Madras High Court
Unknown vs Dated : 22.7.2009 on 22 July, 2009
IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 22.7.2009 Company Application No.82 of 2009 in Company Application No.211 of 2003 and Company Application No.241 of 2009 in Company Petition No.130 of 1999 P.JYOTHIMANI,J.
Company Application No.82 of 2009 is filed by the applicant Mr.R.Vijayaumar seeking permission to him to institute the intending suit in respect of the property situate at Kazhipattur Village comprised in Survey No.1 45 Cents, Survey No.3 35 Cents, Survey No.22/1 85 Cents, S.No.3 120 Cents in all measuring an extent of 2.85 Acres situate in Kancheepuram District, which is the subject matter of sale in C.A.No.211 of 2003 in C.P.No.130 of 1999.
2. In respect of the second respondent (company in liquidation), Mr.M.Ravindran, learned Senior Advocate has been appointed as an Administrator and he is taking steps to find out the various properties belonged to the company, the rights and liabilities, and is administering the assets along with the Official Liquidator. The learned Administrator has filed C.A.No.241 of 2009 for a direction against the said Mr.R.Vijayakumar to hand-over documents pertaining to the land in Survey No.19/2D measuring 20 Cents at Kazhipattur Village, Chengalpet Taluk, Kancheepuram District.
3. The applicant in C.A.No.82 of 2009 is stated to have been the owner of 15 Acres of land in Kazhipattur Village and 50 Cents of land in Muthukkadu Village, having acquired 5.28 Acres in Kazhipattur Village and 50 Cents in Muthukkadu Village under a registered sale deed dated 17.2.1986, and the remaining extent at Kazhipattur Village, comprised in various survey numbers, was acquired by M/s.Goodluck Inn Private Limited, represented by its Managing Director Mr.R.Vijayakumar.
4. The first respondent Mr.C.Natesan of Anubhav Plantations Limited is stated to have entered into an agreement for sale of the said properties with the applicant in C.A.No.82 of 2009 on 9.6.1996. It is stated that the price of the land under the said agreement was fixed at Rs.11,250/- per Cent in Kazhipattur Village and at Rs.45,000/- per Cent in Muthukkadu Village. According to the applicant in C.A.No.82 of 2009, pursuant to the said agreement of sale, the said Mr.C.Natesan, the first respondent was liable to pay a sum of Rs.1,91,25,000/-, out of which a sum of Rs.40 Lakhs was paid as advance.
5. It is his further case that, pursuant to the said agreement for sale, the applicant has executed sale deeds in favour of the first respondent and his nominees except in respect of 4.21 Acres situate at Kazhipattur Village. According to him, in respect of those lands, even though the documents were prepared and signed, they were not registered. However, the applicant restricts his claim only in respect of 2.85 Acres in respect of which, according to him, three documents were prepared, but were not signed by him nor registered in accordance with law. It is stated that the first respondent Mr.C.Natesan and his nominees have paid an amount of Rs.1,70,00,000/- leaving a balance of Rs.21,25,000/-.
6. After the second respondent was directed to be wound up in C.P.No.130 of 1999 and the Official Liquidator along with the third respondent was appointed as Administrator on 2.11.1999, it is stated that the learned Administrator has issued notice to the applicant in C.A.No.82 of 2009 on the premise that the said sales were effected in favour of M/s.Anubhav Plantations Limited (company in liquidation), for which the applicant has filed his objection stating that the purchase by the first respondent was in his individual capacity and the sale consideration was paid by the first respondent as an intending purchaser. However, the learned Administrator initiated action to sell the properties before the Company Court, by treating those properties as that of the Company in liquidation.
7. On an application filed by the learned Administrator in C.A.No.211 of 2003 in C.P.No.130 of 1999, the property to an extent of 7.85 Acres or thereabout was stated to have been sold through Court for a consideration of Rs.50 Lakhs as per the order dated 12.11.2003. It is stated that the said property to an extent of 7.85 Acres was sold to the fourth respondent in court auction sale for Rs.50 Lakhs and a sale deed was executed on 13.10.2005 and registered as Document No.885 of 2005 in favour of the fourth respondent.
8. The case of the applicant is that in respect of an extent of 2.85 Acres, since the sale was not completed in favour of the first respondent, the sale effected through Court auction is not valid. It is his case that inasmuch as the company in liquidation was not owning the said property, as there was no vesting of those properties with the company, the sale effected through Court is not valid and if at all there is any right over the company that can only be for specific performance. It is his further case that the sale effected to the fourth respondent is not valid in law and the applicant is taking steps to file a comprehensive suit to set aside the sale. It is in respect of the same, the present application seeking leave of this Court is filed.
9. The learned Administrator, in his report, has stated that M/s.Goodluck Inn Private Limited, represented by Mr.R.Vijayakumar, as an owner of the land and Power of Attorney holder of some land owners, agreed to sell 21.18= Acres of land in Kazhipattur Village and 50 Cents of land in Muttukadu Village to the first respondent Mr.C.Natesan, Chairman-cum-Managing Director, Anubhav Group of Companies for a consideration of Rs.1,91,25,000/-. It is stated that, as per the agreement, the applicant has received Rs.1,93,00,000/- from the company and executed 39 sale deeds in favour of the nominees of the first respondent. Out of the said 39 sale deeds, 25 have been registered and 14 remain unregistered, which is to an extent of 12.32= Acres.
10. It is stated that out of the said 12.32= Acres, the applicant has conveyed 4.54 Acres of Government land, in which there are more than 250 huts. On a report filed by the Administrator, this Court has ordered investigation by CBCID on 16.8.2001 and the CBCID filed its report on 9.11.2001. Thereafter, this Court, by order dated 14.11.2001, directed the CBCID to proceed with the case in accordance with law.
11. It is stated that, as against the said order of this Court, Mr.R.Vijayakumar has filed an appeal in O.S.A.No.401 of 2002, in which there was an order of stay. On an application filed by the Administrator to vacate the order of stay, the Division Bench has dismissed the appeal on 26.2.2003. It is stated that, thereafter, the CBCID filed a charge sheet and the matter is pending before the XI Metropolitan Magistrate, Saidapet in C.C.No.6535 of 2003 and the said Mr.R.Vijayakumar has obtained anticipatory bail from this Court with certain conditions, viz., depositing Rs.50 Lakhs and surrendering his passport, which was subsequently modified directing the furnishing of bank guarantee for Rs.50 Lakhs and the bank guarantee, as directed, was furnished in favour of the Official Liquidator. The remaining land to an extent of 7.785 Acres was sold in open auction in the Court for Rs.50 Lakhs in favour of the fourth respondent and the sale deed has also been executed in favour of him.
12. It is stated that this Court, by order dated 4.3.2005, has directed Mr.R.Vijayakumar to pay an amount of Rs.20 Lakhs towards the full and final settlement in respect of the government land measuring an extent of 4.20 Acres in Survey No.20 at Kazhipattur Village, which was sold by him. It was after payment of the said amount, the bank guarantee came to be revoked.
13. It is stated that the Administrator has moved an application in C.A.No.243 of 2004 against the said Mr.R.Vijayakumar to hand-over the vacant possession of other lands agreed to be sold to the company in liquidation. In the said application, Mr.R.Vijayakumar filed an application for setting aside the sale which was dismissed and the appeal against the said order was also dismissed, apart from dismissal of the Special Leave Petition by the Supreme Court.
14. The learned Administrator has stated that Mr.R.Vijayakumar, in his affidavit dated 16.3.2004 filed in C.A.No.211 of 2003 in C.P.No.130 of 1999, to set aside the order in the said application dated 12.11.2003 has clearly admitted that an extent of 0.20 Acres belonging to the company in liquidation in Survey No.19/2D was by mistake left out to be sold and he has also stated that the said property can be sold by the Administrator, for which he has no objection. It is in view of the said undertaking by the said Mr.R.Vijayakumar, the learned Administrator has filed C.A.No.241 of 2009.
15. It is the contention of Mr.R.Thiagarajan, learned counsel appearing for the applicant in C.A.No.82 of 2009 that this application is filed only seeking leave of this Court under Rule 9 of the Companies (Court) Rules, 1959 to enable the applicant to file, on the Original Side, a suit for declaring that the sale effected in respect of 2.85 Acres of land at Kazhipattur Village as invalid and non-est in the eye of law, apart from declaring that the applicant is the owner of the property and for other reliefs of injunction.
16. It is his submission that for the sale of the property, which was effected in favour of the first respondent in his individual capacity, the first respondent has paid an amount of Rs.1,70,00,000/- out of the agreed sale consideration of Rs.1,91,25,000/- and therefore, the balance amount of Rs.21,25,000/- is due to be paid by the first respondent.
17. It is his contention that out of the fourteen sale deeds, at least in respect of three sale deeds covering 2.85 Acres of land the documents have not been registered and not been signed by the applicant and therefore, on the date of the sale by court auction, the company in liquidation or the first respondent, in his individual capacity, was not having any ownership over the same and in such circumstances, such sale effected by the court auction in respect of 2.85 Acres of land should be only treated as non-est and ultimately, the applicant is entitled to declaration that he remains to be the owner of the said extent of the property and if the company in liquidation has got any right, it can be only an equitable remedy of specific performance of the agreement of sale dated 9.6.1996.
18. It is his contention that all original documents in respect of the properties are with the applicant, who, as an owner, was not called at the time of sale by this Court and therefore, according to him the said land of an extent of 7.85 Acres never vested with the Official Liquidator, even though in the affidavit filed in support of the application, the applicant has restricted only in respect of 2.85 Acres of land. It is his contention that the applicant has got a right of recission and refund of the amount.
19. It is his contention that even though it is true that, as against the judgment in O.S.A.No.129 of 2007, the Supreme Court has dismissed the appeal, the same would not operate as res judicata for a permission to be given by this Court under Section 446 of the Companies Act read with Rule 9 of the Companies (Court) Rules, 1959. It is his submission that granting leave is a routine affair under the Letters Patent and would contend that any condition can be imposed.
20. According to him, the decision taken by the Company Court, which is summary in nature and not decided based on the appreciation of evidence, even though the same has been confirmed up to the Supreme Court, res judicata principle is not applicable. To substantiate that the principle of res judicata would not apply to the present case he would rely upon the judgments in Mathura Prasad Bajoo Jaiswal and Others v. Dossibai N.B.Jeejeebhoy, [1970] 1 SCC 613 and Sushil Kumar Mehta v. Gobind Ram Bohra, [1990] 1 SCC 193. He would submit that Company Court proceeding, being a collateral proceeding, cannot be equated to a regularly instituted suit and he would rely upon the judgments in N.Krishnaih Setty v. Gopalakrishna and Others, (1974) 2 SCC 624 and Rangasamy,K. v. Tamil Nadu Housing Board, 2005 (2) CTC 81.
21. He would also rely on the judgment in (2007) 5 CTC 521 to contend about the effect of sale conducted by the Company Court. He would submit that the Court auction purchaser will not get better title since he purchases along with litigation, by relying upon Valji Khimji & Co. v. Official Liquidator of Hindustan Nitro Product (Gujarat) Ltd., (2008) 9 SCC 299 and Usmansab Hatel Sahab v. R.L.Meharwade, (1998) 3 SCC 271.
22. On the other hand, it is the contention of Mr.R.Murari, learned counsel appearing for the fourth respondent, who is a court auction purchaser, that an application filed before the Company Court under Sections 446(1) and 446(2)(a) of the Companies Act are not summary in nature and when once the applicant in C.A.No.82 of 2009 himself has invoked the provisions of Section 446(2) of the Companies Act and filed an application, which was decided by dismissing the same on merits, against which, admittedly, the appeal was also dismissed, apart from the SLP being dismissed by the Supreme Court, it is not open to the applicant to file another suit on the same cause of action. He would also rely upon the detailed judgment of the Division Bench as well as the order of the learned Judge, wherein there is an elaborate discussion about the right of the applicant, while ultimately rejecting the case of the applicant. According to him, the said judgments should be treated as binding upon the applicant.
23. He would submit that inasmuch as the Court of competent jurisdiction has decided the issue, the same cannot be a subject matter of suit. He would add that if the decision of this Court, as approved up to the Supreme Court, under Section 446 of the Companies Act is not final, then the Section will have no meaning and that would be only an empty formality. He would rely on the judgments in Gulabchand v. State of Gujarat, AIR 1965 SC 1153, Bhanu Kumar Jain v. Archana Kumar, (2005) 1 SCC 787, and South Indian Bank Limited v. Imperial Chit Funds (P) Ltd., (1976) 46 Company Cases 665 (Kerala).
24. The learned Administrator has also submitted that when an issue has been decided in detail between the parties in a Company Application and the same has been approved up to the Supreme Court, the same is binding upon the applicant and he is not entitled to file a separate suit once again and that would make the provision of the Companies Act redundant. He would also submit that the applicant in C.A.No.82 of 2009, having filed a sworn affidavit giving no objection for the sale of 0.20 Acres of land by the Administrator, has got a legal duty to return the documents relating to the said property to the Administrator in the interest of the creditors of the company in liquidation.
25. I have heard the learned counsel for either side, perused the records and given my anxious thought to the issue involved in this case.
26. At the outset, it has to be pointed that even though Mr.R.Thiagarajan, learned counsel appearing for the applicant in C.A.No.82 of 2009 has submitted as if the dispute relates to 7.85 Acres stating that the said land has never vested with the Official Liquidator, in the affidavit filed by the applicant in support of C.A.No.82 of 2009, the applicant has made it very clear that he intends to file a suit for which leave is prayed only in respect of 2.85 Acres. In fact, the relief in the intended suit also makes it clear that the property mentioned in Schedule 'C', in respect of which the applicant is seeking permission to file a suit for declaration, is of 2.85 Acres.
27. The point to be considered squarely in these applications is as to whether the decision taken by a Company Court in an earlier application filed by the same applicant, which has ultimately been confirmed by the Division Bench in O.S.A. and the Hon'ble Apex Court, can be a subject matter of an independent suit once again.
28. The main thrust of the contention by the learned counsel for the applicant is that the company application was decided in a summary manner and therefore, such decision by the Company Court, which is not by recording evidence, etc., cannot be considered to be a decision on merit and hence, the principle of res judicata will not apply.
29. Section 11 of the Code of Civil Procedure, enunciating the principle of res judicata, makes it clear that when once an issue was directly and substantially decided in a former suit, the subsequent suit is barred under the said principle. Section 11 of the Code of Civil Procedure is as follows:
"Section: 11. Res judicata.
No Court shall try any suit or issue in which the matter directly and substantially in issue has been directly and substantially in issue in a former suit between the same parties, or between parties under whom they or any of them claim, litigating under the same title, in a Court competent to try such subsequent suit or the suit in which such issue has been subsequently raised, and has been heard and finally decided by such Court.
Explanation I- The expression "former suit" shall denote a suit which has been decided prior to the suit in question whether or not it was instituted prior thereto.
Explanation II.- For the purposes of this section, the competence of a Court shall be determined irrespective of any provisions as to a right of appeal from the decision of such Court.
Explanation III.- The matter above referred to must in the former suit have been alleged by one party and either denied or admitted, expressly or impliedly, by the other.
Explanation IV.- Any matter which might and ought to have been made ground of defence or attack in such former suit shall be deemed to have been a matter directly and substantially in issue in such suit.
Explanation V.- Any relief claimed in the plaint, which is not expressly granted by the decree, shall, for the purposes of this section, be deemed to have been refused.
Explanation VI- Where persons litigate bona fide in respect of public right or of a private right claimed in common for themselves and others, all persons interested in such right shall, for the purposes of this section, be deemed to claim under the persons so litigating.
Explanation VII.- The provisions of this section shall apply to a proceeding for the execution of a decree and reference in this section to any suit, issue or former suit shall be construed as references, respectively, to proceedings for the execution of the decree, question arising in such proceeding and a former proceeding for the execution of that decree.
Explanation VIII.-An issue heard and finally decided by a Court of limited jurisdiction, competent to decide such issue, shall operate as res judicata in as subsequent suit, notwithstanding that such Court of limited jurisdiction was not competent to try such subsequent suit or the suit in which such issue has been subsequently raised. "
30. The term "suit" has not been defined in the Code of Civil Procedure. In Black's Law Dictionary the term "suit" is defined as "any proceeding by a party or parties against another in court of law". In Mst. Gulab Bai & Others v. Manphool Bai, AIR 1962 SC 214, the Supreme Court, while observing that the term "suit" cannot be liberally construed on the basis of the legislative history of the principle of res judicata, held that it must be a whole issue in the suit before the competent court. The relevant portion of the said judgment is as under:
"6. The word "suit" has not been defined in the code, but there can be little doubt that in the context the plain and grammatical meaning of the word would include the whole of the suit and not a part of the suit, so that giving the word "suit" its ordinary meaning it would be difficult to accept the argument that a part of the suit or an issue in a suit is intended to be covered by the said word in the material clause. The argument that there should be finality of decisions and that a person should not be vexed twice over with the same cause can have no material bearing on the construction of the word "suit". Besides if considerations of anomaly are relevant it may be urged in support of the literal construction of the word "suit" that the finding recorded on a material issue by the Court of the lowest jurisdiction is intended not to bar the trial of the same issue in a subsequent suit filed before a Court of unlimited jurisdiction. To hold otherwise would itself introduce another kind of anomaly. Therefore, it seems to us that as a matter of construction the suggestion that the word "suit" should be liberally construed cannot be accepted. This position would be abundantly clear if we consider the legislative history and background of section 11.
.....
12. ...... In other words, it is the whole of the suit which should be within the competence of the Court at the earlier time and not a part of it. Having regard to this legislative background of section 11 we feel no hesitation in holding that the word "suit" in the context must be construed literally and it denotes the whole of the suit and not a part of it or a material issue arising in it."
31. It is true that in many of the judgments of the Supreme Court and other High Courts, it was held that the forum where summary proceedings are effected by the Presiding Officer by passing orders, such decision cannot be barred by the principle of res judicata in a regularly instituted suit. In fact in Pandurang Ramachandra Mandlik (since deceased by his Lrs.) and another v. Smt.Shantabai Ramachandra Ghatge and other, AIR 1989 SC 2240, it was held that a decision of a tenancy authority under the Bombay Tenancy and Agricultural Lands Act, 1948 cannot be deemed to be a decision in a suit.
32. A Division Bench of this Court consisting of S.Jagadeesan and P.D.Dinakaran, JJ., (as Their Lordships then were) in Ganesh Benzoplast Ltd., v. Sundaram Finance Limited, 2002 (2) CTC 238, taking note of the fact that under the Arbitration and Conciliation Act, 1996 the applicability of Code of Civil Procedure has been consciously taken away by the law makers while it was available in the Arbitration Act, 1940, held that a decision taken under Section 9 of the Arbitration and Conciliation Act, 1996 does not require any averment in any particular manner and therefore, the decision cannot be taken as a decision to bar a regularly instituted suit.
33. Section 26 of the Code of Civil Procedure, while speaking about the "institution of suits", states as follows:
"Section 26. Institution of suits.
(1) Every suit shall be instituted by the presentation of a plaint or in such other manner as may be prescribed.
(2) In every plaint, facts shall be proved by affidavit.
34. The term "court" as defined under Section 2(11) of the Companies Act, 1956 is as follows:
"Section: 2 (1) to (10) (11) "the Court" means,-
(a) with respect to any matter relating to a company (other than any offence against this Act), the Court having jurisdiction under this Act with respect to that matter relating to that company, as provided in section 10;
(b) with respect to any offence against this Act, the Court of a Magistrate of the First Class or, as the case may be, a Presidency Magistrate, having jurisdiction to try such offence;]"
35. In the Companies (Court) Rules, 1959, framed in accordance with Section 643(1) and (2) o the Companies Act, 1956 by the Supreme Court of India, Rule 6 enables the applicability of Code of Civil Procedure before the Company Court, which is as follows:
"Section 6. Practice and procedure of the Court and provisions of the Code to apply: Save as provided by the Act or by these Rules, the practice and procedure of the Court and the provisions of the Code so far as applicable, shall apply to all proceedings under the Act and these Rules. The Registrar may decline to accept any document which is presented otherwise than in accordance with these Rules or the practice and procedure of the Court.
36. These applications are pressed into service based on the powers of this Court under Rule 9 of the Companies (Court) Rules, 1959, which is akin to the inherent powers of the Civil Court under Section 151 of the Code of Civil Procedure. Rule 9 of the Companies (Court) Rules, 1959 giving inherent powers to the Company Court states as follows:
"Section 9. Inherent powers of Court: Nothing in these Rules shall be deemed to limit or otherwise affect the inherent powers of the Court to give such directions or pass such orders as may be necessary for the ends of justice or to prevent abuse of the process of the Court."
37. On an order of winding up passed by this Court and the Official Liquidator being appointed as Provisional Liquidator, no suit or legal proceeding can be either commenced or proceeded if they are pending, of course except with the leave of the Court and this Court will have jurisdiction to entertain and dispose of any such suits, except those which are pending in appeal before the Supreme Court or High Court. Section 446 of the Companies Act reads as follows:
"Section:446. Suits stayed on winding up order.
(1) When a winding up order has been made or the Official Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the Court and subject to such terms as the Court may impose.
(2) Court shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of-
(a) any suit or proceeding by or against the company;
(b) any claim made by or against the company (including claims by or against any of its branches in India);
(c) any application made under section 391 by or in respect of the company;
(d) any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or rise in course of the winding up of the company, whether such suit or proceeding has been instituted or is instituted or such claim or question has arisen or arises or such application has been made or is made before or after the order for the winding up of the company, or before or after the commencement of the Companies (Amendment) Act, 1960 (65 of 1960).
(3) **** (4) Nothing in sub-section (1) or sub-section (3) shall apply to any proceeding pending in appeal before the Supreme Court or a High Court."
38. Therefore, a decision of this Court on any suit or proceedings by or against the company initiated by a party under Section 446(2) of the Companies Act is deemed to be a decision taken in a suit. By virtue of the powers of this Court under the Companies (Court) Rules, 1959, adopting the procedures of the Code of Civil Procedure, it cannot be said that a decision taken by this Court under the above said Section is a summary proceeding simply because the party has not chosen to let in evidence to substantiate his case. When once the Company Court has jurisdiction to decide any matter under Section 446(2) of the Companies Act as a suit, the parties have right to adduce evidence like regularly instituted suit since it is a court of competent jurisdiction.
39. In Gulabchand Chhotalal Parik v. State of Gujarat, AIR 1965 SC 1153, a Constitutional Bench of the Apex Court has held that Section 11 of the Code of Civil Procedure is not exhaustive with respect to an earlier decision and even a decision on a matter in controversy arrived at and decided after full contest or after affording fair opportunity to the parties to prove their case by a Court of competent jurisdiction would also act as res judicata. It was also held that a decision after contest in a writ petition under Article 226 of the Constitution of India would operate as res judicata between the parties. The relevant portion of the said judgment is as follows:
"60. As a result of the above discussion, we are of opinion that the provisions of section 11 C.P.C. are not exhaustive with respect to an earlier decision operating as res judicata between the same parties on the same matter in controversy in a subsequent regular suit and that on the general principle of res judicata, any previous decision on a matter in controversy, decided after full contest or after affording fair opportunity to the parties to prove their case by a Court competent to decided it, will operate as res judicata in a subsequent regular suit. It is not necessary that the Court deciding the matter formerly be competent to decide the subsequent suit or that the former proceeding and the subsequent suit have the same subject matter. The nature of the former proceeding is immaterial.
61. We do not see any good reason to preclude such decisions on matters in controversy in writ proceedings under Arts 226 or 32 of the Constitution from operating as res judicata in subsequent regular suits on the same matters in controversy between the same parties and thus to give limited effect to the principle of the finality of decisions after full contest. We therefore hold that on the general principle of res judicata, the decision of the High Court on a writ petition under Article 226 on the merits on a matter after contest will operate as res judicata in a subsequent regular suit between the same parties with respect to the same matter."
40. Again, while reiterating the above view, it was held in Bhanu Kumar Jain v. Archana Kumar, [2005] 1 SCC 787 by the Apex Court, while explaining about the principle of res judicata, referring to the earlier judgment rendered in Hope Plantations Ltd. v. Taluk Land Board, Peermade, [1999] 5 SCC 590, that when once a Court of competent jurisdiction has decided an issue, the same should be final on the basis of the principle of public policy. The Supreme Court, with approval of the established precedents, has held as follows:
"18. It is now well settled that principles of res judicata apply in different stages of the same proceedings. (See Satyadhyan Ghosal v. Deorajin Debi, AIR 1960 SC 941 and Prahlad Singh v. Col. Sukhdev Singh, [1987] 1 SCC 727.)
19. In Y.B. Patil v. Y.L.Patil, [1976] 4 SCC 66 it was held:
4. It is well settled that principles of res judicata can be invoked not only in separate subsequent proceedings, they also get attracted in subsequent stage of the same proceedings. Once an order made in the course of a proceeding becomes final, it would be binding at the subsequent stage of that proceeding.
20. In Vijayabai v. Shriram Tukaram, [1999] 1 SCC 693 it was held:
13. We find in the present case the Tahsildar reopened the very question which finally stood concluded viz. whether Respondent 1 was or was not the tenant of the suit land. He further erroneously entered into a new premise of reopening the question of validity of the compromise which could have been in issue if at all in appeal or revision by holding that compromise was arrived at under pressure and allurement. How can this question be up for determination when this became final under this very same statute?
21. Yet again in Hope Plantations Ltd. v. Taluk Land Board, Peermade, [1999] 5 SCC 590, this Court laid down the law in the following terms:
17. ... One important consideration of public policy is that the decisions pronounced by courts of competent jurisdiction should be final, unless they are modified or reversed by appellate authorities; and the other principle is that no one should be made to face the same kind of litigation twice over, because such a process would be contrary to considerations of fair play and justice.
22. It was further held:
31. Law on res judicata and estoppel is well understood in India and there are ample authoritative pronouncements by various courts on these subjects. As noted above, the plea of res judicata, though technical, is based on public policy in order to put an end to litigation. It is, however, different if an issue which had been decided in an earlier litigation again arises for determination between the same parties in a suit based on a fresh cause of action or where there is continuous cause of action. The parties then may not be bound by the determination made earlier if in the meanwhile, law has changed or has been interpreted differently by a higher forum. But that situation does not exist here. Principles of constructive res judicata apply with full force. It is the subsequent stage of the same proceedings. If we refer to Order 47 of the Code (Explanation to Rule 1) review is not permissible on the ground that the decision on a question of law on which the judgment of the Court is based has been reversed or modified by the subsequent decision of a superior court in any other case, shall not be a ground for the review of such judgment.
41. As rightly submitted by Mr.R.Murari, learned counsel for the fourth respondent, when a person is seeking relief under Section 446(2) of the Companies Act in which a decision is arrived at as that of a suit, the proceeding before the Company Court cannot be held to be an empty formality.
42. The Kerala High Court in South Indian Bank Ltd. v. Imperial Chit Funds (P.) Ltd. (In Liquidation), [1976] 46 Company Cases 665 (Kerala), while explaining about the proceeding under Section 446 of the Companies Act as meaningful and a decision on principle even in respect of granting of leave, quoting various judgments, has held as follows:
"10. In In re Subhodhaya Publications Ltd., [1955] 25 Comp Cas 49 (Mad). Ramaswamy J. observed that leave in such cases cannot be obtained merely for the asking and will not be granted automatically or as a matter of course. The general principle governing granting or refusing leave is to prevent a litigation against the company which has been wound up except with the consent of the court and where the matter cannot be effectively adjudicated in the winding up proceedings itself.
11. In Balkrishna Mahadeo Vartak v. Indian Association Chemical Industries Ltd., [1958] 28 Comp Cas 179, 181 (Bom), Chainani J. has observed as follows :
" Section 446 provides that when a winding up order has been made, no suit shall be commenced except by leave of the court and subject to such terms as the court may impose. The object of the section is to save the company which is being wound up from unnecessary litigation and to protect its assets for equitable distribution amongst its creditors and its shareholders. The consequence of the winding up order, therefore, is that no suit can be filed against the company without obtaining the leave of the court. An application for such leave is, therefore, made necessary by the order for winding up. In dealing with such an application, the court has necessarily to consider the interest of the company and to see that its assets are not wasted in frivolous and unnecessary litigation. An order or decision on such an application is, therefore, clearly an order or decision in the matter of winding up. It is not a mere procedural order, for it affects the valuable right to obtain relief by filing a suit. An appeal, therefore, lies against such an order or decision under Section 483 of the Act."
12. In Hansraj v. Official Liquidators, Dehra Dun Mussoorie Electric Tramway Co. Ltd., AIR 1929 All 353, it is observed that the discretion to refuse leave must be exercised with due regard to the rights of third persons who are not members of the company and who had not to come in and claim the share. It is also observed that the unlimited power to refuse leave will be exercised by a court of law in furtherance of the ends of justice and not capriciously.
13. The principle in short is that if the applicant who seeks leave of a court, can be given what is due to him, without having recourse to proceedings in the winding up court to prove his claim, then he can be given what is due to him and need not be ordered to file a fresh suit. If he can say " there is some property upon which I have a certain specific charge, I want to realise that charge. I have nothing to do with the distribution of your property among your creditors. This is my property. " ; then leave need not be given but he can be given what is due to him without waiting for the winding up proceedings to be completed. The point to be emphasised is that if the applicant is a person outside the winding up proceedings, then he should not be forced to file a suit. His claim can be considered without giving leave to file a suit."
43. In the light of the above said legal position, when we approach the facts and circumstances, as narrated above, which are not much in dispute, it is relevant to point out that on an application filed by the learned Administrator of the company in liquidation in C.A.No.211 of 2003 for bringing the properties of the Company for sale, by an order dated 12.11.2003, this Court has confirmed the sale in respect of a total extent of 7.875 Acres comprised as follows:
Survey No. Extent 1 0.45 19/1 0.85 19/2B 0.205 19/2C 0.44 22/1 0.85 22/2 1.25 23/2 0.36 27/1 0.79 27/2 1.13 3 1.55 Total 7.875 in favour of the fourth respondent Mr.J.Sekar for a consideration of Rs.50 Lakhs and also directed the Official Liquidator to execute sale deed in his favour and hand-over possession of the land on payment of sale consideration. Subsequently, it is seen that, on the payment of the entire sale consideration, sale deed was executed in favour of the fourth respondent by the Official Liquidator on 13.10.2005.
44. It is to set aside the said sale effected pursuant to the order dated 12.11.2003, the applicant has filed C.A.No.1037 of 2006 in C.A.No.211 of 2003 in C.P.No.130 of 1999. The contentions which are similar to the one raised by the learned counsel for the applicant herein were raised exhaustively. In fact, it was the specific contention on behalf of the applicant that unless and until the document is registered to convey the title in favour of the company in liquidation, the property has never vested with the Company and therefore, the sale deed executed by the Official Liquidator cannot confer any title to the fourth respondent herein. The point relating to Section 54 of the Transfer of Property Act was also raised. Dealing with the said contentions in the order dated 19.1.2007, this Court has held as follows:
"16. ..... Be that as it may, in the context of Section 54, although the title as such does not validly pass on to the purchaser, considering Section 47 and 49 of the Registration Act, the fact remains that the transaction of sale had already taken place even before the Court sale was ordered. The Registration of the document in terms of Section 54 of the Transfer of Property Act and as per Section 47 of the Registration Act, merely enables the vendee to have his rights related back. Yet the fact that the document had not been registered does not defeat the fact that there had been a sale in favour of the Company in liquidation by the Applicant, a fact which the present Applicant even today could not deny, he having received the sale consideration in full. In the context of the scheme of Section 54 of the Transfer of Property Act and the provisions of the Registration Act, the claim made by the Applicant as to the valid conveyance of title to the auction purchaser by the Company in liquidation, the decision reported in [1991] 1 SCC 715 Hamda Ammal v. Avadiappa Pathar, needs attention."
45. The said company application to set aside the sale was, ultimately, dismissed by this Court with the following decision:
"19. As far as the present case in concerned, the Applicant does not deny the receipt of the sale consideration. He does not deny the fact that he has executed the sale deed, but it awaits registration. Having received the full consideration, the failure to register the document is an act of omission which is otherwise enforceable in law. Hence the conduct of the Applicant herein is only an indication of his intention to somehow make a gain out of his own conduct to the detriment of those who had parted with the money. Having received the consideration and waited for the sale to take place, it is not now open to the Applicant to come before this Court to take advantage of his own conduct to challenge the sale. Quite apart from this, having accepted the sale as regards the other documents which were also not registered, singling out the particular property is indicative of the intention which, admittedly, speaks of his conduct. Whatever be the chemistry of this attitude of the Applicant, the challenge now made herein lacks bonafides. Hence I do not find any justification for accepting this plea. Above all these, a person who has received the consideration in full and in fact in excess cannot now be permitted to take advantage of his own acts of commission and omission, seeking to derive support from Section 54 of the Transfer of Property Act. Leaving aside the statutory provisions, even as a matter of equity, he does not deserve any indulgence from this Court. I do not find any justification to grant a seal of bind approval to his stand based on Section 54 which would only amount to an affirmation of a reprehensible conduct of this nature."
46. On an appeal from the said order filed by the applicant, the Division Bench, by judgment dated 21.10.2008 in O.S.A.No.129 of 2007, while dismissing the appeal, has held as follows:
"10. Learned counsel appearing on behalf of the appellant raised the question with regard to the nature of sale of property belonging to the appellant in absence of a registered sale deed. It has not been disputed that the consideration amount in most of the cases has been received by him. It is for the said reason the Court allowed time to the parties so as to enable the appellant to accept the rest of the amount, if any, due from the company through the Official Liquidator, but the appellant was not agreeable to the same. On the other hand, the appellant offered to give back the consideration amount with interest after four years of sale deed. This was not accepted by the Administrator as sale has already taken place and the sale made in favour of the 3rd respondent, J.Sekar is not under challenge in the present appeal.
11. The question whether the transfer made by the appellant in favour of the company was legal or not was not to be determined in the present company petition. If the company was in possession of the land, as was shown before learned Judge in their affidavit, if any amount was due to the company it was well within the jurisdiction of the Court to auction sell the property. The order of the Court dated 9th April, 2003 directing the Official Liquidator to auction sell the property by publication of notice in eight national newspapers having not been challenged, the matter could not have been reopened in the company petition.
12. We find the appellant also suppressed material fact that out of the total lands he sold some of the Government lands and for that charge sheet has been served against him. It is also not in dispute that though total land was more than 5 acres, but his claim is only with regard to 1.20 acres and not for the rest of the area, though sold in the same manner. In view of the admitted facts as mentioned above, we find no ground made out to interfere with the order passed by learned Judge."
47. It is not in dispute that, as against the said judgment of the Division Bench, the Special Leave Petition filed before the Supreme Court was also dismissed on 26.11.2008. In such circumstances, when this Court has, on merit, decided that the sale effected in favour of the fourth respondent pursuant to the auction cannot be set aside, the present application is filed praying for leave to file a suit to set aside the same auction sale effected on 12.11.2003 in C.A.No.211 of 2003 and the consequential sale deed executed by the Official Liquidator.
48. As held by the Kerala High Court, as narrated above, the proceedings before the Company Court under Section 446(2) of the Companies Act cannot be said to be a matter of routine and it cannot be said that the decision arrived by this Court is not binding on the applicant. It is well settled that granting of leave to file a suit under Section 446(1) of the Companies Act is not a matter of routine and it is a decision to be taken on the merits of the case and not to encourage vexatious litigation. In the light of the categoric finding in the above said proceedings, which went up to the Supreme Court, to the effect that, admittedly, the applicant in C.A.No.82 of 2009 has received the sale consideration, and especially, after referring to the provisions of the Registration Act read with Section 54 of the Transfer of Property Act, when it was decided that the applicant has no right over the property, granting of such relief will be only encouraging vexatious litigation.
49. That apart, the conduct of the applicant, which has been narrated above, throughout the previous proceedings shows that certain criminal proceedings are also pending against him and he has been taking different stand in respect of the extent of property. While at one stage he has claimed ownership over an extent of 21 Acres and subsequently, over an extent of 7 Acres and at one point of time he claimed ownership over 1.20 Acres of land and he is now restricting his claim over an extent of 2.85 Acres of land. The conduct of the applicant shows that he does not deserve any indulgence from this Court, which is expected to take note of the interest of the creditors, preservation of assets of the company while granting such leave.
50. The reliance placed on behalf of the learned counsel for the applicant on the judgment in N.Krishnaih Setty v. Gopalakrishna and Others, (1974) 2 SCC 624 has no application to the facts and circumstances of the case. That was a case wherein the plaintiffs who wanted to file a suit were not made parties to the earlier suit, since at that time they were not born and in those circumstances, under Section 11 of the Code of Civil Procedure, the Supreme Court has held that the principle of constructive res judicata is not applicable and taking note of the fact that even the Court which decided was a Munsif Court, which has no jurisdiction at that time, has held that the Court was not a court of competent jurisdiction since the suit should have been filed in Subordinate Court.
51. Likewise, the judgment of the Division Bench of this Court relied upon by Mr.R.Thiagarajan in Rangasamy,K. v. Tamil Nadu Housing Board, 2005 (2) CTC 81 also has no application, since that was a case where an allottee of the Housing Board on lease-cum-sale agreement was held to be not an owner since the sale takes place only after the final installment and execution and registration of sale deed.
52. Again the judgment of the Supreme Court in Mathura Prasad Bajoo Jaiswal and Others v. Dossibai N.B.Jeejeebhoy, [1970] 1 SCC 613 relates to a case where a decision taken on question of law was subsequently changed by judicial precedent. The Supreme Court, while deciding as to whether the earlier decision on question of law can be treated as res judicata between the same parties, held that where the law is altered since the earlier decision, the earlier decision will not operate as res judicata between the same parties. That is not the issue in this case.
53. In the judgment of the Supreme Court in Sushil Kumar Mehta v. Gobind Ram Bohra, [1990] 1 SCC 193, while deciding about the settled principle of law regarding res judicata, it was held that in cases where a Court having no jurisdiction has decided or where an issue has not been decided between the parties, the same cannot act as res judicata in a subsequent suit and the principle of waiver will also not apply holding that it is a matter of public policy. It was held as under:
"26. Thus it is settled law that normally a decree passed by a court of competent jurisdiction, after adjudication on merits of the rights of the parties, operates as res judicata in a subsequent suit or proceedings and binds the parties or the persons claiming right, title or interest from the parties. Its validity should be assailed only in an appeal or revision as the case may be. In subsequent proceedings its validity cannot be questioned. A decree passed by a court without jurisdiction over the subject matter or on other grounds which goes to the root of its exercise or jurisdiction, lacks inherent jurisdiction. It is a coram non judice. A decree passed by such a court is a nullity and is non est. Its invalidity can be set up whenever it is sought to be enforced or is acted upon as a foundation for a right, even at the stage of execution or in collateral proceedings. The defect of jurisdiction strikes at the authority of the court to pass a decree which cannot be cured by consent or waiver of the party. If the court has jurisdiction but there is defect in its exercise which does not go to the root of its authority, such a defect like pecuniary or territorial could be waived by the party. They could be corrected by way of appropriate plea at its inception or in appellate or revisional forums, provided law permits. The doctrine of res judicata under Section 11 CPC is founded on public policy. An issue of fact or law or mixed question of fact and law, which are in issue in an earlier suit or might and ought to be raised between the same parties or persons claiming under them and was adjudicated or allowed uncontested becomes final and binds the parties or persons claiming under them. Thus the decision of a competent court over the matter in issue may operate as res judicata in subsequent suit or proceedings or in other proceedings between the same parties and those claiming under them. But the question relating to the interpretation of a statute touching the jurisdiction of a court unrelated to questions of fact or law or mixed questions does not operate as res judicata even between the parties or persons claiming under them. The reason is obvious; a pure question of law unrelated to facts which are the basis or foundation of a right, cannot be deemed to be a matter in issue. The principle of res judicata is a facet of procedure but not of substantive law. The decision on an issue of law founded on fact in issue would operate as res judicata. But when the law has since the earlier decision been altered by a competent authority or when the earlier decision declares a transaction to be valid despite prohibition by law it does not operate as res judicata. Thus a question of jurisdiction of a court or of a procedure or a pure question of law unrelated to the right of the parties founded purely on question of fact in the previous suit, is not res judicata in the subsequent suit. A question relating to jurisdiction of a court or interpretation of provisions of a statute cannot be deemed to have been finally determined by an erroneous decision of a court. Therefore, the doctrine of res judicata does not apply to a case of decree of nullity. If the court inherently lacks jurisdiction consent cannot confer jurisdiction. Where certain statutory rights in a welfare legislation are created, the doctrine of waiver also does not apply to a case of decree where the court inherently lacks jurisdiction.
The reliance placed on the above said judgment by the learned counsel for the applicant in C.A.No.82 of 2009 is not also of any help to the applicant.
54. In respect of the right of a bona fide purchaser for value, the Supreme Court has observed in Ashwin S.Mehta and another v. Custodian and Others, [2006] 2 SCC 385 as under:
"70. In that view of the matter, evidently, creation of any third-party interest is no longer in dispute nor the same is subject to any order of this Court. In any event, ordinarily, a bona fide purchaser for value in an auction- sale is treated differently than a decree-holder purchasing such properties. In the former event, even if such a decree is set aside, the interest of the bona fide purchaser in an auction-sale is saved. (See Nawab Zain-ul-Abdin Khan v. Mohd. Asghar Ali Khan, [1887] 15 IA 12.) The said decision has been affirmed by this Court in Gurjoginder Singh v. Jaswant Kaur, [1994] 2 SCC 368."
55. Again in Valji Khimji & Co. v. Official Liquidator of Hindustan Nitro Product (Gujarat) Ltd., [2008] 9 SCC 299, in respect of the auction purchasers, a distinction was made between the auction not subject to subsequent confirmation and auction which is subject to subsequent confirmation and held that unless fraud or collusion is pleaded and proved the confirmation of sale cannot be set aside. The relevant portion is as under:
"29. In the present case we are satisfied that there is no fraud in the auction-sale. It may be mentioned that auctions are of two types (1) where the auction is not subject to subsequent confirmation, and (2) where the auction is subject to subsequent confirmation by some authority after the auction is held.
30. In the first case mentioned above i.e. where the auction is not subject to confirmation by any authority, the auction is complete on the fall of the hammer, and certain rights accrue in favour of the auction-purchaser. However, where the auction is subject to subsequent confirmation by some authority (under a statute or terms of the auction) the auction is not complete and no rights accrue until the sale is confirmed by the said authority. Once, however, the sale is confirmed by that authority, certain rights accrue in favour of the auction-purchaser, and these rights cannot be extinguished except in exceptional cases such as fraud.
31. In the present case, the auction having been confirmed on 30-7-2003 by the Court it cannot be set aside unless some fraud or collusion has been proved. We are satisfied that no fraud or collusion has been established by anyone in this case."
The said judgment relied upon by the learned counsel for the applicant is also not applicable to the facts and circumstances of the present case and on the other hand, it supports the case of the fourth respondent.
56. In Harihar Nath and Others v. State Bank of India and Others, [2006] 4 SCC 457, while explaining about the object of Section 446 of the Companies Act, it was held that the purpose is not only to avoid unnecessary litigation, multiplicity of proceedings and protect the assets for equitable distribution among its creditors and shareholders, but also enables the Court to decide as to whether any suit or proceeding pending before other courts are to be directed to be adjudicated by the said Court or by itself. The relevant portion is as under:
"18. The object of Section 446 of the Act is not to cancel, nullify or abate any claim against the company. Its object is to save the company which has been ordered to be wound up, from unnecessary litigation and from multiplicity of proceedings and protect the assets for equitable distribution among its creditors and shareholders. This object is achieved by compelling the creditors and others to come to the court which is winding up the company and prove their claims in the winding up. For this purpose, all suits and proceedings pending against the company are also stayed subject to the discretion of the winding-up court to allow such suits and proceedings to proceed. When a winding-up order is passed, the effect is that all the affairs pertaining to the company in liquidation, including all suits/proceedings by or against the company, come within the control and supervision of the winding-up court. The winding-up court has to decide whether it will let the suit/proceeding to continue in the court where it is pending, or it will itself adjudicate the suit/proceeding. Thus, under Section 446(1), the winding-up court only decides about the forum where the suit has to be tried and disposed of. The Limitation Act which prescribes the periods within which a party can approach a court seeking remedies for various causes of action, is not attracted to such applications under Section 446(1) of the Act. However, as elaborate arguments were advanced on this issue, we will deal with them in some more detail.
57. The judgment relied upon by the learned counsel in Usmansab Hatel Sahab v. R.L.Meharwade and others, [1998] 3 SCC 271 has also no application to the facts of the case. That was a case relating to Order 21 Rule 90 of the Code of Civil Procedure in respect of an auction sale wherein the purchase money was not deposited within fifteen days by the auction purchaser and when the High Court has directed the owner to pay the loss suffered by the auction purchaser on the ground that it was at the instance of the owner the sale was set aside after fifteen years, the said part of the order of the High Court was set aside by the Supreme Court.
58. In such view of the matter, it is not possible to accept the contention of the learned counsel for the applicant in C.A.No.82 of 2009.
59. In respect of C.A.No.241 of 2009 filed by the learned Administrator, it is not in dispute that the applicant in C.A.No.82 of 2009 in the affidavit filed by him in C.A.No.211 of 2003 has clearly stated as follows:
"I submit that an extent of Ac 0.20 Cents belonging to the company in liquidation in S.No.19/2D has by mistakenly been left out to be sold. This could be also sold by the Administrator for which I do not have any objection."
Therefore, it is not open to the applicant in C.A.No.82 of 2009 now to go back.
In the result, C.A.No.82 of 2009 is dismissed and C.A.No.241 of 2009 is allowed and Mr.R.Vijayakumar (applicant in C.A.No.82 of 2009) is directed to hand-over documents pertaining to the land in Survey No.19/2D to the learned Administrator within eight weeks from the date of receipt of a copy of this order.
sasi