Calcutta High Court
Greatwall Vanijya Ltd vs Bengal Waterproof Ltd. & Ors on 7 March, 2017
Author: Harish Tandon
Bench: Harish Tandon
IN THE HIGH COURT AT CALCUTTA
ORDINARY ORIGINAL CIVIL JURISDICTION
G.A. 1054 of 2011
G.A. 1840 of 2011
IN
C.S. 76 of 2011
Greatwall Vanijya Ltd.
-Vs-
Bengal Waterproof Ltd. & Ors.
G.A. 2017 of 2011
G.A. 2697 of 2011
G.A. 3078 of 2011
G.A. 3230 of 2011
G.A. 71 of 2012
G.A. 558 of 2012
IN
C.S. 156 of 2011
Bengal Waterproof Ltd. & Ors.
-Vs-
Bihar Rubber Co. Ltd. & Ors.
Before: Hon'ble Justice Harish Tandon
Date: 07.03.2017
Appearance:
Mr. Jayanta Kumar Mitra, Mr. S.P. Sarkar, Mr. Pramit K. Ray,Mr. S.K. Kanodia, Mr. Arik
Banerjee
.... For Greatwall Vanijya Ltd.
Mr. Ranjan Deb, Mr. Ratnanko Banerjee, Mrs. Lapita Banerjee, Mr. R.N. Vyas
... For Bihar Rubber Co. Ltd. & Mr. Sudip Kusarye.
Mr. Rajib Mallick
... For Respondent Nos. 4 to 9 in C.S. 156/2011 and G.A. 2017/2011.
Mr. Jishnu Saha, Mr. Rudraman Bhattacharya, Mr. Devajyoti Bhattachrya, Mr. Surajit Sen, Mr. Sourish Banerjee, Mrs. N. Dutta Chowdhury, Mr. Souvik Majumdar ... For Defendant Nos. 1, 3 & 5 In C.S. No. 76 of 2011& for the Plaintiff in C.S. No. 156 of 2011. Mr. Krishna Raj Thakkar, Mr. Subhankar Chakraborty .... For Defendant No. 1 in C.S. No. 156 of 2011.
Mr. Koushik Bhattacharya, Ms. Hasnuhana Chaskraborty ... For Respondent Nos. 4 in C.S. 156/2011 & for Respondent No. 10 in C.S. 76/2011. The Court:
All the interlocutory applications filed by the respective parties in C.S. 76 of 2011 and C.S. 156 of 2011 were listed together and decided to be taken up analogously. C.S. 76 of 2011 is filed by Greatwall Vanijya Ltd. (GVL) for a decree for perpetual injunction restraining the defendants thereunder from revoking, canceling or terminating the registered user agreement dated February 25th, 2008 as modified by the agreement dated February 26th, 2010 and a letter of undertaking dated February 26th, 2010 issued by Bengal Waterproof Ltd. (BWC), the defendant no. 1 therein and mandatory injunction directing all the defendants therein to execute supplementary agreement to registered user agreement incorporating three clauses as agreed in a letter of undertaking dated February 26th, 2010 and other consequential reliefs in the form of specific performance of an agreement dated February 25th, 2010.
C.S. 156 of 2011 is filed by BWC along with two persons claiming to be controlling, administering and managing the affairs of the BWL for declaration that the board meetings held on 24th May, 2011 and 4th June, 2011 by Bihar Rubber Company Ltd. (BRC), the defendant no. 1 therein are illegal, null and void. A further declaration was sought that all forms and returns pertaining to BRC and notice dated 17th June, 2011 be declared void, delivered up and cancelled. The consequential relief in the form of an injunction is further sought restraining the defendants therein from giving effect or further effect to any resolution that may be taken or passed at the board meeting of BRC held on 24th May, 2011 and 4th June, 2011 and also restraining the defendants from proceeding on the basis of the letter dated 17th June, 2011 by which the extraordinary meeting was called on 12th July, 2011. Another declaration is sought relating to the panel clauses appearing in Memorandum of Understanding dated February 26th, 2010 to be illegal, null and void.
The undisputed facts appearing from the averments made in both the plaints are adumbrated herein below--
The BRC is engaged in manufacturing waterproof products like gum boots, raincoats, rubber clothes and was established in 1920. The aforesaid products were sold under the trade mark "Duckback" which is being used since the incorporation of BWL. The said trade mark was duly registered with the Registrar of Trade Marks under Registration Nos. 4738, 6714, 104595, 104596, 880684 and 516674. The BRC was all along the subsidiary of the BWL until the dispute cropped up which is the origin of both the suits instituted by the respective parties. It is undisputed that the BWL permitted and allowed the BRC to make use of the trade mark (Duckback) initially by a registered user agreement dated 28th August, 1972 which was either extended or renewed and last of such agreement was entered into on 25th February, 2008.
A Memorandum of Understanding was entered into between the BWL and GVL on 26th February, 2010 for providing financial accommodation through the instrumentality of BRC which was secured by issuing shares of BRC to be allotted in favour of GVL. All the contesting parties are ad idem on the execution and existence of the said Memorandum of Understanding and the terms and conditions embodied therein. The salient features of the said Memorandum of Understanding discernable therefrom are that the Cachet Waterproof Pvt. Ltd. (CWL) being the holding company of BWL which is also the holding company of BRC approached the GVL to invest a sum of Rs. 2,49,29,120/- as both BWL and BRC are in urgent need of financial support to discharge their liabilities. The said amount was agreed to be invested in equity share capital of BRC on terms, which have been discussed, negotiated and principally agreed by the parties. The authorized capital of BRC was Rs. 50,00000/- divided into 3000 cumulative preference share of Rs. 100/- and 47,000/- equity shares of the same value and the paid up share capital of the BRC was Rs. 28,56000/- divided into the 28,560 equity shares of Rs. 100/- each.
Pursuant to the discussion the shareholders of BRC in extraordinary general meeting held on 25th February, 2010 resolved to increase the authorized share capital to Rs. 2,00,00000/- by issuing 1,97,000 equity shares of Rs. 100/- each in addition to the existing shares. It was agreed that BRC shall issue the said increased equity shares at a premium of Rs. 48/- per share to GVL within five working days from the date of the execution of the said M.O.U and all follow up actions shall be taken in respect thereof. To secure the aforesaid amount the GVL was permitted to nominate one person to act as a Chief Finance Officer in BRC and all the bank accounts of the said company shall be operated jointly in which the said Chief Finance Officer shall be one of the secondary. All the meetings of the board of directors of the BRC shall be held in presence of the said Chief Finance Officer and remain binding on the parties. The capital so generated in BRC by issuing the preferential equity shares in favour of GVL shall stand transferred to BWL as refundable security deposit bearing interest at the rate of 12% per annum in consideration of grant of irrevocable user of the trade mark "Duckback" for a period of 10 years from the date of the execution of M.O.U. The M.O.U further contains a specific term that the BWL is entitled to buy back the said equity preferential shares issued to GVL within a maximum period of six months from the date of M.O.U at a premium of Rs. 58/- per share. In default, all the existing directors of BRC shall resign and the directors to be nominated by GVL shall be appointed as directors of BRC. It was further agreed that if the default occurs, the GVL will run and operate all the existing and future business of BRC for such period as may be determined by GVL upon payment of royalty at a fixed rate of 1.5% of the turn over for "Duckback" brand to BWL up to 25th February, 2020 or till such date which BRC continues to use the said trade mark and the BWL shall continue to pay the interest at the rate of 12% per annum to BRC for the security deposit taken by the BWL for the use of the trade mark. It is undeniable that the BWL could not buy back the aforesaid preferential share within six months from the date of M.O.U. The genesis of both the suits originated upon the expiration of six months from the date of M.O.U and the first suit came to be filed by GVL for the reliefs as indicated above.
On the contrary, the BWL instituted subsequent suits alleging that an extension of period was sought and granted by the parties and the amount equivalent to the equity shares issued to the GVL was tendered but was refused by the GVL. In addition to the same, it is further contended that it was all along intended by the parties that the entire transaction would be treated as a loan in substance though various agreements in the form of M.O.U, letters and correspondences may indicate otherwise. In substance, what is sought to be contended by BWL is all such transactions, agreements, correspondences and memorandum of agreement were intended to secure the money lent and advance in order to facilitate the BWL to wriggle out from the financial stringency and therefore the GVL cannot eat up or take over the BRC, which is a subsidiary company of BWL.
Both the parties are at variance on the interpretation of the several clauses and terms and conditions embodied in memorandum of agreement and supplementary agreement including the user agreement, which this Court feels, are the matter to be decided after full-fledged trial. Several, interlocutory applications are taken out by the respective plaintiffs of both the suits for interim reliefs and the orders are being passed from time to time.
The first application which was filed by the GVL in its suit being G.A. 1054 of 2011 for an order of injunction restraining BWL, CWL, BRC and other three defendants being the directors of the BWL from revoking, canceling and terminating the registered deed of agreement dated February 25th, 2008 as modified by the agreement dated February 26th, 2010 and an undertaking of even date and / or changing the capital structure of the BRC and other reliefs which are sought in the plaint (C.S. No. 76 of 2011). The said application was moved on 13th April, 2011 and an ad interim order of injunction was passed restraining the defendants therein from issuing any further shares in BRC and / or from changing the capital structure thereof in any manner whatsoever. However, the Court found that the differences may be resolved by the parties and the observation to that effect would be evident therefrom.
On 11th May, 2011, the Court further restrained the BRC from surrendering the registered user agreement in relation to the trade mark "Duckback" and also restrained the BWL from terminating the said agreement, subject, however that the BRC acts in conformity with the said agreement dated 26th February, 2010.
Amidst the pendency of the said application, the BWL filed Civil Suit No. 156 of 2011 for the reliefs as stated herein before and filed an application being G.A. 2017 of 2011 for an order of injunction restraining the defendants of the said suit to give effect to any resolution that may be passed in a board meeting of BRC allegedly held on 24th May, 2011 and 4th June, 2011 and also to transfer the said preferential shares held by GVL in BRC and to exercise any voting right on the basis of the aforesaid shares. It is alleged in the said application that on 25th September, 2010 and again on 5th October, 2010 the representative of BWL went to hand over the two cheques covering the amount under the said M.O.U in order to redeem the said shares but was refused by the GVL. A notice was issued on 17th June, 2011 where from it appears that six directors were appointed as the additional directors of the BRC and on enquiry it was revealed that Form-32 was filed on 6th June, 2011 on behalf of the BRC showing the appointment of the three directors on 24th May, 2011 and another Form-32 which was filed subsequent thereto shows the appointment of an additional director on 4th June, 2011. It was, however, further revealed that Form-18 was filed for change of the registered officer of the BRC and the annual return of the company would also show that the same was signed by one Sudip Kusarye as authorized person on the basis of the resolution taken in the board meeting held on 4th June, 2011.
The said application was moved on 11th July, 2011 and in course of the hearing it was submitted on behalf of the GVL that they will not transfer the shares held by it in BRC pending the disposal of the said application. Purely on the basis of such submission the Court did not pass ad interim order of injunction and directed the parties to exchange affidavits with further direction that all the applications filed in the aforesaid two suits shall appear together.
It would not be out of place to mention that after issuance of the interim order in G.A. 1054 of 2011 on 13th April, 2011 and 11th May, 2011, an application was taken out by BWL being G.A. 1840 of 2011 in C.S. 76 of 2011 alleging the taking over of the management and control of the BRC by GVL, which would be evident from the letters issued on 8th June, 2011 through the General Manager. It is alleged therein that the GVL has acted with ulterior motive to take over the management and control the BRC and also misappropriating the shares which was kept as collateral security for the money lent and advance. An order of injunction was sought restraining the GVL from making any allegations as contained in the said letter or similar allegations and also from interfering with the business activities of the BWL, CWL and BRC. The Court did not pass any ad interim order when the said application was moved but directed the exchange of affidavits by the parties.
While the aforesaid applications were pending an interim order and directions for affidavits were passed, another application being G.A. 2697 of 2011 is taken out by BWL in C.S. 156 of 2011 alleging that despite the interim order passed in the aforesaid applications, the GVL is contemplating to the transfer such shares to other persons by splitting up the share certificates standing in its name. It is further alleged therein that in the affidavit-in-opposition filed by one Sudip Kusarye describing himself as one of the directors of BRC to an application being G.A. 1840 of 2011 disclosed the agenda of the meeting of board of directors held on 4th June, 2011 in this regard.
A further notice was issued on August 13th, 2011 by GVL requisitioning an extraordinary general meeting of BRC seeking to remove the petitioner nos. 2 and 3 as directors of the BRC and to appoint six directors in the board with an intent to take control and management of the BRC which is contrary to the terms and conditions of M.O.U. In the said application the relief in the form of an injunction restraining the BRC and the GVL from giving effect or further effect to the said notice was sought. The said application was moved on 6th September, 2011 wherein the direction for filing the affidavit was passed.
It appears from the record that all these applications were directed to be taken up together and in fact were taken up by the Court in the month of September, 2011 but the hearing could not be concluded. Alleging that taking advantage of the pendency of the aforesaid applications a further notice dated 10th September, 2011 was issued under Section 169(6) of the Company's Act for convening an extraordinary general meeting to pass the resolution adopted in an extra ordinary general meeting dated 17th June, 2011, which is illegal, null and void. An application being G.A. 3078 of 2011 was filed for an order not to give effect to the notice dated 10th September, 2011. It was further alleged that attempts are being made to take over the assests and other properties belonging to BRC by the GVL so that the complete control can be achieved. The said application was moved on 30th September, 2011 and an order was passed that the meeting shall be convened in terms of the said notice only for the purpose of adjournment to a date beyond November 15th, 2011.
It was expressly observed in the order that though GVL is attempting to refer the provision of Section 169 of the Company's Act but it would be unfair to permit the GVL to steal a march over the plaintiffs during the pendency of the pending applications where the issues are under consideration. The Court further directed all the interlocutory applications to be listed at adjourned motion on 2nd November, 2011 and further directed the parties to complete the affidavits in the meantime.
Against the said order dated 30th September, 2011 by which the Co-ordinate Bench directed the meeting to be convened for the purpose of adjournment, an intra court appeal was filed before the Division Bench which was eventually dismissed. Pursuant to the said leave being granted to convene the meeting the representative of the BWL attended the same and it was recorded on a sheet of paper that the meeting was adjourned till 16th November, 2011. The authorized representative of BWL raised a point in the said meeting that the same is defective being coram non judis as only two share holders were present whereas the five members are required to form the coram. The extract of the resolution was subsequently came to the notice of the BWL on 18th October, 2011. An application being G.A. 3230 of 2011 was filed by the BWL challenging the notice dated 12th October, 2011 by which the meeting was scheduled to be held on 16th November, 2011 on the aforesaid allegations for an order of injunction against the GVL and the BRC not to take any steps on the basis of the said notice dated 12th October, 2011. The said application was listed on 14th November, 2011 and the parties consented not to hold the extra ordinary general meeting until further orders of the Court.
Subsequently, all the pending applications appeared on 30th November, 2011 when a dispute cropped up over the representation of BRC. The Court permitted the respective Counsels to represent the BRC and file their respective affidavits and directed the applications to be listed on 20th December, 2011.
The matter could not be taken up until another application being G.A. 71 of 2012 was filed by BWL in C.S. 156 of 2011. In the said application it is averred that the BRC was provided a loan facility by the State Bank of India, New Alipore Branch but the GVL and Mr. Kusarye who subsequently changed flank, initially caused default in servicing the monthly interest component. The State Bank of India issued letter dated May 11th, 2011 for audit of the stocks, book debts, sundry creditors and other current assets and liabilities of BRC to be conducted by Senior C.A. / Cost Accountant and to submit the report to the bank immediately. Pursuant to the said request a Charter Accountant was appointed to look into the matter but to utter dismay he was not allowed to have any access by the directors of the company.
A further notice was caused by the State Bank of India on July 7th, 2011 calling upon one of the directors of the BWL to regularize the account within seven days therefrom otherwise they will be put into a default list. It was further alleged that all the sale proceeds, received or receivable are being deposited in an undisclosed bank account opened at the instants of the GVL and the debtors of the company were also asked to discharge their liabilities of payments of the price of goods to other associate companies of the GVL. A direction was sought upon the GVL and the said Mr. Kusarye from using any other bank account in the name of BRC and to ensure that all proceeds from the sales are deposited with the State Bank of India with other consequential reliefs. The said application was moved on 10th January, 2012 when the Court found that the direction to pay the sale proceeds in the name of associate companies of the GVL is irregular as the debtor is required to discharge his obligation towards payment of the creditor only. The Court appointed the Special Officer to ensure that all sale proceeds are deposited in accounts of the BRC held with the State Bank of India under the supervision of the Special Officer and the accounts of the BRC should be prepared on quarterly basis to be furnished to the Advocate on Record of the appearing parties.
The said order dated 10th June, 2012 was assailed before the Division Bench in APOT 33 of 2012 which came up for final disposal on 6th February, 2012. The Division Bench observed that the direction to deposit the entire sale proceeds received or receivable in the account of the BRC with the State Bank of India without any clarification as to the withdrawal for day to day running of business, appears to be harsh as it would cause impediment in the smooth running of the business. The said order was modified by the Division Bench to the extent that the Chief Finance Officer shall act as Joint Special Officer to see that the deposit of sale proceeds and other amount are deposited in the State Bank of India for the time being and BRC will be entitled to withdraw the amount from the said account as and when necessary for the purpose of running of the business. It was further observed that if such arrangement does not appear to be helpful for BRC, it would be open to the BRC and the GVL to approach the Trial Court to seek permission to open another account in any bank of their choice which shall be considered in objective manner. The State Bank of India was further permitted to approach the Trial Court for an appropriate order or direction if so advised.
The aforesaid observation encouraged the GVL to take out an application being G.A. 558 of 2012 for an order permitting the opening of the bank account in any other bank and compelling the State Bank of India to delete the signatures of the existing persons from the said account and to record the signatures of the persons authorized by the BRC for operating the State Bank account. The said application appeared along with G.A. 71 of 2012 on 10th April, 2012. A direction was passed upon the Joint Special Officers to submit report whether another account should be opened in another bank as the present banking arrangement does not appear to be helpful. Simultaneously, this Court directed the Joint Special Officers to operate the existing account of BRC with the State Bank of India in order to give effect to the order of the Appellate Court dated 6th February, 2012.
There was a complete silence on the part of the parties after the said order until all the pending applications are listed before this Court. The learned Advocates appearing for the respective parties advanced their submissions on substantive applications and have conceded that the disposal thereof would govern all other applications which were filed because of the mitigating circumstances during the pendency of those substantive applications.
Mr. Saha, the learned Senior Advocate appearing for BWL, the plaintiff in C.S. 156 of 2011 submits that the Memorandum of Understanding dated 26th February, 2010 can never be construed as selling of the BRC to the GVL but was a mere transaction of loan to overcome the financial crisis. It is further submitted that the time limit indicated in the said MOU to buy back the shares issued to GVL to secure the loan is not the essence of the contract as the parties subsequently extended the time. According to him, the conduct of the parties during the transaction is one of the relevant factors for the proposition that the time was not the essence of a contract, which would be corroborated by the fact that in fact the time was extended. In support of the aforesaid contention he placed reliance upon a judgment of the Supreme Court in case of M/s Hind Construction Contractors -Vs- State of Maharashtra reported in AIR 1979 SC 720, McDermott International Inc. -Vs- Burn Standard Co. Ltd. & Ors. reported in (2006) 11 SCC 181 and Arosan Enterprises Ltd. -Vs- Union of India reported in (1999) 9 SCC 449.
Mr. Saha ardently submitted that the two cheques covering the value of the shares allotted to the GVL in terms of the said MOU was tendered and upon refusal thereof, the BWL instituted a suit for such reliefs. He, thus, submitted that any action taken during the pendency of the suits can be taken note of by the Court and the appropriate order may be passed in furtherance of the final relief claimed in the suit under the changed circumstances and therefore there is no fetter on the part of the Court to mould the relief necessitated by the subsequent events. To buttress the aforesaid submission, the reliance is placed upon a judgment of the Supreme Court rendered in case of Gaiv Dinshaw Irani & Ors. -Vs- Tehmtan Irani & Ors. reported in (2014) 8 SCC 294.
It is thus submitted that GVL have applied before the Registrar of Trademark to have the trademark "Duckback" registered in their name which would be evident from the documents uploaded on the official website. He thus concludes that the right of the plaintiff, pending the suit, should be protected by an order of injunction and also taking over of the entire management of the BRC by the GVL, which is a subsidiary of BWL.
Mr. Jayanta Kumar Mitra, learned Senior Advocate appearing for GVL refuted the contention of Mr. Saha in saying that the various clauses contended in MOU leaves no manner of doubt that the time was the essence of the contract and in the event the BWL failed to buy back the shares at the premium indicated therein, the GVL was entitled to have the complete control of BRC by appointing its directors and the BWL was obligated to sale the remaining shares held in BRC at the price fixed in the said MOU. It is vehemently submitted that there was never any extension of time granted to BWL nor the alleged two cheques were ever tendered within the stipulated time.
It is further submitted that the meeting held of the BRC was in conformity with the provisions of the Act and the removal of the directors cannot be said to be illegal and / or contrary to law. Mr. Mitra submitted that the registered user agreement is valid till 2020 and therefore the BRC is entitled to use the said trade name under the said agreement, which is irrevocable as agreed by the parties. Mr. Mitra, thus concludes that the scope of the suit cannot be enlarged by bringing various facts, which constitutes distinct, separate and independent causes of action and prays that the applications filed by the BWL be dismissed on that count.
It is apposite to record that two sets of Counsels are appearing for BRC. One set is supporting the cause of BWL, the other GVL. It would be a mere repetition of the submission advanced by these two sets of lawyers because of their allegiance to each of those the prominent litigating parties.
The facts narrated in the preceding portion of this order manifest that the entire dispute hinges on the memorandum dated 26th February, 2010 and the action and the conduct of the parties subsequent thereto or in terms of the Clauses contained therein. The entire dispute is based upon the said Memorandum of Understanding and the intention of the parties gathered therefrom. Admittedly, the BRC was a subsidiary of the BWL and the later is the registered owner of the trademark "Duckback". The BRC was allowed to use the said trademark by a registered user agreement dated 28th August, 1972, which was extended and renewed from time to time. The last registered user agreement was entered into on 25th February, 2008 for a period of 10 years, which may be extended for further term as may be agreed. It is also not in dispute that the CWL is the holding company of BWL and BRC and both the later companies were in need of urgent financial support to discharge there liabilities. The MOU dated 26th February, 2010 was entered into to give the financial support to those companies and in order to secure the money so invested, it was agreed that the BRC will increase the share capital and allot the same to the GVL at a premium of Rs. 48/- per share within five working days from the date of the execution. It was further agreed that the invested amount so generated in BRC shall be transferred to BWL as refundable security deposit carrying an interest at the rate of 12% per annum and the BWC shall permit the BRC to use the trademark "Duckback" for a period of 10 years from the date of the MOU, which would be irrevocable.
The MOU further contemplates that the BRC shall buy back those shares allotted to the GVL at a pre determined price of Rs. 158/- per share within six months from the date of the said MOU. Clause 't' of the said MOU assumes significance by its nature, which says that in the event the BWL fails to buy back the shares of the GVL within six months from the date of MOU then the BWL would be bound to sale its entire shareholding to BRC at a pre-determined and mutually agreed price of Rs. 158/- per share and all existing directors of the BRC shall resign. Clause 'u' of the MOU further provides that the GVL will run and operate all existing and future business of the BRC for such period as may be decided by it and shall go on paying the royalty at the rate of 1.5% of the turn over for such trademark or brand for a period up to 25th February, 2020 and in the event the GVL decides not to continue with the use of the said trademark, the security deposit would be refunded with interest at the rate of 12% within a period of 30 days.
Whether the time within which the BWL is to buy back the shares from the GVL was an essence of the contract or not is essentially dependent upon the intention of the parties to be seen either from the various clauses contained therein or the conduct in course of their dealing under such MOU. In arriving to such decision not only the various clauses of the contract are to be harmoniously construed but also the purpose and intention to be gathered, which led to the extension of such contract. In this regard the support can be lent to a judgment of the Supreme Court in case of M/s Hind Construction Contractors -Vs- State of Maharashtra reported in AIR 1979 SC 720 wherein the Apex Court held:-
"8. It will be clear from the aforesaid statement of law that even where the parties have expressly provided that time is of the essence of the contract such a stipulation will have to be read along with other provisions of the contract and such other provisions may, on construction of the contract, exclude the inference that the completion of the work by a particular date was intended to be fundamental; for instance, if the contract were to include clauses providing for extension of time in certain contingencies or for payment of fine or penalty for every day or week the work undertaken remains unfinished on the expiry of the time provided in the contract such clauses would be construed as rendering ineffective the express provision relating to the time being of the essence of contract."
It is no longer res integra that mere fixation of time to perform certain obligation does not ipso facto make the time an essence of the contract. The various clauses of the contact is to be read conjointly and in meaningful manner so also the intention of the parties and their conduct and actions in pursuance thereof. Apart from the same, the recitals of the agreement is also a relevant factor in this regard as held in case of Arosan Enterprises Ltd. -Vs- Union of India reported in (1999) 9 SCC 449 in the following words:-
"27. Mere fixation of a period of delivery or a time in regard thereto does not by itself make the time as the essence of the contract, but the agreement shall have to be considered in its entirety and on proper appreciation of the intent and purport of the clauses incorporated therein. The state of facts and the relevant terms of the agreement ought to be noticed in their proper perspective so as to assess the intent of the parties. The agreement must be read as a whole with corresponding obligations of the parties so as to ascertain the true intent of the parties. In the instant case, as the port of discharge has not been named neither is the surveyor appointed - without whose certificate, question of any payment would not arise - can it still be said that time was the essence of the contract? In our view the answer cannot but be a positive "No"."
In McDermott International Inc. -Vs- Burn Standard Co. Ltd. & Ors. reported in (2006) 11 SCC 181, the Supreme Court succinctly laid down when the time can be considered to be an essence of the contract in conjunction with the provisions contained under Section 55 of the Contract Act in these words:-
"85. The question which further arises for consideration is as to whether the respondents having proceeded on the basis that time was of the essence of the contract, it was bound to issue a notice of repudiating the contract subject to reservation as regards its claim of damages. MII, however, states that it had never raised a contention that the time was of the essence of the contract, but the claim arises in view of the delay caused in completion of the contract for a period of 34 months and consequent escalation of costs. The price payable in terms of the sub- contract did not adequately cover increased costs expended by MII. On a plain reading of the provisions of Section 55 of the Indian Contract Act, it is evident that as the parties did not intend that time was to be of the essence of the contract on the expiry whereof the contract became voidable at the instance of one of the parties, but by reason thereof the parties shall never be deprived of damages.
86. We may notice that BSCL had never pleaded before the arbitrator that the time was of the essence of the contract. In construction contracts generally time is not of the essence of the contract unless special features exist therefor. No such special features, in the instant case, have been brought to our notice.
87. The learned arbitrator proceeded on the basis that BSCL had accepted and acknowledged that no additional cost on account of delay was occasioned in completing the helidecks. MII is found to have incurred additional cost for offshore installation. The learned arbitrator has also found that MII had not received any payment on account of such increased cost. The compensation under the said head of claim was only in addition to Change Orders 2, 3 and 7 to which we shall advert to a little later.
88. This Court in Hind Construction v. State of Maharashtra stated:
(SCC pp. 76-77, paras 7 & 8) "7. ... that question whether or not time was of the essence of the contract would essentially be a question of the intention of the parties to be gathered from the terms of the contract. ... (See Halsbury's Laws of England, 4th Edn., Vol. 4, para 1179).
8. ... even where the parties have expressly provided that time is of the essence of the contract such a stipulation will have to be read along with other provisions of the contract and such other provisions may, on construction of the contract, exclude the inference that the completion of the work by a particular date was intended to be fundamental; ... (See Lamprell v. Billericay Union Exch at p. 308; Webb v. Hughes; Charles Rickards Ltd. v. Oppenheim.)"
In view of the proposition of law as laid down in the above reports, what emerges is that mere stipulation of time in the contract does not automatically attract the time being the essence of a contract. The time, being the essence of a contract, must be gathered from the various clauses of an agreement and the intention of the parties in course of the dealing. In the instant case, it is a debatable issue whether the parties extended the time stipulated in the said agreement, which can only be decided upon full-fledged trial. It would not be wrong to say that if the time stipulated in the agreement is extended mutually even in absence of any stipulation in this regard in the agreement, such time cannot be an essence of a contract. It would not be proper for this Court to delve into these questions at the interlocutory stage when both the parties are at variance on extension of time. The Court can safely proceed on the premise that the financial support was given by the GVL to BWL by increasing the share capital of BRC and allotting those additional shares to GVL at a premium of Rs. 48/- per share with clear understanding that the same would be returned to BWL at a price of Rs. 158/- per equity share.
The various clauses in the MOU conveys a definite intention of the parties that such amount is secured by nominating a person in the board of directors of the BRC by GVL. The matter took the different turn when the GVL wanted to have a full control of the BRC as BWL failed to buy back those shares within the stipulated time. Various meetings are called by the BRC and applications are pouring in on every such action for protection and preservation of the rights of the respective parties. From time to time the Court passes interim orders which are still operative.
There is no difficulty in molding the relief under the changed circumstances even if the rights of the parties are crystallized at the time of institution of the suit. The interim orders are passed in aid of the final relief to protect and preserve the rights of the parties. This Court is unable to accept the submission of Mr. Mitra that the Court cannot pass an interim order on the basis of the facts unrelated and / or unconnected with the main reliefs. The support can be lent to a judgment of the Supreme Court in case of Gaiv Dinshaw Irani & Ors. - Vs- Tehmtan Irani & Ors. reported in (2014) 8 SCC 294 wherein it is held:-
"48. Considering the aforementioned changed circumstances, the High Court taking note of the subsequent events moulded the relief in the appeal under Section 96 of the Code of Civil Procedure and the same has been challenged by the appellants before us. In ordinary course of litigation, the rights of parties are crystallised on the date the suit is instituted and only the same set of facts must be considered. However, in the interest of justice, a court including a court of appeal under Section 96 of the Code of Civil Procedure is not precluded from taking note of developments subsequent to the commencement of the litigation, when such events have a direct bearing on the relief claimed by a party or on the entire purpose of the suit, the courts taking note of the same should mould the relief accordingly. This rule is one of ancient vintage adopted by the Supreme Court of America in Patterson v. Alabama followed in Lachmeshwar Prasad Shukul v. Keshwar Lal Chaudhuri. The aforementioned cases were recognised by this Court in Pasupuleti Venkateswarlu v. Motor and General Traders wherein he stated that:
(SCC pp. 772-73, para 4) "4. ... It is basic to our processual jurisprudence that the right to relief must be judged to exist as on the date a suitor institutes the legal proceeding. Equally clear is the principle that procedure is the handmaid and not the mistress of the judicial process. If a fact, arising after the lis has come to court and has a fundamental impact on the right to relief or the manner of moulding it, is brought diligently to the notice of the tribunal, it cannot blink at it or be blind to events which stultify or render inept the decretal remedy. Equity justifies bending the rules of procedure, where no specific provision or fair play is violated, with a view to promote substantial justice--
subject, of course, to the absence of other disentitling factors or just circumstances. Nor can we contemplate any limitation on this power to take note of updated facts to confine it to the trial court. If the litigation pends, the power exists, absent other special circumstances repelling resort to that course in law or justice. Rulings on this point are legion, even as situations for applications of this equitable rule are myriad. We affirm the proposition that for making the right or remedy claimed by the party just and meaningful as also legally and factually in accord with the current realities, the Court can, and in many cases must, take cautious cognizance of events and developments subsequent to the institution of the proceeding provided the rules of fairness to both sides are scrupulously obeyed."
49. The abovementioned principle has been recognised in a catena of decisions. This Court by placing reliance on Pasupuleti Venkateswarlu case, held in Ramesh Kumar v. Kesho Ram that: (SCC pp. 626-27, para
6) "6. The normal rule is that in any litigation the rights and obligations of the parties are adjudicated upon as they obtain at the commencement of the lis. But this is subject to an exception. Wherever subsequent events of fact or law which have a material bearing on the entitlement of the parties to relief or on aspects which bear on the moulding of the relief occur, the court is not precluded from taking a 'cautious cognizance' of the subsequent changes of fact and law to mould the relief."
50. This was further followed in Lekh Raj v. Muni Lal. This Court in Sheshambal v. Chelur Corpn. Chelur Building while discussing the issue of taking cognizance of subsequent events held that: (SCC p. 476, para
19) "19. To the same effect is the decision of this Court in Om Prakash Gupta case where the Court declared that although the ordinary rule of civil law is that the rights of the parties stand crystallised on the date of the institution of the suit yet the court has power to mould the relief in case the following three conditions are satisfied: (SCC p. 263, para 11) '11. ... (i) that the relief, as claimed originally has, by reason of subsequent events, become inappropriate or cannot be granted;
(ii) that taking note of such subsequent event or changed circumstances would shorten litigation and enable complete justice being done to the parties; and
(iii) that such subsequent event is brought to the notice of the court promptly and in accordance with the rules of procedural law so that the opposite party is not taken by surprise.'
51. This Court in Rajesh D. Darbar v. Narasingrao Krishnaji Kulkarni, a matter regarding the elections in a registered society, held that the courts can mould relief accordingly taking note of subsequent events. Furthermore, in Beg Raj Singh v. State of U.P.21 while deciding on the issue of renewal of a mining lease held that: (SCC pp. 729-30, para 7) "7. ... A petitioner, though entitled to relief in law, may yet be denied relief in equity because of subsequent or intervening events i.e. the events between the commencement of litigation and the date of decision. The relief to which the petitioner is held entitled may have been rendered redundant by lapse of time or may have been rendered incapable of being granted by change in law. There may be other circumstances which render it inequitable to grant the petitioner any relief over the respondents because of the balance tilting against the petitioner on weighing inequities pitted against equities on the date of judgment."
52. Even this Court while exercising its powers under Article 136 can take note of subsequent events. [See Bihar State Financial Corpn. v. Chemicot India (P) Ltd., Parents Assn. of Students v. M.A. Khan, State of U.P. v. Mahindra & Mahindra Ltd.]
53. Thus, when the relief otherwise awardable on the date of commencement of the suit would become inappropriate in view of the changed circumstances, the courts may mould the relief in accordance with the changed circumstances for shortening the litigation or to do complete justice."
This Court also cannot overlook the fact that one of the directors appointed by the BWL has changed the flank and joined the GVL detrimental to the interest of the BWL and the meetings of the board of directors have been held to remove the directors appointed by BWL. There is an apparent attempt on the part of the GVL to take a complete control of the BRC and this Court, therefore, feels that interim protection must be extended till the disposal of the suits filed by the respective parties.
All the applications are disposed of on the following orders:-
(i) All the parties are restrained from issuing any further shares of BRC and / or from changing the capital structure of the said company in any way or manner whatsoever;
(ii) BWL and BRC are restrained from revoking, canceling or terminating the registered user agreement dated February 25, 2008 as modified by the agreement dated February 26, 2010 read with the letter of undertaking dated February 26, 2010 issued by the BWL to GVL till 25th February, 2020;
(iii) The GVL and BRC and their agents, assigns and / or directors are restrained from selling, transferring, alienating and / or mortgaging the immovable assets of BRC;
(iv) The Joint Special Officers appointed by the Division Bench in the order dated 6th February, 2012 shall continue to function and discharge their duties in the manner as indicated in the said order. In addition thereto, the Joint Special Officers shall submit the accounts in the form of report on half yearly basis till the disposal of the suit;
(v) BRC is further restrained from inducting any new directors into the Board of Directors till the disposal of the suit.
(Harish Tandon, J.)