of the Transferor upon the
Transferee."
The above views of the learned Single judge were
confirmed by the Division Bench, of the Bombay High
Court by its decision dated 11-02-2010 in Appeal No.
26/2008.
19. Similar questions arose on occasions in the Courts in
England, which were called upon to decide the question
whether claims and suits abated when plaintiff companies
amalgamated with others. In Mercer Alloys Corporation v.
Rolls Royce Ltd. [1971] 1 W.L.R. 1520 the Court held
that:
CS(OS) 301/2003 & CS(OS) 470/2004 7 of 25
"....where a plaintiff company is merged in its parent
company so that it has itself ceased to exist as a
separate corporate entity, the court has power to
substitute the parent company as the plaintiff in the
action, even after judgment, both under this rule and
under its inherent jurisdiction."
The matter was examined in detail, with reference to
decided authorities, and the statutory provisions, in Toprak
Enerji Sanayi A.S. v. Sale Tilney Technology Plc. [1994 (3)
All E.R. 483], where a Turkish transferor company claimed
that it succeeded to the claims, in litigation (in the UK) of a
transferee company, after amalgamation. The relevant
discussion by the Court is as follows:
"First, these authorities do not consider a situation
where during the course of English proceedings there
is a transmission of interest from one party to another
by virtue of the doctrine of universal succession or a
foreign statute having similar effect. In Baytur S.A. v.
Finagro Holding S.A. [1992] Q.B. 610, 619, the
question for decision was whether an assignment of
the rights and obligations of the buyers which took
effect under a traite de scission in accordance with
French law had the effect, without more, of rendering
the assignee a party to an English arbitration as soon
as the assignment took effect. The Court of Appeal
held that it did not but expressly reserved the position
"where the foreign law creates a universal successor,
as in National Bank of Greece & Athens S.A. v.
Metliss [1958] A.C. 509." The comment in the
judgment of Lloyd L.J.[1992] Q.B. 610, 619 that
"there cannot be a valid arbitration when one of the
two parties has ceased to exist," must be read subject
to the same possible exception. The question I have to
consider remains, on the authorities, an open one.
CS(OS) 301/2003 & CS(OS) 470/2004 8 of 25
The second observation is that while the reported
cases show quite clearly that a corporation which has
ceased to exist is not entitled to maintain any legal
proceedings, they do not show that where the
dissolution occurs in the course of pending
proceedings this necessarily deprives the court of any
power to do what is just and convenient in the
particular case. There are a variety of principles which
apply in different situations and, so far as I am aware,
there is no reason why the court should not be entitled
to mould a procedure which takes account both of the
interests of the parties and the needs of justice
following a transmission of interest.
It was urged upon me that it is a general principle of
English law that if a plaintiff or defendant named in
English proceedings does not exist at the date the
proceedings were commenced, then the proceedings
are a nullity and must be set aside: see Lazard Bros. &
Co. v. Midland Bank Ltd. [1933] A.C. 289. That
principle is not in point since Enerji was a legal entity
at the date the writ was issued. In any event the
principle is not absolute since it is subject to the
exception that where a mistake has occurred in
naming a party, that mistake may be cured under Ord.
20, r. 5(3): see Dubai Bank Ltd. v. Galadari (No. 4),
The Times, 23 February 1990. Consequently, if the
transmission of interest has occurred before the writ is
issued and by a mistake the transferor and not the
transferee is named as plaintiff in the proceedings,
then even though the transferor has ceased to exist, the
misnomer can prima facie be cured so as to substitute
the transferee as plaintiff: see The Sardinia
Sulcis [1991] 1 Lloyd's Rep.
It was also urged that it is a general principle of
English procedural law that where a plaintiff or a
defendant to pending proceedings is a corporation and
the corporation is dissolved during the course of
CS(OS) 301/2003 & CS(OS) 470/2004 9 of 25
the proceedings, this event brings the proceedings to
an end for all time and they cannot subsequently be
revived. This, I think, is to express the position far too
broadly. As the reported cases seem to indicate, it is
necessary to draw a distinction between those
situations where the action has merely "abated" so that
it can be subsequently revived and those cases where
the action has died for all time.
In Foster Yates & Thom Ltd. v. Edgehill Equipment
Ltd., The Times, 29 November 1978, the plaintiff
commenced proceedings in February 1975 but on 24
December 1975 a resolution was passed for voluntary
winding up. At the end of December 1976 the final
accounts of the plaintiff were passed and the requisite
returns were filed for registration with the result that
under section 290(4) of the Companies Act 1948 the
plaintiff was dissolved after the expiry of three
months in March 1977. On 7 April 1978 an order was
made under section 352(1) of the Act (corresponding
to section 651 of the Companies Act 1985) declaring
the dissolution to be void. It was held that the effect of
that declaration was prospective only and did not
validate acts done since the dissolution in March
1977. Consequently, once the company had been
dissolved there was no possibility that proceedings
which took place thereafter could subsequently be
validated with the result that the action pending at the
date of dissolution "ceases, not temporarily and
provisionally, but absolutely and for all time:" per
Megaw L.J.--
Both in Morris v. Harris [1927] A.C. 252 and in the
Foster Yates & Thom case a distinction was drawn
between a restoration under section 352 of the Act of
1948 (section 223 of the Companies (Consolidation)
Act 1908) which was prospective only and other
provisions of the Companies Acts which had
retrospective effect and provided that "the company
CS(OS) 301/2003 & CS(OS) 470/2004 10 of 25
shall be deemed to have continued in existence as if
its name had not been struck off:" section 353(6) of
the Act of 1948; section 242 of the Act of 1908. In the
Foster Yates & Thom case the Court of Appeal
rejected the submission that where a restoration took
place under section 352 of the Act of 1948, so that the
restoration was prospective only, the action merely
"abated." But both Megaw and Cumming-Bruce L.JJ.
discussed the meaning of "abatement," and Cumming-
Bruce L.J. said:
'upon the failure of an action for want of a
plaintiff or of a plaintiff with an interest in the
proceedings the action would abate but could
revive if and when appropriate steps were taken
to enable the action to proceed.'
It was accepted that abatement did not put an end to
an action but merely suspended it.
In Tymans Ltd. v. Craven [1952] 2 Q.B. 100 the Court
of Appeal held that where a plaintiff company had
been struck off the register pursuant to
section 353(5) of the Act of 1948 and was therefore a
non-existent person at the time certain county court
proceedings were commenced, those proceedings
were subsequently validated when an order was made
under section 353(6) that "the company shall be
deemed to have continued in existence as if its name
had not been struck off." That decision was applied by
Evans J. in Eastern Capital Holdings Ltd. v. Fitter
(unreported), 19 December 1991, where a plaintiff
company was dissolved after proceedings had been
commenced and, before any order for restoration had
been made, an application was made by the defendant
for the action to be dismissed on the ground that the
plaintiff company had ceased to exist. It was held by
Evans J. that an action which might be revived under
section 653(2) or (3) of the Act of 1985 (corresponding
CS(OS) 301/2003 & CS(OS) 470/2004 11 of 25
to section 353 of the Act of 1948) should not sensibly
be dismissed but should be stayed.
I do not find anything in these authorities which
should lead me to the conclusion that because Enerji
ceased to exist on 30 November 1990 Seniteri cannot
be substituted as plaintiff under Ord. 15, r. 7. It is true
that on the evidence there remained no possibility
after the merger that Enerji could be revived as a legal
entity. But the provisions of Turkish law which
resulted in the death of Enerji as a legal person
included an element not present in the provisions of
the Companies Acts considered in Morris v.
Harris[1927] A.C. 252 and the Foster Yates & Thom
case, The Times, 29 November 1978, namely, that by
virtue of the same statutory provisions, all the assets
and liabilities of Enerji were transferred to the
absorbing company which thenceforth stood in the
shoes of Enerji....
20. The above decision, and conclusions recorded in it
were approved in a Division ruling of the Court of Appeal,
in Yorkshire Regional Health Authority v. Fairclough
Building Ltd. & Anr 1996 (1) All ER 519 where the Court
observed that:
"......When a litigant dies, or becomes bankrupt, the
litigation does not cease, unless the cause of action is
personal to him. It may be carried on by his personal
representatives, or his trustee in bankruptcy, in their
own names. There is, not surprisingly, provision in
the RSC for the change in the identity of the party to
be duly made: R.S.C., Ord. 15, r.7. A corporate
plaintiff does not die, but it may cease to exist. A
particular example is when the corporation, which is
a creature of statute, is terminated by statute and its
rights and liabilities are transferred to some other
person. When that occurs, the new person may
CS(OS) 301/2003 & CS(OS) 470/2004 12 of 25
become a party to pending proceedings in place of the
old.
Although the identity of the party changes, the nature
of the claim does not. It is, in legal terms, the same
cause of action as it was before. There is no question
of a new claim or cause of action being asserted, even
though in the particular circumstances the claim is
being made by a different person. Because it is the
same cause of action, there is no scope for a limitation
defence. The defendant cannot say that the time for
bringing proceedings has expired when the new
claimant replaces the old, because the essential point is
that no new claim is being put forward.
Until 1980, this was entirely clear. Ord. 15,
r. 7 regulated the change in the identity of the party.
Ord. 15, r. 6 and Ord. 20, r. 5 provided for the quite
different situation where a new or an existing party
seeks to introduce a new claim into the proceedings
after the relevant time-limit has expired.
The second defendants say that all this was changed
by section 35 of the Limitation Act 1980 and by
amendments to the Rules of the Supreme Court since
that Act was passed. They say that the effect of the
change in the identity of the claimant, if it takes place
after the limitation period has expired, is to extinguish
the claim, so that in the present case they, the
defendants, fortuitously go scot-free.
The short answer to this submission, in my judgment,
is that limitation defences have nothing to do with a
change in the identity of a party under Ord. 15, r. 7. It
is quite obvious that the statute and the rule changes
were not intended to have this extraordinary effect. It
is equally obvious that if the so-called literal
construction were to compel the conclusion for which
the second defendants contend, then it would be as the
CS(OS) 301/2003 & CS(OS) 470/2004 13 of 25
result of an unfortunate oversight by Parliament and
the draftsman of the rules.
Only if the court was obsessed by the strictly literal
interpretation and oblivious to the common sense of
the matter could the conclusion be entertained.
21. It would be relevant to notice, at this stage, the
observations of the Supreme Court, in Mithailal Dalsangar
Singh & Ors v. Annabai Devram Kini & Ors., (2003) 10
SCC 691, where the Court held that in as much as abatement
results in denial of hearing on the merits of the case, the
provisions for abatement are to be construed strictly;
likewise, a request for setting aside abatement and the
dismissal consequent upon abatement has to be considered
liberally. What cannot be lost sight of in the discussion is
that while upon the death of an individual plaintiff or
claimant, the court is empowered to substitute the legal heir
or representative, failing which an abatement of action
occurs - even that can be overcome if the heir or
representative (who might not be aware of his rights, or
might be in the dark about the litigation itself) applies for
setting aside the abatement; if the time provided for doing so
lapses, the residuary Article in the Limitation Act, 1963
applies, enabling such a course of action. The underlying
thought is that a cause of action is not extinguished; the
court has to trace, or at least make an effort to trace the
rightful successor to prosecute the claim, or defend the
proceeding. The argument based on Section 3(42) of the
General Clauses Act, 1897 is also of no assistance, because
even if a company is a person, and winding up results in its
death, as explained earlier, there is a radical difference
between an amalgamation and a final winding up order, after
all affairs of the company have been taken care of by the
Court. It is therefore held that the conclusions of the
learned single judge that the suit had abated by virtue of
Order 22 Rule 3, on the "death" of the original plaintiff,
cannot be sustained.
CS(OS) 301/2003 & CS(OS) 470/2004 14 of 25
22. As regard the second question, i.e. applicability of
Order 22 Rule 10, those provisions are enabling provisions
meant to further ends of justice. This was held in S.
Amarjit Singh Kalra (dead) by Lrs. and Ors. and Smt. Ram
Piari (dead) by L.Rs. and Ors. v. Smt. Pramod Gupta
(dead) by Lrs. and Ors. 2003(3) SCC 272:
"26. Laws of procedure are meant to regulate
effectively, assist and aid the object of doing
substantial and real justice and not to foreclose even
an adjudication on merits of substantial rights to
citizen under personal, property and other laws.
Procedure has always been viewed as the handmaid of
justice and not meant to hamper the cause of justice or
sanctify miscarriage of justice. A careful reading of
the provisions contained in Order 22 of CPC as well
as the subsequent amendments thereto would lend
credit and support to the view that they were devised
to ensure their continuation and culmination into an
effective adjudication and not to retard the further
progress of the proceedings and thereby non-suit the
others similarly placed as long as their distinct and
independent rights to property or any claim remain
intact and not lost forever due to the death of one or
the other in the proceedings. The provisions contained
in Order 22 rule 1 are not to be construed as a rigid
matter of principle but must ever be viewed as a
flexible tool of convenience in the administration of
justice."
..............................................
"31. But, in our view also, as to what those
circumstances are to be cannot be exhaustively
enumerated and no hard and rule for invariable
application can be devised. With the march and
progress of law, the new horizons explored and
modalities discerned and the fact that the procedural
laws must be liberally construed to really serve as
handmaid, make it workable and advance the ends of
CS(OS) 301/2003 & CS(OS) 470/2004 15 of 25
justice, technical objections which tend to be
stumbling blocks to defeat and deny substantial and
effective justice should be strictly viewed for being
discouraged, except where the mandate of law,
inevitably necessitates it. Consequently, having regard
to the nature of the proceedings under the Act and the
purpose of reference proceedings and the appeal
therefrom, the Courts should adopt a liberal approach
in the matter of condonation of the delay as well as
the considerations which should weigh in adjudging
nature of the decree, i.e., whether it is joint and
inseparable or joint and severable or separable."
23. In the opinion of this Court, the law declared by the
Supreme Court regarding the legal effect of a merger, or
scheme of amalgamation, upon pending proceedings, in
Bhagwan Das Chopra (supra) that "subject to such terms
it becomes liable to be impleaded or becomes entitled to
be impleaded in the place of or in addition to the
transferor company or corporation in any action, suit or
proceeding, filed against the transferor company or
corporation by a third party or filed by the transferor
company or corporation against a third party and that
whatever steps have already taken place in those
proceedings will continue to operate against and the
binding on the transferee company or corporation in the
same way in which they operate against a person on
whom any interest has devolved in any of the ways
mentioned in Rule-10 of Order-22 of Code of Civil
Procedure, 1908" affords the clearest guidance in such
circumstances. Neither Saraswati Investment Syndicate,
nor Singer nor any of the decisions is a direct authority on
the question of succession to legal proceedings before a
civil court. Even though Bhagwan Dass was rendered in
the context of industrial adjudication, the Court expressly
relied on Order 22 Rule 10, and spelt out its application in
these circumstances. For these reasons, the conclusion of
the learned Single Judge that as the suit had abated under
CS(OS) 301/2003 & CS(OS) 470/2004 16 of 25
Order 22 Rule 3, CPC, resulting in the consequent
inapplicability of Order 22 Rule 10, appears to be based
on a textual reading of that provision. Order 22 Rule 10,
CPC applies in cases like the present; the Court would
have then, to necessarily embark on an inquiry - albeit a
prima facie or rudimentary one, to decide if indeed the
applicant concerned is the successor entitled to the
carriage of the legal proceeding, i.e. the suit. In fact,
though in General Electric Canada Inc (supra) the learned
Single Judge seems to rely on the proposition of corporate
death, the decision itself indicates that the terms of
amalgamation were considered, and the claim to
succession (of the applicant) was turned down.
24. It is pertinent to note that procedural laws are meant to
regulate the object of doing substantial and real justice and
not to foreclose adjudication on merits. The court is
mindful of the fact that barring the application of the
principle action personalis moritur cum persona, (i.e. a
personal right of action dies with the death of the person)
other claims do not extinguish, and can be continued. A
creditor's claim to his dues therefore does not die. Even
where abatement occurs, in the sense that the time
prescribed for the setting aside of abatement expires -
under Article 120 of the Schedule to the Limitation Act
expires, the creditor/claimant, through the successor, or the
successor, as the case may be, can request the court to
condone the delay in moving an application, under
Section 5 of the Limitation Act.
25. The Merger deed specifies that the entity as such has
not ceased to exist but is continuing for limited purposes:
"Within liquidation, our activities are limited to the
collection of our receivables and settlement of our
liabilities."
26. This Court, however desists from pronouncing on the
issue, as that would be the subject matter of inquiry under
CS(OS) 301/2003 & CS(OS) 470/2004 17 of 25
Order 22 Rule 10, CPC, by the concerned court. As the
learned Single Judge held that since Bank Kreiss AG the
sole plaintiff, ceased to exist on and from 09.10.2001, it
would be considered to be 'dead' and the suit abated and he
further held that Order 22 Rule 10 CPC does not apply,
there was no inquiry about the claim made regarding
succession. Having regard to the conclusions reached by
this Court, in the earlier portions of this judgment, it is just
and appropriate that the claims of Yapi Kredi Bank, and
its claimed successor, C.H. Financial Investments, should
be inquired into under Order 22, Rule 10 CPC by the
learned single judge. The said applications are accordingly
restored to their original position on the file of the Court.
27. As a result of the above discussion, this Court is
of the opinion that the impugned judgment and order
of the learned single Judge are unsustainable; these are
set aside. The matter is remitted for inquiry, as to who
is the successor entitled to continue with the suit. The
learned single judge would undertake that inquiry in
accordance with the procedure applicable under Order
22 Rule 10, CPC. All rights and contentions of the parties,
on the facts and merits of the rival claims are reserved. The
appeal is allowed in the above terms without any order as
to costs." (emphasis is mine)
7. I have reproduced in extenso the complete arguments and
discussion in the judgment in the case of Yapi Kredi Bank (Deutschland)
AG (supra) as that discussion and ratio squarely covers the issue in
question. The final ratio of the Division Bench in Yapi Kredi Bank
(Deutschland) AG's case (supra) is contained in paras 23 and 27 and
which ratio categorically lays down that Order 22 Rule 10 CPC applies
CS(OS) 301/2003 & CS(OS) 470/2004 18 of 25
in the scenario where a party to a suit is a company and such a company
ceases to exist because of an order of amalgamation. Of course, whether
or not in the facts of the case in Yapi Kredi Bank (Deutschland) AG's
case (supra) actually devolution of interest had or had not taken back
because there was a dispute under the assignment/transfer deed, and
therefore on the facts whether devolution of interest did take place or not,
to apply provision of Order 22 Rule 10 CPC was left open to be decided
by the learned Single Judge, however the ratio of the judgment in Yapi
Kredi Bank (Deutschland) AG's case (supra) is very clear that once
there is amalgamation of one company with another company pursuant to
a scheme of merger sanctioned by a Court Order 22 Rule 10 CPC applies
and not Order 22 Rules 3 and 4 CPC.
8. Learned counsel for M/s International Tractors Limited very
strenuously and emphatically seeks to distinguish the judgment of the
Division Bench of Yapi Kredi Bank (Deutschland) AG's case (supra) by
relying upon the order of the Supreme Court passed in challenge to the
judgment of the Division Bench of this Court of Yapi Kredi Bank
(Deutschland) AG's case (supra). Reliance was also placed upon a
CS(OS) 301/2003 & CS(OS) 470/2004 19 of 25
Division Bench judgment of this Court in the case of General Electric
Canada v National Hydroelectric Power Corporation Limited & Anr.,
FAO(OS) 299/2012 decided on 06.12.2012.
9. Let me at this stage, with respect to first argument, reproduce the
entire order of the Supreme Court passed in Special Leave Petition
Nos.18757-18758/2013 titled as 'Ashok K.Chauhan & Ors. Vs. Yapi
Kredi Bank (Deutschland)' dated 09.05.2013 and this order reads as
under:-
"Heard Mr. Mukul Rohtagi, learned senior counsel for
the petitioners.
Special leave petitions are dismissed.
However, it is clarified that if by lapse of time, right,
title or interest in the successor company has extinguished,
such plea of limitation may be raised by the respondent in
the written statement and upon such plea being raised the
issue will be framed and tried in accordance with law.
In view of above, no order on the applications for
permission to file SLP and to serve the respondent through
Attorney is necessary and the said applications also stand
disposed of."
10. I do not find anything in the order of the Supreme Court dated
09.05.2013 which in any manner whittles down or sets aside the ratio of
the Division Bench judgment of this Court in the case of Yapi Kredi
Bank (Deutschland) AG (supra) that in case of amalgamation of one
company with another company pursuant to a scheme of merger
CS(OS) 301/2003 & CS(OS) 470/2004 20 of 25
sanctioned by a Court it is Order 22 Rule 10 CPC which would apply and
not Order 22 Rules 3 and 4 CPC. The Supreme Court in its order dated
09.05.2013 only left the issue of merits as regards whether the main suit
itself is time barred, and this issue of merits of limitation was left open to
be framed in the main suit. It is not the order of the Supreme Court that
there is a limitation period for filing an application under Order 22 Rule
10 CPC. As seen from the order of the Supreme Court dated 09.05.2013
the SLP against the judgment of a Division Bench of this Court in Yapi
Kredi Bank (Deutschland) AG's case (supra) was dismissed except
making observations with respect to the entitlement to get an issue of
limitation framed of merits in the main suit and not of limitation qua the
application under Order 22 Rule 10 CPC. As stated below the Supreme
Court has already held in the judgment in the case of Dhurandhar
Prasad Singh Vs. Jai Prakash University and Ors., (2001) 6 SCC 534
that there is no period of limitation for filing an application under Order
22 Rule 10 CPC.
11. Therefore, reliance placed by M/s International Tractors Limited
on the order of the Supreme Court dated 09.05.2013 for arguing that the
ratio of Division Bench in the case of Yapi Kredi Bank (Deutschland)
CS(OS) 301/2003 & CS(OS) 470/2004 21 of 25
AG (supra) is not applicable is a misconceived argument and rejected.
12. So far as the reliance placed by M/s International Tractors Limited
on the judgment of the Division Bench of this Court dated 06.12.2012 in
the case of General Electric Canada (supra) is concerned, the same is in
fact not even understood by this Court as to how can this judgment be
cited at all because this judgment not only does not uphold the ratio of a
Single Judge in the case of CS(OS) No.675/1999 titled as M/s Bank
Kreiss AG v Mr. Ashok K. Chauhan & Ors., decided on 23.10.2007
which was set aside by this Court in Yapi Kredi Bank (Deutschland)
AG's case (supra), but also the judgment of the Division Bench in
General Electric Canada's case (supra) holds that the company General
Electric Canada in the facts of that case did not 'die' and there was never
an amalgamation of that company with any other company and hence the
issue on facts did not arise with respect to applicability of the ratio of the
Single Judge in M/s Bank Kreiss AG's case (supra) and which ratio in
any case was specifically set aside by the Division Bench in its judgment
dated 17.01.2013 in Yapi Kredi Bank (Deutschland) AG's case (supra)
as discussed above.
CS(OS) 301/2003 & CS(OS) 470/2004 22 of 25
13. In view of the above, the following conclusions emerge:-
(i) The provision of Order 22 Rule 10 CPC applies in case of
amalgamation and merger of a company and not the provisions of Order
22 Rules 2, 3 and 4 CPC.
(ii) Once, it is the provision of Order 22 Rule 10 CPC which applies,
and there is devolution of interest, that there does not arise any issue of
any limitation for filing of an application under Order 22 Rule 10 CPC
and as held by the Supreme Court in the judgment in the case of
Dhurandhar Prasad Singh (supra).
(iii) The factual position with respect to passing of the orders of
amalgamation and merger by the Bombay High Court and Punjab and
Haryana High Court remain undisputed and with the consequential effect
as per the relevant provisions of the Companies Act and the scheme of
amalgamation and merger, the rights and liabilities etc of M/s Punjab
Tractors Limited now get devolved upon M/s Mahindra and Mahindra
Limited.
14. I may note that in this suit the present set of applications which are
being disposed of by this Court were filed in the year 2011 i.e
CS(OS) 301/2003 & CS(OS) 470/2004 23 of 25
valuable time of around five years has been lost on account of frivolous
objections raised on behalf of M/s International Tractors Limited in
opposing the application of M/s Punjab Tractors Limited and which
application was nothing but only for continuing the suit with the new
successor company, namely, M/s Mahindra and Mahindra Limited,
pursuant to amalgamation and merger orders. Besides valuable judicial
time having been wasted, there has been expenses incurred by M/s
Punjab Tractors Limited over these five years in contesting the subject
applications which have been disposed of by this order. Therefore, while
allowing I.A. Nos.6733/2011 in CS(OS) 470/2004 and I.A.
No.6720/2011 in CS(OS) 301/2003 and dismissing I.A. No.6206/2011 in
CS(OS) 470/2004, I impose actual costs upon M/s International Tractors
Limited with respect to the fees paid by M/s Punjab Tractors Limited /
M/s Mahindra and Mahindra Limited to its Advocates for contesting
these applications. The entire fees paid by M/s Mahindra and Mahindra
Limited/ M/s Punjab Tractors Limited for contesting the applications I.As
6733/2011 and 6206/2011 be filed in the form of an affidavit in this
Court along with the certificate of the lawyers of having received the said
fees within a period of four weeks from today and such fees paid to the
CS(OS) 301/2003 & CS(OS) 470/2004 24 of 25
Advocates will be the costs in favour of M/s Mahindra and Mahindra
Limited and against M/s International Tractors Limited for disposal of
these applications. Costs be paid within four weeks after the affidavit of
costs is filed by M/s Mahindra and Mahindra Limited.
CS(OS) 301/2003 & CS(OS) 470/2004
15. In these connected suits evidence of Punjab Tractors Limited / M/s
Mahindra and Mahindra Limited already stands concluded. It was the
evidence of M/s International Tractors Limited which was being recorded
and at which stage the subject applications came to be filed.
Accordingly, list both the suits before the Joint Registrar for fixing dates
of remaining evidence to be led on behalf of M/s International Tractors
Limited on 16th November, 2015.
I.A. No.24250/2014 in CS(OS) 470/2004 (filed by defendant nos.1 to 3
u/O 7 R 11 CPC)
16. List for hearing on 8th January, 2016.
VALMIKI J. MEHTA, J
SEPTEMBER 08, 2015
nn
CS(OS) 301/2003 & CS(OS) 470/2004 25 of 25
