Delhi High Court
Thomas Cook India Limited vs Hindustan Theremo Prints Limited (In ... on 19 March, 1999
Equivalent citations: 1999IIAD(DELHI)705, [2001]103COMPCAS138(DELHI), 79(1999)DLT404, 1999(49)DRJ709, (1999)122PLR26
ORDER Anil Dev Singh, J.
1. This is an application of the Official Liquidator moved on behalf of M/s.Hindustan Thermo Prints Ltd. (for short "the Company") seeking recall of the order dated March 20, 1990 passed by Mahesh Chandra, J. in C.A. No. 7567 of 1989 whereby leave was granted to the first respondent to file a suit under Rules 6 and 9 of the Companies (Court) Rules, 1959.
2. The applicant 'Hindustan Thermo Prints Ltd. is a company in liquidation in respect of which winding up order was passed on February 24, 1986 in Company Petition No. 62 of 1983 filed by Thomas Cook India Ltd., an unsecured creditor of the 'Company'.
3. The first respondent is a company incorporated under the laws of England and has its registered office at Bristol, England. This respondent supplied plant and machinery to the 'Company'.
4. The second respondent M/s. Polar Chem Coats is the auction purchaser of the assets of the 'Company'.
5. The third respondent is Grindlays Bank which gave a loan to the tune of Rs. 2,01,15,000/- to the 'Company'. Like other financial institutions, namely, Bank of America, National Trust and Saving Association, the Pradeshiya Industrial Investment Corporation of Uttar Pradesh (PIC UP) and Vijaya Bank, the Grindlays Bank is also a secured creditor and a mortgagor in respect of the land, building, plant and machinery of the 'Company.
6. The 'Company' on December 23, 1980 is alleged to have entered into a contract with the first respondent whereby, the first respondent was to supply to the 'Company various, machines and accessories on the terms and conditions specified therein. The 'Company' was required to pay to the first respondent sterling pound 640,143 for the supply of the machinery in the following manner:-
1. A confirmed letter of credit for sterling pound 581,940 to be opened by the 'Company' with a recognised London bank against presentation of documents.
2. A second confirmed irrevocable letter of credit for sterling pound 29,097 to be opened by the 'Company' with a recognised London bank prior to the shipment of the above said articles from U.K. so that payment coincides with the arrival of the technical team in India for installation of the machinery.
3. Balance of 29,097 pounds to be paid by the 'Company' to the first respondent not later than December 31, 1982, the exact time to be agreed upon by both the parties around the middle of 1982.
7. The first respondent claims that while it had received payment under the first letter of credit, the remaining payments in respect of two installments of pound sterling 29,097 each pertaining to invoice No. 35191 dated 22nd December, 1981 and invoice No. 352061 dated December 24, 1981, were not made by the 'Company'. As per the first respondent, the 'Company' on November 14, 1981, earlier to the issue of above said two invoices, had informed the former that due to deficiency of rupees six million in the project cost the latter had been forced to defer the payment of two installments to July 1982 and August 1982. Subsequently the first respondent by its letter dated September 28, 1982 reminded the company for settling the dues. The 'Company' by its letter dated October 6, 1982, however, informed the first respondent that the date of payment of the two instalments can be decided by the parties across the table. As per the stand of the first respondent, it made several oral as well as written requests to the 'Company' to pay the unpaid balance but without any tangible results.
8. On May 25, 1983, Thomas Cook Ltd., an unsecured creditor of the 'Company', filed a company petition No. 62/83 under Section 434(1) of the Companies Act, 1956 seeking winding up of the 'Company' with the allegation that the 'Company' was indebted to it in a sum of Rs.1,06,039 alongwith interest accrued thereon at the rate of 18% per annum and the 'Company' had failed to pay the outstanding amount despite repeated demands. Besides, it was claimed that the 'Company' was insolvent and was not in a position to pay its debts. On May 18, 1984 the company petition was admitted and citation was directed to be issued in the Statesman, Vir Arjun and Delhi Gazette. Thereafter, on February 14, 1986, this court directed the winding up of the 'Company' as the 'Company' failed to discharge its liability owed to Thomas Cook Ltd. and the Official Liquidator was appointed as the liquidator of the 'Company'. It appears that the third respondent Grindlays Bank Ltd. and other secured creditors as also the unsecured creditor H.S. Nag and Associates (P) Ltd. also entered the fray. Vide order dated August 13, 1987 the terms for the auction of the assets of the 'Company', including plant and machinery, were settled and auction was fixed to be held on September 10, 1987 at 3.00 P.M. in court. For this purpose an advertisement was directed to be issued in all leading newspapers in India. Accordingly, on September 10, 1987 auction was held in court pursuant to the order dated August 13, 1987. There were only two bidders M/s. Delhi Paper Marketing Ltd. and Pollar Chem Coats in the field. However, M/s. Delhi Paper Marketing Ltd. withdrew from the contest leaving behind the second respondent M/s. Pollar Chem Coats in the field. There being no other bidder, the bid of M/s. Pollar Chem Coats was accepted for Rs.1.40 crores. Subsequently on December 4, 1987 it agreed to enhance its bid to Rs. 1.43 crores. Pursuant to the acceptance of the bid of the second respondent, possession of the assets of the 'Company', including plant & machinery was handed over to it in compliance with the order dated December 18, 1987 of the Company Court.
9. On April 28, 1988, the first respondent filed two applications being C.A. No. 829/88 and C.A. No. 831/88. Through C.A. No. 829/88 the first respondent sought an interim relief under Order 39 Rules 1 and 2 CPC for stay of the distribution of the assets of the company to the extent of pound 58,194 equivalent to Rs. 13,55,022/-. By means of the other application, being C.A. No. 831/88 under sections 511 and 518, the first respondent claimed the following reliefs :-
(a) "Restore the possession of machinery to the applicant who is the legal owner of the same, or in the alternative to pay an amount of Rs.13,55,022/- (Pounds 58,194) out of sale proceeds of the property of the Respondent including the machinery of the Applicant.
(b) Pass any other order/orders as this Hon'ble Court may deem fit and proper in the circumstances of the case."
It appears from the reading of the applications that the first respondent was fully aware of all the orders passed by Company Court from time to time in the matter. In the written submissions the first respondent has also conceded the fact that on April 18, 1987 it was informed of the order of winding up passed by the Company Court. Both the applications were heard together. On May 20, 1988 the following order was passed Mahindar Narain, J.
"CA 829/88:
After hearing the counsel for some time, Ms. Gandhi states that she may be permitted to withdraw this application.
It is asserted in the application that the goods were supplied by the applicant to M/s. Hindustan Thermo Prints Ltd. vide invoices Nos. 35159 and 35206 dated 22nd December, 1981 and 24th December, 1981. It is also asserted in the application that the letters of credit were opened. Once the letter of credit is opened, on presentation of documents, the amount is received by the seller of goods, through a nominated banker. There is no assertion in the present application that any special type of letter of credit was opened which did not guarantee payment. The only assertion made is that the amount is unpaid.
In any case recovery of amount was barred by time on 22nd December, 1984.
In view of the prayer for withdrawal of the application, I permit this application to be withdrawn. Liberty to the applicant to move again provided the petitioner can satisfy the court that claim of the petitioner as a creditor of the company is prima facie within time, by virtue of time being extended in the manner provided by law.
CA 831/88:
In view of withdrawal of CA 829/88, this application is also dismissed as withdrawn. "
10. From the above, it is clear that the first respondent withdrew the aforesaid applications as the court was of the view that "the claim of the first respondent was barred by time on December 22, 1984". Liberty however was granted to the first respondent to move again as a creditor of the company provided it could satisfy the court that its claim was within time by virtue of time being extended in the manner provided by law. On July 20, 1989, the first respondent moved a further application being C.A. No. 7567/89 for seeking leave of the court under Section 446 of the Companies Act read with Rule 9 of the Companies (Court) Rules, 1959, to file a suit against the 'Company' and the auction purchaser for the following reliefs:-
(a) that the property in the machinery and equipment continues to vest in the respondent.
(b) the said machinery be returned to the respondent No.1.
(c) that, in the alternative the sale proceeds of the said machinery with interest at the rate 18% per annum be ordered to be paid to the respondent No.1.
11. On March 20, 1990, Mahesh Chandra, J. allowed the application and permitted the first respondent to file a suit as prayed for. Pursuant to the above said permission being granted, the first respondent on April 23, 1990 filed a suit being Suit No.1387/90 in this Court with the below mentioned prayer clauses :-
(i) That the property in the equipment of machineries listed in Schedule B8 C annexed to the plaint continues to vest in the plaintiff company.
(ii) That the mortgage effected by defendant No.1 in favour of defendant No.3 Grindlays Bank P.I.C. in respect of the suit schedule machineries and equipment belonging to plaintiff is invalid.
(iii) That the said mortgage effected by defendant No.1 in favour of defendant No.3 in respect of the suit schedule machineries and equipment belonging to plaintiff conferred no right of sale or disposal on defendant No.1 and defendant No.3.
(iv) That the said suit schedule machineries and equipment did not become the property of defendant No.2.
(v) That the said suit machinery schedule B and C are liable to be returned to the plaintiff.
(vi) That in the alternative a decree for a sum of Rs.16,68,115.00 with interest at the rate of 18% from the date of invoices till date be passed in favour of the plaintiff.
12. On September 24, 1993 the official liquidator filed the instant application (C.A No.1447/93) for recall of the order dated March 20, 1990 passed by Mahesh Chandra, J.; for a direction to the the first respondent to prove that the company is indebted to it in accordance with Rule 147 of the Companies (Court) Rules, 1959; and for stay of hearing of the Civil Suit No.1387/90. The application came up for hearing before J.K. Mehra, J. on May 8, 1995. Mehra, J. taking note of the earlier applications filed by the first respondent being CA-829/88 and CA-831/88, was of the view that fresh claim could be filed only in terms of leave granted by the Court in the said applications. In this regard, Mehra, J. observed as follows:-
"Faced with this difficulty, the applicants made a prayer for withdrawal of their applications, which was granted. The application was allowed to be withdrawn with liberty to the applicants to move again provided the petitioner can satisfy the Court that claim of the petitioner as a creditor of the Company is prima facie within time by virtue of time being extended in the manner provided by law. The injunction application was disposed of in these terms, while CA 831/88 wherein substantive prayer for adjudication had been made, was merely dismissed as withdrawn."
13. J.K. Mehra, J. also noted that the first respondent instead of moving a fresh claim in terms of the leave granted by this Court in C.A. No. 329 and 331 of 1989, moved C.A. No. 7567/89 seeking permission to file a suit without disclosing the factum of moving the earlier applications and their withdrawal, and the terms on which it was allowed to move afresh in the matter. It was also noted that no notice of hearing was given either to the Grindlays Bank or the Auction Purchaser. Since the first respondent had failed to draw the attention of Mahesh Chandra, J. to the facts anterior to the filing of C.A. No. 7567/89, the first respondent practiced deception by concealment of facts. As a consequence thereof the Court fell into an error in passing the order dated March 20, 1990. In view of this position, J.K. Mehra, J. was of the view that the order granting leave to file the suit, is liable to be recalled. However, in the interest of justice, the matter was directed to be renotified for hearing on the question as to whether or not the claim of the first respondent company is within limitation. This is how the matter falls for further determination.
14. I have heard learned counsel for the parties on May 5, 1998 & on February 26, 1999. Learned counsel for the applicant submitted that the order dated March 20, 1990 passed by Mahesh Chandra, J. was passed in ignorance of the fact that the first respondent had filed C.A. No. 831/88 in which he had claimed the restoration of possession of the machinery and in the alternative for payment of an amount of Rs.13,55,022/- out of the sale proceeds of the machinery and the order passed thereon. It was further contended that since the prayer of the first respondent was not acceded to by Mahender Narain, J. as reflected by order dated May 20, 1988, permission to file a civil suit ought not have been granted by Mahesh Chandra, J. by a subsequent order dated March 20, 1990. Besides, it was urged that the order dated March 20, 1990 passed by Mahesh Chandra, J. ought to be recalled as the first respondent had suppressed the fact of having filed C.A. No. 831/88 and the order passed thereon. Learned counsel also submitted that the first respondent despite having full knowledge of the orders dated February 4, 1987, August 13, 1987, September 10, 1987, December 4, 1987 and December 18, 1987 whereby the Court directed the sale of the assets of the company, including the plant and machinery, accepted the bid of the second respondent, directed delivery of possession of the assets, including plant & machinery and to the second respondent on deposit of the bid amount failed to challenge them in appeal. Having allowed the Official Liquidator to deliver the possession of the machinery to the second respondent, the first respondent should not have been allowed to file a suit subsequently for a declaration that the property and machinery and equipment continues to vest in the first respondent and for the return of said machinery to it.
15. Learned counsel for the third respondent-Grindlays Bank adopted and reiterated the submissions of the applicant-Official Liquidator.
16. On the other hand, the first respondent submitted that the first respondent sold the machines to the company by means of an agreement dated December 23, 1980 and the said sale was subject to clause 6 of the standard conditions of contract according to which the equipment was to pass on delivery or when the purchase price was paid in full, whichever was latter. It was further contended on the basis of clause 6 that since the part of the sale price was still outstanding from the company, the title to the equipment remained with the first respondent, and as the title did not pass to the company the claim of the first respondent to recover possession of plant and machinery could be filed within three years of the taking over of the plant and machinery by the Official Liquidator or within three years of the taking over of the plant and machinery by the second respondent. According to the first respondent, the present case would be covered by Articles 68 and 69 of the Limitation Act. In support of his submission learned counsel relied upon the following decisions :-
1. Hemendra Lal Roy Vs. Indo Swiss Trading Co., .
2. Akkipeddi Gopalasastry Vs. Vijayawada Eng., .
3. Brijmohan Singh Vs. Bhagwatsingh, .
4. Kalicharan Vs. Ganeshi Lal, AIR 1928 Oudh 47(1).
17. I have considered the submissions of learned counsel for the parties. In order to appreciate the submissions of the learned counsel for the parties it will be necessary to notice some of the orders passed by my predecessors from time to time :
Feb. 4,1987 : Sale of the assets of the company were
directed;
Aug.13,1987 : Terms of auction of the assets of M/s.
Hindustan Thermo Prints Ltd. were
settled and the Official Liquidator
as also the Grindlays Bank were
directed to advertise the sale;
Sept.10,1987 : Auction was held in court and offer of
the second respondent which was initially
for a sum of Rs.1.30 crores and subsequently
raised to Rs.1.40 crores was accepted;
Dec. 4,1987 : The second respondent was persuaded to
agree to the payment of Rs.1.43 crores
instead of Rs.1.40 crores, and the order
dated September 10, 1987 stood modified
accordingly;
Dec.18,1987 : The bid amount was deposited and possession
was directed to be delivered to the second
respondent.
Consequent to the above orders especially order dated December 18, 1987, possession of the assets, including the plant and machinery, were handed over to the second respondent.
18. It is significant to note that the first respondent did not move to participate in the proceedings before the Court until after the orders till May 20, 1988, when it filed C.A. Nos. 829/89 and 831/89 nor appealed against either the order directing auction of the assets or the various other above noted consequential orders even though the first respondent was aware of the winding up proceedings as due information was given to it by the Official Liquidator on April 18,1987. The first respondent allowed the second respondent to commit its money for the purchase of the machinery, supplied by it. Once the rights of the second respondent were allowed to be crystalised the same could not be allowed to be prejudiced by permitting the first respondent to file a suit for repossession of the machinery and for seeking invalidation of mortgage of the plant and machinery which was meant to secure the loan facility extended to the company by the financial institutions. Thus, the filing of the application C.A. No. 7567/89 by the first respondent and its acceptance also prejudices the rights of the Grindlays Bank and other secured creditor.
19. It is the case of the first respondent that the company was required to pay to the former Pound Sterling 640,134 on account of the supply of the machinery to the latter. In order to ensure payment of pound sterling 611,037 out of pound sterling 640,134, confirmed irrevocable letters of credit for an amount of Pound Sterling 581,940 and Pound Sterling 29097 were opened. Since this was the position, the first respondent ought to have explained as to how on presentation of documents the amount under the second letter of credit for Pound Sterling 29097 was not received by it through the nominated banker. No attempt has been made by the second respondent to render any explanation much less a satisfactory one despite the fact that in the order dated May 20, 1988 passed by Mahendar Narain, J. this aspect of the matter was highlighted and it was observed that the recovery of the amount was barred by time on December 22, 1984.
20. The first respondent without dispute has received Pound Sterling 581,940 in respect of the machinery supplied to the company. That means even according to the first respondent it had received bulk of the money for the machinery supplied by it. At no stage of the proceedings the first respondent offered to return the said amount or part of it after deducting suitable amount on account of compensation for use of the plant and machinery by the company, if it wanted to claim the possession of the machinery. It cannot pocket the bulk of the money and still claim title over the plant and machinery. Even if it is assumed for the sake of argument that some payment is still due to the first respondent from the 'company'. At the most the first respondent can be treated as a creditor of the company. It seems that it was for this reason that a limited leave was granted vide order dated May 20, 1988 to the first respondent to move again as a creditor of the company provided it could satisfy that its claim was prima facie within time. Leave was not granted to file a suit for establishing title over the machinery and to challenge the mortgage of the plant and machinery created by the company in favour of the third respondent. Application seeking leave to file such a suit was incompetent. In view of the liberty which was reserved to the first respondent it could file a fresh claim only in terms of the order dated May 20, 1988.
21. It also needs to be noted that the first respondent did not mention in its application (C.A. No. 7567/89) that it had filed two earlier applications (C.A. Nos. 328/89 and 331/89). It also did not disclose the orders passed on those applications. The first respondent by suppressing the above said applications and the order passed thereon has gained unwarranted advantage which could not have been made available to it in view of the limited nature of the liberty granted to it. In the circumstances it was not open to the first respondent who had made a prayer for withdrawal of C.A. Nos. 329/89 and 331/89 with permission to file a fresh claim as a creditor to exceed the liberty granted to it. A benefit gained by a litigant from the court by suppressing and concealing material must be withdrawn by recalling the very order by which he secured the same and the principle of finality of litigation in such circumstances can not be pressed into service. The apex court in such cases has gone to the extent of holding that such a litigant has no right to approach the court and his case can be thrown out at any stage of the litigation. At this stage, it would be apposite to quote the observations of the Supreme Court in S.P. Chengalvaraya Naidu (dead) by L.Rs. Vs. Jagannath (dead) by L.Rs. and others :-
"The High Court, in our view, fell into patent error. The short question before the High Court was whether in the facts and circumstances of this case, Jagannath obtained the preliminary decree by playing fraud on the court. The High Court, however, went haywire and made observations which are wholly perverse. We do not agree with the High Court that "there is no legal duty cast upon the plaintiff to come to court with a true case and prove it by true evidence". The principle of "finality of litigation" cannot be pressed to the extent of such an absurdity that it becomes an engine of fraud in the hands of dishonest litigants. The courts of law are meant for imparting justice between the parties. One who comes to the court, must come with clean hands.
We are constrained to say that more often than not, process of the court is being abused. Property-grabbers, tax-evaders, bank-loan dodgers and other unscrupulous persons from all walks of life find the court process a convenient lever to retain the illegal gains indefinitely.
We have no hesitation to say that a person whose case is based on falsehood, has no right to approach the court. He can be summarily thrown out at any stage of the litigation."
22. The plea of the first respondent that the suit is within time as the title in the plant and machinery has not vested in the company since a sum of Rs.13,55,044/- with interest at the rate of 18% per annum is still outstanding from it to the first respondent is not well founded. Clause 6 of the general conditions of the contract dated December 23, 1980 which has been pressed into service for justifying the plea loses its significance in view of the invoices dated December 22, 1981 and December 24, 1981 under which plant and machinery was sold to the company and it was required to make payment within thirty days from the date of the receipt of the machinery. Therefore, clause 6 of the contract stood superseded by the new condition which was incorporated in the invoices. Since the payment was allegedly not made within thirty days by the company as contemplated by the in-voices, the first respondent could have filed a civil suit to recover the same within three years of the expiry of the same, i.e., by December 22/24, 1984 as the suit would be governed by Article 15 of the Limitation Act, 1963. In view of the stipulation contained in the invoices the first respondent could not have filed a civil suit for repossession of the machinery. Therefore, the decisions cited by the learned counsel have no application.
23. In the circumstances, therefore, the order dated May 20, 1988 permitting the first respondent to file the suit needs to be recalled. I order accordingly. However, the first respondent is permitted to file its claim, if not already filed, in terms of the Rules as a unsecured creditor before the Official Liquidator. It will be open to the first respondent to prove that the company is indebted to it and in case the claim is proved the first respondent shall be paid out of the amount set apart by order dated July 11, 1989 for payment to the unsecured creditors and for other purposes provided the amount is still available and subject to equitable distribution amongst the unsecured creditors and subject to the orders of the Company Judge.